I recently attended Licensing Live 2016. There, Shlomo Weiss, senior vice president of software monetization at Gemalto (News - Alert), talked about how when he was younger, he started collecting baseball cards, and eventually it became a business. At one point his business tried a different angle – they blindfolded a kid and let him pick from a group of cards for 50 cents. He then realized if there were higher value cards, he could charge them more. Eventually the principal shut it down, but this exercise taught Weiss and his buddies about value and charging.
This concept applies to software today, and it prompts us to ask the following questions.
- What is the core value of your offering?
- How has it evolved?
- How do you capture that value?
Value, of course, is dynamic. It changes based on factors like market demand and trends. Baseball cards, for example, have a different value today than in the past.
That leads us to a discussion about the so-called Now Economy. Examples of players in this new economy are Amazon, Netflix, SolarCity (News - Alert), and Uber. What all of these companies have in common is that they are bringing value closer to the consumer. They are also all data-driven, as data is the oil that keeps the Now Economy machine moving. And all these businesses live in a connected ecosystem. Uber, for example, has set an expectation of immediacy, and pricing is dynamic. It can test new things and can scale rapidly because of the automation in the Uber business.
Of course, it’s not just transportation that is being disrupted by automation; manufacturing is as well. And that will drive the fourth manufacturing revolution, which will enable the creation of customized products at the same costs as mass produced products.
Agriculture and health care are a couple other examples of additional verticals being shaken up, and improved upon, via automation – in these cases, allowing for more efficient use of resources like water, and broader availability of health care resources.
All of the above means that business models need to be flexible. And that creates the need for new models and new ways to charge for products and services offered through those models.
Cloud-based communications and connected licensing allow for business models based on a pay-per-use and subscription basis, noted Laila Arad-Allan, director of product management for software monetization at Gemalto. That allows things to be done on the fly, expands the market of a business, and enables customers to consume software according to preferences, said Arad-Allan, all the while lowering entry-level pricing for customers. That said, subscription plans need to be flexible to be useful, and usage-based licensing needs to be able to scale up and down as desired and required.
Meanwhile, business intelligence can provide insight on customer feedback, so businesses can see which features of their solutions are used and just how they are used. That can help organizations determine product roadmaps, define points of differentiation, and identify upselling opportunities.
Marketing profiles can allow a business to see that customers using one module more often or like or need other modules. Organizations can use this knowledge both for upselling and to reduce churn.
Entitlement management is also important, said Arad-Allan, explaining it serves as the backend of software monetization. It reduces IT and operational costs, and allows business to optimize product packaging and activations and to leverage data reports to understand product usage.
Finally, she added, it’s important to have best practices, not just the best product. That involves embracing the cloud to boost customer experience and choosing strong partners when making the jump to software monetization.
Bottom line: You can generate significantly more revenue if you can correctly price services with a low barrier and offer additional pricing points which exude “must have” value.
Edited by Alicia Young