Any business which works within software should know about Josh Melick. This is a guy who focuses his life on both software providers and how they can do more in the world of business to keep customers happy and to make more money. An example of this can be seen in the brilliant article which he wrote and uploaded to his blog, about the problems that so many companies have when it comes to pricing structures. Here is exactly what Josh had to say about the matter, and what the benefits are of following his line of thought.
Adding a Third Dimension
The point tat Josh is making here is that too many companies set up theirs various price levels, and that most are based on the number of users which a client is allowed and the amount of usage which they are granted. Josh however think that a third level should be added to all levels of the structure, and that is a definite amount of time which the product will be allowed to be used for. When you listen to the benefits in doing this, you will understand why he has written the article.
All businesses had to increase price, this has to be done in order to meet costs as the years go on. The issue with selling software however, for an indefinite amount of time, is that you cannot then increase the price as and when you want to. Although technically speaking you can, there are just too many dangers with doing so, chief among them is losing your customers.
Offering Upgrade Promotions
If someone takes your silver package and they don’t have a definite amount of time in which they can use it, getting them to upgrade to gold could be challenging. If however they have to go through a renewal process once a year, this is your opportunity to convince them that an upgrade could be smart. You could even offer them a lower price rise if they do make the switch.
Planning For The Future
Having your clients on a timeframe allows for far easier planning and a much better outlook for the business. Each month you will know how many contracts are expiring and where you need to focus your marketing energy that month. Information about your clients and your business is essential and this kind of data is critical for your planning in the business.
Most customers don’t mind an increase in price, within reason of course, what they are looking for however is transparency. Adding this third dimension to your pricing structure will certainly deliver the transparency which they want, and it will make it crystal clear to them that when their time is up, the price will be increasing. This will help with trust and customer retention, two critical components of your business.
Josh is absolutely on the money when he talks about adding this third dimension.