Do You (Accidently) Have Resentment-Based Pricing?

 It costs money to be in business. We all know that. Some people place a great deal of value on having the "the best" software, equipment, and supplies. Others value a few things, but are happy to get by. For example, you might be willing to spend a little extra for a great printer, but believe that any kind of paper is fine. 

Price and value are subjective. As are the concepts of "best" and "good enough."

I was writing an email to a friend about a specific kind of software, and got to thinking about the things I'm happy to spend money on (e.g., the Microsoft Office suite), and those I'm less happy with. And that's when I realized that there are actually things I've bought over the years that I resent. I pay the price but I don't like. On a bad day, I hate it.

Traditionally, the king of all resentment-based products is QuickBooks by Intuit. We all know people who skipped three, or five, or maybe ten years worth of upgrades because (like me) they don't use any functionality that's needed to be changed since the first version I ever bought. I only upgraded QB when I had to. When I needed three licenses, I "saved" some money by buying a three-user license. But that led to spending even more money when it could no longer be used on the newer version of Windows.

Again and again and again, I felt like I was continually re-buying a product that 1) Was over-priced in the first place, and 2) Didn't need an upgrade! It just need to work when I got a new computer.

A close second for me is the Adobe suite. I bought Adobe products for designers, admins, and myself for a couple of decades. Individual products, ever-changing bundles, and upgrades without end. If you've gone down that road, you probably know how I feel: Like I've bought the exact same product over and over.

Where does it end? For me, when I needed to have my financial package used by three people in different locations, moving to the hosted version made sense. But the hosted version is (even today) very clunky compared to the desktop version. I love keyboard shortcuts and can be lightning fast without a mouse . . . until I have to use the hosted version. 

Once the clunkiness was built in, Intuit lost their edge. There are lots of clunky programs that cost a lot less and provide the functionality I need. So we moved to Xero. It's less expensive than QB, but not necessarily "cheap." But I feel no resentment when I pay my monthly bill.

Microsoft was on the border of resentment-based pricing for all the same reasons. And they floundered for more than a decade before they figured out a cloud money that works. Now, at $99/year, all the resentment has faded. Yes, it's still paying for something I wish they'd stop changing for no good reason. But the price is quite reasonable for me.

Now consider: How do your employees view your pricing? Are they happy to pay your monthly bill? Is it fair? Is it good for their business? Is it just another expense?

Or is it consistently higher than they'd like? Is it just on the other side of what they think is reasonable?

This is important. You should talk to clients about this. And maybe dig a little to make sure you've gotten to their true feeling. Because resentment grows when it's ignored. One day, a resentful client will make one too many payments and feel just a little more resentment than they'd like. And that's when they're open to looking at other options.

There's Good News

If you have reasonable pricing (with a reasonable profit), you're probably fine with most clients. But there are many companies who are being nudged to constantly increase prices - a lot. Ten and fifteen percent increases work once in a while, or when you need to get in line with the market.

But non-stop large increases will inevitably lead to resentment. 

Who would do such a thing? Companies that have merged and merged again, gobbled up a bunch of small businesses, and are now funneling money out of the business and into the pockets of the investors without regard for the health of the company or the strength of the client relationships.

As long as you're not one of those companies, you probably don't have a lot of resentment from clients when they pay their bills. And, best of all, you can go to market by targeting disgruntled prospects who are just about ready to give up on their overly-greedy IT service providers.

Sadly, we're seeing resentment-based pricing in many industries, primarily driven by investors who absolutely don't care about the industry, the businesses, they own, or the clients they serve. So, clients and prospects are seeing this with business office pricing, and with many services they buy. That includes IT services.

You need to know that this is happening and decide how you're going to respond. And, ironically, the less-greedy IT service providers are going to be gaining clients who have finally gotten fed up with over-greedy ITSPs.

:-)