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  • #994263
    crimson23
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    Hi All,

    I am in the progress of trying to decide the best pricing strategy to adopt for my online marketplace and am actually finding this question a lot harder to answer than expected, which is why I’m reaching out to you for some valuable input. Below is a summary of the online marketplace so you have a better background before contributing to this post:

    Business: Online Marketplace connecting contributors selling digital content to businesses, where I will take a 10% rake of the revenue (includes product and support extension purchase) with the seller taking home the remaining 90%.

    Products: Digital contents such Excel templates that contains a particular layouts (no data) which people/businesses would benefit from purchasing instead of building it themselves, therefore saving time and accelerating insight.

    Target Audience: Small to medium sized businesses (actual users of the content ranging from as low as 10 to more than 5,000).

    Support: Each seller on the marketplace will be responsible for providing support for the product they sell.

    Cost: The estimated cost to purchase a single product varies. Starting from a few hundred dollars (e.g. $100) and reaching up to a few thousand dollars (e.g. $5,000).

    Licensing: The buyer who has purchased the product is licensed to use it and receive support from the seller on an annual basis. There is no activation key or method to restrict the digital content from being illegally copied or used elsewhere without a valid license. The cost for ongoing license (support) renewals should be included within the pricing strategy.

    The above should give you a good idea of where I am and possible where I need to be. A pricing (license & support) model which I’m leaning towards in explained below. In the below example the initial product costs $1,000, but does not include any support.

    1. With Product Purchase: Support purchased @ 30% of list price
    2. During Support Period: Extension of support purchased during the first 6 months @ 50% of list price
    3. Support Expired: Extension of support purchased after 6 months @ 70% of list price

    I believe it should be mandatory for businesses to purchase support @ 30% when they first purchase the product. After that, they can decide to either go without it or repurchase support at a premium of 50% or 70% of the list price.

    Another questions I had was whether the initial product cost of $1,000 should be charged differently based on the number of users each business has (e.g. 1-20, 21-100, 101 to 500 to xxx ). The revenue generated will obviously be a lot larger from larger businesses, which is the appeal. If I should be considering this, how do I go about accurately capturing (or enforce) this information during the checkout on the online marketplace when the business could incorrectly select ‘1-20 users’ instead of ‘500 to xxx users’.

    Thank you for reading and I look forward to hearing your feedback. Have a great ‘safe’ Easter weekend.

    Crimson

    #1195813
    Dave Gillen – Former FS Concierge
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    Hi Crimson,

    Could you give an example of an actual product, and what “support” would entail for this product? Are these products that are available elsewhere or just on your site?

    Dave

    #1195814
    crimson23
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    • Total posts: 22
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    Hi Dave,

    An example of an actual product would be a complex excel template with various formulas/macros/code, which would help small businesses to efficiently prepare tax returns for best results.

    On purchase the product will cost $130 ($100 item + $30 support). Support would involve the author issuing updates to ensure the product works as described, availability of the author to provide support, technical questions about the products built-in features and functionality, assistance with reported bugs and issues.

    Thanks,
    Crimson

    #1195815
    Dave Gillen – Former FS Concierge
    Keymaster
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    Thanks Crimson. If the unique/novel part about your site is the products themselves (or creating a marketplace for them), then I would make the pricing as simple as possible (confusion is a big barrier to sales). That means sticking to convention for how similar types of products are usually priced (I’m finding the “pay for support” model a little confusing).

    If the initial product included support for 1 yr, then you had the option to “upgrade” to the new version each year, then that might fit better with the way people are used to paying for desktop software for example.

    As you’ve identified, there are some issues with licensing an excel file. Many products that “could” be excel files have become SAAS products because it’s easier to control and charge an ongoing fee for access.

    Just some thoughts, but good luck!

    Dave

    #1195816
    crimson23
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    • Total posts: 22
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    Hi Dave,

    Thanks for your input. The unique part of the site is indeed the products themselves, so you are right in suggesting to keep the pricing as simple as possible. With that in mind, the product will be best priced to include 1 year support, so it’s clear to users what they are getting from the start. After that 1 year is over, they must extend their license/support for the product by purchasing an extension at a discounted rate (e.g. 30%).

    The marketplace caters for cloud and on premise systems which is why a SAAS model will unfortunately not be suitable in this instance. As much as I’d like to adopt to subscription model, I can’t see a way around it at this stage. The main reason for this is because Author Joe could upload a product priced at $100, while Author Sarah uploads a product for $500 and Author Crimson a product at $1,000. A perpetual licence model is the only fair way in my eyes in a multi-vendor marketplace environment.

    Thanks,
    Lance

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