pricing as gaming

I have this little conundrum: Pricing our product (the thingamy).

Using my own highly scientific methods I have looked into these models:

• Industrial pricing. Take the direct costs, add indirect costs, add some margin and cross your fingers. (Good Old Pricing)
• Auctions. Highest bidder, one buyer, one product, one winner. (Macho Pricing)
• Fill-up-last seat airline pricing. (Last First One Is A Cheapskate / Smart One Pricing)
• Software pay per seat and time unit. Fixed, but with payment options. (Wet Finger In Wind Pricing)

Gaming the company, gaming the customer...

Ehh, what about "value delivered"? You know, that benefit minus cost thing, the kind-of-core strategy thing... I have no clue at what penny that value is a positive for my potential customer!

I think I shall ask.

Then I could have a spitting chance to deliver good value while I get enough to make it worth the effort.

If enough - both happy, if not - lets' talk another day.

If I never find an overlap I probably deserve it and should do something else :)

Yes, I think I will ask. Every time. No auction, not game it, not fix it - converse and find it.

Conversed Pricing as it is.

Comments

[Stewart]

I learned that the value that a product can be priced at is directly proportional to the buyers ability to swallow a large cost, therefore small businesses expect to pay less than huge corporations, it then is up to you to decide who you'd like to buy your product, wankers in suits, or blokes in bedrooms? :)

[Eric Mattson]

I think Stewart got it right (sort of).

There needs to be a fifth item on the list of pricing strategies.

"Value" pricing - i.e. what is the value of what Thingamy provides?

Perhaps "commission" is the closest model that exists.

You could calculate it like so:

Price of Thingamy = X% of what it saves you or earns the customer.

Now all you have to do is figure out how to scale that model. ;-)

[Ryan]

$299. the answer is usually $299, just ask joel.

[sig]

Ryan, I always thought the answer was 42 :)

Eric, quite right, actually forgot that one - Performance Pricing - often used among SIs.

For us it raises a crucial issue: The thingamy concept is not focused on "efficiency" nor "cost saving" (even if it should deliver that) like most enterprise software does.

It's focus is on the Business Model as a whole - in particular how to keep that a dynamic one, getting better by the day, having more "control" over it allowing easier creativity in that area . And as Business Models goes it affects income as well as costs and everything else... sometimes hard to quantify and split out from what the business owner dreams up in the morning shower! His idea of course, but thanks to the tool we delivered or not?

Perhaps we should do "Back Capital" and take payment in equity?

Not a bad idea for startup-customers actually... :D

[clarke ching]

Take a look at the excellent The Art of Pricing: How to Find the Hidden Profits to Grow Your Business by Rafi Mohammed http://www.amazon.co.uk/exec/obidos/ASIN/1400080932/026-6055567-0561242?%5Fencoding=UTF8

It's really easy to read and it'll help you think of the many options you have for pricing your product. The most important point is that you don't just have 1 option.

Here's an excert (I bought the book immediately after reading it): http://www.randomhouse.com/catalog/display.pperl?isbn=9780307337320&view=excerpt

[Dennis Howlett]

We talked about this Sig - yes - value pricing is defintely the thing. The question is...how do you (or more correctly WE as it must be part of the discussion) build the benchmarking model that incorporates a sensible and acceptable method of calculating little things like ROi (little 'i' v. important here)? That's a good one to juggle methinks.

[Ric]

How confident are you? Do you think you could survive if you just told clients to pay you what they thought it was worth?

I've often thought that you might get ripped off sometimes, but others would pay more than you were expecting - the big question is 'do we have the balls to do it?"

[sig]

Dennis, agree that the "i" is important - think I will suggest the "factor of ten" (see former post) and straight-faced suggest 900% :D

Joking aside, funny thing that "value" proposition in "purchase decisions": Like Kathy and others repeatedly say; there is "want" and "need" - last one mostly used to argue for the decision made by the former.

Thus the "want" is the crux, while the "need argument" (ROi) more hygienic in it's function. Adding heaps of "want" to a software product... hehe... will work on it!

And that leads to Ric's pertinent questions: "How confident are you?"

Pretty much as you know, stupid or not that's a completely different issue :)

"Balls to do it?", hehe, no doubt... stupid or not etc.

But the more "want" (in whatever form) the easier it is to get a decent price, fighting on "hygienic factors" would leave little on the table I think.

[sig]

Clarke, enjoyed the excerpt you suggested - in fact his restaurant-menu-pricing solution therein is pretty close to a Conversed Pricing path, although with bigger bandwidth (and inherent limits) required by the transaction volume.