#3 More Objective Based Pricing
In #2 we focused upon selling PS View as a “Freeware” solution. However, when you agreed to become a PS View dealer we are assuming you did so because of the profit potential it presented over any other ECM provider. Let’s take a moment to look back at the “Freeware” model and find the profit.
There is a dealer in an exclusive territory which costs him $10,000 per year. He has approximately 1,200 customers. Using our “Freeware” model and our entry level MFG. Retail Price for support of $250 per month, he would have to sell 3.3 clients to cover his annual cost of goods. Let’s assume you can support a client on your hosted server, with a scaled-down version of PS View, using templates you designed for far less than 50% of $250 per month. One of two things becomes very clear. Either you will make a very good profit selling to a minimal number of your clients, or you can reduce that monthly fee to appeal to many more clients and prospects.
For argument’s sake let’s say you decide it will cost you $50 per month including the hosting fee, to support each client if you get at least 10 clients. Your total annual cost would be $16,000 including the annual fee for the software. Now imagine how many more clients you may sway to use your software if you only charged a monthly fee of $99.00. The objective here is to sign up as many clients as possible to gain control of their documents so you may also retain them as a total service client. Secondarily, that monthly fee can be a deal closer in a competitive situation because it includes software and support.
To take this further, let’s assume that only 10% of our dealer’s clients are willing to consider ECM. If those 120 clients sign up, that will equal $49 times 120 clients or $5,880 per month in profit. This is using the system as a total “Freeware” solution. We still haven’t factored in the value of customer retention, the profit from the deals which have been won because of this added value and the future profits gained from clients desiring to upgrade and purchase a system once they have gotten over the fear of ECM.
Having said all that, pointing out the obvious advantages of paying once and selling many has over a traditional marketing approach. This is especially true when the cost is so low and your territory is exclusive. Let’s take a look at just a few.
Microsoft and Oracle got so huge and so profitable based upon this very approach. They created software which can be duplicated and sold over and over leading to giant profits. In fact, at one time our solution was used by Oracle as its document management component.
Beyond the profit you earn selling the software are the fees:
1. you charge for support,
2. for additional modules such as Process Automation and Forms Automation,
3. for custom programming beyond the scope of support,
4. for additional products which add value to PS View, such as a robust zonal OCR package
5. for the installation of the system
6. for the installation of desktop Capture
7. for additional users
8. and for hosting.
Once again, use our MFG. Pricing as your guide. Your annual cost is your target. The goal is to build enough support revenue to cover next year’s annual cost and then some. Our pricing is designed to pay for itself each and every year building bigger and bigger profits.