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Vadim Yasinovsky: "Give everyone a deal." (Clear Software pres speaks on pricing)

Clear Software president Vadim Yasinovsky is convinced that pricing is the software industry's most arcane art. "Before I shipped our first product," he says, "I asked everyone what we should charge. I got answers all the way from $89 to $500. And everyone I talked to was incredibly positive they knew exactly what our price should be."

Yasinovsky's product, a dBase flow-charting utility, finally shipped in February 1988 with a relatively timid $99.95 price tag. "The first version still had some significant limitations and we were pioneering a new category, so we wanted people to feel good about what they got for their money," he says. "In hindsight, we really screwed up badly."

Clear's low-end pricing strategy created cash-flow problems almost immediately. The Bituation worsened when Yasinovsky signed his first distribution contract. "We were selling maybe 10% more copies, but now we were giving 50% off to Micro D. That really hurt us. We were

struggling to survive."

After shipping a few thousand copies, Yasinovsky released an enhanced version that he sold to earlier buyers for a token $10 upgrade charge. Four months later, a significantly improved version 2.0 was ready--and this time Yasinovsky decided he had to get more aggressive about pricing. The new release was priced at $199.95; the cost of an upgrade ranged from $50 to $100, depending on which version a user owned.

To Yasinovsky's amazement, 80% of his registered users promptly switched to Clear 2.0, and sales of the new version have kept growing steadily. "It turns out that our users--especially corporate buyers--are almost entirely insensitive to price. We doubled the cost of the product within nine months and we got maybe three calls from people who were upset by the new price."

. . Yasinovsky now says he learned an important lesson from his pricing mistakes: software buyers care more about their perceptions of prices than about actual dollars and cents. Among his conclusions:

* Never confuse the customer. The initial release of Clear

came in two forms--a $99 version that generated dot-matrix output, and a $149 version for the H-P LaserJet. "Everybody got confused. We got all kinds of calls complaining about why they didn't want to pay the $50 extra. And we were always straightening out orders from people who bought the wrong version."

* Make the first upgrade a bargain. By letting early

customers buy a modestly improved upgrade for little more than the cost of the manual and diskettes, Yasinovsky says his company "developed an incredible amount of loyalty and trust." When he went back to these same customers with a more substantial upgrade a few months later, "they thought we were wonderful people and paid whatever we asked."

* Give everyone a discount. "It's irrelevant how much a

product costs if you offer a deal," says Yasinovsky. Clear distributes 15% discount coupons to help promote direct sales, and the company's order-takers are told they can give 20% off "to anybody who asks."
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Date:Apr 15, 1989
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