Cheap

Most current software products sell at price points ranging from one sixth to one eighth the price of AutoCAD. Around Autodesk it's sometimes easy to forget just how high the price of AutoCAD is. Also, there's a tendency to forget that this wasn't always the case. When AutoCAD was introduced, it was priced at $1000, and for much of its history it sold for roughly $2000. This was a premium price, but much closer to the mainstream of contemporary software.

In fact, the combination of AutoCAD's high price and high volume is, to my knowledge, unique in the industry. Software this expensive tends to be semi-custom products or packages that address a small vertical market, not something sold by dealers with an installed base numbering hundreds of thousands.

Any company able to command a premium price should feel gratified; it's the ultimate verdict of the market on the quality and utility of the product in question. However, when the premium approaches an order of magnitude above other products with similar or greater development investment and, at the same time, dealers find it increasingly difficult to sell the product at anything approaching the recommended retail price, it's time to ask the following question.

``What price point for AutoCAD generates the maximum revenue and profits for Autodesk and its distribution channel?''

I'll skip the refresher course on price elasticity curves from Econ 101. Just recall that beyond a given point raising the price of a product reduces revenue by causing volume to decrease. In the longer term, overpricing renders a product vulnerable to lower-priced competition.

In an environment where concerns about grey market distribution, software piracy, health of the dealer channel, faltering sales growth, and worries about margins abound, it would seem wise to revisit the question of AutoCAD's price and ask whether it is consonant with the pricing of software products which will maintain and expand their leadership in the 1990s.