Even though Innovation is the lifeblood of software development, it’s rare for any software product to be unique enough to have no direct competitors. That means, of course, that understanding your competitive environment must be an essential component of your pricing strategy.
True competitive understanding, however, entails more than a comparison of product features or UX or list prices. Those views are important, but if used alone to represent your competitive environment, they can yield ineffective, or even damaging, pricing strategy decisions.
Perceptions of value are contextual and nuanced
Effective software pricing accounts for how actual customers perceive value. What aspects do buyers of your competitors’ products place value on? What do they consider your competitors’ strengths…weaknesses? What did they really pay for the product (often not the list price)? This insight from your competitors’ customers directly informs how to structure your pricing and packaging for optimal margins and cost competitiveness.
But how do you get that insight? A customer’s perception of value is nuanced and contextual, relating to their specific situation. So, a market survey or industry report will fall well short of what you’re looking for.
“A customer’s perception of value is nuanced and contextual, relating to their specific situation. So, a market survey or industry report will fall well short of what you’re looking for.”
– “Chris Mele, Software Pricing Partners, LLC”
Engaging buyers & users in a dialog is crucial
In our experience, the most useful insight comes from speaking directly to your competitors’ customers. That, of course, is a challenge…they might have signed an NDA, be reluctant to share information, or even have counter-intelligence processes in place. Not to mention the need to first identify your competitors’ customers and the relevant contacts.
Yet, companies that excel at pricing have figured out how to gain this essential insight, and it’s improving both their top- and bottom-lines.
From scouring forums to identifying competitor customers, to initiating contact at a low-level and working up the company’s hierarchy, effective competitive intelligence is methodical and requires patience and persistence.
It’s worth it. With a line of sight into customer perceptions of your competitors’ strengths and weaknesses, and the value they and their software products deliver, you will be in a much stronger position to successfully restructure your pricing model, and overall monetization approach.
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