How I doubled the price of my software product and sold ten times as many copies

I am guessing that at $9.99, prospective customers assume that prior customer purchases don't reflect much due diligence -- that people would buy it for $10 "just to see", and just throw it away if bad. Prospectives might then assume that $20 is enough to get priors to research it, or to think twice before recommending it, and that sales at that price thus do reflect quality.

But prospectives don't know anything about priors purchases, right? Maybe prospectives are assuming that the stuff is selling at that price. After all, the seller knows the market best, right? And there is some truth to that assumption: If it hadn't sold at $20, it wouldn't have been around for long.

If that theory makes sense, it may be that your customers felt that $40 was high enough to suggest the consumer validation they needed. Validation was only one component of their decision, "value" was another, and at 80 they didn't feel the value was there. The theory suggests that if you had cut price below 40, your total sales would have fallen.

I imagine that buyers often treat prices like poker bets, and try to extract information about the underlying hand from the value assigned by the holder.

Joel's article on pricing ought to be required reading, even if he offers no hard and fast answers: http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...

At a glance the simple explanation, having some experience in marketing myself, is that $19.99 is a magic price point- 9/10 times you will not see any price point on an infomercial that isn't $19.99 or $19.95. And it's because it's a magic price point. Hard to explain but it works.

If he had gone from $19.99 to 39.99 or from 4.99 to 9.99 it would not ave had this effect- his volumes would have gone down. But if you want to sell something at $14.99, 9.99 or 24.99, don't do it- just sell it at 19.99.

One aspect I didn't mention in my blog post is that I have a hard-core following of four people that email me once every few months complaining about the price. They complain that $9.99/month is too much, $19.99/YEAR is too much, and that I can't be making any sales at $19.99/month. In short: don't take pricing advice people who aren't giving you money :)

You can hire another developer to bring more software into the world, you can donate it to charity, etc. Income is merely a "money option", it doesn't mean you have to exercise that option in any particular way.

So it's not just "more fair" to set reasonable prices -- like your gut suggests -- but they also discourage competitors from appearing.

I guess the real question is whether or not you're willing to risk future competition for the short term benefits of increased profits.

Because you might think you can invest the money more wisely than other people in terms of its net benefit. You might invest it into charities you believe in, into research on topics you think is important, employ people you think need jobs, and so on.

There is a fine line here. In my mind a product should be priced relative to the value it creates for people. If this price point provides more money than one needs to sustain daily life then I think its a perk. Besides that if I make a product that is making more money than I need, that gives me more of an opportunity to do a lot of things. Anything from building better more awesome products to donating my time or money to charity.

Also, over the long term, it could allow him to cash out or retire or whatever sooner, so the total amount of money he takes from other people over his lifetime might not go up as much as you'd think.

If you know customer demand so well that you don't need to experiment, that's awesome.

I do the same in the Apple App Store. I rarely ever browse through free apps.

Prior to the App Store, I also very rarely bought any software. Since iPhones and iPads and all that stuff came out, I'm buying a good 1-3 apps per month on average, every single month. I'm kind of amazed at that.

In the beginning I got sales. But over time, I got less and less because people would just re-package it and give it out for free (they are allowed to do this under the GNU).

I suppose it depends on your demographic of users too. More tech savvy users will figure this out quickly

But of course we all know that when you pay $300/hour for legal services, you are paying for insurance, not the actual service.

As for how to find out, call a lawyer. You really don't want to trust the legality of your business to a Google search.