Brent Simmons: Deflation and Introductory Pricing.

"At first glance, I think this argues in favor of having introductory pricing when releasing a new product or a major new version of a product. It increases demand in the short term, since people know that the price will go up."

I mostly agree with Brent's post. And here's an interesting problem Flying Meat will be running into shortly with VoodooPad 5: there's no upgrade path for folks on the Mac App Store. If I want to get paid for the work I put into VoodooPad 5 (from existing customers) I have to remove VP4 from sale, and create a brand new app on the store (VP5).

Traditionally FM has offered upgrades to previous owners for ~50% of the original price. But since there is no variable pricing on the MAS I have to either charge everyone full price or have an introductory price that everyone pays.

Here are some different models that can be used:

VP5 as a new MAS product and charge full price.
This is the way Apple has historically gone with the iWork and iLife suite of apps. The upside of this is that I capture full price from new customers, the downside is that I risk angering existing customers who are used to paying the upgrade price.

Adobe also recently used this model updating Photoshop Elements 9 to 10 on the MAS. There didn't seem to be much anger in the marketplace that I could see though.

Apple used to have upgrade paths for its Pro line of software, such as Aperture. However that seems to be gone with the App store as well. When Aperture 3 came out it was $199 new, or $99 upgrade. These days it's only available on the MAS at $79.99. (Apple has also taken the Aperture trial away).

Update the existing MAS product, everyone gets upgrades for free.
In the short term, this is the best scenario for the customer. This also means I have little incentive to put "real work" into future VoodooPad updates. In my experience, pushing out a major update to an app is equal to or harder than writing a new app. And since I need money to support myself and my family, this isn't a great option for FM.

I can already hear someone saying "just charge less and you'll get four times as many customers- which is twice as much money!". This will also multiply the support burden (and probably by more than 2x). Lower price means more people will buy a product on a whim. I'd rather have fewer customers that have done the research, compared multiple products, and is willing to pay a higher price for a product that fits their needs.

VP5 as a new MAS product with reduced price (forever).
This is probably the next best model for the customer. Everyone gets the upgrade price! Forever! But what do I do a few years down the road when VP6 is released? Cut the price in half again, to 1/4 the price of VP4? I just don't think this is sustainable model.

VP5 as a new MAS product with "introductory" reduced price.
With this model I'll run into the problems that Brent describes, and as another indie dev has pointed out - I'm not capturing the right amount of money from new users. And what about people who want the upgrade price after the intro price is gone?

But this is probably the best model for me to use with VP5.

As an aside, when I introduced Acorn 3 with an introductory price it had one interesting (though rare) side effect that I hadn't expected: spite. Some existing customers were upset that new folks got the intro price! However it was rare and I brushed it off, because spite sucks and I don't want to touch it.

Update: A couple of people have mentioned In-App Purchases for new features. So I'll add my thoughts on that:

In-App Purchases
So the idea is that I could update the existing VP4 MAS product, and then say "hey if you want these neat new features, send me some money!". Or maybe give a free download, and have those features available for in-app purchase.

Then I think about what I'd want as a user of other people's software, and this isn't something I'd like. So I don't think I'll be taking this approach either.