My father used to say that about cheap shoes but I later discovered it applied to software too. When I took over as the CEO at Excelan, Our TCP/IP software was priced at $65 per copy. No matter what computer it was used on. It was buggy and our customer support was sucky to say the least. Math said that there was no wat we were ever going to make money at that price. Customers were frustrated, I was frustrated and our employees were frustrated. Overnight I decided to raise prices ten fold. I hired people to provide customer support and beefed up our QA/QC department. prices stuck, quality started to improve and customer service got much better. I was later able to raise prices ten fold again. Customers mumbled but they had no alternative and they needed the functionality we were providing. We came to be known for a good quality product and excellent service and became very profitable.

Every body is a loser when you provide cheap shoddy products. Market clearing prices are set by the competition. Customenr does not remember what he paid but he for sure remembers what he got.

Ratan Tata learnt that lesson with Nano. He was fixated on one lakh price when the cheapest alternative was six lakhs. One has to provide quality product at a reasonable price. Customers deserve that, but you need to be able to deliver that and make a reasonable profit.




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