Subject: Re: street performer protocol
From: "Stephen J. Turnbull" <turnbull@sk.tsukuba.ac.jp>
Date: Tue, 16 May 2000 10:21:14 +0900 (JST)

>>>>> "Crispin" == Crispin Cowan <crispin@wirex.com> writes:

    Crispin> The market has exactly one pricing scheme: "what the
    Crispin> market will bear."

And so on ... I'd _love_ to quibble with Crispin's phrasing, but
allowing for the imprecision of using everyday English, it's bang-on
the "received theory" so I'll leave it alone.  (Probably more
intelligible that way, anyway. ;)

But I don't think either Jonathan or Brian disputes that analysis.
The real point, IMO, is that Jonathan's (stated; I'm sure he knows the
competitive market song-and-dance, too) argument presumes a highly
customized, specialized market (note he never mentions other
customers; other customers are relevant because you get better at
building products, and so can sell to them at higher profit when
possible, cheaper when necessary), while Brian is presuming a
shrink-wrap style market (he talks about the other customers and other
firms selling the same product).

    Crispin> If you are the only competent producer in your
    Crispin> "neighborhood", then go ahead and play hardball.  If you

With one caveat: to get the highest price, you need to build the
highest quality product---but that may last long enough to interfere
with your ability to sell the product next time around.  (This assumes
no service needed, as in the business model described for Sleepycat.)
So you may want to "invest" in goodwill (in the psychological sense)
by charging a "reasonable" price rather than "what the customer can
bear".  To be fair, this is one of Brian's arguments, but his
presentation suggests that goodwill == lack of resentment, which I
think is not an appropriate business model.  (It patronizes the
customer.)

    Crispin> are not the only producer around, you either need to
    Crispin> compete, or hope that the competion's marketing sucks so
    Crispin> bad that the consumer is unaware of the competition.

Which is it?

I don't think anybody is good enough at producing software reliably to
budget that more than a few firms can hope to survive long in the
shrink-wrap market, period, and open source firms are at a
disadvantage because they do not have a reasonably long "initial
monopoly" period to build up reserves for the next "killer product."

So I think that the strategy for open source firms producing products
has got to be highly customized, near one-of-a-kind installations.
Which points to Jonathan's view of the pricing realities more than
Brian's, I would say.

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