Ask HN: B2B Pricing
3 comments
There's no getting around understanding what the value of your technology to your customers is.
The starting point is to find out the raw ROI. So if they use your technology, how much money will they make or save? How does this compare to your competitor? So I would say, you need to take the final step and translate that 10x reduction in error to dollars.
I don't care if my GPS is exact, but to an airline company this is critical and they would spend well to make sure it takes into account the curvature of earth, etc...
But the raw ROI is just the starting point. Companies also pay a lot of money for other intangible features. There are some companies that spend millions on Oracle when they could probably get by with free open-source. Clearly Oracle is not competiting on price here, but on a feeling of 'security', knowing that my site will not go down and if it does, I have someone to yell at and come fix it.
If your product is truly revolutionary, maybe there are early adopter advantages. Could early adopters of your product steal revenue from competitors by using your tech? Price that in.
If your product is truly revolutionary, this final price may end up being pretty high and give some customers pause. A good approach would be reduce the price of your product for a pilot phase of say months. In return for reducing your price, you can ask for some specific feedback or a testimonial. Make sure they understand you aren't just reducing the price in return for nothing.
After they go through the pilot and have a real tangible sense of the value of your product, they may be willing to pay your high price you initially calculated.
The starting point is to find out the raw ROI. So if they use your technology, how much money will they make or save? How does this compare to your competitor? So I would say, you need to take the final step and translate that 10x reduction in error to dollars.
I don't care if my GPS is exact, but to an airline company this is critical and they would spend well to make sure it takes into account the curvature of earth, etc...
But the raw ROI is just the starting point. Companies also pay a lot of money for other intangible features. There are some companies that spend millions on Oracle when they could probably get by with free open-source. Clearly Oracle is not competiting on price here, but on a feeling of 'security', knowing that my site will not go down and if it does, I have someone to yell at and come fix it.
If your product is truly revolutionary, maybe there are early adopter advantages. Could early adopters of your product steal revenue from competitors by using your tech? Price that in.
If your product is truly revolutionary, this final price may end up being pretty high and give some customers pause. A good approach would be reduce the price of your product for a pilot phase of say months. In return for reducing your price, you can ask for some specific feedback or a testimonial. Make sure they understand you aren't just reducing the price in return for nothing.
After they go through the pilot and have a real tangible sense of the value of your product, they may be willing to pay your high price you initially calculated.
[deleted]
First, I'll recommend the same free e-book here that I recommended over there: http://www.neildavidson.com/dontjustrollthedice.html
It will give you a good framework for figuring out your pricing.
If I were in your shoes, I'd be asking myself what the value to the customer is. What's their ROI going to be?
Once you do get in the door with somebody, I suspect you'll hear what they used to pay your competitors.
It will give you a good framework for figuring out your pricing.
If I were in your shoes, I'd be asking myself what the value to the customer is. What's their ROI going to be?
Once you do get in the door with somebody, I suspect you'll hear what they used to pay your competitors.
My startup is close to finalizing a business-to-business product and has some close connections within the industry that will result in likely first sales. However, we've been having trouble pricing the service. Every competitor on the market requires a request for a service quote, so price benchmarking is difficult. Also, getting this business to say what they're currently paying is unlikely.
Without getting too specific, we're developing an atmospheric science-based technology that is extremely disruptive. For example, the "error" reading for our product is nearly 10x less than current methods. However, it seems illogical to charge a price premium in suit.
As far as cost to provide the service, it is minimal. Should we charge on the hypothetical lower end of the spectrum for hopes of easy adoption, of charge a slight premium for quality? I have a monthly rate in my head that makes sense to me, but I have no idea if it is too high or too low.
On another note, this was a Ph.D. dissertation technology, and adjusting it for direct consumer use is not possible.