• Analyst Perspective
• Executive Summary
• What is an optimized price strategy?
• Challenging environment
• Pricing skills are declining
• Key considerations for more effective pricing decisions
• Case Study
• New product price approach
• Is Your Pricing Strategy Optimized?
• Who should care about optimized pricing?
• SoftwareReviews’ methodology for optimizing your price strategy
• Insight summary
• Blueprint deliverables
• Guided Implementation
• SoftwareReviews offers various levels of support
• Workshop overview

• Our process
• Assign team responsibilities
• Educate the team
• Document portfolio and target products
• Clarify product target margins
• Establish customer price to value
• Identify competitive pricing
• Establish new price and gain buy-in

• Summary of Accomplishment
• Bibliography
• Related SoftwareReviews Research

Joanne Morin Correia
Principal Research Director
SoftwareReviews

• A lack of alignment and collaboration among finance, marketing, product development, and sales.
• A lack of understanding of customers, competitors, and market pricing.
• Inability to stay ahead of complex and shifting software pricing models.
• Time is wasted without a deep understanding of pricing issues and opportunities, and revenue opportunities go unrealized.

• Pressure from management to make quick decisions results in a gut-driven approach to pricing.
• A lack of pricing skills and management processes limits sound decision making.
• Price changes fail because discovery often lacks competitive intelligence and buyer value to price point understanding. Customers’ reactions are often observed much later, after the decision is made.
• Economic disruptions, supplier price hikes, and higher employee salaries/benefits are driving costs higher.

• Organize for a more effective pricing project including roles & responsibilities as well as an aligned pricing approach.
• Work with CFO/finance partner to establish target price based on margins and key factors affecting costs.
• Perform a competitive price assessment and understand the buyer price/value equation.
• Arrive at a target price based on the above and seek buy-in and approvals.

Most product managers just research their direct competitors when launching a new SaaS product. While this is essential, competitive pricing intel is insufficient to create a long-term optimized pricing strategy. Leaders will also understand buyer TCO.

Your customers are constantly comparing prices and weighing the total cost of ownership as they consider your competition. Why?

Implementing a SaaS solution creates a significant time burden as buyers spend days learning new software, making sure tools communicate with each other, configuring settings, contacting support, etc. It is not just the cost of the product or service.

• An integral part of any product plan and business strategy.
• Essential to improving and maintaining high levels of margins and customer satisfaction.
• Focused on delivering the product price to your customer’s business value.
• Understanding customer price-value for your software segment.
• Monitoring your product pricing with real-time data to ensure support for competitive strategy.

• Increasing or decreasing price on a gut feeling.
• Changing price for short-term gain.
• Being wary of asking customers pricing-related questions.
• Haphazardly focusing entirely on profit.
• Just covering product costs.
• Only researching direct competitors.
• Focusing on yourself or company satisfaction but your target customers.
• Picking the first strategy you see.

• Supplier costs and inflation are rising, eroding product margins and impacting customers’ budgets.
• Pressure from management to make a gut-feeling decision because of time, lack of skills, and process limitations.
• Navigating competing pricing-related priorities among product, sales, and finance.
• Product price increases that fail because discovery lacks understanding of costs, price/value equation, and competitive price points.
• Slowing customer demand due to poorly priced offerings may not be fully measured for many months following the price decision.

• Competitive analysis
• Pricing
• End of life

• Optimizing software profit with four critical elements: properly pricing your product, giving complete and accurate quotations, choosing the terms of the sale, and selecting the payment method.
• Implementing tailored price changes (versus across-the-board price actions) to help account for inflation exposure, customer willingness to pay, and product attribute changes.
• Accelerating ongoing pricing decision-making with a dedicated cross-functional team ready to act quickly.
• Resetting discounting and promotion, and revisiting service-level agreements.

Has it been over a year since prices were updated?

Have customers told you to raise your prices?

Do you have the right mix of customers in each pricing plan?

Do 40% of your customers say they would be very disappointed if your product disappeared? (Adapted from Growth Ramp, 2021)

Case Study

Middleware Vendor

INDUSTRY
Technology Middleware

SOURCE
SoftwareReviews Custom Pricing Strategy Project

Key Initiative: Optimize New Pricing Strategy

The program’s core objective was to determine if the vendor should implement a price increase and how the product should be packaged within the new pricing model.

Results
This middleware vendor saw buyer support for a 10% price increase to their product line and restructuring of vertical contract terms. This enabled them to retain customers over multi-year subscription contracts, and the price increase enabled them to protect margins after the Microsoft price increase.

Iterating to a final price point is best done with research into how product pricing:

• Delivers target margins.
• Is positioned vs. key competitors.
• Delivers customer value at a fair price/value ratio.

New Target Price:

• Buyer Price vs. Value
• Cost - Plus
• Vs. Key Competitors

• Customer price/value equation interviews
• Impacts of Supplier cost increases
• Competitive pricing research
• How product pricing delivers target margins

Who should care about optimized pricing?

Product managers and marketers who:

• Support the mandate for optimizing pricing and revenue generation.
• Need a more scientific way to plan and implement new pricing processes and methods to optimize revenues and profits.
• Want a way to better apply customer and competitive insights to product pricing.
• Are evaluating current pricing and cost control to support a refreshed pricing strategy.

