52 Bicycles

My notes on the MITEFC GET SMART seminar on software pricing held earlier this evening. Jim Geisman of softwarepricing.com gave a fantastic talk and moderated discussion.

1. Modular packaging is important so you can reduce the price without diluting value (instead, you take away a module etc)
2. Customer pays for the “economic core”
3. Customer values the core plus intangibles
4. Five Steps to Pricing:

1. Configuration & Payments should fit usage
2. Sensible Metrics that scale the pricing (per user, per transaction etc)
3. Sensible price structure
4. Value-based price levels
5. Consistently-applied discounts (try not to give it away in negotiation - build it into the model)

1. Value to customer (usually that which can be realized in the first 6 months) as compared with alternatives and substitutes, discounted for internal costs and risks related to implementation/change. (Determines price ceiling)
2. My internal costs / cost structure (doesn’t matter to the customer, but does drive whether I can affordably sell a given price-point) (Determines price floor)
3. Competitive prices (from direct competitors - indirect competitors are built into the value calculation) (should not decide the day, because you should be offering something different from the competitors, else this is a commodity, and we all know how to price those) 

This entry was posted on Wednesday, February 22nd, 2006 at 4:17 am and is filed under Technology Business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. Reddit This