Market Stage Transitions - Pricing Software

I once was told by a smart man, "Price something at the cost of lunch and people will buy without thinking." This makes sense when you're after consumer markets and volume. When we talk about enterprise business software, however, we need to examine much more variables to arrive at an effective price-to-value fit. Meaning, price must fit where value is matched. Cost of Acquisition should be markedly lower than Customer Lifetime Value.

As an industry, we tend to solve this pricing dilemma quite well. Although we fail to determine pricing equilibrium and timing for scale, often setting improper benchmarks or stabilizing our price models, prior to the market reaching equal levels of sanity or arriving at stability or predicable growth patterns. This leaves customers running to lower cost providers, or chasing them off with a low price point into the arms of larger players with better perceived value. We should remain erratic, unpredictable, test boundaries and price simply but not constrained by rules and fences, especially when in market stage transitions.

More on this later.