In Camels and Rubber Duckies, Joel Spolsky discusses what he believes to be a poor pricing decision:
Bad Idea #2: How Much Money Do You Have? Pricing. This is the kind used by softwareDo you agree? Should product price lists be on the website?
startups founded by ex-Oracle salesmen
where the price isn't on the website
anywhere. No matter how much you
search to find the price, all you get
is a form to provide your name,
address, phone number, and fax number,
for some reason, not that they're ever
going to fax you anything.
It's pretty obvious here that the plan
is to have a salesman call you up and
figure out how much you're worth, and
then charge you that much. Perfect
This doesn't work so good either.
First of all, the low end buyers are
just going to move on. They will
assume that if the price isn't listed,
they can't afford it. Second, the
people who don't like salesmen
harassing them will just move on.
Worse, as soon as you send a message
that your price is negotiable, you're
going to end up reverse segmenting.
Here's why: the big companies you sell
to, the ones who should be willing to
give you the most money, are
incredibly sophisticated about
purchasing. They'll notice that your
sales guy or gal is working on
commission, and they'll know that he's
got quarterly quotas, and they'll know
that both the salesperson and the
company are going to be incredibly
desperate to make a sale at the end of
the quarter (the salesperson to get
his commission, and the company to
avoid getting their knees shot off by
their VCs or Wall Street). So the big
customers will always wait until the
last day in the quarter and end up
getting a ridiculously good price
which somehow involves weird
accounting shenanigans so the company
can book a lot of revenue that they're
never really going to get.
Note that I'm referring to relatively expensive purchases (thousands of $ after all users/options purchased), as opposed to like a one-off $29.95 texteditor or something.
If the thing you're selling is undefined ("complex solutions"), then of course you can't price it. By definition?
But if you're selling software, there's some good reasons to post prices, the biggest of which is that you have a strong negotiating position, in that you don't negotiate.
"We need a discount" can be countered with "All our customers pay the same," which is only a credible statement if you publish your prices. And all big customers will ask for discounts.
Here's more about the "discount gambit " and more reasons for having fixed, published pricing.
Besides, it's just honest.
When I'm looking for a solution/product to buy I ran away from websites without pricing.
If someone writes "contact us for pricing " that reads "contact us so we can rob you ".
It's going to be either too expensive or tricky, but always dirty.
When it comes to the solutions require custom packages, different modules, different requirements put a sample case study with pricing so I can predict the cost before your crazy salesman steal 30 minutes of my precious life for something I won't buy with that price tag.
Not listing the price is doing the perfect market segmentation, charging as much as the customer willing to pay. Yet it's so dirty almost all customers in the world hate it.
Several questions for consideration:
Our product follows the "software as a service" model with a tiered pricing schedule. The monthly cost ranges from a few hundred to a few thousand dollars per month. I decided to make our pricing public because I think our fees are very reasonable and because personally I almost never "call for price."
Self answering because my opinion is different than the question. For many years, I wholeheartedly agreed with this: not listing the price is simply a way for some salesman to harass me into a price. Thank you but no thank you, next!
But I've since changed my mind on this. We do not, and will not, list prices for our products or services. The reason is simple: we do not sell a commodity, but instead complex and customized packages. And, since we can work with customers that range from 2 to 20,000+ employees, our packages cannot be one-size-fits-all.
While anything can of course be broken down to "per user costs" (software) or "per mili impressions" (advertising), it's different for everyone based on the options, modules, targeting, etc. I think it would be a disservice to clients to start the conversation with prices, since we can't know what they'll be without assessing their needs. In fact, we don't even know if our product/service will even be a good fit without knowing what they need, and we certainly don't want to sell to those who don't need.
It's not about How Much Money Do You Have? but How Can We Work Together To Deliver Maximum Value?
If the product is concrete (i.e. you're delivering the same product to each customer), then I believe the pricing should be public on the website.
As a consumer, it really pisses me off if a company hides their pricing. It says to me "your time is not important - we'll decide when to give you the information you're looking for ". What I say to them is "Well, I'm not clicking your contact button, I'm off to your competitor ".
Of course the company has no idea this is happening. Here's the way to measure it - have a 'Pricing' link that takes people to your 'Contact Us' form. See how many people abandon your site from that page.
If you have an off-the-shelf product, it's usually good practice to publish your pricing. If your product is customized for each customer, or there are many options to consider, it's often best to have your sales team walk prospective customers through the process.
In certain industries, there are other factors at work. If your company regularly competes for government contracts in a bidding process, you won't publish your prices. After all, you'd let your competition know the price they have to beat.
I have a price list that is going to be published on my website and is already given away to anybody who wants it. So I'm all for open pricing.
Note that I favor open pricing although my product tends to fall in the salesman-calls-you kind of category, in that is not commodity software, mainly targets large enterprise customers and may involve customization.
My most important reason for this is that I don't have a salesman to call and negotiate, to begin with, and am not too good at negotiating myself. Second, there's small and medium businesses who are a potentially large audience for my product (I haven't had time to find out, yet) that I find it hard to market directly to, but who I don't want to put off by looking too enterprisey, either.
Finally, I'm already quite happy with my approach to segmentation, which is having diferent editions of my product that are equal in features but vary in capacity. I feel that I can comfortably target different types of companies without having to give myself a headache about charging everybody differently.
I use free customization and extra services as negotiation mass with large customers.