Nov 24, 2009
Show me the Pricing!
Last night I was directed to Joel Spolsky’s blog and his post Camels and Rubber Duckies; it’s a very long post but recommended if you have the time. (thanks @SoftwareMaven)
In his post Joel tries to help you find the best price for your software but towards the end he highlights what he calls bad idea #2;
Bad Idea #2: How Much Money Do You Have? Pricing.
This is the kind used by software startups founded by ex-Oracle salesmen where the price isn’t on the website anywhere. No matter how much you search to find the price, all you get is a form to provide your name, address, phone number, and fax number, for some reason, not that they’re ever going to fax you anything. It’s pretty obvious here that the plan is to have a salesman call you up and figure out how much you’re worth, and then charge you that much.Perfect segmentation! This doesn’t work so good either. First of all, the low end buyers are just going to move on. They will assume that if the price isn’t listed, they can’t afford it. Second, the people who don’t like salesmen harassing them will just move on. Worse, as soon as you send a message that your price is negotiable, you’re going to end up reverse segmenting.
Here’s why: the big companies you sell to, the ones who should be willing to give you the most money, are incredibly sophisticated about purchasing. They’ll notice that your sales guy or gal is working on commission, and they’ll know that he’s got quarterly quotas, and they’ll know that both the salesperson and the company are going to be incredibly desperate to make a sale at the end of the quarter the salesperson to get his commission, and the company to avoid getting their knees shot off by their VCs or Wall Street. So the big customers will always wait until the last day in the quarter and end up getting a ridiculously good price which somehow involves weird accounting shenanigans so the company can book a lot of revenue that they’re never really going to get.
via Camels and Rubber Duckies – Joel on Software
Why are B2B technology vendors obsessed with secret pricing?
- 2009 Lamborghini Murcielago, MSRP of $354,000 to $382,400
- Out of this world celebrity retreat in Malibu 4 bedrooms & 4 full baths costs $11,900,000
How do I know that? Google.
Those are some of the highest priced things a private consumer could purchase and the price is right there for all to see.
The price itself is a communication tool, it says:
- We know our products value to the market and have picked a price we are confident in
- This is a very nice car/house
- Don’t waste the sales persons time if you are not a millionaire
It communicates market confidence, quality and it even “qualifies the lead”. What it does not do is lock out people shopping for a $10,000,000 house; we all know there is haggle room with MSRP.
Don’t get me wrong, companies need to put evangelists in the field, perhaps now more than ever. An argument for public pricing is not an argument against direct sales unless knowing the price is the only value your sales people bring to the client.
Companies purchasing mission critical software for their projects need to look you in the eye and get a feel for your company. Businesses purchase trust and a shared commitment to “getting the job done” as much as they purchase technology.
But is withholding price the best way to start the relationship or get the first meeting?
If you have an opinion on public pricing for B2B products please join the conversation by commenting.
Nice post. I tend to agree that pricing should be made public (maybe not in all cases, but certainly in most). If companies price their products correctly, why hide it and make people guess? Besides, pricing invariable gets spread via word of mouth as sales people circulate among customers in the marketplace. All that said, I think it also takes good messaging to explain the value of a product. Take one without the other, and you can create more questions than answers.
Hi Shuey, Both value-messaging and pricing take time to get right but as you correctly point out one is no good without the other. At NxN you spent a lot of time and effort trying to change the perception of Alienbrain’s price/value balance. Did that battle affect your opinions on public pricing?
Absolutely. We started with a high price that was communicated via sales people. The word spread quickly that we were a high-priced solution. It took us a while to take our pricing public and to refine our value messaging. Only after we did, did we begin to overcome the persistent high-priced perception.
So another question for you.. MarCom success is traditionally measured in “web leads”. Getting people to fill in that little form, name, email address, phone number, purchase time frame etc.
How does public pricing affect the goals and success metrics of MarCom?
There are actually many measures of marketing success, depending on a company’s objectives. Captured leads is only one measure. In terms of public pricing’s affect on metrics, it again depends on the company’s goals of publicizing pricing, e.g. it is to combat a misperception and thereby increase interest, is it to deter some people in order to capture more qualified leads, etc? These things will vary from one company to the next, and measuring there efficacy will also vary depending on what the company is trying to achieve.
Great post! Setting the right price for your product is some kind of black art. It requires a good understanding of your offering, which you don’t always have when you first launch and knowing what your customers are willing to invest for this value.
Getting it right the first time around is almost impossible. Making a mistake and having to readjust should not be a problem provided that you can act quickly and message your changes properly.
In our case, Audiokinetic, we came out too high compared to competition and what customers were willing to invest and on top of this we made our pricing private. We ended up making a significant adjustment and went public with it. We had a few marketing campaigns around the topic to spread the word. And even if still today people perceive us a more expensive compared to others, they understand the value they get for the price.
At the end of the day, I think pricing should be public. The more information you give to customers the better equipped they are to make a choice. This should increase the number of lead and accelerate your sales cycle. Your Sales team should add value to the mix and be there to ensure the customer understand the value of the product, ensure they get a pleasant experience with the product and ensure the customer can be won.
One other important point is to understand why do people keep their pricing private? Make sure that the issue is not the price. Regardless of the way you message it or not, marketing will never be able to solve a bad price. And please, trust your sales team they are after all validating price and value with customers every day :)
Gen thanks for your insight.
The article suggests that businesses expect less “wiggle room” on openly priced B2B products. Are you seeing this? What differences, if any, have you experienced in the way businesses negotiate deals with you now?