Netflix, a service whose adoption rate has been growing at astounding rate of 3.6M users a quarter, has changed the way we watch shows and movies at home. They are one of the most successful tech firms started in the late 90s. Just think of some of their dot.com competitors: Excite, Kosmo, and Webvan and [...]
Tag Archives | Pricing / Licensing
A winning business model requires a unified and all-encompassing approach that goes far beyond how monies are collected and products or services are delivered. In an earlier article, I mentioned a long list of functional areas that must align around a winning business model, but neglected to include Legal. How the legal eagles affect business models is critical and deserves an article of its own. That’s right–even the legal team is part of a winning business model.
Can prices be set too low for consumers? A recent study by Dr. Antonio Rangel of CalTech says yes. Dr. Rangel observed the brain activity of subjects and found they exhibited more pleasure drinking wines when they thought they cost more. For those of us that study the finer points of pricing, this is a very interesting result. We all know that there is a sense to “you get what you pay for” that acts as a negative factor when evaluating the lowest priced alternatives. What Dr. Rangel has established is that there is more than the fear of getting stuck with an inferior product at work; people actually get more enjoyment from certain products if they think they cost more. The data communicated by the price is working not just at a rational level, but at an emotional level as well. That is, from the brain’s standpoint, these products are objectively better in a post-purchase environment.
While SAP’s brand and development resources are enormous assets, SAP’s operations—the very way it does business—must be re-thought for BBD and the changes required for success are fundamental in every sense. SAP needs to re-think its sales, services, integration, support, development and revenue models. The enterprise sales force is too expensive to address mid-sized customers and the R/3 eco-system is ill-suited to address BBD deployment. Even the SaaS revenue stream will require major adjustments.
Last year I wrote about the communication gap between the saas (software as a service) and web application communities. The quick summary of the gap is that they’re both dealing with the same technologies — hosting an application on a server and accessing it over the Internet — but from completely different perspectives and even [...]
What does it mean when a vendor adopts flat-rate pricing, but later moves away from it? Does this mean the vendor misjudged the market initially or wised up and found new ways to exploit their customers? The truth is both more and less complicated than any of these explanations.
Amazon is in the news because they announced that as of June 1, they are introducing tiered pricing for parts of their S3 web services. Amazon’s announcement states that many customers will pay less and some will pay (a lot) more. To understand what is going on, it helps to understand a little about pricing theory and practice.
What do you do if you have a mature product and the market gives you grief over your complex pricing? You have to do something, but what you do depends on your level of market power and your view of pricing. With Oracle’s latest pricing announcement, one gets the sense that Oracle is still being Oracle. That is, this is the latest installment in Oracle’s attempt to update pricing without actually changing their pricing much. As the category leader, they get pressure to lower prices but know that they don’t have to do so. So while the headline suggests Oracle is simplifying, they are not. They remain, as ever, optimized for revenue capture.
As in any innovation-driven market, software vendors continue to develop and exploit a variety of business models, most recently a variety of “free” services. Unlike the period of the Internet bubble, during which companies failed because they didn’t monetize their services, many of today’s “free” services are well thought out and are likely to become successful businesses. While this article looks at the monetization side, it is equally important to note that these companies leverage Web 2.0 tools and consequently have dramatically lower development and operating costs than their Internet bubble predecessors.
SoftSummit 2006 (a conference led by Macrovision) happened a couple of weeks ago. I was there as a speaker so got a chance to meet some good people. Much of what was discussed was the same old, but one session stood out.
One topic over lunch on Wednesday was this: “Virtualization Takes Over the Enterprise.” Raghu Raghurum, VP of platforms at VMWare and Chad Jones, Sr. Product manager at Microsoft were the two content leaders.