To All Software Vendors: Keep It Real on Upgrade Prices

OK, upgrades are on my mind a lot right now, and I don’t want to tell anyone how to run their business—it’s hard enough running my own. But to all you software vendors out there, can we please keep it real when it comes to upgrade pricing?

I’m catching up on phone messages and emails after our big cameo on the silver screen, and among my many messages were two from the vendors of some development tools we use in-house. These are fairly expensive products, and the messages were pleas to buy their latest and greatest. Although I’m happy with the products in question, I won’t be jumping on either upgrade deal anytime soon.

The reason? The programs in question cost several hundred dollars apiece, and the upgrades in question were incredibly minor (e.g. “now with better support for Word 2007 XML export!” or “more responsive menus! [I’m not even kidding on these]). But, because I’m a valued customer—the companies in question are offering me an upgrade discount of…about 15-25% less than buying the whole product over again.

To wit: the first product costs $799 to buy in the first place, but upgrades can be had for the special upgrade price of just $599 (but only if I act now–otherwise the upgrade price goes up to $699!) In comparison, upgrades to ComicBase typically run about 1/3 of the original price ($99.95 for the upgrade to the $299 Archive Edition, or $49.95 for the $129.95 Professional Edition).

Normally, I’d just shake my head in disbelief, but this time, in a fit of misplaced inter-company generosity, I made the mistake of actually telling the salesman of the special $599 upgrade why I wasn’t taking him up on his kind offer:

“Hey look, let’s say I get $800 worth of value out of buying your product from a starting point of nothing, which is pretty much the minimum I’d need in order for it to make sense to buy a $799 product in the first place. That’s not chump change for me, and the product really has to deliver in order to meet that. But when you price the upgrade at $599, you’re saying the difference in value between the two-year-old version I’ve already got and the new one is by itself worth 75% as much as a whole new program.”

“I mean, are you really telling me that the ‘Improved Word 2007 XML support’ is such a great feature that I’m going to get 3/4 of the value from it alone as I did going from nothing at all to the current version?”

I didn’t think so either.

What the salesman apparently didn’t recognize was that when you ask me to buy a $699 upgrade to a $799 product, it was less a question of upgrading, than trying to sell incredibly similar software to someone who already owns a copy. Upgrades are generally easy to sell: you’ve already found the customer, and done at least one thing which makes them happy. New purchases are much harder. And that’s effectively what they were asking me to buy.

Honestly, though, I sympathize with anyone running a business, and we all have to choose our best shot at a strategy for success. Ours is to keep upgrade prices as low and attractive as we can make them, and be as aggressive as possible with the data and feature set so that our customers really look forward to each year’s upgrade.

Every year, it’s really a game of, “What can we do to make this version so awesome that anyone whose subscription just ran out will be dying to grab the next one?” We don’t want to merely justify the upgrade price, we want to pack in an excess of value so that as many people as possible will feel that grabbing the current upgrade is one of the smartest buys they’ll make this year. (And I for one completely believe this–especially in the case of ComicBase 14! I know that we won’t get everyone to upgrade every year with this strategy, but our customer retention rates have been known to make a lot of other companies green with envy. And that’s the way I want to keep it.

But that’s just one man’s opinion. I wish these other folks the best of luck with their strategy (and I really do enjoy their products). But please, stop calling to ask why I didn’t grab the new version this year, and get your engineers to do something more than “improved menu speed” to justify an almost-the-same-as-new “upgrade” price.

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