Any advise on Pilot Projects? Should a startup do free pilot projects?
Jim Geisman www.softwarepricing.com)
is a real expert in this area. He's active in the MIT Enterprise Forum, conducts seminars, and consults. Very good guy. I have notes on his recent seminar for MITEFC GET SMART on my blog: http://www.raydeck.com/2006/02/software-pricing-notes/
Can't see anything on the 'Forum' page. :(
For what it's worth, here is a related blog post
Exceptionally useful article!
You have really considered the various dimensions of Enterprise Software Pricing. Congrats.
It is not a coincidence that I have just a couple of days blogged about Software Product pricing http://blog.nrichsoft.in/2006/12/12/getting-your-pricing-right/
It is not meant for any particular category of products but it addresses the issues one needs to address before getting onto the aspect of pricing.
Very well written article.. I agree the structure of pricing is far more important than the actual prices.
Excellent article! This contains valuable and useful information that shows much experience was involved in the writing. I myself have experienced many of the shortcomings described as well as resolved them with the same or similar recommendations. As a curiosity, has anyone observed a hybrid pricing model with upfront licenses per site/location coupled with monthly and transactional pricing for maintenance fees?
Very well thought out list of points. Good Article.
I would think that one of the other things that enterprise software developers need to think about is whether to offer their product as a TBL (time based license) where the cost of the software is for a three year use. This model as opposed to a term license. You cover it somewhat in point #8 under maintenance but not directly. With TBL mechanism you have the opportunity to recover the cost of the added cost of R&D and new features at a much higher price point as opposed to maintenance revenue which is usually lower. The TBL pricing can also include the maintenance fee.
The other point is that companies also need to factor in post-sales costs. Ex: costs occurred when an application engineer needs to visit the site to help get over an technical issue that cannot be resolved over the phone or if the company calls in with a request to train additional staff for s/w use.
Dharmesh - Brilliant article.
You have a typo in it.
Nobody wins win this happens == Nobody wins when this happens
Don't forget to formulate a negotiation and discount strategy. It's hard to enough to come up with your pricing internally, but then many software companies start discounting rampantly at the first sign of trouble in the sales cycle. This create a vicious cycle that dramatically reduces profits. So be prepared. If customers have price objections, that may be a good sign. Enterprise buyers are trained to raise price objections. Understand them. Offer to remove value in exchange for lowering price. ("we're pretty self-sufficient, we don't want to pay for 24/7 support." "Ok, we'll take you down to bronze support.") You can also use prepayment discounts, as the post suggests, case study discounts, or work with the customer to lower installation costs.
Thanks for the article. This really helps to get the thoughts rolling. It's hard to know where to start with pricing in the Enterprise space. Cost models vary so widely that sometimes if feels like a lot of guess work.
This article is well written and full of ideas that help many of us able to work out a very critical item of marketing a product in an ever changing marketing environments. Sometimes we forget the basics of selling and buying. In many areas solution is selling and not marketing. Cost and pricing model depends on what works for a customer. Very good article!