Discussions around the budget for new software can be stressful. Before you go with your hands outstretched, you’ll want to know exactly what to look out for, how to set expectations for how the software will be priced and perhaps most importantly, what questions to ask so that you’re not holding an invoice with a surprising number at the end.
We’ve helped hundreds of companies implement pricing software and worked with customers to find the right solutions based on their needs.
So, how much does pricing software cost? At Pricefx, the total cost of implementing pricing software starts at $100,000 and can go up to $1.5 million per implementation project. The cost of a subscription ranges from $100,000 to $3.5 million per year and is based on your company’s yearly annual Revenue Under Management (RUM) or Annual Revenue Managed (ARM). This doesn’t include premium costs like premium technical support.
This article will help you know what to expect as you enter conversations with account executives here at Pricefx, or any other vendor you may consider working with. Armed with this information, when you get to work on budgeting to support your pricing software project, you’ll find better alignment, less confusion and, ideally, a faster path to implementation success.
The two main components of the software cost conversation are subscription and implementation. Subscription cost being the annual cost to use the solution and implementation the cost to configure the solution you need.
The Implementation Cost of Pricing Software
Let’s start with the implementation aspect of cost, seeing as, without implementation, we can’t really begin to discuss subscriptions.
The three main factors that impact the cost of implementation
The complexity of the pricing workflows
The depth of the analytics
The integration points of the solution with your systems
The Complexity of the Pricing Workflows: When we refer to the complexity of the pricing workflows, what we mean is how many steps or processes it will take to perform specific pricing tasks. The three elements are linked to the pricing journey – from building prices all the way to making sure the prices you set are the prices your goods and services are sold at, and optimizing prices so that you can constantly improve. This can include other aspects of the pricing process like price setting, promotions and contracts management (aka, on-invoice and off-invoice revenue leakage management), price quoting and price optimization.
Think of it this way, the journey always starts with building your prices and ends in executing those prices before looping back again. Along the way, you might want to discuss negotiation, maintaining prices, improving prices, feedback and so on. Each of these stops along the way will affect the complexity and, therefore, the price of implementation.
Depth of Analytics: After determining how complex your workflows might be, we can move on to discussing how many dashboards you require and the kind of information you need to be displayed or embedded throughout the pricing process. The depth to which you will be able to analyze the elements of your pricing is tightly associated with the quality and amount of data you need to implement. In some cases, the data is not logically connected, and the implementation team would need to go create the logic so that what the end-user sees tells a meaningful and accurate story.
You will need more analytical understanding if you handle multiple price changes across hundreds of products, customers and multiple regions. Simply put, if the more complex your offering, market and type of information you need, the deeper analytics you’ll need.
The Number of Integration Points: Integration starts with the three minimum sets of information that you will need for any pricing software implementation: customer, product and sales transactional data. The variability comes when thinking about what other inbound (from your other systems) or outbound data (comes from our systems) elements need to be integrated with the Pricefx solution. We think about the number of integration points like ERPs, CRMs, e-commerce portals, data warehouses and other output data systems.
Each of these variables is usually expressed as the hours spent by our implementation team and is reflected in the final price. Understanding the implementation process and factors for success like having a clear definition of goodwill help you and our team to assess the complexity, depth and the number of integration points leading to fewer surprise needs that might affect the price.
And if you were to speak to other vendors, you would find that some or all of these factors (although named differently) would be used to approximate implementation costs.
Training: Obviously in order to use the software, you will might need some level of training for you and your team. Technical support is usually a one-time fee lives as in implementation cost. Some vendors will offer some level of training for you and your team to learn how to use their software. Again, you can be offered standard training as well as premium levels of training that can be customized to your needs.
Minimum and Maximum of Implementation Cost of Pricing Software
Minimum range: So, at Pricefx, if you were to implement a project where you only want to analyze your pricing strategies and get a basic but important understanding of how you’re performing, then you would need to budget about $100,000. In this case, you might not need to integrate any more than a handful of well-known systems like SAP.
Maximum range: Now, on the other hand, if you wanted to implement a robust pricing solution that did more than analyze your data but also predicted the impact of your pricing strategies on profit margins while helping your sales teams to close more deals, faster, then the cost for that starts to inch past that $100,000 mark to 7 figures.
The Subscription Cost of Pricing Software
The final subscription price, like the final implementation price, depends on a handful of factors. In this section, we go through the factors that you might find at a handful of other pricing vendors as well as those that are specific to Pricefx. However, with the first 6 factors, you should be able to walk into any conversation with a vendor with a basic understanding of how they might charge you.
Some of these factors at set up on a tiered basis, meaning that in order to have premium versions, you will have to pay more.
