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Friday, May 28th, 2010
You can tell a lot about software by looking at the pricing modelBy Tyler King
When evaluating software, nothing can replace a thorough test drive, but there are a few red flags you can look for to decide if an option is even worth testing. In my opinion, the biggest indicator of quality is the pricing structure. By looking at how a company prices their product, you can generally tell a lot about how much they believe in it.
I'm going to go over some common software pricing schemes and I'll explain how you should interpret them. Obviously, these rules aren't set in stone, but they act as decent guidelines when you're forming your first impressions.
1 - The software is completely free
Free software is hard to judge, but it's normally not a good sign when business software is completely free. When something is free, that means the company makes money in less direct ways (such as selling your information). This can be fine with consumer products like Facebook, but it's unacceptable when it comes to your business's sensitive information. Unless it's made by Google or some other reputable company, you should be suspicious of free software.
2 - There is a limited free version, but you have to pay for the full version
This model shows that the company believes in their product enough to let you try it, and they think you'll like it enough to decide to pay for it. This pricing model is generally a good sign, but there's one thing to watch out for. This model is common among companies that nickel and dime you to death after you're hooked (think Turbo Tax). They can upsell you until you're broke, so make sure you understand exactly how much additional features cost before committing.
3(a) - There is a free trial after which point you have to pay
This is my favorite model because it shows the ultimate confidence in the product. You get to use a full version of the software for free. You'll only pay for it if it's good, and the price is clear. I think that this is the most honest and upfront system because the customer knows exactly what to expect. It's no coincidence that this is how pricing works with Less Annoying Software
3(b) - There is a free trial, but you have to give your credit card info to start the trial This is a small variation on #3 where there's a free trial but you have to enter your credit card info to start the trial. Normally a company will only do this because they hope you forget to cancel. You should be very skeptical of any company that uses shady tactics like this. 4(a) - You pay the full price up front Thanks to the internet, the logistics of offering free trials are easier than ever. This means that if a company wants you to pay for software before trying it, they've probably got something to hide. If you can't test it out, it's generally not even worth considering.
4(b) - You pay a setup fee in addition to the normal price
Some software companies charge a monthly or annual fee, plus a one-time setup fee. To me, this means that the company wants to make as much money off you as they can before you realize their product sucks. The only time this is ok is if setting up the software actually requires real physical resources that cost the vendor money.
This post is already too long, but I'll leave a couple more red flags to look out for in the comments. Feel free to join the conversation.
Tags: picking software, Pricing
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This blog helps small businesses find and use easy, effective software. Most technology is meant
either for individual consumers, or huge corporations. We'll help you find the tools that are
powerful enough to help run your business, but simple enough that you can start using them by
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This blog is written by the co-founders of Less Annoying CRM. We build an easy customer management tool that helps small businesses organize customer information and track leads. If you have any feedback about this blog, please feel free to contact us.
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