How Important Is Competitor Intelligence In Your Software Pricing Strategy?

To Improve Pricing, Software Companies Must Get Serious About Competitive Intelligence

Soon it will be football season and millions of Americans will dedicate considerable energy to their favorite obsession. Meanwhile, the professional, college and even high school teams they follow will dedicate considerable resources to competitive intelligence gathering. Scouts will attend opponent’s games, coaches will scrutinize every formation and play called by opposing coaches, players will watch countless hours of video and analysts will pour over data. They will do this to get a firm grip on their competitors’ strengths and weaknesses, understand their tendencies and learn how they respond in specific situations.

They will do it to improve their chances to win.

The Importance of Competitor Intelligence in your software pricing model

Imagine if your software company could gather that kind of intelligence about its competition. Would that help you improve your chances to win?

When it comes to your company’s pricing strategy, the answer is a resounding “yes”. Competitor intelligence research is a critical component to building an effective and sustainable software pricing model.

Of course, most software companies pay attention to their competitive environment. But, like the successful football teams, software companies must go beyond easy-to-get information and anecdotes to get to the really useful stuff. In other words, a comparison of product features or UX or list prices may be helpful, but if that’s all you know about your competitive environment, you’ll be ill-prepared to make effective pricing strategy decisions.

Find Out What Real Customers Think About Your Software Pricing

Effective software pricing accounts for how actual customers perceive value. Some examples include:

  • What aspects do buyers of your competitors’ products value?
  • What do they consider your competitors’ strengths…weaknesses?
  • What did they really pay for your competitors’ product (often not the list prices)?

Understanding your competitive landscape with the insights from your competitors’ customers directly inform how to structure your pricing and packaging for optimal margins and cost competitiveness.

This begs the question, “but how do you get that insight?”

How To Gather Competitive Intelligence Research

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.

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 disinformation or counter-intelligence processes in place. Not to mention the difficulty in first identifying 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 making an impact on both their top- and bottom-lines.

From scouring websites and forums to identify competitor customers, to initiating contact at a low-level and working up the company’s hierarchy, to connecting with industry experts, effective competitive intelligence is methodical and requires patience and persistence. It also requires adherence to special ethical and legal standards, a critical line that is often crossed, with damaging consequences.

What To Avoid When Gathering Competitive Intelligence

Competitive intelligence is an important aspect of software pricing, however, the process can be fraught with ethical dilemmas that need to be carefully considered before proceeding. It is perfectly acceptable to use all available information published from sources like company websites, product reviewers, discussion forums and reputable third-party research firms. Problems arise when this intelligence is gathered under false pretenses. For example, when an interviewer pretends to be a real prospect. This type of behavior places your company in the midst of a few ethical issues. To learn more about the dangers of competitive intelligence, read The Do’s and Don’ts of Competitive Intelligence Gathering.

The Benefits Of Competitor Intelligence

Done right, a strategic competitive intelligence analysis is 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.

For an excellent primer on the type of competitive information you need to inform your pricing strategy, read 5 Things You Need to Know About Competitors That You Can’t Learn on Their Websites. If you’re ready to partner with experts that can improve your pricing strategies and competitor intelligence, then contact us. We’d be happy to talk to you about our Competitive Intelligence services and discuss your situation.

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About The Author

Chris Mele

Chris Mele

Chris is Managing Partner for Software Pricing Partners, where he and his team have launched some of the software industry’s most transformative monetization strategies. As a former software company founder and leader, Chris focuses on the impact effective licensing, packaging and pricing strategies can make on the most essential software company metrics: revenue, profit and valuation. Under his leadership, Software Pricing Partners has become an influential voice for growth-oriented software companies both large and small.

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