If you're in the software business and you haven't read this book, chances are you don't know what's going on. This may sound a bit abrupt, but that is the way it is. Bsaic concepts like lock-in and the need to differentiate are discussed in a clear and useful way. If more people would read this, a lot fewer mistakes would be made.

Both authors are professors at the University of California at Berkeley. This book deals with how unchanging principles are being applied to the changing conditions and technologies of information marketing (software).

A unique condition to today's information economy is that it's products are costly to produce, cheap to reproduce and without fixed supply. Value must be created by 'versioning' and personalizing a product in a number of different ways. The other alternative is to become a cost-leader commodity seller.

How to lock-in your customers for the long-term is discussed, as well as how not to be locked-in by your suppliers.

The pros and cons of evolution strategies are explained. Should your product be backward compatible or cleanly break with old technology?

Best in this book is how different positive feedback approaches can put your company in the super-accelerated growth mode.

Five Bright Stars !

The arrival of the Internet and the information explosion it created has made it possible for inventors and entrepreneurs to build a business from scratch to worldwide marketing capability in a very few years. The authors of this book take the position that all too often we are deluded into thinking certain and tried and true economic principles have been abolished by this new Internet economy. They argue their position without jargon and with examples taken from the real world.

While old pricing ratios and old pricing strategies may not apply in the information age, new pricing ratios and new strategies have taken their place. Information goods can be costly to produce but cheap to reproduce. For example, a copy of a 100 million dollar movie on videotape costs a few cents to make. So pricing cannot follow, say, a 20% markup rule when the unit cost is essentially zero; "you must price your information goods according to customer value, not according to your production cost."

Several chapters cover pricing strategies and how to maintain control when some "view the Internet as one giant out-of-control copying machine." These strategies involve methods for differing your product from your competitors, avoiding sky-high initial pricing that encourages competition, and customizing. Interestingly, they note the "one-to-one marketing" strategy was "first described by economist A.C. Pigou in 1920."

Sometimes literally giving a product away works. The book describes how the former school teacher (Sheryl Leach) that created Barney gave free videos to day care centers and others located near the stores selling the Barney tapes. A note inside told parents where the stores were. It worked magnificently and Barney is now one of todayýs icons.

The development of digital watermarks has provided one tool for controlling piracy of your web presented material.

An important information age problem is recognizing and dealing with "lock-in." The writers compare cars with computers. You can switch from a Ford to a Chevy with no trouble, but changing computers may obsolete your present software. How do you convince customers to switch to your product or service when a switching cost is involved? The authors discuss several strategies.

Problems with "lock-in" and "switching costs" also often occur when you purchase durable equipment and service contracts. The authors advise you to carefully consider the costs of being locked-in to you supplierýs parts and services. They especially caution regarding "evergreen contracts" which automatically renew.

Many interesting historical examples are used to drive home points. Edison, for example, with regard to establishing standards, invented the word "Hello" for answering the phone. He was hard of hearing and the English "Hallow" didnýt grab attention as well. Incidentally, Alexander Graham Bell pushed for "Ahoy." The battles for standardizing railroad gauges and the classic standards battle that established AC power over DC power are detailed. (No mention of Tesla, a shame.)

The enormous role "blocking patents" can play when a formal standard-setting process is taking place within an industry is discussed. Most people think of industry standards as being dictated by the mighty corporations, but if the small guy is not invited to the table his firm "is not required to license its patents on fair and reasonable terms." The government may also monitor a standard-setting procedure with regard to monopoly considerations. When the steel electrical tubing people attempted to stack the deck, the plastic electrical tubing people cried foul and won.

Yet another interesting historical example is given in the discussion regarding how the concept of reasonable royalties and "just price" arose. It goes back to medieval times: "the just price of a horse was the price that would prevail at the open market at t

I saved a lot of money buying this textbook on-line. It was in good quality.

Although this book was written in 1998, it is just as relevant if not more so today. The book discusses how Internet entrepreneurs should price their goods/services; how they can create lock-in effects to instill customer loyalty; and perhaps most importantly, how they can create network effects so as to exponentially increase their client base and barriers to entry. A brilliant book written by two leading authorities on economics.