When entrepreneurs are selling a new product, they need to know how to price that product. There are plenty of variables that go into a product’s pricing — from the cost of manufacturing to the product’s usefulness to even the state of the market at the time — and to be successful, the product’s vendor needs to be able to predict just what his or her customers will be willing to spend on that product. If the seller goes too low, he or she risks significant financial losses; if he or she gambles on a price that’s too high, the product probably won’t sell as efficiently, if at all.

It’s the same with software pricing. If you are a software developer, the price you place on your software will make or break most of your sales, so you need to be diligent about your pricing strategy. You can make smart pricing choices if you consider the following while you plan out the prices of your own software products.

Think Like Your Customers

Yes, you need to factor in all your costs, from development to manufacturing, but these things aren’t at the forefront of your customers’ minds. Rather, what’s most important is how much your customer really needs your product.

Think back to your first economics class. You definitely learned about the demand curve, which predicts that as the cost of a product rises, the demand for that product will fall. For sellers of products — like you and your software — there is a sweet spot between price and demand that will maximize profits.

This sounds exceedingly logical; the only problem is that your customers aren’t always going to think logically. The demand curve doesn’t take into consideration, for example, the perceived value added to a brand-name product or a customer’s illogical and emotional associations with that product.

Perhaps Ryan buys Tide detergent instead of some generic because he really does think it contains more soap; maybe Amy always goes for the Schwinn bike because that’s what her dad rode for years. These customers are willing to pay more for these products for reasons the demand curve doesn’t understand.

If your product can supply any of this intangible value, you may be able to increase your price and thus increase your profits. To change the customer perception of your product, it’s best if you have a unique, novel piece of software that helps individuals or businesses in unexpected and crucial ways. However, smart visual design — think Apple products — can also do the trick.

Think About the Future

Software is changing faster than ever with a great influx of new talent and ideas surging the industry onward and upward. When you’re pricing your new product, consider how these changes will impact how your customers work with your product.

Plenty of software is moving to the cloud, as marketplaces for cloud-based applications grow exponentially every week. Services of all kinds are available online with subscription and without download. Thousands of companies are making the move to the cloud because of its myriad benefits, from flexibility to scalability to increased productivity and collaboration.

It seems as though the cloud is the way of the future in the software industry, so it’s highly possible you may need to make your services available on the cloud sometime soon. No matter how you distribute your software, though, be sure that all your licenses are up to snuff by using a monetization service like those found on SafeNet-Inc.com.

There are plenty of considerations to make while pricing your new piece of software. An amazing resource for new and old developers alike is Neil Davidson’s book “Don’t Just Roll the Dice,” which explains more in-depth strategies for evaluating your product’s value in the market and in customer’s minds. If you price your product well, you’ll find your customers supremely satisfied and checking up on your work to see what else you can supply.

If you mess up and go too low or high, however, you’ll see revenue vanish and your software become buried under the hundreds of new services released every day. It might take some research, but you can pinpoint the perfect price for you.