Overcome the Uncertainty of Subscription Pricing

While you can't eliminate uncertainty in any pricing decision, you can cut it down to size. The best way to do this is to break the uncertainty into smaller, bite-size pieces. This is especially important if a company is considering a term or subscription pricing model.

Here are seven steps you can take to assess the impact subscription pricing will have on your business:

1. Check the impact of a new licensing and pricing model on existing customers.
2. Develop a what-if model to assess revenue impact of new price structures.
3. Prepare a transition program for upgrading existing customers to new licensing and pricing models.
4. Minimize revenue risk by doing a staged new product roll out.
5. Link changes in price levels and price structures to value delivered.
6. Consider new product configurations that increase the perceived value of your products.
7. Start with fixed, longer term licenses before moving to more flexible terms.

Checklist for Implementing Subscription Pricing

• Leave Enough Leadtime to Deal with Pricing.
• Involve the Key Players in a Pricing Team.
• Build Pricing Team Momentum and Maintain Focus.
• Estimate application usage patterns.
• Revise product configurations.
• Document price structure and price levels.
• Revise product promotion.
• Determine impact on sales method.
• Make sales support and compensation consistent.
• Provide product maintenance and support.
• Make license administration and support tools available.
• Trace through impact on logistics and accounting.
• Modify license agreements.

Activities to Add to New Product Introduction Milestones

When implementing a subscription model, companies need to add new steps to their product introduction process. As we mentioned before, most companies tend to implement a change in business model in the next major release of an application. A successful subscription licensing implementation requires a thorough understanding of the impact of license managers on the product, its marketing and sales. If your company has a formal new product introduction process, you may find the following steps a useful addition to the project plan:

• Understand the concept of license managers.
• Assess license manager technology alternatives.
• Assess business impact of flexible licensing.
• Access impact of flexible licensing on marketing and sales.
• Evaluate and select license manager technology.
• Modify logistics, support, and contracts.
• Develop pricing and licensing transition plan for existing customers.
• Develop revised sales/channel programs for flexible licensing.
• Pre-announce new pricing and licensing to selected customers.
• Revise pricing and licensing based on customer feedback.
• Begin customer shipments.