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Which Comes First - Product or Price in Software Monetization?

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Which Comes First - Product or Price in Software Monetization?

October 13, 2016

  By Susan J. Campbell, TMCnet Contributing Editor

Getting the most value out of your software development is always a challenge in software monetization. In an economy where the focus is on leveraging cloud-based solutions, the opportunity for sustainable revenue is definitely there, as long as your strategy supports the focus.

In reality, however, the focus on the cloud is not the only variable that is affecting software monetization. A study of the market is essential, but one thought leader also suggests that you design the product around the price. Madhavan Ramanujam of Simon-Kucher & Partners is a pricing and monetization expert. His research suggests the goal should be to build the product around the price if you hope to optimize software monetization opportunities.

While Ramanujam has learned from the more than 10,000 different projects Simon-Kucher has undertaken for companies throughout the world, there is a core belief within the software monetization strategy that products and solutions need to be designed purely around things that customers place true and tangible value on. While this concept is one that makes a lot of sense, it is definitely much easier said than done, as highlighted in this Licensing Live blog.

Throughout the market, innovations in products and services tend to have a 70 percent failure rate, meaning the companies either miss their revenue and profit goals or the they simply fail completely. Ramanujam’s rules are expected to have a significant impact on helping software companies to fully extract value from their products and services, while enabling customers to do the same.

Not sure how this would look in real-world applications? Ramanujam hasn’t kept the concept a secret and even without these insights, companies seeking software monetization are doing so with this method. Some of the biggest brands in the world, for instance, have applied these rules and reaped the benefit. Companies like LinkedIn (News - Alert), Porsche and Uber have all leveraged the strategy of designing the product around the price and enjoyed significant profitability as a result.

Companies seeking to bring to market a Software-as-a-Service (SaaS (News - Alert)) offering or software monetization for embedded solutions within their hardware products stand to benefit from this approach. With the market rapidly moving towards cloud computing, and the Internet of Things and machine-to-machine capabilities gaining ground, the opportunity to leverage a proven strategy in monetization is here. Taking advantage of the right approach ensures revenue and drives the ultimate value.

Edited by Stefania Viscusi
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