The Price of Success
Simply put, pricing is the most critical decision a software company can make before a product launch. No other variables under management control are more effective at creating revenues and overall business value–or destroying it. Yet how to license, package and charge for software capabilities and services remains the most under-exploited aspect of the software business model.
Pricing strategy today is typically an afterthought—a guess early on by founders instead of a disciplined analysis by seasoned executives. Too often, pricing only comes into full focus when there’s a perceived “pricing problem.” The critical and complex decisions necessary for a successful pricing strategy are typically put on the back burner until these systemic issues in pricing begin to affect revenue growth. That’s too late.
Software companies notoriously focus instead on costs, undervaluing their solutions along the way. Worse yet, they confuse value-based pricing with charging what the market will bear, resulting in market fairness issues where customers that bought the same thing often pay different prices.
While rolling out new pricing approaches can feel fun and exciting when first starting out, the lack of a disciplined process to triage the myriad of pricing strategy issues can create large distractions for management at a time when they should be focused on executing in the marketplace.
Proven. Proactive. Profitable.
At Software Pricing Partners, we understand the pitfalls that improper pricing strategies can have on today’s software companies. Our DNA dates back to the inception of the industry as a whole, with our leadership involved in the development and distribution of today’s licensed software.
Over the years, we’ve harnessed and expanded this insight to develop and refine a proven, proactive process, format and framework. Unlike typical pricing models, our monetization models take a holistic view on pricing, providing today’s forward-thinking executives with the purpose-built pricing strategies they need to generate critical revenue and meet their profit potential.
The difference between traditional pricing and strategic monetization:
Traditional Pricing Models
- Narrow focus, typically on one application of a product line and its associated pricing tiers.
- Tendency to get caught up in mechanics and administration.
- Short-term focus on pricing the here and now, fighting fires – often driven by a pressing deadline.
- Majority of time spent finding things to charge for and then determining “the number”.
- Lacks an orderly process to explore offering structures and packages. Tendency is to start with product specs.
- Primary dialogue is around pricing tiers and website pricing pages.
- “Big deal” focuses on amounts paid and rarely takes into account other value trade-offs.
Our Monetization Models
- Broad focus ensuring monetizing fits all of a software company’s products and services.
- Price setting is viewed as just one part of the SPP Monetization Framework.
- Looks to monetizing the product roadmap, including future products and services as well as related products and services (including partners).
- Heavy focus on balancing simplicity vs. precision for ease of use and understanding across customers, sales and marketing.
- Uses a structured process for deep exploration of product and service bundling to more fully address customer segments and needs.
- Price levels and discounts are only developed after it is clear what is adding value and how value is added.
- Addresses big deal scalability with discount schedules, volume roll-outs and other creative ways to attract and keep game-changing clients.
INSIGHTS FROM OUR SOFTWARE PRICING EXPERTS
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