To read the original Forbes article, click here.
When it comes to software pricing, it turns out most software companies are trapped in the 80’s.
If you’re using tiered pricing, a form of volume pricing, you may not realize this technique was first proposed in 1987, targeted to manufacturers of physical goods. But just because a technique worked for manufacturers doesn’t mean it is working well for software companies.
Tiered Pricing Changes Customer Behavior and Lowers Profitability
This Forbes article covers the following topics:
- A brief history of volume pricing and where it originated.
- How tiered pricing constructs can lead to lost revenue in negotiations.
- How tiered pricing changes customer behavior, incentivizing them to purchase differently and distorting demand.
- Why finely grained tiering is more profitable and encourages customers to maximize their spend with you.
- Why pricing for third-party components is especially problematic and ultimately creates complications for buyers.
- Why showing customers how to earn discounts vs. demand them is important.
- Why it is important that software salespeople to get tools that enable clearer communicate of pricing to prospects.
You can read our full article on Forbes: Why Some Software Companies Are Unknowingly Pricing Their Solutions Like 1980’s Manufacturers.
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If you are using tiered pricing, in less than two weeks you can boost profits by as much as 18%. Let us show you how to do this in parallel with your other goals this year.
