Council Post: What Software Companies Get Wrong About Pricing

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If they want long-term success, software companies must prioritize creating frictionless, transparent pricing processes.

Around the same time, software companies realized they could charge customers vastly different prices—and get away with it. Before the advent of social media, customers had fewer ways to connect and disclose the pricing they received. Now, of course, the landscape has changed. Customers can exchange information in nanoseconds. But many software companies have not updated their pricing strategies to reflect this new reality.

of software executives and decision-makers, 42% of respondents said that “their company provides no deal-level pricing guidance.”. New companies are more prone to this erroneous mindset because while their teams are talented in developing technology, they don’t tend to have the necessary experience to make the right pricing judgment calls. Without that experience, these teams often fall back on copying their competitors’ pricing, which is ineffective.

Friction-filled pricing processes are also detrimental from a market efficiency standpoint. Without data-based, well-thought-out pricing decisions, software companies risk undervaluing their products and, in turn, not getting paid their true worth for the value they deliver. In some cases, software companies give customers contracts that lock in low prices for years to come, which can cause severe financial strain later on.

 

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