Question

Topic: Strategy

Pricing Strategy Dilemma

Posted by SRyan ;] on 4/14/2004 at 6:27 PM ET 238 Points
We have just launched our data collection tools that work with mobile phones and the Web, and we intend to sell usage on a monthly subscription basis. (I know ASP business models were off the mark three years ago, but there *are* some sane and successful companies marketing this way now.) Our goal is to keep the service affordable for small to mid-sized customers, so they spend less than $100 monthly for each field location they manage.

HOWEVER... Two of our beta customers are nationwide water utility operators, and they manage hundreds, if not thousands, of field locations. Even with blood-curdling discounts, our pricing rapidly moves us beyond that dot on their horizon that means Cheaper To Build It Ourselves. The "good problem" we have is that these customers love the product (it's BirdNest.com, by the way) and they want to negotiate a license fee.

Now what do we do?

Are there any guidelines for how to market and price a service to a large customer? Especially while pursuing a different strategy with smaller customers?

Looking forward to getting your thoughts here!! Thanks.

Shelley
To continue reading this question and the solution, sign up ... it's free!
SUBSCRIBE
Or, SIGN IN

RESPONSES

  • Posted by SRyan ;] on 4/14/2004 at 7:10 PM Author
    JBtron, thanks for the quick response. We do have a sliding scale of discount pricing (still to be proven, as we are very early in our launch). The Big Customer seems to want to pay a one-time license fee, or possibly a flat annual fee.

    Since this isn't software we're selling, and the subscription pricing model is essentially unproven, I'm hesitant to agree to a flat license fee. Even if I *did* know what to charge them ($50K? $250K?), I may not be able to convince the investors I'm romancing that the subscription model will fly.

    Confusing, isn't it?

    - Shelley
  • Posted by telemoxie on 4/15/2004 at 9:34 PM Accepted
    I'm no expert in negotiating license fees - but in the future, I'd suggest targeting smaller prospects.

  • Posted by SRyan ;] on 4/15/2004 at 11:59 PM Author
    I've been so impressed by the quality of answers that I generally see on this know-how exchange, and posting my own question was a great experience.

    Thanks to each of you for the time and thought you put into your responses. They were all good! I want you to know that those I "accepted" were chosen for their Insight Quotient. (That means there was something in there my team hadn't thought of already.)

    With sincerest appreciation...

    - Shelley
BACK TO TOP

Post a Comment

Related Discussions

Community Info

Top 25 Experts
(Strategy)