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The Real Cost of Buying Software to the Customer
As a vendor of software, you know exactly how much money you are going to make on a deal. But there are extra costs for the customer when purchasing software.
If you can anticipate these costs and align your sales process with the customers buying process, you will win more deals and have happier customers.
I'm not talking about price negotiation or selling on value. I mean sometimes it is difficult to quantify the total cost of ownership when buying software.
Is it a one off fee or an annual/monthly license fee. Priced per user or company, what is a user?, how many different levels of users and prices are there. Are there different options, Gold, Silver, Bronze. Is there a set-up fee and training costs involved, what about maintenance and upgrades. With some software offerings it is a nightmare to calculate how much it is going to cost; to buy and continue using each year
Don't use teaser prices to draw in customers, then add on all the extras. Make pricing clear and easy to calculate.
With the credit crunch and cash flow issues, payment terms can now make or break a sale. When we first started out and were sourcing a supplier. We selected three companies we were happy to do business with.
As a start-up cash was tight, but we actually choose the most expensive supplier. As they had the best payment terms; no upfront fee, paid monthly, with first two months discounted. Over a year, they were more expensive, but the terms made the deal the best fit for us.
Check your payment terms, to see how you can make your offering more attractive to customers. Credit facility, discounts at the start and payment duration.
Everyone remembers the PPARS debacle. That was a bespoke software system, but off the shelf software can also suffer from project failure. Lots of companies purchases software that they don't use. This can be for various reasons and is a massive waste of time and expense to companies.
In order to prevent project failure, it is best to involve all stake holders (Users / Managers / Third Parties) during the sales process. This ensures that the software solutions meets the needs of everyone involved and enables a successful roll out.
Check everyone who will use the system gets involved before purchase. A free trial of the software can help ensure customers know exactly what they are buying and won't waste their money.
Don't under estimate how much time and cost is involved for the customer to get set-up using your software. You might think your software is intuitive and easy-to-use, but it's still a new system to the purchaser and will take time to implement. Extra training days and delays in assimilation will be very costly to customers.
Give customers an accurate cost and time frame for roll out. Detail how you will help them if things go wrong, let them know they are not forgotten about once you get paid.
How does the software work. Are a new server and resources required to run the software. Customers then have the expense of running and maintaining that equipment. Do you have to go on site to install and set-up the software. What happens if there is a problem and upgrades; are further site visits required. This is all extra expense to customers.
The Cloud/SaaS is the future for ISVs. No need for customers to invest in new equipment, no need for engineers to install software. Problem fixes and upgrade are done automatically.
If you can anticipate these costs and align your sales process with the customers buying process, you will win more deals and have happier customers.
1. Actual Price
I'm not talking about price negotiation or selling on value. I mean sometimes it is difficult to quantify the total cost of ownership when buying software.
Is it a one off fee or an annual/monthly license fee. Priced per user or company, what is a user?, how many different levels of users and prices are there. Are there different options, Gold, Silver, Bronze. Is there a set-up fee and training costs involved, what about maintenance and upgrades. With some software offerings it is a nightmare to calculate how much it is going to cost; to buy and continue using each year
Don't use teaser prices to draw in customers, then add on all the extras. Make pricing clear and easy to calculate.
2. Payment Terms
With the credit crunch and cash flow issues, payment terms can now make or break a sale. When we first started out and were sourcing a supplier. We selected three companies we were happy to do business with.
As a start-up cash was tight, but we actually choose the most expensive supplier. As they had the best payment terms; no upfront fee, paid monthly, with first two months discounted. Over a year, they were more expensive, but the terms made the deal the best fit for us.
Check your payment terms, to see how you can make your offering more attractive to customers. Credit facility, discounts at the start and payment duration.
3. Project Failure
Everyone remembers the PPARS debacle. That was a bespoke software system, but off the shelf software can also suffer from project failure. Lots of companies purchases software that they don't use. This can be for various reasons and is a massive waste of time and expense to companies.
In order to prevent project failure, it is best to involve all stake holders (Users / Managers / Third Parties) during the sales process. This ensures that the software solutions meets the needs of everyone involved and enables a successful roll out.
Check everyone who will use the system gets involved before purchase. A free trial of the software can help ensure customers know exactly what they are buying and won't waste their money.
4. Roll Out
Don't under estimate how much time and cost is involved for the customer to get set-up using your software. You might think your software is intuitive and easy-to-use, but it's still a new system to the purchaser and will take time to implement. Extra training days and delays in assimilation will be very costly to customers.
Give customers an accurate cost and time frame for roll out. Detail how you will help them if things go wrong, let them know they are not forgotten about once you get paid.
5. Infrastructure
How does the software work. Are a new server and resources required to run the software. Customers then have the expense of running and maintaining that equipment. Do you have to go on site to install and set-up the software. What happens if there is a problem and upgrades; are further site visits required. This is all extra expense to customers.
The Cloud/SaaS is the future for ISVs. No need for customers to invest in new equipment, no need for engineers to install software. Problem fixes and upgrade are done automatically.
