Pricing of digital goods and services

An appropriate pricing strategy is inevitable in achieving competitive advantage; however, firms have to be aware of the key resources needed for successful pricing and invest in developing the firm’s pricing ability. Pricing of digital goods and services is especially challenging due to the high-volatility environments and the special characteristics that these offerings have as compared to other economic goods. Despite of its importance, the literature, to date, did not investigate the pricing of digital goods and services from the resource-based perspective (RBW) and the capability-based view (CBV). After conducting a multi-case study of five firms, this research provides an in-depth view on the pricing practices of digital goods and services through the theoretical lenses of RBV and CBV and proposes a model that captures the key activities and the key resources needed for pricing of digital goods and services

Pricing of Digital Innovations as an Entrepreneurial Process

How do entrepreneurs set a price for digital innovations they develop and market? This is an important question in current information society where digitalization is making established pricing models outdated. In this study, we focus on this issue by examining what kinds of activities and resources entrepreneurs possess when pricing digital innovations. Based on five case studies, including 37 interviews with key decision makers involved in the pricing process, we found that pricing of digital innovations can be conceptualized as an entrepreneurial process in which the pricing capabilities are developed based on the resources at hand. In this view, the pricing model is adjusted through negotiations with customers as an iterative process. Our findings contribute to the IS literature by integrating insights from RBV, DRBV, and entrepreneurship theories to the pricing process of digital innovations

Developing sales and revenue models for Software as a Service

SaaS-palvelut ovat yleistyneet viimeisten vuosien aikana ja niiden käyttö tulee myös jatkossa kasvamaan. Perinteisissä ohjelmistoissa yleisesti alkuinvestoinnit ovat olleet suuret, jolloin hankintaan liittyvät taloudelliset riskit ovat korkeita. Perinteisissä ohjelmistoissa asiakkaan on myös useasti panostettava omaan IT-infrastruktuuriin sekä omiin sisäisiin IT-resursseihin kuten henkilöstöön. Nykyään yhä useammin sovelluksia kuten SaaS-palveluita käytetään suoraan palveluntarjoajan palvelimelta käsin verkon ylitse ja niiden käytöstä veloitetaan käytön mukaan tai esimerkiksi kuukausittain. SaaS-palvelun käyttö on yleisesti kustannustehokkaampaa ja näin ollen taloudellisesti riskittömämpää asiakkaalle. SaaS-palvelut mahdollistavat erilaisia hinnoittelumalleja kuin perinteiset ohjelmistot. Myös niiden myyntitavat poikkeavat perinteisistä ohjelmistoista. Näin ollen on tärkeää, että organisaatiot paneutuvat erilaisiin mahdollisuuksiin ennen SaaS-palvelun markkinoille lanseerausta. Case-organisaatio on tuomassa markkinoille uuden SaaS-palvelun ja tämän diplomityön tavoite on, selvittää minkälaisia myynti- ja hinnoittelumalleja on olemassa ja mitkä mahdollisesti soveltuisivat organisaation tarpeisiin. Diplomityössä pyritään löytämään vastaus myös siihen, miten hinnoittelu vaikuttaa SaaS-myyntimallin valintaan ja miten hinnoittelu ja myyntimalli tuotteistetaan SaaS-palveluksi. Diplomityössä käsitellään myynti- ja hinnoittelumallien teoriaa. Teorian jälkeen tutustutaan tapaustutkimuksen menetelmiin ja aineistoon. Tutkimuksessa määritellään myös case-organisaation tavoite ja johdetaan niistä kriteerit, joihin sitten teoriaa heijastetaan. Tutkimuksen loppupuolella avataan lukijalle tutkimuksen tulokset sekä siihen liittyvät arviot ja rajoitteet sekä annetaan jatkokehitysehdotus. Tutkimuksessa ei pystytty tarkasti osoittamaan soveltuvinta myyntimallia case-organisaatiolle, vaan todennäköisesti sopivin olisi hybridimalli, jossa yhdistyvät parhaat käytänteet kahdesta eri myyntimallista. Hinnoittelumalleista case-organisaatiolle soveltuvin olisi malli, jossa asiakaskunnan laajentaminen mahdollistettaisiin helpoiten 14. päivän tai 30. päivän kokeiluversiolla, jonka jälkeen joko asiakas maksaisi käytön mukaan SaaS-palvelun käytöstä tai hankkisi ohjelmiston ohjelmistovuokrausmallin mukaisesti

