Five points to success: pricing and marketing of digital products, services and software

Digital solutions are no longer developed and sold only by IT companies, but are increasingly found in the portfolios of many other industries (for example, FinTech, digital health, mechanical engineering). Pricing and selling these digital products is often challenging – but at the same time offers very great potential for gaining market share and increasing revenue. In our projects, our consultants have identified several success factors for commercialization.

Digital products are different

In terms of commercialization, digital products differ from classic “tangible” products such as industrial goods. Unlike these, it is not possible to base pricing for software or platforms (e.g., CRM or ERP) or digital services on manufacturing costs in a meaningful way. In addition, there is usually a lack of empirical values for prices, as digital innovations make new business models, applications and solutions possible.

Value-based pricing and sophisticated value selling therefore make more sense. This requires systematically determining the value of the digital product from the customer’s point of view and translating it into a scalable pricing and business model. The pricing of digital products therefore includes new pricing models that usually better capture the value for the customer: Comprehensive subscription models with bundling of hardware, software, managed and remote services, and consulting are becoming increasingly popular. The hybrid offering of hardware and services is often referred to as EaaS (“Everything as a Service”).

Key points of successful commercialization of digital products, services and software

In our experience, the successful commercialization of digital solutions is closely tied to value-based pricing and a sales strategy tailored to this. Often, the necessary structures in sales are missing to place genuine digital products in new and partly unknown market segments. Market knowledge, such as the customer journey, central touchpoints and product experience, i.e., the value drivers, must therefore be built up for the go-to-market.

We recommend initially focusing on a few core points for digital solutions, “cultivating” pilot segments and developing these further in an agile manner.

Success factors for marketing

There are five key success factors for marketing digital products, software and services:

Precise customer segmentation

Who are the customers with whom I can most quickly create a sufficiently large customer base for the product in a targeted strategy?

A differentiated product offering

How can the product be offered in different performance classes, for example editions or bundles, in order to be able to tap heterogeneous willingness to pay?

A value assessment from the customer's point of view

What are the relevant value drivers of the options for each segment? How can these best be quantified?

A scaling business and pricing model

How can the value to the customer be mapped into a scaling business and pricing model with appropriate metrics (pay per "X") that grows with value and willingness to pay?

An effective distribution

How can the digital product be optimally distributed? What are the levers that reduce churn in pre-sales and aftersales and promote retention, recovery, extension, cross-selling and upselling? Which functions (for example, marketing, customer success or revenue management) and which sales organization is required?

How to: Valuing Digital Products, Services & Software for Optimal Pricing

The key points presented are intended as an initial overview of factors that can be used to successfully offer a digital product to initial customers. Each of the points should be designed in such a way that commercialization can grow along with the organization’s growing market success and experience.

The goal is to explore and quantify the added value of the new digital product compared to the next-best alternatives (NBA) on the market.

When determining value, it is sufficient to first conduct a small study with test customers. The goal is to sound out and quantify the added value of the new digital product compared to the next-best alternatives (NBA) on the market. Even a simple prioritization of functions by the customer generates insights that can later be translated into an initial pricing model by expert estimates.

Use direct price inquiry as a simple method of market research to determine willingness to pay as part of a customer survey on the pricing of a product. R&P shows you what is important.

When talking to customers, a structured approach that combines direct price queries, prioritization and classification into a customer segment is ideal. Digital products can be easily split into solutions for specific applications or “editions” with different sized feature sets through a modular feature set. Customers then select according to need and willingness to pay, and the risk of a “wrong” price for the provider is reduced. The product offering thus combines the need from customer segmentation with a scaling business and pricing model.

Experience with digital solutions

In recent years, Roll & Pastuch has worked with clients from a wide range of industries to develop successful concepts for marketing and pricing digital services, products and software, including:

  • A scaling pricing model for a Software as a Service (SaaS) solution with appropriate metrics for law firms with varying law firm sizes and price increases
  • The blueprint for designing pricing models of various digital products for a technology company – from simple embedded modules to production control software
  • The design of a SaaS pricing model for analytics software in radiation diagnostics to generate for higher revenue potential for the manufacturer
  • The development of a bundle of digital modules for a manufacturer of machine tools to minimize sales efforts

Learn more about your pricing potential

We will be happy to answer your questions and provide you with further information on pricing and marketing of digital products, services and software.