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5
Agenda:
1. Who wants to price an IT Service ?
2. Cost-Based Pricing Vs Value-Based Pricing
3. How to price an IT Product
Tiered Pricing:
Pre-sales
Shipping and Handling
Installation
Switching Cost
Since custom-built elements are likely to bloat the cost (and profits)
Clients insist on COTS components in at least the non-custom elements
Complementary Pricing:
Is when consumable products or services are offered as additional
The base product is sold at a low price s.t. resistance to purchase is minimized
ASP/SaaS (even MSP) can be considered as a case of Complementary Pricing
Price Lining:
Higher search costs of one group Vs low reservation prices of
another group
Sometimes the software may have identical functionality
Periodic Discounting:
Higher search costs of Innovators employed to price higher
initially
Gradual cost reduction occurs as product matures
Relatively long technology or market lifecycles are necessary
Buzzword (Contd.)
ITS Cos. ask deal size to be $10M or above for outcomebased pricing
Has a more futuristic component called revenue-sharing
model
Where cause-effect is even harder to establish
The IT Service has to be the prime reason of the revenue
increase
Even if in measurable combination, e.g. an IVR
complementing keypad Ops