You obviously know that the price of your software will have a big impact on your sales…but do you understand exactly how? Choosing the right price for your software is probably the trickiest part of the entire marketing process.

While keeping costs in mind is the first step when deciding on price, a good pricing strategy goes beyond this. Here are the key strategies you need to consider when developing your software pricing.

Consider Your Brand

In 1996, McDonald launched the Arch Deluxe with the goal of targeting a more sophisticated group of customers, but it was a big failure. The main reason was that the Arch Deluxe was a premium product while McDonalds’ brand is all about cheap products.

When pricing a product, remember what your brand is about. Ask yourself: who is my ideal customer? If your brand is about providing a software for everyone, you’ll require a relatively low price for your product. However, if your brand is about offering a premium software, value it at a higher price. This is the easy stuff…let’s move on.

Price Affects Perceived Value

Imagine the following scenario. You want to buy a watch, but you don’t know anything about watches. You’re in a jewelry store and you see two nice watches: one at $200 and the other at $600. Which one do you think is more valuable? Of course, you think the $600 watch is the better one – and if you want the best, you’ll buy it even if you don’t know anything about watches.

In an experiment described by William Poundstone in his book Priceless: The Myth of Fair Value, some students and experts had to evaluate a home for sale. They were divided into four groups, and each group received a different listing price from the man who was selling the home. The experiment showed that higher listing prices brought forth a higher evaluation from both students and experts (if you want to take a more detailed look at the experiment, you can read about it in my infographic about pricing strategies). Ultimately, this example shows that products with higher prices are associated with a higher perceived value.

Bundle Your Products

When you want to buy a burger from McDonalds, they usually ask if you want to make the burger into a combo. Of course, they don’t ask this because they are good guys, they ask because it’s an effective pricing strategy.

Would you prefer buying the burger at $4 or would you prefer buying the burger with fries and a drink for $5? Taking the combo seems like a good deal, so you presume that you shouldn’t miss the boat…the only problem is that you end up spending more than you intended.

You can apply bundling to software too. Some of the biggest software companies have applied this strategy for many years, it’s nothing new.

Here’s an example from Adobe.

Adobe offers all their software for a monthly fee. I would guess that no one in the world would want all of them – and probably no one can use all of them either. However, it seems like a great deal because if you should ever need a particular software, you have it in your suite. But the truth is that you are likely spending money for things you don’t need; however, Adobe sets their price based on the bundle of software they give you.

No Free Plan

Pricing strategies are not only about determining an optimized price or bundle for your products, they are also about offering free stuff. Not having a price is a pricing strategy! Let’s walk through an example: Do you think that having a free plan is a good way to acquire more customers? Ruben Gamez conducted an interesting study where he shows that having a free plan damages sales. He offered a free plan and a paid plan for one of his products, but only 1% of people were taking the paid plan — and the shocking fact was that only 0.8% of free users were upgrading to the paid plan.

When he removed the free plan, he recorded an 800% increase in his paid customers. As he illustrated in his study, other SaaS companies also removed their free plan because of the same reason – including CrazyEgg, MailChimp and Evernote. Which leads me to my next point…

Offer a Free Trial

You shouldn’t offer a free plan, but you should offer a free trial for your software.

MECLABS showed how offering a free trial can be a winning strategy for companies. According to them, offering a free trial reduces the cost per acquisition of customers. Specifically, they reported a 40% reduction in the cost per acquisition. They also showed that, for one of their clients, 68.75% of free trial members went on to pay for at least one month of the service, and 87.7% of another cohort of free trial members converted to customers.

Visual Website Optimizer reported an interesting split test about free trials from GetResponse. GetResponse put the free trial button near the “buy now” button on their homepage and compared it with the homepage version which has only the “buy now” button. The free trial button didn’t decrease paid sign ups, contrary of what they expected, and they also experienced a 158% increase in free trial sign ups.

What do you think about these pricing strategies? Which do you think are the most effective? Let us know in the comments!