2. Introduction
Software Pricing Partners
•Unique focus since 1987
– Pricing and business models
– Software-based offerings
– Vendor-side, B2B clients
•Practice areas
– Value-Driven Pricing
– Value-Based Selling
– Strategic Discounting
•Project results
– Enhance value from products & services
– Improve financial performance
– Increase sales effectiveness
3. This Morning
•Why “good” pricing and licensing matters
•How licensing and pricing landscape is changing
•Some things you may need to do
4. Why Customers Buy
Does what is needed
Offering
Works in my situation
Offering is good value
Competition
Preferable to known alternatives
Acceptable risk
Decision-making Economics, TCO
Perceived value
Funding available
Buying ISV is trustworthy
Painless process
Responsive
Channel Convenient
Reliable
5. Getting Customers to Buy
•License Delivery Model
– Entitlement
– Fulfillment
– Systems
– Integration
•Pricing Model
– Value metric
– Packaging and licensing
– Scheduled discounts
– List prices
– “Deal” prices
6. Getting-Paid-Fairly Processes
Deliverables Entitlement
PricePricing
Deal Fulfill
Details
Order List Prices
Entry Scheduled Discounts
Packaging & Licensing
Invoice
Value Metric
Financials
7. Pricing and License Delivery Models
Impact on Why Customers Buy g
in l iv
er
y
ric de
P o el del
D o
M M
Does what is needed
Offering
Works in my situation
Offering is good value
Competition
Preferable to known alternatives
Acceptable risk
Decision-making Economics, TCO
Perceived value
Funding available
Buying ISV is trustworthy
Painless process
Responsive
Channel Convenient
Reliable
9. Trends and Vendor Impact
Major Trends
•Web is everywhere
•Virtualization increasing
•Emerging revenue models
•Commoditization continues
10. Trends and Vendor Impact
Web Everywhere
•Web is everywhere
– More web apps
•Simple pricing
– B2C influencing B2B
•Bite-sized packaging
– Customer expectations
•Usability influences value
•Virtualization increasing •Easy to try / buy / use
•Emerging revenue models
•Commoditization continues
11. Trends and Vendor Impact
Virtualization Increasing
•Web is everywhere
•Virtualization
increasing
– Use is accelerating
– Hardware less important •App tracking harder
– Clouds-in-clouds •Hardware-based metrics harder to use
•Usage data available
•Emerging revenue models •Hosted model more popular
•Commoditization continues
12. Trends and Vendor Impact
Revenue Models
•Web is everywhere
•Virtualization increasing
•Emerging revenue models
– Perpetual under fire
•Payment options
– Subscription rising
•Pay for actual use
– Slow ramp-up
•Pricing “latency”
•Commoditization continues •Lower price points
13. Trends and Vendor Impact
Commoditization Continues
•Web is everywhere
•Virtualization increasing
•Emerging revenue models
•Commoditization continues
– Low entry cost
– Tech availability •Increased competition
– Short lifecycles •More me-too products
•Agility is critical
•Less room for error
14. Trends and Vendor Impact
Impact
Smaller chunks
Offering
On-demand, as needed
Price-focused
Competition
Even more features
Economics, TCO
Decision-making
Perceived value
More self-service
Buying
Easy to try and scale
Web is key
Channel
Less outside sales
15. Trends and Vendor Impact
Build Strong Delivery Model
Smaller chunks
Offering
On-demand, as needed
License Delivery Model Requirements
Price-focused
Competition
Even more features •Track packaging and features
•Manage multiple products
Economics, TCO
Decision-making
Perceived value
•Create and manage editions
Buying
More self-service •Multiple fulfillment models
Easy to try and scale
•Customer self-service
Web is key
Channel
Less outside sales •Ease-of-administration
•Ability to change rapidly
•Financial and billing integration
16. Trends and Vendor Impact
Build Strong Pricing Model
Smaller chunks
Offering
On-demand, as needed
Pricing Model Requirements
Price-focused
Competition
Even more features •Focus on overall “offering”
Economics, TCO
•Charge for value created
Decision-making
Perceived value
•Simple packaging
Buying
More self-service
Easy to try and scale
•Discounting framework
•Price levels in line with value
Web is key
Channel
Less outside sales •Policy-driven discounts
•Multiple payment options
17. Topics
•Why Customers Buy
•Trends and Vendor Impact
•Pricing Model
