How to price Software?(versioning SW)

It’s a mechanism of segmenting your users according to their willingness to
pay. You figure out if you can group your customers in different ways,
and then see if those groups are willing to pay different prices for your
product.
Here are some of the ways of doing it:
• By feature. For example, you can have ‘standard’ and ‘pro’ versions of
tools. This is extremely common in the software business. Microsoft’s
Visual Studio 2008 comes in five different versions: Express
(free), Standard ($299), Professional ($799), Team System ($5,469) and
Team Suite ($10,939). That’s a price for everybody, with features to
match, from the cash-poor hobbyist to the rich, blue chip enterprise
developer. In the Time Tracker 3000 example, you might create a professional edition that lets people compare how their usage of different products compares with other people doing similar work.
• By availability. Some of your customers might be prepared to pay
more to get your product quickly. Hardback books are a good
example of this. They have the same content as paperbacks, but are
packaged differently and aimed at people who cannot wait for the
content. For the Time Tracker 3000, you could sell an additional
subscription service that gets customers early access to software.
• By demographic. Students have less money than businesses, hobbyists
than professionals and school kids than baby boomers. You could
provide a version of the Time Tracker 3000 which students could
get, but only if they prove they’re in full time education.
• By geography. Customers in the USA will pay more for the same
product than those in India and China. Microsoft, to compete with
the threat of open source, provides a cut-down ‘starter’ edition of
its Vista operating system, available only in poorer countries such
as India and Mexico. The Time Tracker 3000 might be available in
India for 10% of its US cost, but be localized into Hindi, rendering it
useless to Westerners.
• By industry. Perhaps architects, or software developers or aircraft
designers have specific needs, and perhaps your software can be
customized to suit them. The Time Tracker 3000 could come in a
special edition, aimed at law firms, that not only tracks application
usage, but also bans certain applications.
• By platform. Mac users might be willing to pay more money for
your software than Windows users, or vice versa. You could sell a
Time Tracker 3000 for the Mac at a higher price than the Windows
version.

Dangers of Versioning:
You need to make sure that the features you choose for each version appeal to the segment you’re targeting.
Versioning only works if people can easily compare the products being versioned.

When people are presented with a bunch of confusing options they
cannot compare, going for an extreme isn’t their only option.
They also have a tendency to defer: to simply not buy, or go for a
competitor’s product.