Setting a Price for the Workforce Management Software

Say we wrote a nice workforce management application. We want to sell it, so we need to set a price.

Pricing classic methods

When pricing the application, we can follow multiple methods. We can

  1. calculate the money the application costed and adding a markup
  2. research the price of competiting products
  3. calculate how much money the client will spare in a reasonable mortgage

Pricing classic methods have flows

Each method has flows:

  1. it is very important to know the cost of the product we sell (say below). Say the unitary cost is UNI_COST, we add a reasonable markup, say 30% and we get a lower bound on the sale price. If we go below this figure, we lose money. This information will help us in not setting a low price, but it won’t help in fixing the market price. If the market allows for a much bigger markup, we lose the opportunity to earn more
  2. when researching the market, we will usually find that any product (say a fork) can cost from a few cents or several hundreds (thousands ?) dollars. A simple research re the competitive products won’t say much. Instead, it will show the need to segment the market and position our product in the minds of the target market.
  3. beauty is in the eyes of the lover. The client could not agree on the suggested benefits or in the value of each benefit. “Know thy customer”: we need to study our target customer more and set a price that accurately reflects customers’ perception of value: the Economic Value to the Customer (EVC)

Workforce management software: what do people really buy ?

A workforce management application does a number of things:

  • fast planning in the use of human resources
  • equity in the use of human resources
  • quality control
  • control of costs

We can offer our customers this list of features as sales strongpoints.

However, are we sure that what the application does is what customers want, and what they are willing to pay?

Car salesmen know they are not selling cars: they are selling status.

Booksellers know they are not selling books: they sell information, or fun.

Which value do clients perceive in our software ?

Usually customers will only pay for

  • solution of problems
  • fun

Usually customers have a relationship in mind that balances products' benefits and prices.

In order to sell, we need to set a product price that matches customer’s perception of value.

We need to know more about the last, what drives us into Customer Value Research

Workforce Management Software: customer value research

the research will have a few goals:

  • find which features are really seen as valuable by the target
  • study competitive products
  • segment the target market
  • estimate price sensitivity
  • produce a reliable prediction of sales and profits

as usual in economics, we want to study human behaviour.

We start assuming that customers behave rationally. Not true, but useful:

The rational behaviour can be predicted, the irrational cannot. If our customers are rational 50% of times, we can predict their behaviour 50% of times: not bad.

  • A market survey is usually a 2 step-process:
  • a qualitative research

a quantitative research

However when high figure sales are not expected (and we are not selling a consumer product, like soap) experts allow to skip step 2.

In order to perform step 1, we need to create a interview guide.

An interview guide will provide the list of questions to ask during the phone interviews. Also it will contain instructions re how to analyze the answers.

Interviews will begin with customers and prospects. The needed number of interviews is surprising low.

The length of an interview should not exceed 20 minutes. In order to make respondants happy, some form of cheap premium could be planned.

The help of an expert is important here. The expert will know how:

  • create proper questions (phrasing is critical here)
  • analyze data
  • hide the name of the sponsor

We will use professional interviewers with proper language skills to administer the interviews to sales people, customers and prospects. In the end we will be able to identify the important features that pilot the customer trade off decisions.

We will use professional interviewers with proper language skills to administer the interviews to sales people, customers and prospects. In the end we will be able to identify the important features that pilot the customer trade off decisions.

Interviews will be recorded.

The respondent will be shown a YouTube video of our application.

Then the interviewer will start the following questions:

How many times a day do you create a rostering ?

What do you use to create a rostering ?

About what price would you expect to see our product offered for?

At what price would our product start to look so cheap that it could not possibly be of good quality?

At what price would the product start to look to expensive?

What do you like most about our new product?

What do you like least about our new product?

Overall, how interested are you in buying this product if it were available?

How would you prefer to purchase this product?

Which is your company income ?

What is the price per hour for staff time ?

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