To read the original Forbes article, click here. You can read part one of the discussion on the inherent dangers of using buying personas for your pricing and why software companies should stop using content marketing frameworks to create their pricing.
Using content marketing frameworks rooted in buying personas leads to unnecessary complexity in a software company’s pricing and packaging. This approach creates microcosms of customers that software leaders think will yield a substantial amount of revenue. However, this approach can bring more complexity into the mix, slowing customer acquisition rates and threatening profitability.
Simplicity in pricing, not complexity, is what leads to profitable growth for software companies. Instead of focusing on minute differences between prospect groups, software leaders should look for more significant differences, as well as common threads. This can only be achieved by using a monetization specific framework that handles intellectual property (software features and services) properly. Making important tradeoffs that bring simplicity without threatening revenues is the goal of the monetization framework.
What Is a Software Monetization Model?
It’s not enough to create a just pricing model. To fully activate today’s software revenue models, you need healthy expansion sales, upsells and cross-sells. To make that happen, a comprehensive monetization model is needed that addresses three key areas: licensing, packaging, and pricing.
- Software Licensing (Licensing Model): refers to what ultimately goes into the quantity field of the contract and represents the range of quantities selling teams will see in day-to-day activities.
- Software Packaging (Offering Model): refers to how software is bundled and sold, using a myriad of approaches like good/better/best, modular, platform/apps or other patterns specific to how the software enables and delivers value.
- Software Pricing (Pricing Model): refers to how much software costs and how it is structured, and its job is to scale the company’s pricing to produce a reasonable and rationale net price for everything the company sells–regardless of the volume at which the software and services are being sold.
The critical decisions that are made within these three focus areas determines the ease, or subsequent suffering, your customers experience when transitioning from legacy pricing to new pricing and packaging. These decisions also determine the ease (or misery) at which new customers can buy and sales teams can sell.
All three models must come together into a cohesive whole (a.k.a. Monetization Model) that enables sales with a simple and easy dialog with prospects and customers. This can only be achieved if the right balance between simplicity and complexity is struck.
Steps To Get On The Right Pricing Path
This Forbes article covers the following topics:
- How to eliminate unnecessary complexity and micro-segmentation of customers into groups that may not yield substantial revenue.
- Why looking for commonalities across customer groups is more important than excessive segmentation.
- The role of pricing as a sales enablement function: to make things easy for sales by reducing complexity.
- How using buying personas spawns unnecessary SKUs and complicates downstream operations and supporting systems.
- The role of simplicity to enable smoother legacy customer transition efforts.
- Why pricing should be treated as an ongoing discipline with adjustments made over time.
You can read our full article on Forbes: How Software Leaders Can Achieve Simplicity To Maximize Profitable Growth.
