PriceGains innovative pricing model broadens the market for mature electronic hardware product line.
Staying on top over a long period of time requires that management constantly be evaluating product strategy as well as pricing strategy. In this case, PriceGain helped an electronics manufacturer extend the life of its flagship product.
Situation: New software eroded sales of market-leading hardware.
Our client had led its industry for nearly 20 years with a unique set of technologies that were sold in the form of electronic hardware products. However, the company was seeing increased competition from software-based products that perform similar functions. Longer sales cycles and increased pressure to discount prices also affected new business efforts. What could be done to shorten the sales cycle, reduce the level of discounting required to close sales, and extend the lifetime of the products? And could our client lower the barriers to entry in order to expand its client base?
Solution: Minor product change led to a major change in pricing.
PriceGain surveyed major customers and resellers in the US, Europe and Asia and mapped out the end-users business models. This research determined what made our clients very expensive products a worthwhile investment. In the process, we discovered that customers could generate substantial new revenue by using the products in a slightly different way. It also revealed that the true value of the product was incorporated in the software embedded in the hardware platform. We worked with the R&D team to incorporate a minor change that allowed our client to sell the hardware platform at 10% of the old price, and charge for software components on a pay-as-you-go basis. Customers were then given the option to pay a substantially higher one-time license fee for unlimited use of the software components.
Result: Product life extended, discounting reduced and sales negotiations shortened.
Customers responded positively to the new business model and sales volumes stabilized within two months. It allowed our clients salespeople to overcome price-based objections, answer competitive threats much more effectively, and reduce negotiation time. Customers now have a rate card and can determine for themselves how much to spend instead of negotiating for discounts. Customers are now able to choose between the unlimited software license and the pay-as-you-go program, something that has improved the company’s pricing image substantially. Our client is now able to continue selling a very high margin product that was near its end-of-life and under intense competition.