Pricing the Cloud: An Auction Approach

Cloud computing has changed the processing and service modes of information communication technology and has affected the transformation, upgrading and innovation of the IT-related industry systems. The rapid development of cloud computing in business practice has spawned a whole new field of interdisciplinary, providing opportunities and challenges for business management research. One of the critical factors impacting cloud computing is how to price cloud services. An appropriate pricing strategy has important practical means to stakeholders, especially to providers and customers. This study addressed and discussed research findings on cloud computing pricing strategies, such as fixed pricing, bidding pricing, and dynamic pricing. Another key factor for cloud computing is Quality of Service (QoS), such as availability, reliability, latency, security, throughput, capacity, scalability, elasticity, etc. Cloud providers seek to improve QoS to attract more potential customers; while, customers intend to find QoS matching services that do not exceed their budget constraints. Based on the existing study, a hybrid QoS-based pricing mechanism, which consists of subscription and dynamic auction design, is proposed and illustrated to cloud services. The results indicate that our hybrid pricing mechanism has potential to better allocate available cloud resources, aiming at increasing revenues for providers and reducing expenses for customers in practice

A adequação da estratégia de pricing Pay What You Want à distribuição de conteúdo digital online

Versão Final (Esta versão contém as críticas e sugestões dos elementos do júri)O objetivo do presente estudo é verificar se a adoção de uma estratégia de pricing Pay What You Want pode ser mais adequada para o mercado de distribuição de conteúdo digital online. Verificámos que uma estratégia de pricing é tão mais adequada quanto maior for o seu potencial para, entre outros aspetos, proporcionar uma receita superior às empresas. Para verificar a adequação da estratégia Pay What You Want foi aplicado um inquérito online a uma amostra de conveniência para avaliar a intenção de compra e o preço de reserva para um conjunto de produtos digitais. Isto permitiu verificar que, em determinados casos, esta estratégia pode conduzir a resultados superiores através de uma redução dos montantes individuais pagos, que é compensada por um aumento no número de compradores. Este estudo vem salientar a importância para o controlo de gestão de analisar o impacto das decisões sobre políticas de preço.The purpose of this study is to verify if the Pay What You Want pricing strategy can be a best-fit for the online digital content industry. It was possible to observe throughout this study that a pricing strategy is the most adequate if, amongst other aspects, it can provide a higher revenue for the businesses. In order to verify the adequacy of the Pay What You Want pricing strategy, it was applied an online survey to a convenience sample, which was inquired about the intent to buy and the willingness to pay for a set of online digital products. The results allowed us to conclude that, in some cases, this strategy can lead to higher results for the businesses through a reduction of the individual amounts paid which are offset by an increase in the number of potential buyers. This study highlights the importance for management control of analysing the impact of the decisions related to pricing in the results of the company

Adjusting Software Revenue and Pricing Strategies in the Era of Cloud Computing

Recent research has recognized cloud computing as a new paradigm of servitization in which software products are offered based on service contracts. Thus, instead of selling software licenses, software vendors can rent software as a service to customers. However, it is still unclear how software providers can use software renting as a competitive strategy in the software market. Based on 37 interviews with software professionals from five case firms, this paper focuses on the connection between competitive forces and the factors influencing the selection of a pricing model. The findings indicate that servitization of the software offering makes it possible to adjust revenue and pricing strategies relative to market competition. Depending on the competitive situation in the market, firms apply mixed revenue models, or else a hybrid pricing mechanism, to protect their business against rivalry and substitutes. The software renting model has several advantages which significantly help software vendors to expand their business opportunities. However, in some cases, powerful customers are able to limit the revenue and pricing options. The findings also indicate that software renting is related to cost leadership and differentiation strategies, whereas software licensing is linked to a focus strategy.peerReviewe