•Summary / Q&A
18. Many Pricing Models
Full custom
99 cent app
Flat rate
Freemium
Perpetual, subscription
Multi-tier packages
Per-user, per-click
CPU power
19. Many Pricing Models Elements
X
Full custom
99 cent app
Flat rate
Price Pricing
Deal
Freemium Details
List Prices
Perpetual, subscription Scheduled Discounts
Multi-tier packages Packaging & Licensing
Value Metric
Per-user, per-click
CPU power
20. Pricing Model
Price Pricing
Deal Price
Details Details
List Prices List Prices
Scheduled Discounts
Packaging & Licensing Price
Packaging & Licensing
Structure
Value Metric Value Metric
21. Developing a Pricing Model - Structure
Value Metric
Value
Metric
Focus on overall •Scale with value delivered
“offering”
•Relate to customer business
Charge for value
created •Uniform across products
•Easy to estimate
Simple packaging
•Easy to measure, monitor use
Discounting •Unambiguous
framework
Price levels in line
with value Price Pricing
Deal
Details
List Prices
Policy-driven
Scheduled Discounts
discounts
Packaging & Licensing
Multiple payment
Value Metric
options
24. Developing a Pricing Model - Structure
Licensing & Packaging
Licensing &
Packaging
Focus on overall •Make choices easy, obvious
“offering”
•“Reasonable” value steps
Charge for value •Peg to use cases, segments
created
•Smooth upgrade / upsell path
Simple packaging •Payment equivalence
Discounting
framework
Price Pricing
Deal
Price levels in line Details
List Prices
with value
Scheduled Discounts
Policy-driven
discounts Packaging & Licensing
Value Metric
Multiple payment
options
26. Developing a Pricing Model - Structure
Scheduled Discounts
Scheduled
Discounts
Focus on overall
•Standard discounts
“offering” •Qualified customers get discounts
Charge for value •Focused on customer behavior
created
•Logical
Simple packaging
Discounting
framework
Price levels in line
with value Price Pricing
Deal
Details
List Prices
Policy-driven
Scheduled Discounts
discounts
Packaging & Licensing
Multiple payment
Value Metric
options
27. Scheduled Discounts
•Introductory
– Focus on new product
•New customer
– Attract new accounts
•Bundle
– Increase transaction value
•Upgrade
– Trade-up, upsell
•Loyalty
– Reduce churn
•Segment focused
– Industry, customer type
28. Developing a Pricing Model - Details
List Prices
List
Prices
Focus on overall •Economic value delivered drives price levels
“offering”
•Competition, perception a moderating influence
Charge for value
created •Covering costs is a sanity check
•Price points, packaging, discounting must fit
Simple packaging together
Discounting
framework
Price levels in line
Price Pricing
Deal
with value Details
List Prices
Policy-driven
Scheduled Discounts
discounts
Packaging & Licensing
Multiple payment
Value Metric
options
30. Developing a Pricing Model - Details
Deal Pricing
Deal
Prices
Focus on overall •Adhoc / negotiated + scheduled
“offering”
•Couple with sales comp
Charge for value •Develop policies to standardize responses
created
•Negotiation capability and capacity
Simple packaging
Discounting
framework
Price levels in line Deal Pricing
Price
Details
with value List Prices
Policy-driven Scheduled Discounts
discounts
Packaging & Licensing
Multiple payment
Value Metric
options
33. Summary
Align Processes AND Systems
Deliverables Entitlement
PricePricing
Deal Fulfill
Details
Order List Prices
Entry Scheduled Discounts
Packaging & Licensing
Invoice
Value Metric
Financials
34. Summary
Pricing Model Must Fit Business Model
Attractive Acquire
Offering Customers
Generate
Visibility
Margin
Price
Details
Price
Finance Structure Satisfy
Growth Customers
Upsell Expand
More User Base
Improve
product
35. Summary
Common Issues
•License delivery and pricing models
– Key to success
– Influences growth rate
– Affects cash flow
•Hard to develop, change, administer
– Plan, do, improve
– A process…
…Not an event
•Friction points
– Longer sales cycle
• Aggravate discounts
– Slow / inaccurate fulfillment
• Low customer satisfaction
– Inefficient operations
• Financial impact
36. Summary
Respond to Market Trends
Smaller chunks
Offering
On-demand, as needed
Price-focused
Competition
Even more features
Economics, TCO
Decision-making
Perceived value
More self-service
Buying
Easy to try and scale
Web is key
Channel
Less outside sales