Code, Community and Pain Thresholds

Over the last week two applications I use made major announcements. Both are good apps, both are (or will be) WAX applications. It was fascinating to watch these two announcements happen so close together, because they represented two little software startups that have made significantly different choices for the road ahead.

Up until this point the companies had been similar. They were conducting a public beta of their software, which was indicated to become commercial software once the beta period ended. At the point that they went gold, there would be a price tag associated with the software. In the meantime you could participate in a public beta for free - or in other words, the community was testing software that was not yet ready for prime time.

The first of these is Spanning Sync, a company that makes a cute little applet of the same name that links iCal with Google Calendar. While there are some rumblings about Salesforce integration, the Google calendar sync is the main available feature at this point. Spanning Sync announced their 1.0 product, which meant the end of the beta testing period. People who wanted to continue to use it would have to pay up after 15 days - $25 for a one year subscription, or $65 for a lifetime subscription.

The second announcement was from Kaboomerang, the makers of a great little GTD productivity app called Actiontastic. Kaboomerang announced that as of now, Actiontastic was going open source. It would be free in both the beer and speech sense of the word.

Both announcements were made in the company blogs. Here's a fairly representative sample of comments from the Spanning Sync blog:

Pricing is outrageous!

That's $50 per year for something which is more of a convenience than a must-have.

That is very steep. I appreciate all the hard work that went into this, but I don't see that many people converting to paid at these rates. I won't.

In contrast here's a representative example of the comments from the Kaboomerang blog:

Jon,
I echo the sentiments that this is incredibly generous. You’ve done a great job on this application, and I’m incredibly grateful to you for doing this. I hope you can continue finding satisfaction in developing this application!
I also agree that at the least you should provide a donate button. Your work does deserve at least some monetary reward :)

So on the surface it definitely looks like Kaboomerang has made friends, and Spanning Sync has lost customers. On the other hand I can tell you that Spanning Sync now has $25 of my money, and Kaboomerang doesn't.

It's tempting to say that one of them is right, and one of them is wrong. But which?

Well according to Harry Beckwith, author of Selling the Invisible, pricing is a complicated and not always rational beast. He says that if no one is complaining about your pricing, its too low. If everyone complains its too high. Beckwith asserts that the sweet spot is when about 20% of your customers are telling you that your pricing is too high. I suppose that Spanning Sync could look at their sales and count negative comments and emails about their pricing and see if the proportions come out right. Beckwith doesn't say much about people who don't say anything, but silently walk away because the prices are too high.

Everyone has some sort of pain threshold, after all. I've long been a fan of the Quantrix Modeller, but I've never been able to justify the price tag on it when the alternative was to continue to use the Excel spreadsheets I already had. I (and other people, I know) have asked Quantrix to reconsider their pricing, but they don't seem particularly interested in servicing the sub-$300 market. Maybe we're the 20% in this case.

The more interesting case of the two companies who made announcements is Kaboomerang. Actiontastic is a standalone Mac OS X app right now, but its going to gain WAX status in the near future when Actionatr kicks into gear. While it's not yet clear, it looks like Kaboomerang may adopt the so-called "freemium" model: offer a base product for free, and charge for a "professional" package. This is the model undertaken by Web 2.0 companies such as 37 signals' BaseCamp and many others. If their open-sourcing of Actiontastic works out, maybe they will harness their community and make a success of their premium products. The "freemium" model has yet to really be proven, so it's not yet well known what it takes to make it a success or not.

And on the other hand, Spanning Sync has my $25 now.