Why I paid $150 for a $2 part

Last year my freezer stopped working. I called a local Mr. Appliance repair man to come out and fix it. When he arrived, Mr. Appliance quickly assessed the problem and had everything fixed in about 20 mins. The bill for the repair was $150. I was a very happy customer.

I had worked with Mr. Appliance before. He is a small local business who is professional, upfront and just a nice guy. Before he left, we had a nice conversation and I asked him how he was able to justify charging $150 for 20 mins and a $2 part. (Not in an argumentative manner. It was a conversation, businessman to businessman.) His reply was paradigm shifting.

He told me that I was not paying for 20 mins of his time. I was paying for 25 years of experience that allowed him to identify and fix the problem in 20 mins. Its pretty impossible to argue with that logic. If he had spent 3 hours working on my fridge, I probably would have paid the same bill and never had asked the question. However, because of Mr. Appliance’s 25 years experience, he did not need 3 hours. He only needed 20 mins.

Mr. Appliance is a good businessman and stands by his work. This is something that the software community could learn from. I have felt that for too long that the largest issue facing want-to-be indie developers is that they are developing software and not a business. This is a huge topic with too many branches to go through in this single post. But what is one lesson that we can learn from Mr. Appliance? We need to starting valuing our own work.

I have been solely supporting my family of 5 as an indie developer for 6 years now. I am blessed to be in my situation. I have built an amazing community of customers and I look forward to working with them every day.

Over the past few years the complexity of the software that I develop has grown. I am releasing a lot fewer products than I used to. However, the products that I do ship are higher quality and solve much larger problems for my customers. I have been developing for 17 years now. I develop software now that I could not have even dreamed of developing, even just 5 years ago. I look back at code that I wrote back then and I shake my head. If you have been developing for any amount of years, I am sure that you can relate.

With higher quality software, that solves bigger problems for my customer, I need to ensure that I value my work and not charge pittance for it. How we price our software has been debated countless times. I feel that there really isn’t a single correct answer for all developers. It all depends on your market.

The larger your market, the lower you could price your software in order to gain marketshare. If your product has mass market appeal, in theory, you could sell a $1 product to a million users. Obviously there is a much bigger story here. Developing a mass market success is hard, very hard. I have zero experience with developing software for the masses. I don’t have the resources or desire to compete with large companies with massive teams just yet. I prefer working in the niches. As they say, the riches are in the niches…

If you want a sustainable business in a smaller niche market, we need to price our products to reflect their true value. Since our market is smaller, we have fewer customers to potentially buy our product. So if we want to support a full time business, we need to charge more in order to make what we need to keep the doors open. From a customer standpoint, they are purchasing software that has been specialized for their niche. Traditionally, the more specialized a product is, the more expensive it should be. Why not with software?

When we raise our prices on software, less people will purchase it. Many will complain. Some will even be downright nasty. You will simply need to put on your big boy pants and stand by your product. Don’t ignore all of the negative feedback though. Over time, you will make small pivots until you and the market find a nice medium. That does not always mean that your pricing is too high either. Maybe you only need to add features to win people over. I feel that you have hit the golden price when you have users in the 3 buckets below.

  1. Instant purchase. The price is a no-brainer.
  2. Not an instant purchase but see the value. They will be back when they have the need.
  3. OMG! Overpriced! They love the product and want it but are furious at the cost.

You will need to determine what the right balance is. Obviously, you want most users in buckets 1 and 2. If you don’t have any users in bucket 3, you may have priced your product too low.

Six years ago, the prices of my products ranged from $1 to $10. However, my prices now range from $5 to $99. (I also have many free products.) From a business standpoint, higher pricing allows me to work on the harder problems that my customers face. With more money I can take on larger, more risky, projects that take potentially years to complete. It also allows me to hire Support Jedi to provide my customers with a level of support that I could not do on my own. I now manage my own online community for my users on my own servers. I have close to 300 training videos for all of my products. I could go on and on about the things that we can do with more money but hopefully you get the point.

When charging more money for software, its not about putting money into our own pockets. Its about providing stellar software and mind blowing customer service to your community. When you invest back into your customer, they will notice. You will develop raving fans that are more than happy to pay for continued support.

Let’s look at a real life example. Most of my business is developing addons for RapidWeaver, the best web design app out there for Mac. Traditionally, all addons in the RapidWeaver market are licensed so that you can purchase it once and use it on as many websites as you would like. This is unlike most other web platforms which are for the most part licensed per website or via subscription. Most of the addons available in the RapidWeaver market are widget based: sliders, galleries, fancy effects, etc. However, one limitation that the community has been waiting for is a great way to edit your website online. Since RapidWeaver is a Mac app, the entire site is designed locally and then published online. About 2 years ago, I decided to solve this problem.

I released CMS for RapidWeaver in October 2015. It consisted of 2 separate products: Easy CMS and Total CMS. Easy CMS allowed you to edit virtually any image or text content on your site with ease. It is currently priced at $49.95 with an all you can eat license (buy once, use as much as you want). Total CMS is the ultimate CMS experience for RapidWeaver with full on text, image, gallery, blog editing and a whole lot more. However, I chose to price Total CMS at $99.95 per domain.

Total CMS solves a big problem for RapidWeaver users. It provides zero setup, yet fully customizable CMS solution to edit your entire site contents online. It tightly integrated with RapidWeaver to provide a seamless experience from designing inside the app to editing the content online. It took me 2 years + 15 years of experience to develop Total CMS. My success with a previous higher priced product, Foundation for RapidWeaver, allowed me to take the risks required for such a larger project. I worked 70+ hour weeks almost exclusively on Total CMS for nearly 18 months. I was confident in my pricing when it launched. I felt that I was providing tremendous value to my customers. The price also rewards my business for the time and experience put into its development.

The new per domain pricing model makes perfect sense. For power users who are just building and maintaining one website, they only have to pay once. However, many of my customers use RapidWeaver to design websites for money. These users will get a lot more value from Total CMS. They will ultimately pay more for this value over time since they will be purchasing a license for each new domain.

Now obviously not all software fits into the pricing situation that I just outlined. However, the take away here is that we need to evaluate the real value that our software provides to our customers. Just as I learned from Mr. Appliance, we also need to take into affect the time and experience that we as developers have dedicated to our craft. That needs to be reflected in the price as well.