Hybrid pricing in enterprise software-as-a-service company

Pricing is a fundamental activity that involves multiple functions of a company. Even though it’s performed by all businesses, the pricing decisions aren’t necessarily straightforward. This thesis aims to portray a unique pricing case from the business-to-business software-as-a-service domain. The literature lacks real-life examples from both fields. The case company uses a relatively unique hybrid pricing approach entailing a reoccurring license fee and a one-time implementation charge. The pricing case is for a new service and a new customer, which means that the case is also novel for the case company. The holistic single case study was conducted by interviewing the project personnel from the case company. Documentation from the pricing process was gathered as a secondary source to verify and add to the interview data. Before the empirical part of the study, a literature review was conducted to get a comprehensive view of the topic before interviews and, more importantly, to compare the results to the current theory. The review gathers some well-known basic pricing frameworks and then continues to disclose pricing aspects and models from the domains of the case. The results are presented in three themes: pricing process, parameters, and hybrid pricing. The pricing process followed well the models introduced in the reviewed literature. The case shows that large and strategic clients might have the leverage to influence or dictate the pricing process and used methods. Many of the pricing parameters introduced in the literature were used in the case and vice versa. In addition, a major challenge recognised in theory and experienced in practice was the difficulty of finding information to support the decision making. The strategic value of the project is one of the most prominent parameters affecting the case pricing that wasn’t introduced in the literature. Also, hybrid pricing is overlooked in the reviewed pricing literature. The case study presents one approach. The case company started by separately maximising the pricing of the licensing- and implementation charge and then balancing the two based on client sensitivities and company strategy.Hinnoittelu on perustavanlaatuista toimintaa, jossa on mukana useita yrityksen toimintoja. Vaikka se on tuttua kaikille yrityksille, hinnoittelupäätökset eivät välttämättä ole yksinkertaisia. Tämän diplomityön tavoite on kuvata ainutlaatuinen tapaustutkimus hinnoittelusta yritysohjemistopalvelujen toimialueelta. Kirjallisuudesta puuttuu tosielämän esimerkkejä niin yritysten välisiltä markkinoilta kuin ohjelmistopalveluliiketoiminnasta. Tapausyritys käyttää verrattain ainutlaatuista hybridihinnoittelumallia, johon sisältyy toistuva lisenssimaksu ja kertaluontoinen käyttöönottomaksu. Hinnoittelutapaus koskee uutta palvelua ja uutta asiakasta. Tapaus on siis uusi myös yritykselle. Holistinen yksittäistapaustutkimus tehtiin haastattelemalla projektihenkilöstöä tapausyrityksessä. Hinnoitteluprosessin dokumentaatiota kerättiin toissijaiseksi lähteeksi tukemaan ja verifioimaan haastattelutuloksia. Ennen tutkimuksen empiiristä osaa, tehtiin kirjallisuuskatsaus, jonka avulla saatiin kattava käsitys aiheesta sekä vielä olennaisemmin, jotta tuloksia voitaisiin verrata uusimpaan teoriaan. Katsauksessa kootaan tunnetut yleiset hinnoittelumallit ja jatketaan sen jälkeen tapausspesifien mallien esittelyyn. Tulokset esitellään kolmen teeman avulla: hinnoitteluprosessi ja -parametrit sekä hybridihinnoittelu. Hinnoitteluprosessi noudatti hyvin tutkitussa kirjallisuudessa esiteltyjä malleja. Tapaus osoittaa, että suurilla ja strategisilla asiakkailla saattaa olla vaikutusvaltaa sanella käytetty hinnoitteluprosessi ja menetelmät. Tapauksessa käytettiin useita kirjallisuudessa esitellyistä hinnoitteluparametreista. Lisäksi teoriassa sekä käytännössä nähty suuri haaste oli päätöksentekoa tukevan tiedon löytämisen vaikeus. Projektin strateginen arvo on yksi suurimmista käytännössä käytetyistä parametreista, jota ei kuitenkaan mainittu kirjallisuudessa. Myös hybridihinnoittelu on aiheena jätetty huomiotta hinnoittelukirjallisuudessa. Tapaustutkimus esittää yhden lähestymistavan. Aluksi tapausyritys maksimoi hinnoittelumallissa käytetyt lisenssi- ja käyttöönottomaksut erikseen ja sitten tasapainotti nämä asiakasherkkyyden ja yrityksen strategian perusteella