Subject: Re: offering pre-purchases
From: "Stephen J. Turnbull" <stephen@xemacs.org>
Date: Thu, 11 Oct 2007 03:57:12 +0900

Thomas Lord writes:

 > Stephen J. Turnbull wrote:
 > > One further issue that occurs to me, one that Joel discusses but Tom
 > > misses, is discounting.  Not only is delivery of "pre-purchased"
 > > software is uncertain, reducing the value, but this is compounded by
 > > the fact that it's in the future, which also reduces the value, while
 > > payments are up front.  No accountant is going to approve that.

 > The delivery of a hypothetical release is in the future, certainly,
 > but the customer relationship commences immediately upon
 > purchase.   For example, if I get a phone call or an email from
 > a customer, that's different than if I get one from someone else.
 > 
 > So, the value is certain and begins immediately upon purchase.
 > 
 > That has been my first customer's experience, at least.

I don't doubt it (well, I do have strong reservations about the
*extremely* loose way you use the words "certain" and "immediate", I'd
almost think you were quoting from a marketroid white paper ;-).  But
does it scale?  Linear extrapolation from a sample of one is simply an
exercise in wishful thinking, especially with a coefficient of "1.000".

Ie, *that* customer relationship is currently effectively that of an
exclusive contractor, because there's only one.  As Santiago Gala
points out, it only takes two, at most three, before they start
competing with each other for your attention.  At that point the value
degrades.  "When" and "how much" are both uncertain, and therefore the
value is uncertain.

I'm sorry, Tom, but you just don't seem to get it.  What you are
currently doing is a hobby that occasionally returns a few bucks.  You
can afford to give each of your only customer the kind of attention
that a gal with $100 million to invest gets from her personal banker.

To turn that activity into a business, even a "lifestyle business",
you need to scale it and smooth it.  Both will impact your customer
negatively, and at rather small scales and moderate degrees of
smoothing.