We should start with Cost-volume-profit analysis. With Cost-volume-profit
analysis, we can determine how many donations we need for LibreOffice to
breakeven and how many donations we need to reach a target donation amount.
We start by dividing costs by fixed and variable costs:
LibreOffice Fixed Costs 2022:
Legal Advice $50,736.31
Infrastructure, Hosting, VMs, Cloud, Domains $59,082.43
Insurances, Fees $4,640.58
Accounting, Tax and Legal Advice $33,992.64
Fees for Banking and Money Transfer $67,319.98
Running Costs, Fees, Contributions $31,210.62
Depreciation/Investments $2,796.22
Total Fixed Costs $239,988.11
LibreOffice Variable Costs 2022:
Developer Conference $56,454.94
Marketing/Community Projects $20,363.67
Student Project $11,871.93
Promotion of Projects and Organizations $4,064.41
Test Procedures for Quality Assurance $12,943.99
Improved Implementation of Complete Character Sets $12,519.91
Implementation of SmartArt $48,054.55
Cost Employees/Freelancers $674,898.44
Total Project Costs $217,009.71
Total Other Expenses $196,246.25
Total Variable Costs $1,253,339.30
Formulas for Breakeven:
Number of One Time Donations = Total Costs / One Time Donation
Number of Monthly Donations = Total Costs / (Monthly Donation * 12)
Number of Quarterly Donations = Total Costs / (Quarterly Donation * 4)
Number of Yearly Donations = Total Costs / Yearly Donation
Given the default donation options on LibreOffice's donation form:
One time donation $29.00
Monthly donation $5.00
Quarterly donation $15.00
Yearly donation $39.00
To breakeven, we need
51494 donations to breakeven with a one time donation of $29.
24889 donations to breakeven with monthly donations of $5.
24889 donations to breakeven with quarterly donations of $15.
38290 donations to breakeven with yearly donations of $39.
With Cost-Volume-Profit Analysis, we can determine how many donations we
need to reach a target donation amount.
We need to determine our Variable cost per unit. Variable cost per unit =
Total Variable Costs/Total Number of Donations. We can use historical data
to determine total number of donations. Or we can also use What if
Analysis, such as Goal Seek.
We need to determine how much a given donation can cover LibreOffice's
fixed costs with Contribution Margin per Unit. Once the fixed costs are
covered, any additional contribution margin increases income for brand
awareness.
Contribution Margin per Unit = Donation Amount − Variable Cost per Unit
Next, we can determine the BreakEven Volume = Total Fixed
Costs/Contribution Margin per Unit.
Last but not least, we determine our Target Donation Volume or the amount
of donations we need to collect to reach our Target Donation Amount. Target
Donation Volume = Total Fixed Costs + Target Profit /
Contribution Margin per Unit.
LibreOffice's Donation is a combination of the Pay What You Want Pricing
Model and Pay What You Can.
3 Ways We Can Increase Donations
We can ask users for a donation after users have downloaded and used
LibreOffice. It reduces buyer remorse that can occur from asking a payment
before using a piece of software.
What we can learn from research studies
"Another PWYW (Pay What You Want Pricing Model) experiment looked at
determinants for the price chosen by consumers of the application iProduct,
which provided tutorials and lessons for potential application developers
on the App Store (iOS). The application was offered as free with in-app
purchases, including a gratuity mechanism that allowed users to pay/donate
what they wanted for the projects included in the app. The study tested the
significance of four determinants in deciding the PWYW price paid by
consumers: fairness (proper compensation to the seller), loyalty to the
seller, price consciousness (focus on paying a low price), and usage (how
much the consumer will use the product). The study found that price
consciousness negatively influenced the price paid, while usage and loyalty
positively influenced the price paid for the product. Fairness was found to
have no significant effect"
"Further research focused on the long-term perspective of pay what you
want. A study conducted by researchers of the Ruhr-University of Bochum
examines repeated transactions in a pay what you want environment. By using
latent growth modeling, they find that the average price paid decreases
significantly; yet the decrease in price paid reduces with every
transaction. They further show customers' preference for fairness and price
conscientiousness influence the steepness of the individual price curves."
Giving a % of LibreOffice's donations to a Charity can increase the average
donation amount
"In 2010, a large-scale experiment was conducted in an amusement park.
Ayelet Gneezy, Uri Gneezy, Leif D. Nelson, and Amber Brown tested the
effectiveness of PWYW by selling roller coaster photos to park visitors.
Their results show although many more people bought the photo under a PWYW
model, the average price paid is very low ($0.92), resulting in no income
increase for the firm. However, when PWYW was coupled with a charitable
cause (buyers were informed they could pay what they wanted AND that half
of the paid amount would be donated to a patient support organization) the
average amount paid increased substantially (to $6.50). This significantly
increased the firm's income, as well as generating a substantial charitable
contribution. In a 2012 follow-up research paper, Gneezy and colleagues
found PWYW may deter some customers from purchasing. Their results show:
"individuals feel bad when they pay less than the 'appropriate' price,
causing them to pass on the opportunity to purchase the product
altogether".
The 3rd and last option to increase donations for LibreOffice is to
identify regular donors and create brand loyalty
"This is called FairPay ("Fair Pay What You Want Pricing Model"). This
shifts the scope from a single digital content transaction to an ongoing
relationship over a series of transactions. It builds on the benefits of ex
post PWYW pricing (setting the price after consumption, when product's
value is known) and adds a feedback process for tracking individual buyers'
reputations for paying fairly, as assessed by the seller. It then uses the
fairness reputation data to let the seller determine what further offers to
extend to that particular buyer. It seeks to incentivize fair pricing by
buyers (to maintain a good reputation, and thus be eligible for future
offers), and to enable sellers to limit their risk on each transaction in
accord with the buyer's reputation"
Can we use Matomo Analytics from LibreOffice.org to find out where most
donations come from? Can we segment the user base geographically? Can we
segment the user base by donation amount paid?
If we can determine where most donations come from, we can further segment
the market by industry, business size and job titles, using reviews.
Can we get a guest permission to view LibreOffice.org Analytics data?
After we've discovered where most donations come from, we can save costs on
promotional material by focusing on certain market segments. We can create
a marketing strategy: we target one to two market segments this year.
--
Gorjan Lakaliski bul, "Jane Sandanski" nr 56-/8, Skopje, Republic of North
Macedonia
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