If you're unfamiliar with Reflector and its history, you can catch up in under a minute with the bulleted list in my previous post.  Since the announcement, I've read every tweet that had "redgate" in it.  I read the Red-Gate forum posts.  I read the links that are in the tweets and the forum posts.  And, I read all of the 132 comments that I received after offering to buy 10 licenses at $35 per (which Red-Gate then matched with 100 more and bumped them up to the $95 Pro version).

As I mentioned in the previous post, there is a lot of information surrounding this event that is valuable to any entrepreneur, executive, marketing person, or product manager.  Here are some of the lessons that I've learned from the experience:

Free Is Unlike Any Other Price

I had read that "free" is a unique price in Predictably Irrational by Dan Ariely, but there's a big difference between reading about it in a book and watching people freak out over it.  Almost all of the negative posts that I read centered around "Red-Gate said it would stay free and now it's not".  I'm guessing that there wouldn't be as much noise if the situation had been "Red-Gate said that it would stay affordable and now it's a little less so" . . . it just doesn't have the same punch, does it?  To be clear, I understand that "free" does have some unique properties: zero risk, zero acquisition friction, etc. and I'm not suggesting that people shouldn't feel they way they feel.  The lesson learned here is that "free" needs to be treated differently and that it's risky to price anything as free that can't stay that way.

All Information Gaps Will Be Filled

If you've read most of what's been written about this event, you'll notice 2 things about the information:

1. It's incomplete.
2. People will fill in the gaps with their own beliefs.

I read everything from "since Lutz got paid" and "Lutz may not have done the deal if it wasn't going to remain free" to "Reflector should go back to being open source" and  "Red-Gate installed a timebomb in it".  To the best of my knowledge, the details of the deal were never made public.  That means that unless you're Red-Gate or Lutz, you don't know the details.  As for the open sourceness and timebomb: Plenty of people have pointed out that it was never open source and the timebomb had been there for years before Red-Gate acquired it.  The lesson learned here is that any information gap will be filled by someone, at some point and that you might want to consider a defensive move of laying out relevant facts when it's time to announce an unpopular decision.

Non-Physical Products Are Different

People have a different view of non-physical products compared to physical products.  If you buy milk from the store, you don't expect it to last forever.  You know that it's an exhaustible resource that disappears as you use it.  As a physical object, it can't be 2 places at the same time.  Non-physical products have non of these limitations.  Because of this, limitations built into a non-physical product are often seen as taking something away from the end user.  DRM for music, games, and movies is a good example since it so clearly takes away capabilities from the non-physical product.  People hate DRM for a variety of reasons, but one of the most common is that it makes the non-physical product behave in unexpected ways.  All of a sudden you can't listen, play, or watch – not because your network connection went down but because someone made the media require a continuous connection.  That was a limitation that was consciously built into the product.  The timebomb in Reflector is similar.  Except for trial software, most people don't expect software to expire.  When the expiration comes, it's not only unexpected but it's clear that it was put there consciously which can lead to feelings of "you did this to me".  The lesson learned here is that if you're going to do something unexpected, make sure people are aware of it and consent to it in order to avoid an emotional response down the road.  As a point of clarity, "aware" means that they actually know what's going on which means it can't be buried in a EULA.

Developers Are Even Differenter

I lumped music, games, and movies together above when talking about non-physical products because they all have a similarity that separates them from software: most consumers can't create their equivalent.  Once you get into the realm of software, then things get a little stickier . . . all of a sudden you're talking about things that could be created by the end user, although it's often impractical for them to do so.  If you narrow things down to "developer utilities" then you're on really thin ice.  You are actually targeting a market segment that is often qualified to create the thing you're selling them.  Most of the time they'll be very rational about purchasing tools: "This will make me better.  It would take longer to create this myself then the price divided by my salary/rate.  I should buy this."  If something happens to suppress the rationality (like messing with "free"), then they can quickly go into "I don't care what it takes, I'll build it myself!" mode.  The lesson I learned is that when targeting developers as a market, it's important to avoid doing anything that might flip the rationality switch.

Conclusion

To cause the reaction we saw over the last two weeks, it's safe to say that Red-Gate made a mistake.  What's not clear is exactly where the mistake was made and what should have been done differently.  It's not clear because we don't have all of the information.  Don't let this opportunity go to waste, though.  There are some folks who paid steep tuition for the lessons that you can learn from this experience.