Think of this as Volume 15, Number 12 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.
Charge 99 cents for it.
Steve Jobs was the first tech gazillionaire to prove this, with the iTunes store. Charging 99 cents per song was certainly enough for our kids. Hey, it's less than a dollar. Sales zoomed.
When music companies complained, Jobs finally offered them a new price point, $1.29. But are total revenues really higher at that higher price? Not really.
Jobs, of course, only discovered this for digital goods. Dollar stores like the one being built above in Houston have been around for many years. I remember my mother taking me to one over 30 years ago in southern California.
The price appears to be a bargain but with digital goods it doesn't have to be. Most CDs contain about 15 songs. That's $15 for a CD, more than stores charge for top-sellers today. The price is not out of line, especially when you consider the fact that there's almost no distribution cost.
But it is magic, because it is an impulse buy. You see something for 99 cents that you might not like, you may well buy it anyway because, hey, it's just 99 cents. You see the same product available for $2.99, or even $1.29, and you're going to think about it.
It's market psychology in action.
One of the dumbest pieces I've read in a long time is Matt Asay's recent:
In other words, if an app is close enough to free and immediately available, with the added benefit of potentially being higher quality than open-source alternatives (because of the paid investment in developing and polishing the app), will there be any reason to bother downloading an open-source app?
I don't know when Matt forgot what open source is. But it's not really free as in beer. It's free as in freedom. Open source doesn't have to be free as in beer, so long as you can see the code.
Point is, if you price your apps at 99 cents you'll see nearly as many downloads as if you gave it away. Just as important you now have a commercial relationship with the downloader. They didn't just give something a try – they bought something from you. You don't have to convert them, as you do a downloader.
So songs, software, and even text files like this one can all be sold, profitably, at a 99 cent price point. Remember this too. In the Kindle store, authors get to keep most of what they charge. Contrast that with the book publishing business, where a 15% cut of the proceeds is considered generous, because of manufacturing, distribution and marketing costs.
I'm looking for ways to make this work for me, and you should do the same. It's going to change. As more-and-more 99 cent merchandise hits the shelves, the cost of reaching the audience for such goods will go up. But blogs and Facebook and Twitter all represent channels for communication that can be used to convert people to a 99 cent sale.
What gets flattened here? Manufacturing costs have already disappeared. Distribution costs have already disappeared. What gets pressed is simply the cost of marketing, which must get more creative. But marketing is already a creative process, just as writing or producing books, sound files and software is a creative process.
Try the magic price. I think it will work for you.