What is your upgrade policy for a new release?

For a desktop business application, what should the upgrade policy be? Should upgrades be free? 50% discount? What if they just bought the old version last month?

Some companies charge annual "maintenance" fees or subscriptions for this sort of thing. If you don't have that kind of thing, think about doing it. You have to be fair though - if you don't have regular releases then you are just ripping them off.

If it was me I would give them a free upgrade and then formalize a policy and publicize it.

I would probably even give people who just bought a new version a month prior a free upgrade.

I agree with Tim on implementing an annual maintenance charge at some point. You can set the price at somewhere between 10% and 25% of the list price for the software. Don't set it at the sale price, because if your sales force heavily discounts the software, you will lose on maintenance revenue also.

Of course, there are many models and which is best depends on a lot of factors. Mine is:

• minor releases are free
• major releases are free for 3 months
• paid major upgrades are 40% of the original price

I think that is fairly typical.

Whatever you choose you should state your policy clearly before they purchase, not decide retrospectively and:

• don't do major upgrades more than once a year
• don't offer free upgrades for life. Many have done so and then bitterly regretted it later. See:
  http://successfulsoftware.net/2008/09/08/should-i-give-free-upgrades-for-life/

So here's an alternative perspective, obviously not relevant for your current customers, but something to consider going forward. Instead of selling your application 'outright' and then having to worry about how to get people to pay to upgrade, an arguably better model is to offer an annual subscription which includes all maintenance releases and upgrades during the period. This works best in the enterprise space - buyers often prefer a predictable annual cost of ownership rather than having the uncertainty of being hit randomly with upgrade costs.

In terms of pricing the subscription, that isn't always easy as it will usually be less money than you are charging outright. This means an immediate hit to your bottom line for at least the first 18 months. However, beyond that, you should start to develop a nice steady recurring revenue, meaning you're no longer 'only as as good as your last sale'.

NB As Tim notes above, to be fair to your customers, this model does rely on you continually moving the product forward; otherwise they're just going to feel that they're being ripped off.

For a desktop business application upgrades should never be free (outside of the limited upgrades you offer with purchase). Your web site should have an upgrade and support policy page that explains this to your customers. Your exact policy will vary based on your market (small business, medium, large) and the nature of your product.

We offer the following:

1. 6 months of free upgrades for the product, not including major product updates
2. 1 year of product support / maintenance

Our products all have a check for update button and an automatic reminder once per year that a new upgrade is available and that their mainenance term has expired, It's nice tohave an automatic source of additional income and updates do that for us.