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Gail Ferreira  
Media Relations, Gantry Group
978-371-7557 x18 (office)
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TECHNOLOGY SOLUTION PRICING FREQUENTLY RELIES ON COMPETITORS’ PRICING MODELS RATHER THAN FIRSTHAND MARKET INSIGHT

LACK OF MARKET DATA RESULTS IN FREQUENT PRICING MODEL CHANGES FOR TECHNOLOGY SOLUTION VENDORS

CONCORD, Mass., Apr. 23, 2007 — The Gantry Group, LLC announced the results of its quantitative study of technology vendors and service providers to assess their pricing practices for solutions and related services. The study revealed that over half of the respondents (51%) apply competitors’ pricing models and past sales experiences with current customers to determine their pricing strategies. This approach exposes these vendors to the inherent risk that the competition may not have correctly assessed the market’s perception of value. While 31% of study respondents use direct market input from current & prospective customers to guide their price strategies, 69% exclusively rely upon secondary insights.

The study reached executives within 53 technology solution providers who held leadership roles who directly influence and determine their company’s pricing strategy: 62% held positions of VP or higher in their organizations.  

Most companies would like to price based on the market’s perception of value and the competitive landscape, but lack explicit market feedback to guide pricing model structure and levels. Instead, the study respondents informally draw on their personal sense of the market (46%), past buying behavior of current customers (70%), as well as opinions from sales (62%) and the executive/team (62%). Sole reliance on past sales performance and experience may stunt business success with new prospective customers, particularly in new markets or new segments that may bring entirely different buying behaviors and criteria.

“The rapidly evolving shift to the “Software as a Service” model challenges solution providers to completely reexamine their pricing models. To be successful, solution vendors must carve out the right solution bundle at the right price for each target market segment. Lacking formalized, statistically valid market insights, it’s quite easy to ‘miss the mark’ with technology pricing. Frequent price adjustments to discover the pricing package that resonates and differentiates most with customers is expensive and can damage market perception in the process,” said Dale Troppito, Managing Partner at Gantry Group.

Due to the absence of direct market data and the risk of adopting potentially misaligned competitors pricing, the majority of study respondents (55%) reported that they are vulnerable to frequent re-pricing after the technology solution’s initial market launch. In contrast, 75% of those respondents using primary research as their guiding pricing process avoid this costly process of trial and error re-pricing.

“Our hope is that technology solution vendors will recognize the bottom line benefits to be gained by directly testing the target market’s price sensitivities, solution bundling preferences and perceived solution value. This study reveals the business penalties that arise from implementing market assumptions that are not market validated,” said Dawna Paton, Managing Partner at Gantry Group.

Study results also indicate a clear shift towards an all-inclusive annual subscription fee that combines solution usage, a capped block of training hours, technical support and maintenance. Over half (55%) of the respondents now include unlimited support and maintenance in the solution subscription fee; the former pricing model in which a separate charge for support/maintenance was determined as a percentage of the perpetual license fee is declining in prevalence.

 
About Gantry Group    
For the past decade, Gantry Group has created business success for technology-enabled solutions clients through customer market research to help companies develop strategies to build and sell offerings matched to what their target markets truly value. Gantry Group delivers to corporate marketers the firsthand market insights and predictive measurement capabilities that allow them to make informed decisions as they plan ahead and prepare for future market trends and needs.

Through Gantry Group’s market intelligence, market research, and ROI/TCO benchmarking service suites, more than 450 client companies have identified, positioned and quantified their value within the marketplace. Additional information about Gantry Group can be found at www.gantrygroup.com .

For study results, please call Gantry Group at 978-371-7557 ext 18, or go to http://www.gantrygroup.com/research/category.cfm?cat_id=59  to download directly.

Entire Contents, Copyright © 2007 Gantry Group LLC All Rights Reserved. References to any of the contents in this press release must include Gantry Group copyrights and citation.