> Do you look to the market to price (external input) or do you primarily look internally (we think it's worth xyz and adds $x value therefore..)? Whatever you

> Do you look to the market to price (external input) or do you primarily look internally (we think it's worth xyz and adds $x value therefore..)? Whatever you do, don't look internally. Your estimate of what it's worth is always awful. Why? Because prices aren't measured on a linear scale. Just to take an example from every day life: books. A lot of people make impulse purchases of books in the $10-$20 dollar range. Let's call one of those people Bob. It doesn't matter much if Bob is short on cash, a $10 book is easily bought. Often, Bob won't read the book, or won't finish it because it may not turn out to be very good. And curiously, Bob will not save to buy a $30 book, that he's sure he's going to like, because it's simply priced outside of the arbitrary range. In our minds, good books are not allowed to cost more than bad books. If we see two John Grisham titles laying next to each other in the bookstore, and if they're priced differently, what do we assume? a) one book is much better/enjoyable/exciting than the other book b) one book is newer/more popular/hardcover/etc Think about this. It makes no sense that (b) is the right answer. And yet it is. Mostly, I think, you have to find the right price point by experimentation. Don't be afraid to raise the price when you release a new version, and don't be afraid to lower the price with holiday certificates. Then measure and refine. A lot of people are afraid of raising prices because they might lose customers that way, but compare that to all the money lost by giving away your product too cheaply.