Shareware Insight: Pricing / by Murray Hurps

"Pricing is the exchange rate you put on all the tangible and intangible aspects of your business. Value for cash." - Patrick Campbell

Ad Muncher has stayed in business as a shareware product for 15 years.  In this post, I'll highlight some interesting things I've spotted along the way and what I'd do differently if I had the chance.

Early days

At first Ad Muncher was priced at $15 USD for an unlimited license.  I was 14 when this happened, so there wasn't a huge amount of thought put into it.  We are still providing updates and support to those users 15 years later and are very happy to do so in exchange for their support when I needed it most.

Currency problems

Being based in Australia and charging USD has always been a problem.  The dropping USD value meant that at some points we were making half the amount we were from the same price earlier, while providing the same service.

We briefly tried billing exclusively in AUD, but the increase in support problems this caused and a noticeable sales dip, meant we had to revert to USD again and just take the hit whenever the currency moved.  Thankfully since then it's been relatively stable.

Choosing a price

We've tested several other points over the years, but the best thing I ever did was to conduct a comprehensive pricing survey of our target audience.  Around 600 responses were gathered, graphed and analysed in a proprietary analysis page.

From these graphs, I noticed that there were two hotspots in our target markets for maximum revenue, at $19 and $29 USD.  Instead of picking one, I used these two prices to implement tiered pricing with a basic and premium version of Ad Muncher.

This one change resulted in an overnight 40% increase in revenue which continued.  The differences between the versions were just more frequent updates and priority support, but allowed people who were less price sensitive to contribute a little more.

Producing the following splits on purchasing preferences:

And average lifetime customer value seems to peak around the four year mark at $70.

lifetime.png

Interestingly, the price survey also showed a pretty significant difference in the price tolerances of different markets.  I failed to address this need properly and if I had a second chance I'd take better advantage of the local resellers that constantly approached us for partnerships.

Processor choice

We started using third-party processors focused on the shareware industry, namely Regsoft, then Kagi, then Digital Candle.

The last unfortunately entered administration, taking about a month worth of sales with it.

We then developed our own processing platform, with our own merchant account.  The main advantages of this were instant access to funds (instead of ~60 days), more control over the purchasing experience and lower processing costs.

The downside of this is the following trend in fraudulent orders:

Having our own merchant account also meant that every single chargeback cost us $20 AUD in bank fees, along with a physical letter we had to reply to with a fax. Suddenly the slightly lower processing fees didn't make much sense.

Our fraud detection code just couldn't compare with that offered by a company that specializes in payment processing and which has a large number of customers to gather indicators for fraud from.

We had also implemented payment by wire transfer, using an automated script that logged in to our account and checked for transfers, as well as ordering by phone and fax.  All of these turned out to be less popular than we anticipated from user requests.

Our proprietary solution was abandoned in favour of a simple PayPal integration. It's a less customized experience, but has worked very well for us since in all the ways that matter most to us.

Thank you

I'm hugely thankful to every single person who has supported Ad Muncher development.  I was amazed when the very first orders started coming and I remain amazed and humbled to this day.

As a result of your support, last week I was able to announce that Ad Muncher will now be free