>>Hi,
>>
>>I have an off-the-shelf package that I developed for sale. I have two options for licensing it.
>>
>>1. a monthly one of US$25 per user per month
>>
>>2. a one off charge with optional annual support from the second year. For the first 5 users US$2,400 and then $1,000 for the next 5 users. Annual support is 20% of their licence.
>>
>>A client who has been using the system for some months now on the monthly plan is expanding and wants to consider the second option for 34 licences (and of course wants a discount). I had never anticipated selling more than 10 licences per customer.
>>
>>Needless to say I prefer the monthly payment as that means I have regular income.
>>
>>How would you suggest I approach this larger number of licences?
>
>Running some basic numbers:
>
>Monthly
>34 users @ $25 / month = $10,200 / year
>
>One-off
>5 users for $2,400
>29 users @ $200 each = $5,800
>Total 1st year $8,200
>Optional subsequent years support $1,640 / year
>
>The one-off option is less expensive even in the first year, subsequent years are gravy for your client.
>
>Looks like you're pricing the one-off option too low or the monthly too high - they're inconsistent. Either the monthly should be roughly the amount to lease finance the one-off cost, or the one-off cost should be the principal amount of a lease finance at $monthly rate.
>
>Don't be afraid to charge for your software. A business person will be thinking, "If I hire a new employee and they use the software, I can net $X per month". In many cases that $X will be a lot more than $25/month; if your software makes employees $25/month more effective, it pays for itself.

Hi Al,

sorry, I should have been more clear. I am aware of the discrepancy in the pricing and will adjust to suit. What I want to know is how do people approach the pricing in this situation? Do you use a tiered approach like I've been using or is there some other alternative?