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The Spinnaker retail price test.

How much does price affect retail sales volume? Despite a lot of talk about software price wars, there's been remarkably little concrete data that answers this question. But recently Spinnaker Software wrapped up more than six months of price testing on its PFS productivity titles. The result: clear evidence that $50 has become a "magic street price" for consumer products.

"There used to be a real gap between consumer and business software prices," says Spinnaker executive vice president Lynne Weiss. "But we had a theory that all the low-priced upgrade offers in the market had closed that gap, leaving consumers Confused about products priced in the $80 to $100 range." So, using special promotional offers, Spinnaker systematically tried out a variety. of lower prices across different retail chains and product titles to achieve "a pure test without variables."

"Our average street price for PFS titles used to be about $80," Weiss says, "but two things happened when the street price fell below $50. First, our total revenue went up by an average of 140% in the same storefronts where we used to sell at $80. And we opened up another 30% more outlets that wouldn't have carried our products at a higher price. So the overall performance of our product line has increased drastically."

Spinnaker's price tests also identified several "natural" price points below $50," she adds. Street prices of $29, $19, and $9.95 produced good results; however, $39 turns out to be "not a valid consumer price point," Weiss says. "You don't generate more volume at $39 than at $49."

Weiss points out that Spinnaker tested street prices, not suggested retail prices, and ended up restructuring its wholesale discounts to encourage dealers to offer PFS titles at the $49 target price. "We want to avoid stupid street prices like $30.55," she says.

Lynne Weiss, executive vice president, Spinnaker Software, 201 Broadway, Cambridge, Mass. 02139; 617/494-1200.
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Title Annotation:Spinnaker Software tests prices in consumer software market
Date:Aug 10, 1993
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