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How to Price Software

At PointAbout, we're in the midst of working the details out on the best way to price our about-to-be-released web service, AppMakr.com.

Should we price it as a SAAS (Software As A Service) with recurring charges?

Should we price it as a one-time fee?

Should we segment the pricing based of feature sets?  Customer types?  Company size?

What about free trials?  Or site licenses?  Maybe multi-user licenses?  Or bundling?  Or versioning?  How about an advertising-supported free or "freemium" approach?

At PointAbout, we're in the midst of working the details out on the best way to price our about-to-be-released web service, AppMakr.com. Should we price it as a SAAS (Software As A Service) with recurring charges? Should we price it as a one-time fee? Should we segment the pricing based of feature sets?  Customer types?  Company size? What about free trials?  Or site licenses?  Maybe multi-user licenses?  Or bundling?  Or versioning?  How about an advertising-supported free or "freemium" approach? Pricing is one of those things that seems stupidly easy the first time you think about it, then maddeningly difficult the deeper you dig into it. If you're ever faced with having to determine proper pricing strategies, I highly recommend Neil Davidson's free PDF guide, "Don't Just Roll The Dice," which you can also buy from Amazon if you want a physical copy. At 67 pages, it's short enough for a quick read, yet packed with detailed analysis of different pricing strategies, and the pro's and con's of each. Although we haven't yet figured all the answers out, at least we have some ideas of how to frame the problem.

The University of Virginia Holds Entrepreneurship Competition

The University of Virginia took a big step this week towards being as entrepreneur-friendly as other top institutions like Stanford and MIT are by sponsoring the U.Va. Cup competition, with $35,000 in prize money up for grabs.

The winners were Adam Malcom and Scott Kasen of U.Va's Engineering School, with a belt-based live preserver concept that is "more comfortable, unobtrusive and wearable than typical personal flotation devices."  Their design had previously won first place in a 2006 international competition by the Boat U.S. Foundation for Boating Safety and the Personal Flotation Device Manufacturers Association.

Competitions like this are key to encouraging entrepreneurism at an institution like U.Va.  When I graduated from the McIntire School of Commerce in 1998, the school was mostly a feeder school for the large investment banks in New York.  Being an entrepreneur at U.Va. in the late 90's was a very lonely experience, exacerbated by the institutions's attitude that as a public university, its hands were tied as to how proactive it could be in encouraging private endeavors like entrepreneurism.  In fact, I encountered quite a bit of resistance from the University while I was there.

Fortunately, these attitudes are changing.  One only need look to MIT and Stanford as models of how an academic + private partnership can bear tremendous fruit.  Companies like Yahoo and Google are a result of their founder's time at Stanford.  And it turns into a virtuous cycle, as Jerry Yang's $75MM pledge back to Stanford shows.

Walt Mossberg of the Wall Street Journal summed it up well in this article:

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