Software Pricing: Are We Doing It Wrong?

Software Pricing: Are We Doing It Wrong?:

"What I think isn't well understood here is that low prices can be a force multiplier all out of proportion to the absolute reduction in price. Valve software has been aggressively experimenting in this area; consider the example of the game Left 4 Dead:

Valve co-founder Gabe Newell announced during a DICE keynote today that last weekend's half-price sale of Left 4 Dead resulted in a 3000% increase in sales of the game, posting overall sales (in dollar amount) that beat the title's original launch performance.

It's sobering to think that cutting the price in half, months later, made more money for Valve in total than launching the game at its original $49.95 price point. (And, incidentally, that's the price I paid for it. No worries, I got my fifty bucks worth of gameplay out of this excellent game months ago.)
The experiments didn't end there. Observe the utterly non-linear scale at work as the price of software is experimentally reduced even further on their Steam network:

The massive Steam holiday sale was also a big win for Valve and its partners. The following holiday sales data was released, showing the sales breakdown organized by price reduction:

• 10% sale = 35% increase in sales (real dollars, not units shipped)
  
• 25% sale = 245% increase in sales
  
• 50% sale = 320% increase in sales
  
• 75% sale = 1470% increase in sales
  

Note that these are total dollar sale amounts! Let's use some fake numbers to illustrate how dramatic the difference really is. Let's say our hypothetical game costs $40, and we sold 100 copies of it at that price."