Product Pricing Questions to be answered

In a previous blog I described how, as a software or services company that delivers IT intensive products or solutions you need a products pricing approach.   I wrote that first you need to unpack the original problem and this blog looks at your product pricing questions to develop your strategy.

So the necessary pricing questions include the following:

  • What’s your strategy? Are you going to price low and sell lots, or price high and sell a few?
  • How does this fit into your brand, the product you have and the image you want to project?
  • What’s your product? Do not forget that it’s not just the software that you’re selling. It’s the entire package around it.
  • How will your customers judge the justification of your pricing?
  • What reference points will they use? How will they determine what seems right and will they baulk at the price you choose, or will they accept it?

Who are your customers?  How does their business work, and how do they expect to be charged?

  • How much money can they justify and do they prefer a one-off fee, or a monthly subscription?
  • Who are your competitors?
    • How will they react to your pricing?
    • How much more, or less, valuable is your product than theirs? What is their business model?
    • What are their prices?
    • If you undercut them, will you trigger a price war? If you do, are your pockets deep enough for you to win it?  Do you want to co-exist with your competitors, or destroy them?
  • How are you going to sell your software? Do you need to send out sales people to take customers golfing?
  • Or are you planning low-touch sales over the internet? Will you require a telesales team?
  • How much will each sale cost you? Do you need to sell via a channel or reseller? What cut will they take?
  • Can you segment your customers, and create versions?
    • Is your software worth different amounts to different people, and can you create pricing that reflects that?
    • Students and business people for example, or normal and power users, or maybe you can split by geography or taste.
  • How can you bundle your software?
  • Can you create a larger package that contains more than one software product?

So how can you come up with the ‘price’?  Well after answering these questions you should be able to come up a range of prices or models, so that is a good enough start.  Now test it in the real world.

The next articles will discuss this in more details, so keep coming back here for more.  Or if you cannot wait and want a free discussion with Phil about the specifics relating to your business them call or email directly our details are here.

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