Sustainable product pricing
Offering a product on a marketplace allows developers to make a profit that is based on the volume of sales. However, the volume of sales is only unlimited in theory. In reality it depends on things like:
- how many people use the marketplace (now and in the future),
- if your product has value to everyone or only to a niche and what happens if you get (more) competition?
- but there is even more to think about...
When developing plugins for October, there are 3 scenarios:
1) Develop the plugin as part of a larger project for a paying customer
In the first scenario, the developer has already been paid for his work. The developer can either decide to share the plugin with the community for free or ask a little bit of money for it to make some extra profit. How often the plugin is used by others or how satisfied others are with the plugin is not that relevant and it's contribution to the marketplace is small.
2) Develop the plugin as a personal learning experience
In the second scenario, the developer is investing time learning new things. The developer can either decide to share the plugin with the community for free or ask a little bit of money for it as compensation for the time spent learning new things. How often the plugin is used by others or how satisfied others are with the plugin is not that relevant and the contribution to the marketplace is small.
3) Develop the plugin as a product (free or paid)
In the third scenario, it has to be sustainable for the developer to maintain and support the plugin. Either because a lot of people use it and the plugin helps the developer to gain popularity. Or because the developer is making a profit. Or because the developer wants to give something back to the community that has helped the developer make money in some other way.
Developers of products cannot (and should not) compete with the developers from scenario 1 and 2 based on price as the prices of these "competitors" are not sustainable. But when are prices sustainable?
- Let us suppose a developer creates a new plugin as a paid product (scenario 3).
- Let us also suppose that creating this plugin took him 2 days and that (based on his skill and experience) the developer would be paid $1.280,- if a customer would have ordered the developer to create this plugin.
Now at first glance pricing your plugin comes down to the expected volume of sales: if the developer expects to sell this plugin 10 times, the developer might offer this plugin for 1280/10 = $128. If the developer expects to sell this plugin 100 times, the developer might offer this plugin for 1280/100 = $12,80 etc.
But a developer who does this would make a big mistake or rather a couple of big mistakes:
- Instead of being paid $1.280,- at once the developer will be paid this amount spread out over a longer period of time (1 year? 2 years? 3 years?). This should increase the price of the product as the expenses and risks of doing business affect the sales process of the product over a longer period of time (e.g. marketing and innovation to compete with new competition).
- Most plugins do not perform that well. The developer needs to compensate the plugins that fail to perform (or are offered free of charge) by those few plugins that do.
- Having more customers means spending more time supporting them. This is fine if you offer commercial support but if support is included in the price of the product it is not.
- In the case of October, 30% of marketplace sales of developers go to support the project that makes everything possible (you see, even October needs revenue to survive).
The point I want to make
Too many developers (not just on this marketplace but in general) price their plugins unrealistically. As a result they are unable to innovate, support and sustain their activities on the marketplace. This could eventually result in poorly supported low quality products and a bad image for not only the developers but the entire community.
It is important that developers price their work in a manner that is sustainable and for developers of scenarios 1 and 2 to not make it harder for others to offer products that are priced in a manner that is sustainable by offering false competition.
Maybe a marketplace (any marketplace) should even diversify between developers operating under these different scenarios (1-3) so customers know what to expect.
- I know that October displays a “Partner” icon but this is just a paid-for credential without much meaning.
- Ratings are not used enough to have much meaning either.
- Maybe something like the average response time (when using the forum support)? Or display the date of the last update more prominently? Or some combination?
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