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INSIGHT: Only you can change your software pricing experience

INSIGHT: Only you can change your software pricing experience

"In the software industry, pricing is equal parts science and art, and software customers play an essential role in shaping their own experiences."

In order for things to improve for customers, software producers need to make some changes.

These changes won't happen unless customers push their vendors to change processes, roles, and even company cultures in order to provide a better pricing experience.

This is a list of a few of the many ways that customers should encourage software producers to improve.

Transparency:

The first step in the pricing journey should not be "contact a sales rep". Every software producer should have a publicly available pricing page.

We all know that these deals are complicated and often involve custom elements. What is the harm in giving customers a starting point to help anchor their expectations?

Community:

Customers should be encouraged to share their experiences with one another, whether at physical events or online forum.

The software pricing experience should not be a taboo subject (this would be revolutionary… customers are usually contractually required not to discuss purchase information).

License Management:

The more flexible the software licensing arrangement, the more challenging that manual management will be and the more likely that compliance situations will occur.

IDC has published a maturity model to provide guidance on the processes and technology that should be applied to the management of software licenses.

Audits:

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Most of the largest software producers initiate audits, and the majority have an associated annual revenue target.

Software producers say that they would like to reduce the number of audits that they do and focus instead on empowering customers, but until the target goes away it is easy to come to the conclusion that software vendors have little incentive to fix complexity.

Compliance groups within software producers should be measured based on their ability to fix the problems that lead to compliance situations, not awarded when those situations result in revenue.

Governance:

Software producers are always reviewing the relevance and effectiveness of their pricing strategies.

In order to discourage sales or product management from making changes that create complexity but provide little benefit to the customer base, there should be governance, rules and policies around what can be added to the price list and how.

For example, in order for an item to exist as a standalone item on the price list, it should meet certain revenue criteria.

Internal communication:

Software sales reps hear a lot from customers on their pricing experiences, but this feedback doesn't always lead to change. For example, SaaS companies are moving customers to terms that require annual contracts be paid 100% up front.

This is being baked into sales rep's comp plans. Some customers don't mind this, but for many, such as franchises or small businesses, this can be a major hardship.

Annual billing up front has become a major contributor to negative customer experiences in a purchase process that is otherwise generally OK.

Sales reps should know this, but sales management and corporate does not seem to realise how big an issue this can be.

There should be internal mechanisms to manage customer experiences in the same way that these are managed in other parts of the organisation, such as customer support.

“Customer success” needs to include pricing:

Many software providers have customer success initiatives. These initiatives need to focus on the entire ecosystem of customer touch points and include the pricing experience. Customer experience and success should be every employee’s job.

For example, at Citrix every employee rates themselves in terms of how they improved the customer experience as part of their annual assessment.

These are just a few of the many ways that software producers could work to improve their customer's overall experiences by starting with pricing. The good news is that software producers are aware of the issues, and are working to fix them.

However, the challenges are pervasive, and changes will be observed over the course of months or even years-- not overnight.

By Amy Konary - VP, Software Licensing and Provisioning, IDC

This post was originally published on IDC Community.


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