The software industry’s potential is massive, with several fields left untapped while some are still developing. The best part about the industry is that it is still growing as several products are released to the market in various forms daily. Today learn Unlocking Your Software Company’s Potential with Pricing.
So far, this industry is one of the drivers of the world’s economy, and it’s believed to be at the forefront of tech innovation. However, a sticking point for most companies is their pricing strategy as they often get it wrong from the start.
A report by Gartner, one of the top industry analysts, disclosed that the world’s software industry is estimated to be around $407.3 billion. This is a 4.8% increase compared to 2012 figures, and it shows the software industry’s massive potential and how profitable it will be when properly harnessed.
In order for companies to enjoy the benefits this industry has to offer, their pricing strategy has to be right. However, for several businesses, pricing is used as a strategic lever to achieve business goals. Hence, your pricing strategy has to be the right fit for your product.
The best software companies manage, control, and communicate their pricing strategies efficiently. By doing this, they are exploiting the potential of pricing to the fullest, thus increasing profitability.
At this time, it’s important to note that several software companies still have a long way to go regarding their pricing strategy – this is one aspect they have to improve upon as soon as possible.
More attention and focus should be paid to pricing, just like other aspects of business like investment, technology, and product management. The reason for this is not farfetched, here’s why:
The price of a product is essential to a customer. To an organization, on the other hand, price determines the positioning of the product. This concept can also be viewed from the angle of “organic segmentation.”
For example, a company with a workforce of 50 people cannot configure or implement a CRM or an ERP that costs €1 million. Even if they have the ability and willingness to pay, it may not be the ideal step. The price of a product determines a lot of things for a potential customer.
For this reason, you have to make sure the price of your solution or product matches the potential customer’s ability and willingness to pay.
The technology used to create/build your solution or product should be integrated into your pricing. For this to happen, you have to make sure you value your product/solution in a customer-centric way.
Here’s how to go about it. You have to:
- Define the value the technology used in making your product/solution will give to the customer and how your product delivers it to them.
- Next, quantify it and place a sum on it.
- Finally, compare this figure to your current price offering and see if it should be reviewed or not.
For almost every investor, a significant point of concern for their product is the ROI (Return on Investment). In most cases, the assumption is that the investor gets a favorable return on an investment when the company turns a profit.
However, an essential factor for software companies to get favorable profit from an investment is the product’s price. To achieve this, you have to carry out detailed analysis and in-depth projections and run several simulations to get the best price before the product is launched.
This is a continuous process, and to be on the safe side, you have to carry out several price revisions in the course of the product’s life cycle.
Now, ask yourself, are you in the right standing, or does your price need to be revised?
Discover how to use pricing to unlock the untapped potential of your software company.
Where do you stand?
Unlocking Your Software Company’s Potential with Pricing
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“Boosting your Business Performance is our Passion” The Consultants bvba is an advisory and In-house expert company focusing Pricing, Commercial excellence & Business Transformation.
Baydhir Badjoko, https://www.linkedin.com/in/theconsultants