August 4, 2005 What Part of Software’s Price is Future Value? This is a question I don’t think I’ve ever seen discussed before amongst all the MicroISV people, forums, things I follow. Perhaps it’s because we tend not to think that way. Well before I get ahead of myself let me frame the question a bit. When beginning to plan for a version 1.0 there are all kinds of things to consider from system requirements to feature sets to functional specs and more. As things progress more time is spent thinking about post launch items such as marketing, advertising, and of course pricing. Traditional views on pricing seem to focus on what value your software creates for the person or organization buying it, what the competition charges, product positioning and so on. So what I really want to know is should the future of your software be part of the pricing equation? Should features which are not in version 1, but will be in version 2 be at least partially priced for in version 1? What about features which will be in V2, but are currently unknown because they have not been thought of yet! Should they be given some value since you do know they will exist. I don’t know the right answer, but my take is that V1 pricing should take into account features of V2. When a customer purchases your software I don’t look at it as them purchasing this version. Instead I see it as a commitment they’re making to you and you to them. The customer wants to stay with your product. Few people go into a software purchase planning on switching to another solution in a year or two. So if that’s the case it means there’s a responsibility on your part to create future versions with enhanced features and so on. And if viewed as a continuum instead of a one time event it seems logical that the pricing of V1 should reflect some of the effort that will go into V2, V3 and so on. What do you think?