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The Importance Of Software Pricing Strategies

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Price is the amount of money that human pays for enjoying the right, comfort and satisfaction of some product. The price to charge the product is one of the most important making business decision. In the software industry, setting a price for software product is a challenging task because it can affect the business' growth, and build a competitive advantage. Therefore, to achieve and maintain pricing excellence, the company have to follow the following processes.

The initial step of pricing the software product is having a deep understanding of the business. Firstly, the vendor should understand the business goal. Before setting a price, the vendor needs to clearly define the goal because understanding long-term business goal is critical …show more content…

And these following are three interesting software pricing strategies. The first one is the Freemium strategy. This strategy is providing outstanding functionality for free, then have a range of upgrades. The strength point of this strategy is fast increasing of new customer because if customer A satisfies with the software, they will suggest their acquaintance to the user. However, this model can make a huge growing, but it is not working for every product. According to the article in wall street journal, it talks about the failure of this strategy, also David Cohen' s speaking that there are only one or two percent of users that will upgrade to use the premium version. Therefore, if there is a small different between a free version and premium version, in the end will be a losing business.[4] The second one is Per-user pricing. Per-user pricing is a common pricing model, where the user pays different amounts depending on the numbers of people using the service. This strategy does not suit with the customer in the form of companies that have multiple users because it will cut down on the number of people within a company who can get to know and use the software, and the model also limits the potential number of active users.[4] The last one is flat rate pricing or subscription. This is probably the easiest pricing model. Vendors will offer a product with some features at a defined price. Usually it is billed monthly or annually, with a discount on annual subscriptions. The strength point of this strategy is a regular income that can estimate, and if there is no something wrong, the value paid by each user will be very high. However, if there is no a new feature to keep supporting the customer, they may cancel the subscription anytime. And this strategy is now so unpopular even if it is

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