An Unusual Strategy for Software

An alert reader sent in this press release about Schott Systeme a CAD-CAM software vendor, which has held prices constant for a decade and does not charge for support. Annual support charges typically run about 20% of the license fee, meaning that over four years, customers pay as much in support as they do for the software itself. For some enterprise customers, the handholding, priority bug-fixing, and feature implementation is extremely valuable. Giving away this value would be bad pricing. For smaller shops who just want software on a budget, this cost efficiency is a good selling point. The pricing policy announces which type of customers they target. Too often, companies seek to sell to the largest addressable market they can, without considering that even within that market, different sub-segments perceive value differently (see this article for in-depth discussion: The Value Price Waterfall). If Schott Systeme’s pricing policy leads to efficient sales with no haggling, they can still achieve strong margins, because their cost of sales will be lower than that of competitors with higher prices and more pricing complexity.