Will a lower price tag sell more?

When it comes to pricing, software is a mystery.
SimpleMovieX, my flagship product, is no exception. Along all 2008, I’ve used a unique price tag world wide: $35

But in the last 18 months, global currencies have fluctuated quite a lot: Euro and Dollar, to take the prominent ones, have ranged from 1.25 to 1.60, a 25% variation. If we remove low and high peaks, we have sustained exchange rates between 1.35 to 1.55, still a 15% variation.

How does this affect sales? In July’08, SimpleMovieX was 25% cheaper to a French customer than in October’08. Furthermore, this variation breaks psychological price thresholds, like the 30 euros barrier: 27 euros in July, 33 in October (including VAT)
In the meantime, the US customers don’t see a price change, so they can be considered the “reference group”.

Euro / Dollar exchange rate

Let’s do the statistics on the sales between May’07 and Oct’08, a period of 18 months that sees an increase of Euro of 15%, then an abrupt decrease of 25%.
I plot a XY chart of quarterly average values. In X, the Euro/Dollar exchange rate, in Y the ratio of sales to US customer to sales to Eurozone customers.

Correlation chart between currency and sales ratio

Conclusion: No correlation between the two factors. (I was expecting a line, I get a cross!)
Euro customers don’t purchase more when the price of SimpleMovieX goes down.

Classic economic theories of demand/offer balanced by price do not seem to apply here. Software pricing remains a mystery.

1 Comment

montse30December 12th, 2008 at 11:31 pm

nice analysis, but should take into account more factors.