That doesn't necessarily mean they would have netted more money though, their turnover would have been twice as high, but their support costs would have been 10 times as high.

It's even possible that if their average cost to support a user is high enough that they would have lost money on the larger volume / lower price combination.

If they have little or no cost to support a user though, then they likely missed an opportunity.

That turns out to be one of the central questions of Micro Economics. If the demand is elastic, they would have sold more than 10 times the amount and would net a profit by decreasing the price. If the demand is inelastic they would have sold less than 10x and made less money. Ultimately this is an empirical question that can be tested and validated. Once you know the elasticity of demand (as it is called) for a product, you can calculate the optimal price. e.g. the price that will yield the highest profit to the company.

It's very easy to say what you think the price should be, but the preferred method is to empirically test it and get the optimal value that way. It's a lot easier for the OmniGroup to run a sale and test the change in sales once they have some baseline sales numbers. In almost all cases it's better to be on the high side of the optimal price point and come down to it.

For those interested in starting their own company, it's easy and tempting to start with too low of a price. That low price diminishes the value of your product in the minds of the customers and it is really hard to increase your price later.

Anyway, those are my 2c, and for the record I'm one of those who bought it at the higher price.

This is a great point--once you've set your price, it's very hard to come up. It's a lot easier to establish value with your product/brand at a higher price and then offer an alternative, lower-priced SKU to get more volume while still using differentiation and upsell to the higher margin product. In the case of Omni, think OmniOutliner Pro vs. OmniOutliner.

It'd be interesting to see if a lot of money was left on the table when the iPhone app price rushed to $0.99 in the name of volume over long-term profit. Certainly a win for Apple in gaining end-user adoption of the store and showing that it's a viable marketplace, but I can't help but thinking value isn't being captured by price (a lot of iPhone apps cost less than a disposable, bottled soft drink).

If they decide to drop the price someday, they'll be able to make all those sales too.

It's always easy to drop the price on the app store, but very hard to increase the price. So it's rare to see an app go up in price.

Why is it hard to increase the price? Is it harder on the app store than anywhere else? Is there a way to track the price history of apps, or is there a website that does? I'd love to know, I'm considering making an (expensive) app and pricing is a hard problem for any software product.

Because the users will notice and start slagging you in reviews.

Yeah but that's true for any market. Is there data that indicates that this happens more for appstore software? I mean I'm not asking for a peer reviewed, 1000 apps study or anything, just a plausible indication that the average appstore customer is more likely to do this and/or be influenced by blog posts complaining about price hikes. Maybe just showing that appstore customers are far above average in being likely to read and be influenced by online reviews is enough - if there is some correlation to be made between appstore customer profile and sensitivity to price hikes.

It's not true for every market that customer reviews are prominently featured at the sole point of sale and can immediately reflect reaction to prices set directly by the developer. That combination is pretty unique to the app store right now.

At the risk of training people to wait.

As far as I can remember, OmniGroup has never lowered their prices or had any significant sales. I could be wrong about that though.

I'm sure they know what's best for their business and price accordingly, but personally the only software I own from them is OmniFocus. The reason I haven't bought more is nothing special--cost vs. utility. I'd love to use more of their stuff to enhance blog posts or presentations, but I don't see it happening their $50+ prices unless I have some very specific business purpose or I have a lot more disposable income.

Training people to wait isn't that much of a negative. New people who don't know to wait always show up, and the people you train to wait ensure you have a heavy secondary market (see Trade Paperback books, second run movie theaters, etc.)

I'm just as glad that they didn't. There's a rule of thumb among Mac developers that you need to charge at least $20 to be able to make a decent living off your indie software. Given that we can write more desktop-scale apps on the iPad, I'd guess that it's going to be similar for the iPad.

Anything that helps establish a standard of apps actually costing enough that I can run a reliable business off of the platform is better for me. I'm interested in developing for platforms where I can create a sustainable business, not a hit based one, which is exactly where lower than sustainable app prices lead.

It is hard to overcharge because you can always lower the price if you don't get enough sales, but if you start out low it is hard to raise without pissing off later customers. Considering it is a really useful app primarily aimed at business users $50 sounds low to me.

I agree. The main reason I even came to the comments for this article was to say that. I'd even be willing to pay up to about half what they're charging for it. Up until then, however, I'll go without.