Finance, sales, and marketing professionals who are pricing stakeholders in:

• Finding alternatives to current pricing and packaging approaches.
• Looking for ways to optimize price within the shifting market momentum.

How will they benefit from this research?

• Refine the ability to effectively target pricing to specific market demands and customer segments.
• Strengthen product team’s reputation for reliable and repeatable price-management capabilities among senior leadership.
• Recognize and plan for new revenue opportunities or cost increases.
• Allow for faster, more accurate intake of customer and competitive data. 
• Improve pricing skills for professional development and business outcomes.
• Create new product price, packaging, or market opportunities. 
• Reduce financial costs and mistakes associated with manual efforts and uneducated guessing.
• Price software products that better achieve financial goals optimizing revenue, margins, or market share.
• Enhance the product development and sales processes with real competitive and customer expectations.

Is Your Pricing Strategy Optimized?

With the right pricing strategy, you can invest more money into your product, service, or growth. A 1% price increase will improv revenues by:

Price monetization will almost double the revenue increases over customer acquisition and retention. (Pricing Strategies, Growth Ramp, March 2022)

DIAGNOSE PRICE CHALLENGES

• Do you struggle to price new products with confidence?
• Do you really know your SaaS product's costs?
• Have you lost pricing power to stronger competitors?
• Has cost focus eclipsed customer value focus?

OPTIMIZE THESE STEPS

Steps

Outcomes

1. Well-organized project
2. Clarified product pricing strategy
3. Customer value vs. price equation
4. Competitive price points
5. Approvals

Ground pricing against financials

• Give finance a heads-up that you want to work with them.
• Find out the CFO’s expectations for pricing and margins.
• Ask for a dedicated finance team member.

Align on pricing strategy

• Customer’s price/value
• Competitive strategy
• Reflective of costs
• Alignment with financial goals

Decrease time for approval

• Reference current product pricing guidelines
• Compare to the competition and our strategy and weigh results against our customer’s price/value
• Compare against the equation to business value for the suggested change

Increase product revenues and margins by enhancing modern processes and data monetization. Shift from intuitive to information-based pricing decisions.

Adjust product design, features, packaging, and contract terms while maintaining the functionality customers find valuable to their business.

New Pricing Strategy Presentation Template

Optimize Software Pricing in a Volatile Competitive Market Executive Brief

Optimize Software Pricing in a Volatile Competitive Market Workbook

Alignment

Research & Reprice

Buy-in

Call #2: Outline products that require a new pricing approach and steps with finance. Plan next call – 1 week.

Call #3: Discuss the customer interview process. Plan next call – 1 week.

Call #4 Outline competitive analysis. Plan next call – 1 week.

Call #6: Review the initial business case against financial plans across marketing, sales, and product development. Plan next call – 1 week.

Call #8: Discuss gaps in executive presentation. Plan next call – 3 days.

DIY Toolkit

Guided Implementation

Workshop

Consulting

Workshop overview

Contact your account representative for more information.
workshops@infotech.com1-888-670-8889

Align Team, Identify Customers, and Document Current Knowledge

Validate Initial Insights and Identify Competitors and Market View

Schedule and Hold Buyer Interviews

Summarize Findings and Provide Actionable Guidance to Stakeholders

Present, Go Forward, and Measure Impact and Results

1.1 Identify Team Members, roles, and responsibilities

1.2 Establish timelines and project workflow

1.3 Gather current product and future financial margin expectations

1.4 Review the Optimize Software Executive Brief and Workbook Templates

1.4 Build prioritized pricing candidates hypothesis

2.1 Identify customer interviewee types by segment, region, etc.

2.2 Hear from industry analysts their perspectives on the competitors, buyer expectations, and price trends

2.3 Research competitors for pricing, contract type, and product attributes

3.2 Review pricing and attributes survey and interview questionnaires

3.2 Hold interviews and use interview guides (over four weeks)

A gap of up to 4 weeks for scheduling of interviews.

3.3 Hold review session after initial 3-4 interviews to make adjustments

4.1 Review all draft price findings against the market view

4.2 Review Draft Executive Presentation

5.1 Review finalized pricing strategy plan with analyst for market view

5.2 Review for comments on the final implementation plan

1. Documented steering committee and working team
2. Current and initial new pricing targets for strategy
3. Documented team knowledge

1. Understanding of market and potential target interviewee types
2. Objective competitive research

1. Initial review – “Are we going in the right direction with surveys?”
2. Validate or adjust the pricing surveys to what you hear in the market

1. Complete findings and compare to the market
2. Review and finish drafting the Optimize Software Pricing Strategy presentation

1. Final impute on strategy
2. Review of suggested next steps and implementation plan

Our process

Align team, perform research, and gain executive buy-in on updated price points

1. Establish the team and responsibilities
2. Educate/align team on pricing strategy
3. Document portfolio & target product(s) for pricing updates
4. Clarify product target margins
5. Establish customer price/value
6. Identify competitive pricing
7. Establish new price and gain buy-in

Optimize Software Pricing in a Volatile Competitive Market

Our process will help you deliver the following outcomes:

• Well-organized project
• Clarified product pricing strategy
• Customer value vs. price equation
• Competitive price points
• Approvals

This project involves the following participants:

• Product management
• Program leadership
• Product marketing
• CFO or finance representative/partner
• Others
• Representative(s) from Sales