4 ms·
This piece is clearly talking about an enterprise sales model, and because of that I think his point about taking extremely low amounts of money for first custo
by nlavezzo 16y ago
This piece is clearly talking about an enterprise sales model, and because of that I think his point about taking extremely low amounts of money for first customers requires a word of caution.
In our experience at our last company, which was an enterprise software company selling a powerful data analytics platform, almost ALL of the customer negotiations at all stages of the business involved "Most Favored Nation Pricing" clauses - as in, the customer wants to know that no other customer has gotten a better deal. This can be subject to fixed volume discounting, etc. - i.e. someone buying 50 licenses prior to the currently contemplated sale of 20 licenses could have paid less. However, try telling a potential customer that someone previously paid less for the product they're thinking of buying and at a minimum you'll have a hold-up of months of red tape as they get an exception to their purchasing checklist authorized. These corporate purchasing processes are highly inflexible and often imposed by Sarbanes Oxley "internal controls" measures (meaning they're dictated by outside auditors, and not up for discussion) - they are real and need to be factored into pricing strategy.
A good workaround we found is this: make your early licenses have some type of specific restriction or obligation that you will relax in the different class of licenses you will sell later in the company. You might restrict early licenses to dealing with a certain type of data, or you might even add the obligation of participating in a "marketing case study". Do something along those lines (and get it actually written into the contract) so that in the future, you can with good conscience sell less restricted licenses at a higher price point under the inevitable MFN clauses you'll get with Enterpise software sales.
- skmurphy 16y agoI would not worry about special restrictions in your first license, you need to close the deal and establish an ongoing and mutually beneficial relationship. You will learn more about what features your product really needs from your first few customers that it will naturally evolve so that you are selling a different product to later customers asking for MFN. There are many ways to legitimately neutralize/minimize MFN, focus on making your early customers successful.