Smelling it as it is
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Binarynow ends pay what you like test
SOFTWARE RETAILER Binarynow has ended its two week 'pay what you want for software' experiment.
During the course of the fortnight the reseller was offering punters the chance to buy popular software titles, including Kingston Office and Kingston Security, for as little as $1 each. The firm ended the two-week trial today, and as promised, has given us a look at the experiment's results over the period.
Although we reported earlier that in some cases Binarynow did not make a profit on sales, owing to things like the associated processing fees, Premysl Pech, the firm's president, believes the trial was a success.
According to the company 82 per cent of shoppers plumped for the cheapest option, a required $2 investment at $1 per application, while about seven per cent paid more than $2 but less than $10, eight per cent paid $10, a few paid more than $10 but less than full price, and in the end oniy 0.6 per cent paid the full retail price of $39.95. The average price per order was $3.32. Speaking after the figures came out Pech said that the fact that some people paid more than the lowest price, was "reassuring".
The website saw a conversion rate, the difference between visitors and shoppers, of six per cent, and on its best day, December 9th, counted up 18.5 per cent of all sales.
Commenting after announcing the results, Pech told us, "Our common conversion ratio is about one per cent (this is the industry standard). Six per cent is definitely more than I would expect. I call it success. We did not really have any expectation as we were doing this for the first time."
Pech added that Binarynow was not ruling out a repeat of the trial. However, it is unlikely to happen in the near future. "Possibly", he said, "But not any time soon. We may try to do [it] again next Christmas with a different product." µ
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Kingsoft Office 2010 is released and it is free upgrade to previosu 2009 users.
Visit:
http://www.binarynow.com/products/kingsoft-office/
This math could work, but there are also other aspect to consider.
1. It assumes that they did not recieve more visitors, which is hard to believe that this could be the case here. If the number of visitors double, the sale is the same.
2. More customers means, more support expense, but it also means more revenue in the future from antivirus renewal and software upgrades.
3. Usually you need to spend significant amount to 6x increase the traffic. So this is trade off for marketing expense.
Honestly, As a user I prefer when vendor give their "sales" away, vs. spend their money on advertisement. It seems to be a nice guesture.
I have some doubt that this could be a good long term strategy, but it seems as perfect short term promotion. I hope other software vendor will do it, too.
Their conversion rate was up 6x, but their average selling price was down over 10x. This new business model gives them 6x as many customers to support at half the revenue of the original model.
[jim@mb ~]$ cat x.py
for v in [10,100,1000]:
print "For %d visitors:" % v
print " Old buyers:", .01*v, "revenue", .01*v*40
print " New buyers:", .06*v, "revenue", .06*v*3.32
[jim@mb ~]$ python x.py
For 10 visitors:
Old buyers: 0.1 revenue 4.0
New buyers: 0.6 revenue 1.992
For 100 visitors:
Old buyers: 1.0 revenue 40.0
New buyers: 6.0 revenue 19.92
For 1000 visitors:
Old buyers: 10.0 revenue 400.0
New buyers: 60.0 revenue 199.2
I'd rather make twice as much money with 6x fewer customers.
Here is a link to complete "Pay What You Want" expirwment wrap up.
http://www.binarynow.com/office-suite/pay-what-you-want-experiment-wrap-up/