Customer Centric Pricing - January 24, 2011


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Last Tuesday, January 24, the Boulder and Denver Software Clubs hosted their first event of 2011. The topic of the night: Customer Centric Pricing.

Panelists included:

We had a great crowd in attendance (as you can see here), which made for very engaging conversation. All attendees had the opportunity to ask specific questions about topics that were of particular interest to the businesses they operate. As one might expect, the resulting conversation was beneficial to all, since many of us encounter very common challenges when it comes to pricing products and services competitively and strategically.

Beyond Q&A and general group discussion, each panelist discussed experiences at his respective company and offered anecdotes that clearly illustrated one common theme: reaching "the right" pricing is, in most cases, a matter of trial and error.

Here are some highlights from each of their stories:

Survey Gizmo

According to Scott, when Survey Gizmo entered the market, they had about 200 competitors. This competitive market, while daunting for a new startup, also provided significant data from which to base initial pricing. SurveyGizmo, like many of its industry counterparts, has taken a "feature-based" pricing approach, as you can see on their pricing page. Some interesting takeaways from Scott's experiences:

  • Customers often pull your prices higher because the want to pay for more.
  • Larger customers typically pay annually or several years at once (usually at a discount), while smaller customers tend to prefer monthly subscriptions.
  • Customer support is one of the most important "features" that users are willing to pay for; however, supporting customers (especially new ones) is also one of the biggest costs.
  • When applying pricing to feature sets, you must consider different combinations of features. Also, keep in mind that customers place different values on various features, based on their specific needs and wants.
  • SurveyGizmo is moving further toward "user-based" pricing in combination with "feature-based" -- i.e., the more users you have on the service, the more you pay. A familair example of this is SalesForce.

ShipCompliant

Jason's experience contrasted sharply with that of Surveygizmo: when ShipCompliant entered the market, there were no other competitors to look to as a model for pricing. As a result, and in an attempt to reach an appropriate price point, they asked themselves a few questions:

  • How much money do we want to make from a customer per year?
  • How much money will we save our customers in resources such as time, manpower, etc?

From there, they tried out two different pricing structures. They first tried charging on a per-transaction basis. When this was poorly accepted by customers, they soon changed to a tiered pricing structure, where you would pay a flat fee for a range of "transactions" instead of for each one. The customer reaction was positive, and so their pricing structure was solidified. However, when introducing a second product years after the first, they again experimented with different approaches, eventually coming to a similar conclusion as the first time around.

Spatial

Spatial has a very unique offering, and their pricing reflects it. Without going into too much detail (it's complicated), here are some common themes from their pricing history:

  • Along the way, they've tried every pricing model under the sun, and they've made plenty of mistakes - always learning from each.
  • They use different pricing models for the various products that they sell - always keeping it as simple as possible for their customers.
  • They always keep in mind the most important factors from the customer perspective - you have to know what your customer is and isn't willing to pay for!
  • Some customer segments are very difficult to sell to - in Spatial's case, the "difficulty" lies in the fact that their customers are often PhD's and mathemeticians!

Finally, a general tip that came from the night's discussion...

As you can see from the highlights above, the Software Clubs are off to a great start this year. We are excited about the showing from our members and sponsors in January, and we're looking forward to the continued support at upcoming events!

Don't forget to connect with us on Twitter - @BDSoftwareClubs. And interact with other members by using hashtag #BDSC.

Thanks again for everyone's support!