The Case for Agile Pricing Processes

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Customer acceptance of new product capabilities is higher when products are developed using agile development methodologies. One reason for this is the product team has a person who is responsible for providing frequent customer feedback and market information. Another reason is the agile development process is designed to optimize product value, resulting in products that are much more competitive.

Becoming Agile

Monetization and software product development processes are more effective when coupled together

We believe product pricing has much to learn from the basic tenets of agile development — incremental development and on-going customer interaction, and that both the pricing and development processes are more effective when coupled together.

Consider the positive results that can occur when the Product Team and the Pricing Team work together during agile product development:

  • Development priorities and initial estimates of economic value are much improved. The Product Team prioritizes features according to business value. The Pricing Team confirms what drives value and quantifies the economic impact.
  • Products are designed to monitor, manage and monetize usage. The Product Team works with real customers to determine how features are implemented. The Pricing Team engages customers to identify the unit of measure/metric that best aligns with customer business value.
  • Packaging is better aligned with value delivered and likely usage. The Product Team gathers more information from customers about features and usability. The Pricing Team uses customer inputs to determine which features should be packaged together either as different editions or options.
  • Price levels are more competitive and are better aligned with economic value delivered. The Product Team finalizes product features and refines the user interface. The Pricing Team takes a timely snapshot of competitive offerings to ensure the product features, editions, and options are competitive.
  • Pricing and the Monetization Methodology are better aligned with customer needs and willingness to pay. The Product Team increases the number of early customers using the (nearly) finished product. The Pricing Team validates initial price levels and develops a discounting strategy that scales properly.

When companies use agile methods and encourage close cooperation between their pricing and development teams, they are in a better position to monetize their offerings. Better control over product entitlements and usage will result in higher revenues. Smarter product packaging will result in faster sales when the prices customers pay are better aligned with value delivered.

About the Author

Chris Mele

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Chris is a software monetization and pricing expert and former CEO of an award-winning SaaS company. An avid scuba diver, Chris should probably move closer to the beach.

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