A small, dedicated team of data scientists and pricing experts developed a comprehensive pricing strategy for a new data service product.
A global provider of market intelligence, data, and events was nearing the end stages of developing a new data service product targeted at the sales organizations of IT firms. They required a comprehensive pricing strategy to ensure the success of the product in a highly competitive landscape with a number of established companies.
While the client faced intense competition in the market, the product did not have comparable, one-to-one functionality to any other product available, nor was its functionality fully realized by the start-time of the project.
Revenue Management Labs was engaged to develop the new product pricing strategy that addressed the client’s key requirements, which included establishing short- and long-term price structures, determining price levels for the core package and optional add-ons, and developing a comprehensive plan for pricing implementation.
As is common for new, innovative products, the challenges in developing the pricing strategy came mainly from the data gaps and incomparability with other products on the market. Typically, historical, transactional data would serve as a valuable input in setting the price, but here, the product is a completely new offering with no past data to build on and for a new client-side user than the company had traditionally served.
Similar issues with data arose when analyzing competition that made it challenging to benchmark pricing. The product’s functionality was not one-to-one comparable to other products on the market, and the competition did not disclose pricing publicly making it difficult to obtain in most cases.
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Review the advanced analytics behind our pricing strategy and the increase in revenue.
Revenue Management Labs developed a tailored pricing solution for our software client, emphasizing flexibility and value optimization. We proposed a modular price structure, ensuring the solution could be customized to meet specific customer needs. This approach was complemented by setting strategic price points for the base package and additional levers, effectively reflecting the economic value of the product while minimizing the risk of cannibalization. Additionally, for the second version of the product, we provided a comprehensive price structure that included increased prices to account for the enhanced functionalities and added value.
To support effective implementation, Revenue Management Labs developed detailed price execution guidelines. These guidelines covered discretionary discounting approaches, contract terms, and price escalation policies, leveraging internal best practice benchmarks. Furthermore, we created a pricing calculator to enable IDC’s sales team to easily calculate prices based on specific customer profiles and needs. This combination of structured pricing, execution guidelines, and a practical tool empowered the sales team to deliver tailored and value-driven pricing to their customers.
To develop a custom pricing solution for our software client, we began with a comprehensive competitor benchmarking exercise. This involved analyzing the competitive landscape, understanding the functionality offered by competitors, and identifying their price points. This benchmarking provided a solid foundation for our pricing strategy by revealing the strengths and weaknesses of competitors. Following this, we conducted a value map analysis to gain insight into the appropriate price positioning relative to competitive offers. This analysis helped us identify how our client’s offerings could be positioned in terms of value compared to others in the market.
Additionally, we carried out an economic value modeling exercise to derive base package price points. This model helped us understand the economic value of our client’s product and establish a price that reflected this value. To further refine our pricing, we developed price levels for additional solution elements, taking into account various factors such as competitive offerings and the risk of cannibalization within our client’s portfolio. This multi-factor approach ensured that the pricing structure we proposed was balanced, competitive, and reflective of the product’s value. Through these detailed and strategic analyses, we created a tailored pricing solution that aligned with both market conditions and our client’s business goals.
For a detailed review of the pricing methodology and data analysis,
download the full case study on new product pricing for software.
“In general, I believe we have landed at price points and packaging options that will resonate well with the market given our current understanding of key competitors. I am confident, with the product roadmap currently in place, that the Phase 1, 2, and 3 approaches will ultimately yield significant value for our customers. I certainly appreciate all the effort it has taken to get to this point."
Revenue Management Labs delivered a pricing strategy for the new product that was modular and accounted for a second version with enhanced features and value. We also included a plan for implementation that accounts for all necessary sales training and additional rollout.
After year one, the target revenue is expected to reach $7 million, which is about 3-5% of the customer segment.
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