Seven Steps to Overcome Pricing Uncertainty

While you can't eliminate uncertainty in a pricing decision, you can cut it down to size. The best way to do this is to break the uncertainty into smaller, bite-size pieces.

Here are seven steps you can take to assess the impact flexible licensing will have on your business:

1. Check the impact of a new licensing and pricing model on existing customers.
2. Develop a what-if model to assess revenue impact of new price structures.
3. Prepare a transition program for upgrading existing customers to new licensing and pricing models.
4. Minimize revenue risk by doing a staged new product roll out.
5. Link changes in price levels and price structures to value delivered.
6. Consider new product configurations that increase the perceived value of your products.
7. Start with LAN-based products before dealing with the more complex issues of client/server applications.

Checklist for Implementing Flexible Licensing

• Leave Enough Leadtime to Deal with Pricing.
• Involve the Key Players in a Pricing Team.
• Build Pricing Team Momentum and Maintain Focus.
• Estimate application usage patterns.
• Revise product configurations.
• Document price structure and price levels.
• Revise product promotion.
• Determine impact on sales method.
• Make sales support and compensation consistent.
• Provide product maintenance and support.
• Make license administration and support tools available.
• Trace through impact on logistics and accounting.
• Modify license agreements.

Activities to Add to New Product Introduction Milestones

When implementing a license manager for per-user licensing and pricing of an application, companies treat this as an add-on to a new product introduction process. As we mentioned before, most companies tend to implement some form of license management and flexible licensing in the next major version of an application. If your company has a formal new product introduction process, you may find the following steps a useful addition to the project plan:

• Understand the concept of license managers.
• Assess license manager technology alternatives.
• Assess business impact of flexible licensing.
• Access impact of flexible licensing on marketing and sales.
• Evaluate and select license manager technology.
• Modify logistics, support, and contracts.
• Develop pricing and licensing transition plan for existing customers.
• Develop revised sales/channel programs for flexible licensing.
• Pre-announce new pricing and licensing to selected customers.
• Revise pricing and licensing based on customer feedback.
• Begin customer shipments.