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Because “tariff” may
not be a good term to use in this context, I will use “rate” instead from now
on. A “rate” is what one decides to be the price or value per unit of something
[or the price or value of some quantity of something]. So, “Total price =
<units> x <rate>” or “Total price = <quantity> x <rate>”
or “Total price = <quantity> x <price of this quantity>”.
Suppose one sells
widgets. Say, for 1 to 10 widgets, the price per unit is 10; and for 11 to 50
widgets, the price per unit is 9. If one sells 4 widgets, the total price is 4
x 10 = 40. If one sells 20 widgets, the total price is 20 x 9 = 180.
The logic of “Total
price = <quantity> x <rate>”, is identical to the logic of “Total price
= <base price> x <multiplication factor>” that I discussed earlier.
The “rate” or “multiplication factor”, is the price of a quantity.
The “base price”
doesn’t look like a “quantity” at first sight—but in a way, it is. It is actually
the price of a quantity. If, for example, the base price is the price of the
smallest desktop license for the fonts involved, then that base price is dependent
on a quantity. The base price may be the price of a single font, of four fonts,
or of a complete font family. So, the base price is the price of some quantity
Example. When there
are three size ranges, “below A”, “between A and B”, and “above B”—then there
will be a different price (rate, multiplication factor) for each of those
ranges. When only differentiating between a single font, four fonts, and a
complete font family, the following table is an example of different rates:
The rates I use for “big
deals”, are based on educated guessing. Now I will—especially for Joyce—reword
the question I asked at the end of my previous post.
Joyce, the pricing
table of your “App Addendum”, has exactly the same logic as the table above:
Different columns for a different number of font styles, and different rows for
different user size ranges. Now I wonder, for the bigger size ranges (i.e. at
the bottom of your table): Are those prices based on a calculation, an educated
guess, and/or on something else?
Joyce, in the
pricing info about your “Distribution Addendum”, it says: “Pricing for
distribution addenda is four times that of the same number of styles and CPUs
for a basic license”. Now I wonder: Is this multiplication factor “four”, based
on a calculation, an educated guess, and/or on something else?
In the article [www.inc.com/guides/price-your-services.html] “How to Price Business Services”,
three different ways are described to determine the price of what one sells: “Cost-plus
pricing”, “Competitors’ pricing”, and “Perceived value to the customer”.
For a story about
deciding what a fair price is of something you sell, see here: [www.inc.com/magazine/20010401/22307.html].
I think that
sometimes, educated guessing is just unavoidable. My questions were meant to
illustrate that. Having a pricing table for an “App Addendum” specifying a
price of $54,000 for unlimited use for one year for 6 styles, doesn’t explain
why it is that amount—and not, for instance, $44,000 or $64,000. Having a
multiplication factor for a “Distribution Addendum” of 4, doesn’t explain
why it is that factor—and not, for instance, 3 or 5. A suggestion that
all such prices or multiplication factors, can be calculated in some way, or
can be decided in some ‘objective’ way, or are completely based on some
measurement, is misleading to me.
Joyce, on a
fundamental level, your approach is not unlike my approach—except for the “big
I do agree that, in
general, consistency is a good thing—although consistency does not rule out
arbitrariness in the sense of being unfair. (It does rule out arbitrariness in
the sense of not adhering to a system.) So, something that is systematic, is
not automatically fair.
I do agree that in
the context of a pricing table, calculating individual prices (between the
lowest and highest prices) is not needed when the idea is to have a “logical
relationship” between the prices in the table. I also believe that it is
possible to decide what the prices should be at the top of the table (i.e. the lowest prices for
the lowest user size range), because it is possible to find out what kind of
pricing is common in the market for such licensing.
But what about the
bottom of the table (i.e. the highest user size range)? How to decide what the
highest prices should be? Can those highest prices be calculated, when only the
corresponding lowest price is known? Is there a logical step to derive a
highest price from its corresponding lowest price? I don’t think so. I believe
that the “logic of the table” doesn’t help to decide what the prices for the
highest user size range should be. So, for instance, the “logic of the table” doesn’t help to decide
whether a highest price should be $44,000, $54,000, $64,000, or another amount.
Also, for the
highest user size range (the “big deals”), I believe that it makes sense to
decide about the price on a case by case basis—as far as such cases are
dissimilar. For me, the highest user size range is the “educated guessing
In my opinion, by
itself, a consistent pricing system does not automatically produce a fair price
for the highest user size range (although a pricing table with a consistent
pricing system, is a great instrument to ‘sell’ such a highest price to a potential customer).