profit margin

And Again with CRELoaded – B2B Released

Well, I’m not happy with the pricing on B2B. It is the subscription model revisited. Some very discouraging elements to the new pricing on it.

First, they raised the price – a LOT. I can guarantee they will lose business because of it. Many people who need it, and who would buy it if priced lower, won’t. It does include some tech support, but many of those who need to just get in the door with it don’t really care about that.

The entire package is now $595. An upgrade from 6.2 is $250. They are giving a short term concession to recent purchasers of 6.2, to reduce it to $200. If you just paid $350 for a piece of software, would you be happy about being stung for another $200 when you discover two weeks after you bought it, that an upgrade is impending? They are offering a free upgrade for people who bought it recently – but only to the people who KNEW 6.3 was coming. NOT to the people who didn’t know that – those who bought 6.2 B2B just a week or so before 6.3 standard was released. Those are the people who were caught totally off guard, and had no idea that it was coming.

The nasty part to it is that the price includes only three months worth of updates and patches. That includes bugfixes and security patches! They want another $195 for 12 months of the privilege of downloading fixes! This is not standard for the software industry. The standard is that patches and bug fixes are free, whereas there may be another charge for major feature update versions. This is just a variation on the subscription theme.

I think they should have kept the price lower. I will say this until I’m blue. $300 is one of those mental price breakpoints for many small businesses who need to get in the door with a wholesale-capable cart option. If they needed to cut something, they should logically cut support. Not everyone needs it, or wants it. And business-wise, that would actually increase their profits. Here is why:

If you offer software at a price of $300, with no support, the bulk of what you make is gravy. You maintain the website, the documentation, and the forums. All relatively low costs. Lowering the price increases sales on the items with the highest profit margin. Hmmm…. that’s a good thing!

If you bump the price to $600, you not only slashed your sales by MORE than 50%, you also MORE than doubled the amount of overhead if you justify that increase by bundling it with support. Personal support is expensive to provide. The profit margin on it is very low. You have to hire people to put in hours, to provide that support. You just slashed your sales, and you just slashed your profit margin, both at the same time!

On the other hand, if you charge SEPARATELY for the software, and the support, you come out ahead. At the lower price, sales go up on the things that have the lowest overhead and the highest profit margin. That’s smart! And there is no built in support cost for people who do not need it (many people are perfectly happy using the forums) – support becomes a separate thing which has to then be self-sustaining, as it should be. It becomes the LESSER part of the business, where software sales becomes the greater part. Again, as it should be.

Higher sales, higher profits, with each business owner paying only for what they really need. Everybody wins.

That said, it is also relevant to mention that I’ve been asked to review both the Pro package, and the B2B package. I’m currently selecting suitable projects to use them with, so that they will be truly tested under actual business need conditions. The reviews will happen in two stages – short term first impressions, and long term performance. I’ll be posting links to the reviews here when they are completed.

Note: The opinions expressed in this post are the perceptions of the writer, and should not be interpreted or quoted as fact without corroborrating evidence.

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