The Price Is … Wrong!

In the past week, I have spent way too much time dealing with product pricing issues on a number of fronts. It shouldn’t be so hard to get a price – my motto is that the harder it takes to find out pricing, the less motivated customers are going to be to buy it.

Let’s give you some circumstances. I am back again reviewing products for eWeek (please, don’t all email me about your products, PR folks). For one review, it took four days, 10 emails and phone calls to get the actual price of the product. The PR person initially sent me something that looked like Egyptian hieroglyphics that didn’t make any sense to either of us (why did she send it, you might reasonably ask). Of course, the vendor didn’t have any prices on their Web site, at least not that I could find.

As a journalist, this gets my goat. I often hear, “We don’t want our competitors to know about our pricing.” Or “We use multiple tiers so our VARs set their own prices.” Hogwash. What these vendors are really saying, “We don’t have a clue what to charge for our product/service.” Shame on them!

For a client, I was recently working with them on their plan for their new software release. One of my issues is its current pricing model, which has five degrees of freedom:

• Number of PCs supported
• Three different “levels” or overall pricing tiers
• Overall capacity
• Two different software versions
• Other surcharges for extra features

That works out to many thousand different prices. You need a spreadsheet to figure out what you are going to pay. Now, granted, there are some complex software products out there and you don’t want to leave money on the table and charge fairly for your product. But five different knobs to turn before you can calculate a price? Not good.

I was a judge in a local competition put on by our county economic development office to pick wining business plans that would receive a nice $50k cash prize. In the five semi-finalist plans that I reviewed, three of them were missing pricing information. The plans were well thought out, had plenty of detail about the company’s prospective businesses, and even had copious pages of spreadsheets showing how the business was going to make tons of money in year 4. But without the actual price of the product or service, this information is just a lot of hot air. How can you tell if your business is going to be competitive? What is the sensitivity of your price to your market? I asked these questions of my semi-finalists and you could see that they just didn’t make the connection. Uh-oh.

So folks, here’s my advice. Keep it simple. Better yet, make a free version available for a limited time or a limited number of users or PCs or whatever. And if you can’t put your prices online where your customers can see them, then you shouldn’t be in business.

3 thoughts on “The Price Is … Wrong!

  1. You seem to be talking about business plans or new products w/o prices. I agree that those are flawed. How could the three plans begin to project income with no pricing plan in place. Hope non of those won the award unless there was a feedback loop in the award process.

    I find it very frustrating to go online and search for a product and find sites that have no prices listed. I just don’t buy there. I’m talking about items priced under a thousand or two. Can’t imagine how they can sell anything if there is no price. If the site says call for the price I don’t call I just move on.

  2. There was a saying my parents grew up with: If you have to ask, you can’t afford it. I think that logic absolutely stops a lot of sales where the vendor doesn’t post prices.

    It’s a pretty basic element of economics that pricing is the most important element of communication in any market. You should want anyone learning about your product to immediately be calculating the cost/benefit ratio of using it. You also should want them to go away and stop wasting your bandwidth if the product is simply not appropriate for them.

    There’s no reason that you can’t have discounts for all kinds of reasons, and extensions to the product that cost extra, and have individual contracts negotiated, but I think you have to have a basic cost for the single end-user in there somewhere. Or at least an idea of what the smallest configuration would be.

    Methinks there are sales reps involved in this who think that they’re better off having the chance to bend the prospects ear for hours before springing the price on them. Codswollop.

    Van

  3. David,

    I almost fell into this trap when pricing our product. Originally our pricing was 10% of the customers’ savings. Got a lot of blank stares. When I changed it to $60 and showed them savings of $600 to $1,000 then pricing no longer became a problem. Simplicity is best.

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