Pricing Software Products

Delight Your Customers While You Turn a Profit

Jim Semick, ProductPlan

About Pragmatic Marketing

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Experts in technology product management and product marketing

Specialize in training

Trained hundreds of thousands of people at thousands of companies since 1993

About the Presenter Jim Semick

• Founder of ProductPlan, roadmap software for

product & marketing teams

• On founding team of AppFolio (B2B SaaS)

• Validated and helped launch GoToMeeting and

GoToMyPC (acquired by Citrix)

• Frequent speaker on product management

@jimsemick

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Agenda Why it’s a new world for pricing models

Why “customer value” is integral to successful pricing

Key considerations: early validation and lifetime value

Case study examples

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Poll In your organization, who determines pricing?

• Product Management • Marketing • Sales/Finance • Other

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More opportunities than ever to differentiate through

pricing

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Traditional Software Pricing Limited pricing model options Perpetual license fees, enterprise server licenses, etc.

Maintenance agreements Upgrade fees

Disconnected from the value proposition

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Software Pricing: A New World

Dozens of new models Subscription-based Service often included Always updated

A part of the value proposition 8

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So Many Pricing Flavors Per-user User + Free (G2M, ProductPlan) Storage (Dropbox) Features/packages Project (Basecamp) Per item/contact (AppFolio) Freemium (LinkedIn)

Data/Processor time (AWS) Per-node/server (Hadoop) Per visitor/traffic (AdRoll)

Open Source (Red Hat) Advertising (Facebook)

Broker (AirBnB) …and many more

Discovering the Best Model In-depth interviews with buyers

Validate with decision maker

Ask open-ended questions

Understand the job to be done

Understand pains and gains

Understand purchase process

The goal…

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Align Pricing with Customer Value

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Quantitative Value Cost savings Time savings Increased revenue Meet business objectives

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Qualitative Value Reduced frustration Lifestyle benefits Reduced risk (sleep better) Looking good (social benefit)

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Estimate Lifetime Value Early

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Pricing is a Part of the Product When is the right time to set pricing for new products?

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Poll For your last product launch, when was pricing determined?

• Before development • During development (e.g. during Beta) • Immediately before Launch • After Launch

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Typical Pricing Model Decisions

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Move Pricing Validation Earlier

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Case Studies

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Easy to understand vs. competitors

Resonated with customers

Success-based—pay more as business grows

Additional revenue through value+ services

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“All You Can Meet”

Unlimited meetings

No “overage” charges

How did we decide pricing?

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Quantitative Value Cost and time savings (reduced or eliminated travel)

Cost savings (switching from per-minute pricing of existing solutions)

Increase revenue (close more sales deals by conducting better demos)

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Qualitative Value Motivates Lifestyle benefits from conducting meetings remotely

Reduced frustration from switching to an easier-to- use solution

Reduced pain from switching to an easier-to-budget solution

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Case Study

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Food for Thought Customers don’t care about your costs

Don’t be tempted by competitors – innovate!

More tools than ever to test pricing

Sales model influences pricing (and vice versa)

Pricing is highly psychological – factor this in

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Jim Semick Twitter: @jimsemick Email: jim@productplan.com (email me for slides)

Join the conversation and learn more: Website: www.productplan.com Blog: New articles on pricing Webinars: Tomorrow: “Building Better Roadmaps” Plus: Product Mgmt Articles, Free Product Trials and More!

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@productplan

More Information Contacts:

• Rebecca Kalogeris rkalogeris@pragmaticmarketing.com @pragmaticmkting

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