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To all pricing guru out there,

I've developed a web application that we've been using internally for a while and we are looking at selling it as a product in its own write. It is a very niche human resource information management application.

I've just started working out how to price it. The intention is to seperately sell support, maintenance (including new feature requests) but I have no idea how to estimate the likely uptake of the value add services.

I realise its dependant on the application, what it does and how critical it is but have no idea whether 1% or 50% of purchases is in the right ball park for the likely uptake of value add services. Any actual experiences or approaches to 'ball parking' it would be greatly appreciated.

Thanks Matt

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This is different from market to market, of course, but I found from past experience that the max you'd want to price a 'yearly support fee' is around 20% of the cost of the single license.

I've even seen situations where the support contract was originally 25% and had some pushback from corporate purchasers. But instead of lowering the support contract price, the price of the license of the actual product eventually went up, causing the percentage of the support contract to fall to 20%, and all the pushback from corporate customers disappeared.

Of course, this is just an anecdotal thing and it may differ in your market (this was also a web app to be sold and hosted on the customer's servers).

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up vote 1 down vote

We've found 20% to be a good baseline to work from.

We started offering annual software maintenance for our Virtual Time Clock Software in December 2004 after about 7 years of selling just licenses and upgrades. It's been good for us and very well received by our customers. While our new license revenue has more than quadrupled since then, last year's maintenance revenue was greater than our annual new license and upgrade revenue just 5 years ago. You may find some useful details about what our program looks like by checking out our Virtual Time Clock Software Maintenance & Support program page on our web site.

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Software is typically priced as you've outlined - a base price, an annual maintenance fee, and optional support services.

Annual maintenance is typically figured at 22% of the base price.

For the support services - first - you need to think about the value to the client. What costs will your support team displace for the client? What additional revenue might they enable the client to achieve? What quality metrics is your team more likely to achieve than the client's team could achieve.

Second - think about all your costs - hiring, training, perform time, time "on the bench", travel, overhead, etc - and make sure you can cover all these along with a reasonable margin.

Then figure out based on your value analysis how much you can charge over and above your base costs.

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