Check, Please.

Perceived quality is what a customer is willing to pay for. Take a car, for example. Power and velocity are a proxy of quality by clients. Quality and price of a car are strongly correlated.

Take engineering software then. Simulation accuracy and velocity are two major benefits clients are looking for. The first is how much the simulation fits the reality, the latter is how the product design time can be shortened.

For some reasons the software price continue is not correlated to those qualities and continue to be linked to technical features only. Linking price and the perceived value, makes easy converting software advantages into a premium price.

The Art of Pricing

Sun-microsystems markets the new 8-processors server T2000, that can blow out all the old 4-processors. One T2000 can replace two old servers. Theoretically server sales should be halved. Theoretically. Jonathan Schwartz (Sun CEO) actually says the sales revenues from the new T2000 are growing fast, pointing out an interesting phenomenon: “if you double the performance of a machine, customers don’t buy half as many, they tend to double their order”.

Hardware comes together with the software. Software can solve large problems on many processors at the same time. Each processor has to run one software licence. Still, a double number of processor at the same price, comes with a double software price.

An effect of the above price policy is that massive parallel processing or distributed computing will remain rare, unless software companies will change their price policy.