Should Flexible Pricing and Packaging Be Standard for Software Businesses?

| Updated on February 14, 2024

Without a doubt, software companies struggle at the beginning due to intense competition, no matter the industry. Software, in general, has taken the world by storm, with company owners and consumers taking advantage of what business software and apps offer. 

Also Read:- Everything Business Owners Need to Know About Employee Monitoring Software

That said, running a software company in a competitive industry can be quite a challenge, so it’s a good idea to do for the most popular business trends ASAP. As a new business owner, it’s up to you to figure out how to move forward. In the case of the software industry, flexible pricing and packaging is the way to go.

What does It Mean to offer flexible Pricing as a Software Business?

Flexible pricing is hardly considered a new feature for most businesses, but it can seem intimidating for those focusing on software and similar products. Fortunately, pushing for more flexible pricing is not a challenge, especially with business models such as subscription-based services.

For example, SaaS is such a good idea because of the accessibility and convenience it offers both the companies and the clients. You’re technically being quite flexible with the pricing system, making things more convenient for your customers.

Of course, there are more business models related to flexible pricing for a software business, which we’ll discuss further below. 

What About the Licensing and Compliance Issues?

Some business owners are hesitant to give SaaS a try due to the restrictions set by software licensing and compliance. It’s not easy to keep up with compliance regulations, and the result is often a hefty fine that causes long-term issues for startups.

Fortunately, the lack of understanding of compliance has opened the doors for specialists to take charge. Instead of having to do everything on your own, you can instead get the help of a license management system to help you forge ahead. These professionals will handle the burden and make things easier for you.

The trouble with licensing and compliance is that they could cause issues for your company without you realizing something is wrong. Furthermore, whenever you develop software or use the software of other companies, it opens the door to more potential compliance issues.

What Other Things Should I Worry About When I Go for Flexible Pricing and Packaging?

While it’s undoubtedly a good idea to go for more convenient pricing and packaging options as a software business, keep in mind that it comes with its fair share of challenges. Even if we take compliance and licensing out of the picture, it will take more resources, in general, to keep up with the demands of flexible pricing. For example, with subscription-based pricing, you’ll need software to handle the overall load. You’ll also have to keep up with your customers’ subscriptions to ensure that everything goes smoothly. 

As such, listening to customer feedback whenever possible is a good idea. You should always take advantage of the reviews your business gets. Not only this ensures that your business adapts, but it also shows to customers that you’re willing to make changes.. In addition, such a thing fosters loyalty, which means more people will support your company.

Not to worry, however, as switching business models like a SaaS company is easier than most people think. After all, such is the point of flexible pricing and packaging. So it’s not just about sticking to a single business model but also the ability to make sweeping changes due to the nature of flexible pricing methods.

Are There Different Types of Flexible Pricing Available?

Yes, and it’s never a bad idea to learn about their many differences. For example, we’ve discussed subscription-based pricing and how it’s typically the ideal method for most SaaS businesses. That said, there’s also tiered pricing, which involves placing specific features in different tiers. It allows customers to choose how to use the software. Tiered pricing does not need as much attention as most other forms of flexible pricing because, in many ways, it’s similar to traditional pricing methods.

Aside from tiered pricing, you also have usage-based pricing, which is likely the most cutting-edge business model for specific companies. For example, insurance companies have UBI about commercial vehicle insurance. Utilizing telematics, the company adds a device to the vehicle that can help insurers gauge drivers’ behavior. As such, they can change the insurance terms based on best-practice methods when driving. The result is an insurance policy that becomes cheaper the more you focus on safe driving. UBI is a fantastic business model, but it can be tricky.

Another business model, and the one that takes the most effort, is custom pricing, where companies take the time to build effective pricing options for their customers based on their unique situations. Customized pricing plans can take a lot of effort, which is why some businesses try to alleviate the situation using artificial intelligence (AI). With AI’s help, rating engines can potentially deliver custom pricing to each customer without putting too much effort into the process.

One particularly popular pricing method is freemium pricing, where the software is initially free and can be used by anyone, but it has specific features locked behind a paywall. While it might be popular in the mobile gaming industry, it is often seen as predatory due to how freemium pricing tries to convince users to spend money.

Should Flexible Pricing and Packaging be the Standard for Software Companies?

The short answer is yes. Most people are well aware of their control over businesses, and clients can easily look for the help of competitors if their current service is not meeting their expectations. It’s crucial to be wary, as the competition can easily replace your business. Flexible pricing and packaging should be considered the norm, as most clients already have such things at the top of their priority list. When most clients already expect flexible pricing and packaging, it’s natural to adapt to the situation and turn it into the standard for your business.

While not every company is ready to take on the responsibilities of flexible pricing and packaging, especially with software, it offers various benefits and can potentially future-proof a company. While you can try many other business models, SaaS and flexible pricing will help your company thrive.

Adam Green

With more than 3 years of experience as a software and tech writer on Adam has been writing articles, blogs, and featured stories centered around the software and tech niche since he graduated from Virginia Tech University. He writes savvy articles, tutorials, and reviews that explain difficult concepts to readers of all levels. His expertise includes software development, cybersecurity, artificial intelligence, and emerging technologies. Through simple and engaging writing, Adam constantly delivers useful insights that enable readers to feel at ease in the ever-changing technological scene.

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