MARKETER FOR A DAY….How would you like to try your hand at some high-tech marketing? Here’s a case study in pricing to contemplate.
Company X sells a software product designed for specialized, high speed formatting and printing, and it’s licensed based on the number of pages you are allowed to print per month on a single printer. The exact pricing isn’t critical, but here it is anyway:
Pages Per Month
Price
500
$795
25,000
$3,000
75,000
$5,000
200,000
$9,000
Unlimited
$14,000
Normally you buy one license of the software for each printer you have, but with the latest version of the software there’s a problem: the product allows you print virtually. That is, you can “print” to a hard disk, not a printer, and the file that’s created can then be printed later using ordinary (and cheaper) software. Thus, instead of buying one license for each printer, it’s possible that someone might buy just one unlimited license of Company X’s software, format and print everything virtually, and then use other software to perform the actual hardcopy printing.
What to do? Company X’s answer was to eliminate the unlimited license and replace it with a 1 million page per month license at the same price. Customers with large volumes can still buy a large license, but they can’t use a single license to format and print an infinite volume.
Question: what will be the result of this change in licensing policy? Will it increase overall revenue, decrease it, or have no significant effect?
Go ahead and leave your guesses in comments. The interesting thing is that this experiment is being run right now by a real company, which means I can tell you how it turned out. Answer tomorrow.
UPDATE: Answer is here.
