Are you pricing-in the true value of your software product?

When looking at software pricing strategy, one thing I’ve found is that people fail to focus on product definitions and the value proposition for each element of what they sell. The reason for this is that there is an urge to bundle all functionality in a box and say “look at all these extras” In fact they might as well say “look at all the value we are giving away”.

If developers would step back and see how they could productise functionality in their software they would see the true value in what they have built and then price accordingly.

One approach to achieving an insight into the customer perceived value is to ask customers:

 How do you use our software?

and then ask

What would you do if our software wasn’t available?

This latter question allows you to cost their next best alternative option and if it is more than you are charging you may be missing an opportunity to price higher for similar businesses.

Are pricing improvements politically too difficult for CEO’s

My experience in the software pricing and the B2b services sectors has been that CEO’s understand the straight to the bottom line impact of better pricing but when they consider internal and external resistance (Sales execs and clients) the whole thing looks too difficult.  I’ve found though that once you show them the variability in the prices they are currently getting and that some existing customers are currently paying higher rates they are more willing to revisit their pricing strategy. This exercise also helps to identify customer profitability issues.