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Street-Smart Pricing

Marketing to universities, a CEO sold colleges licenses to copy her software and sell it cheaply to students.
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Sometimes tough markets call for new pricing models. Marcel Mendoza, CEO of Edutech, a seven-year-old software distributor in Monterey, Calif., has doubled its sales each year with innovative pricing. To overcome resistance in the educational market, she adapted a pricing model that colleges were familiar with: textbooks.

Educators couldn't fathom buying 500 copies of one of the $500 word-processing programs Mendoza distributes. But they warmed to the idea of software priced about the same as a calculus text. Mendoza developed her "textbook pricing" idea after hearing educators complain about software sold by the unit.

She offers each school a site license based on volume. Working with the college, she projects how many students and faculty members will buy the software, plus how many copies will be used in the campus computing center. The minimum license she sells is for 100 users. "It's like having 'collective individual buyers,' " says Mendoza.

After the school buys the license, students can purchase software that would sell at $250 to $500 retail for an average price of $35 to $75. Mendoza can pass on 85% discounts because her cost of goods sold is reduced, since the school receives one set of disks and must make its own copies of the software. Edutech provides the manuals, minus the boxes. The university bookstore or computer store sells the software, often at a profit thanks to Edutech's prices.

Mendoza says she's had few cases of illegal copying. She's persuaded more software vendors for whom she acts as a distributor to adopt her strategy. She now moves $8 million in software for 12 vendors, about 35% of it through site licensing.

She still sells software by the unit, at about 50% off the retail price, but site licenses represent Edutech's most profitable source of revenues, says Mendoza. "Schools were crying for a good price." -- Susan Greco

Last updated: May 1, 1993




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