Thursday, March 03, 2011

Deep thoughts on Enterprise Software Pricing

I found these bullets in my notes.

  • Always look with the eyes of the customer. Customers do not understand all of your products. Remember how it was on the first day of your job. That is how they feel every time they talk to you.
  • Simple, obvious packaging.
  • Don’t be tricky. Price can be high, but if you’re tricky, your customers will resent it.
  • Minimize footnotes, restrictions, conditions
  • Sell anything to anyone
  • Give price breaks for volume
  • Price against the variable that customers can monitor and control – pricing against company size for instance is hard to monitor and control, versus pricing against the number of users.
Not sure why I wrote down these thoughts. I must have been struggling with a pricing question. Out of context some of them don't make complete sense, but I like them now that I read them again for a second time.

Pricing, IMO, is one of the harder topics that PMs face. It is really voodoo.

The thing that trips up a lot of PMs is the notion of "optimization" -- i.e. finding the right pricing and packaging combination to satisfy every constraint. I think this is absolutely the wrong way to look at it. Pricing is a strategy, and by that I mean it is a set of choices. The choices you make to accomplish the business goals you set (or solve the problems you have).

Every pricing proposal has pros and cons. It is literally impossible to find one that is all pro and no con.