Channel Pro - February 2009

INNOVATIVE PRICING MODEL HELPS PARTNERS

Judy Hodges, research manager for SMB markets at IDC, is keen on an innovative new online pricing model that enables channel partners and their customers to configure a solution online and receive an immediate cost estimate. Thus far, however, the pricing strategy has been deployed only by SAP for its Business All-in-One fast-start program. But no matter, said Hodges, in a conversation with Executive Editor Cecilia Galvin: “The model is here to stay, and will grow in popularity over time.”

ChannelPro-SMB: Let’s assume that online pricing has already been adopted by leading IT vendors. How does it work? Hodges: If a partner or customer wants to know the price of particular components of a solution, they go on the vendor’s Web site and use what-if scenarios to experiment with various components. They take the base solution, plus some added functionality, and see the impact of that on the final price. This is the way pricing is going to go, particularly for price-sensitive customers.

ANALYST

ChannelPro-SMB: Customers would use this as well?

Hodges: Yes, either the IT manager can do it or other executives can use it as testimony to how much a solution might cost so they can better plan their budgets. Also very important is that using the online pricing model reduces customer risk and enables them to understand the critical costs associated with their purchases. It speeds up the implementation process as well because the customer is aware of the various components of the solution prior to its installation, and shouldn’t need time-consuming counseling at this stage. Many times customers want someone to hold their hand during the implementation.

ChannelPro-SMB: What are the advantages for partners and vendors?

Hodges: It allows vendors to disseminate new pricing instantaneously to their partners and customers. If customers go online and don’t return or contact them, the vendor might consider that the pricing is too high. It also helps a vendor publicize to potential partners that a solution is more affordable than they might have previously thought. It will drive up partner satisfaction while attracting additional partners, and it will considerably help the vendor meet its goals to ramp up its indirect channel contribution, expand the addressable market for channel partners, and fully monetize its solutions potential.

I think the online pricing model will be extremely critical to a vendor’s success moving forward. Because there are numerous skilled competitors that have also positioned themselves to score big on the SMB battlefield, this model will greatly assist vendors in standing out from their competitors.

What it does for partners is enables them to build and tailor solutions for their customers based on functional and cost objectives, and allows them to provide a personalized approach for price-wary midsize customers. It also helps to stimulate new customer purchases, including cross-sell and up-sell opportunities. Again, it’s what-if experimentation.

The vendor and the partner can also better understand customer value and potential, and can analyze which solutions are being selected and bundled, and adjust their prices accordingly. The model will help vendors and partners increase sales volume rapidly.

The model is transparent, its responsiveness is great, and the ability to disseminate price changes easily creates a sense of urgency for the customer. If a partner goes online and says, “I think I found the right solution for my customer,” and can then prove it to the customer, the customer is buying.