Software buyers suddenly have more clout at the bargaining table. But that doesn’t mean B2B software suppliers have to give up profit. Here are six strategies for keeping your prices stable.
When IT spending turns pessimistic, any software purchase must align with short-term business drivers, the first of which is to manage costs and preserve capital.
Expect companies to cancel IT projects that won’t provide tangible cost savings or revenue in the next half, and freeze the buying process for longer-term projects.
Where’s the silver lining?
CIOs look to save money in ways other than just killing projects. They look hard at old software’s high maintenance costs and weak security, with an eye to replacing it.
And every IT team is cloud first, ever since they had to scramble to enable thousands of employees to work from home on short notice. Demand for some technologies has soared.
That won’t stop buyers from using the current crisis as an excuse to ask for lower prices.
How should software vendors manage pricing strategies, as a recession looms?
1. Target your market segments that are less price sensitive.
Review your segmentation and de-prioritize those where you already were competing on price. Penny-pinchers will be the first to stop spending, and the last to restart. Also, as part of marketing’s response to the economic crisis, consider how your segments are being hit. Don’t bank on travel and leisure, energy, or consumer goods companies to spring back into spending this year.
2. Connect your value to your buyer’s current pain.
Consider the current market context and lead with the highest value in your product for each target segment. Which customers value which features? Be sure your revised messaging makes that value clear in every marketing effort.
3. Don’t lower prices for your existing products.
Do anything but discounting today’s offerings. Software product management consultant Linda Merrick suggests alternatives, like: Downsize a new offer and price it accordingly. Offer a less-featured package, or flexible seat licenses. Simplify purchasing. Anything but signal a lower value for your flagship. Later, when lost prospects return to the table, they’ll remember that lower price. Demand is not price-elastic in a downturn. If you’ve done steps 1 and 2 above, then pricing concessions are not the way to drive sales.
4. Delight existing customers.
Your best bet for revenue in the first 12 months will be from your existing customers. Think hard about new use cases that your customers may be facing now, and how your product uniquely solves them. Ensure your customers are receiving and perceiving the value they’ve paid for. Publish case studies, tip sheets, configuration guides and helpful videos – all about how to get the most from your product or service.
5. Educate your sales reps.
Reassure your sales teams and channel partners that you have a pricing strategy for the current economic reality. Educate them on how to present the value that you identify. Train them on newly packaged offers and how to sell them.
6. Engage experts.
This is a time for Product Marketing and Product Management to work together to sustain your price points. Don’t hesitate to augment your in-house team’s knowledge.
It’s critically important that you get this right. In times like these, you can never have too much expertise at the table.
Before your sales team starts discounting, grab the pricing reins. Connect your product’s value to the pain of your highest priority market segments. Communicate relevant value to prospects and customers. Train reps to use these new tools to hold the line on pricing.
Economic recession is no joke. But the software industry has survived longer ones.