Software pricing can be a complex and confusing topic for both vendors and customers. How do you communicate the value of your product, justify your costs, and avoid hidden fees or surprises? In this article, you will learn some best practices to make software pricing more transparent for customers, and how this can benefit your technical sales process.
The first step to make software pricing more transparent is to explain your pricing model clearly and consistently. Whether you use a subscription, a perpetual license, a usage-based, or a hybrid model, you should provide customers with a simple and logical breakdown of how you charge for your software. You should also highlight the benefits of your pricing model, such as flexibility, scalability, or predictability. For example, if you use a subscription model, you can emphasize how customers can access the latest features, updates, and support without paying extra.
One thing I've found helpful, is to explain the pricing model from the outset. Software companies get a 'bad rap' for having hidden charges. If you explain your pricing from day one there should be no surprises.
The second step to make software pricing more transparent is to align your pricing with your value proposition. This means that you should demonstrate how your software solves a specific problem, delivers a measurable outcome, or creates a competitive advantage for your customers. You should also show how your pricing reflects the value you provide, such as by offering different tiers, packages, or add-ons that match different customer segments, needs, or goals. For example, if you offer a CRM software, you can show how your pricing corresponds to the level of functionality, customization, and integration that your customers require.
Framing pricing in the context of ROI presents the cost as a tradeoff for the value it will generate. This is done most effectively by running a discovery call before pricing even comes up. Capturing metrics such as conversion rates, average deal size, and typical sales cycle time can provide valuable insight into when a "breakeven" point would be. This way, if your offering costs $20k, instead of just presenting the cost, you can present the cost in conjunction with the value added. "Our solution will cost $20,000. With your conversion rate of X%, average deal size of $Yk, and typical sales cycle of Z weeks, we estimate that you would see ROI within [timeframe] from this purchase due to the lift we provide." This context is important!
The third step to make software pricing more transparent is to provide clear and accurate quotes that include all the relevant details and terms. You should avoid vague or ambiguous language, hidden fees, or fine print that could confuse or mislead your customers. You should also explain any discounts, incentives, or penalties that apply to your pricing, such as for early payment, volume, or contract length. For example, if you offer a 10% discount for annual payments, you should state this clearly and show how it affects the total price.
Every quote issued should be clear and consise. There should be no hidden charges or surprises for customers further down the line.
The fourth step to make software pricing more transparent is to anticipate and address common objections that your customers may have about your pricing. You should be prepared to answer questions such as why your software is worth the price, how your software compares to competitors, or how your software can fit into their budget. You should also be ready to handle any resistance or negotiation that may arise from your pricing, such as by offering value-added services, free trials, or flexible payment options. For example, if your customer asks for a lower price, you can explain how your software delivers more value than cheaper alternatives, or offer them a longer trial period to test your software.
The fifth step to make software pricing more transparent is to educate and engage your customers throughout the sales cycle. You should provide them with helpful and relevant information, such as case studies, testimonials, or demos, that showcase the benefits and results of your software. You should also communicate with them regularly and proactively, such as by sending email reminders, follow-ups, or confirmations, that keep them informed and interested in your software. For example, if your customer is close to making a purchase decision, you can send them a personalized email that summarizes your pricing, value proposition, and next steps.
In my experience, it pays to be open and honest at every step of the journey. Make sure to address negatives as well as positives. All communication should be personal. Treat the customer as you would wish to be treated yourself!
The sixth and final step to make software pricing more transparent is to solicit and act on feedback from your customers. You should ask them for their opinions, suggestions, or concerns about your pricing, such as by conducting surveys, interviews, or reviews. You should also listen to their feedback and use it to improve your pricing strategy, communication, or delivery. For example, if your customer tells you that they are satisfied with your pricing, you can ask them for a referral or a testimonial. If your customer tells you that they are unhappy with your pricing, you can apologize and offer a solution or a compensation.