First you're assuming the software company IS making money on that
little guy, they may not be! They may be hoping the little guy steps it
up over time to a size where they are making money with them.
But lets say that little customer does make them a little money. Clearly
it won't be a lot of money since the guy is paying the minimum charges
for 1 partner 1 translation and 1 transaction. The vendor will have to
sell this small setup to thousands of customers just to stay in business.
But there will be customers who need 10 partners and 10 translations and
100 transactions per day. That customer paid more to set up 10 times the
partners and translations and their monthly bill is larger. They are
gaining much more value from the software as well.
And of course there are really big guys with many more partners,
translations, and a constant flow of transactions. Maybe this customer
is offered an 'Unlimited' transaction price to cap their already much
larger bill at a known amount.
Consider these three types of customers. Which will need more support?
Which will call in with more problems? Which is going to be more urgent
when they call? Chances are those bigger guys. So that adds to the cost
of supporting them and thus more profits need be generated to support
that risk.
Yes the cost to send each customer media (even if it's via the net) and
to produce the software and to have phone lines for them to call in to
and is about the same so it's all too easy to say: "Let everyone pay the
same, it's SOFTWARE after all, no cost really to make the second copy!"
But this ignores business 101. Sell at the price the market will bear,
see: "Airline pricing."
This is just "Larry's pricing model for EDI" mind you but it totally
charges based on how MUCH you use the software, not on the size of your
company. You could be GM running on a massive machine with 100 LPARs but
trading with one little partner so you pay very little. Or you could
be a very small company that specializes in EDI sorts of things and
running on a small P10 machine with a single LPAR but beating the thing
to death with EDI. You then pay more because to you it's valuable and
driving your business.
Here's the thing, I want my software company to be making enough money
to stay in business, properly support the product, enhance it, make it
better. I want them selling to a lot of customers and picking up those
new customers too so that ideas those customers have will feed back into
the product thus helping me. I don't want them 'just hanging on' because
the pricing model isn't working for them.
Don't make me tell the story of my dairy farmer cousin and his milk
hauler again! :-)
- Larry "DrFranken" Bolhuis
www.Frankeni.com
www.iDevCloud.com - Personal Development IBM i timeshare service.
www.iInTheCloud.com - Commercial IBM i Cloud Hosting.
On 8/24/2017 7:54 AM, Rob Berendt wrote:
Question, if they are making a profit by selling something to the customer
with one trading partner and only 1 daily transaction, why should they
charge more for the customer with 100 trading partners doing 1000
transactions daily? I fail to understand this kind of tiered pricing
concept. Everyone things the bigger guy always has bigger pockets to
pick. Not considering they also have bigger expenses, rules and
regulations that many of the smaller guys don't. Why should the bigger
guy subsidize the smaller guys purchase? It's not like an auto lease
where you turn in the product at the end and it's more worn out because
you put some serious mileage on it and you have to pay a surcharge. There
it would make sense because the resale value would be lower. When you're
done with software they don't want it shipped back (at least not since I
can remember).
Been awhile since I've been in the EDI world but wouldn't it make more
sense to base it on the cost of development? For example by transaction
type or bundles of transaction types? 810's, 830's, 850's that sort of
thing?
Rob Berendt
midrange.com