The six main factors that impact the cost of subscription
On-going solution maintenance
Implemented Solution: With the implementation of your pricing solution, complete, most vendors usually operate on a subscription model for using their solution. By “solution,” we’re referring to the segment of the product that you implemented. At Pricefx for example, you might choose to only implement the Price package, and so you’ll only pay for the subscription of that package. At another vendor, you might have only implemented their price optimization solution and so might only pay for price optimization. Yet other vendors may solve one part of the pricing process, in which case the subscription cost is the cost to use the software.
Most companies will charge you based on Revenue Under Management (RUM) on a sliding scale. But you shouldn’t be worried about getting a surprising invoice. Usually, you’ll receive a notification of some sort as you move up that scale but it’s something to think about asking so you walk into cost conversations.
At Pricefx for example, you will receive a notification letting you know that you’re approaching or over your limit, and before the next subscription invoice is sent out, you will be asked to have the price reflect the RUM.
Cloud Infrastructure: You can think of a cloud environment as multi-tenant almost like in an apartment building. Most of the solutions you use are set up this way. Take a Gmail account, for example, each user lives in the same apartment building, but each has their own apartment where one theme might be a beautiful vacation spot you’d like to visit, and someone else’s might be simple geometric shapes.
The same can be said of a cloud environment. A lot is similar, but the layout might be slightly different.
You might also want premium access to their cloud infrastructure when you need something that is extremely specific to your needs. For example, if you know that you will handle a high number of transactions or will need to delay upgrades by just a couple of weeks due to your internal IT processes, then you might ask for a premium hosting service. At Pricefx, premium hosting is based on an annual cost as opposed to the one-time set up of a basic installation.
Price Optimization: At Pricefx, for example, the Price and Profit packages include price optimization solutions. Similarly, at other vendors, you might have solutions that include an element of price optimization. Using price optimization will affect the cost of your software.
However, you might need additional premium support with price optimization in the form of a pricing scientist, someone who understands the complex math and variables associated with pricing and can then help you to build algorithms that are designed to optimize your pricing.
Buying another company, constantly adding new product lines or you have multiple inter-dependent variables, are situations where a pricing scientist or equivalent level of support would be helpful.
On-Going Solution Maintenance: Pricing, like any crucial part of your business, is not set in stone. It evolves as your organization and industry evolve. Implementation services usually allow you to make slight maintenance changes to the initial project scope and keep pace with those changes.
Technical Support: Technical support refers to the level of aid you might need when using the software. Vendors can provide several levels of access to support. At Pricefx, the standard tech support is included in the price of your subscription. However, there are premium levels of support that you can purchase based on your need.
The Last Variable for Subscription Cost of Pricing at Pricefx
At Pricefx, the last variable you might have to consider in the cost of using our software is our premium accelerators. Accelerators are our solution to the most frequently used functions in pricing. They allow you to get sales insights, set prices, and develop rebate and channel dashboards quickly. Our premium accelerators, built in part by Bain & Co., support deal guidance, allow you to easily discover margin leaks and optimize promotions quickly.
It is possible to get some of these insights and dashboards built without Accelerators, but they can be built faster from a template, enabling you to get up and running faster. The addition of these premium accelerators will also affect the cost of your solution.
Minimum and Maximum of Subscription Cost of Pricing Software
Here’s how you can think of the subscription cost of pricing software at Pricefx. Again, this can be used to give you an idea of how it might work with any pricing software vendor.
Minimum: If you wanted a basic starter package that would give you enough to start with pricing software such as analytics or price setting and price building, you might start about $100,000.
Maximum: If you were to get the complete suite of pricing software, that’s everything from analysis to setting your prices, quoting, and optimizing with AI. If you wanted premium offerings like customized training and service level tech support then the cost of pricing software could go up to $3.5 million. You should also take into consideration that most vendors charge based on RUM meaning that if your rum increases that $3.5 million might also increase.
Talking About the Price of Pricing Software with a Rep
The matter of price is something we obviously take very seriously – we are a pricing software company after all and understand the importance of clear pricing as a part of the customer’s experience. With these insights, you should be able to go into any budget discussion (internally or with a vendor) with the confidence that you will have all of the answers necessary to understand how your solution will be priced and avoid the possibility of underselling the cost to management or the executive team.
Tim Shorter is the Chief Sales Officer at Pricefx. He has spent the last 22 years helping organizations drive digital transformation with an emphasis on pricing, business optimization, business intelligence and business process efficiency centered on improving bottom-line margin achievement. Tim, in his 11-year tenure within the pricing solutions industry, has focused his experience in partnering with customers to drive company-wide digital transformation and greater profitability.