Paul Grayson on the Dynamics of the $99 Offer

The main reason why Alibre has been in the news in recent times is because of their ridiculous $99 offer. Back then people started calling the offer unwise because Alibre would get a short term gain, but it would not help the company in the long run. I asked Paul Grayson about this. This is what he had to say:

“The $99 offer was probably the best marketing initiative that we undertook since giving away Express for free, which generated hundreds of thousands of leads. This was most definitely not a short term thing. As customers use the Standard version and find that it works for them, they upgrade to Pro and Expert. We are already seeing a lot of that happening. The point was not to sell $99 CAD. It was to lower the price of entry. We reduced the prices of Pro and Expert as well because we felt that the jump from $99 Standard to $1499 Pro would probably be a large one.

To us, and for that matter, to anyone in the CAD industry, the value of a customer is not the purchase price. The real value is the relationship over years when the customer comes back and purchases upgrades or maintenance. So in effect, we gave up some of the revenue from the initial sale so that we can get more of the back end revenue.”

I asked Paul what he had to say to people who thought that the $99 offer was a ploy to get a bunch of people interested and then fleece them later on. Paul replied:

“Ha! Ha! I must tell you that people who are ready to spend only $99 are kind of hard to fleece. It’s far easier to fleece people who can afford to pay $5000 on a MCAD system. No, this is not a ploy in the way you put it. I mean every business wants to up sell customers. Do you consider that as a ploy? We were very clear with what we were offering for $99 and are very clear with what you get for the $197 Alibre Design Standard plus Maintenance. Our customers know exactly what they are getting and are slowly move up to other more capable versions. This is all part of the plan and it is working. It’s really that simple.”