What's cheap?

You order some coffee with your breakfast, and that steaming, aromatic mug is placed in front of you. But something's wrong. What's that you say? The coffee's not great today? Oh well, it's just a buck.

Today, I'm interested in "cheap."

The $10 Claw

I came across SparkFun's new Robotic Claw, which is considered a great value at $10 (says one comment, "it's so cheap too!"). And it's true, one cannot make oneself such a claw for less. To drive the point home, when a customer asks for detailed specifications, the response is: c'mon, it's a $10 toy, what do you expect?

That got me thinking: what do you expect from a $10 app? We don't give a second thought to investing in a fleeting cup of coffee, and that cheap $10 claw may in fact be 17-cents worth of stamped aluminum, but when it comes to apps, we want so much more for so much less.

Why do we expect $1 apps?

Well, there sure aren't a bunch of $1 claws. Songs may go for that price, but last time the clawmaker checked, his claws didn't make music. No, he won't list his claws for a buck, because development and manufacturing cost too much, and his market is too limited.

The Puddle Point

But now imagine you can program, have some free time, and hear it costs a one time fee of just $25 to sell apps. Cool! Why not slap one together - The Wisdom of Chuck Norris, let's say - and see what happens? After a week of development, you list Wisdom for $5. A month goes by with two sales, so you say: "maybe it's too expensive," and price Wisdom below the puddle point.^[1] Maybe it would have been better to price the app higher, because maybe only true die-hard Norris fans invest, but you've already moved on, leaving the Texas Ranger's insights up for mere pennies on the dollar.

When other developers come along, they figure Norris knows best, and list their similar apps for $0.99 as well. And besides, with purchasing influenced so heavily by app store ratings and reviews, can they really risk costing more than knowledge from the Delta man himself?

Now there are a bunch of $1 apps, some of which are worth much more to the right people, but none of which are monitored in an economic sense. The result is software, which "should" be more highly valued, keeps presenting itself to consumers as only worth $1. And consumers get used to it!

Realities of development

Problem: software costs good money to develop, and most software has a limited market -- the clawmaker's dilemma (less manufacturing). Even the Norris developer's week of "free" time was really $2,000 in lost salary. In fact, to equal his salary, that developer needs to sell roughly six hundred apps every day. Assuming he can sell 220,000 apps each year (that's a lot o' wisdom!), can he keep up with the customer support?

This discrepancy led Jason Fried to write his excellent article, Go Ahead, Raise Your Business Prices. Says Fried about his company:

"We provide our software like a restaurant provides its food, a cabby provides transportation, and a clothing store offers a shirt -- in exchange for money... I think the software industry is killing itself by trending toward a price of 99 cents. Software is more valuable than 99 cents, but as long as software developers say it's worth only 99 cents, then most customers are going to get used to paying only 99 cents."

Is $10 realistic?

Remember those $10 software bins? That was the stuff you didn't want. Times have changed, barriers are lower, and progress is good. But, though the temptation is there to match ridiculously low prices and hope for a million purchases, just be realistic: deliver excellence, sell at worth, consider the upsell, and make barriers of your own... and perhaps you should be the one saying, c'mon, it's a $10 app, what do you expect?

Puddle point: The value below which consumers will no longer scoop cash out of a puddle.