Pricing software offers a myriad of benefits in maximizing profit, optimizing revenue, streamlining operational efficiencies, and enhancing competitiveness. While subscription and add-ons, integration, data storage, maintenance and upgrades, software license, hardware and infrastructure, and IT maintenance are the most common costs associated with pricing software, there are other hidden costs that organizations should be aware of and could catch businesses off guard if not carefully considered.
Here at Pricefx, as a cloud-native pricing software company for more than a decade now, we have experienced the cost challenges our customers face firsthand in their moves into next generation cloud-based pricing, either directly from Excel or other in-house pricing systems, or when they are upgrading from traditional ‘on-premises’ pricing software into a cloud-based model.
In this article, we explore the potential hidden costs involved in migrating to and maintaining a pricing software solution, and as a bonus, we will discuss what could be the biggest hidden cost of all – the cost of not transforming your pricing .
What Pricing Software Costs Do We Know About Upfront?
Whether you are considering a next-generation cloud-based pricing software solution like Pricefx, or a first-generation legacy on-premises pricing software variant, there are range of clear and transparent upfront costs that may include* the following:
- Subscription and Add-Ons
- Data Storage
- Upgrades and Maintenance
- Integration
- Energy
- IT costs
- Software License
- Infrastructure and Hardware
- Energy
Disparities in costs between on-premises and cloud-based pricing software arise from a range of factors like physical hardware, on-site IT staffing, and the resources required at any specific moment. The overall expense associated with each option hinges on specific business requirements. As a rule, cloud-driven pricing solutions tend to be the more cost-efficient alternative.
Notably and importantly, not all of the costs outlined above may be applicable to the type of pricing software your company uses or is considering for acquisition. To learn more about how much pricing software costs, check out the video below:
For those looking to delve deeper into the specifics of the cost differential between cloud migration and legacy on-premises variants in pricing software, you can explore the comprehensive insights provided in the following article:
*Upfront costs may alter for different software vendors. Contact the vendors you are interested in for details.
Unveiling the Veiled: Exploring the Hidden Costs of Pricing Software
So, now we know about the expected costs of pricing software, but what are some of the potential hidden expenses that might be lurking behind the curtain? It is interesting to learn that the costs being more than expected is one of the most reported (35%) causes of buyer’s remorse in businesses investing in software according to a 2023 Capterra study.
Understanding these hidden costs allows businesses to create a more comprehensive budget and make informed decisions when considering and implementing pricing software solutions. Being aware of these potential expenses helps in avoiding unexpected financial burdens and ensures a more efficient utilization of resources.
With that being the case, let’s dive in and examine the list of possible hidden costs that you might like to ask your vendor about before you invest in your dream pricing software solution and if you may need to put some cash away for a rainy day.
Note, as each business is altogether a unique entity, few businesses will face the full collection of hidden costs mentioned here. However, we recommend reading through the following points to check what may apply specifically to your organization.
1. Configuration and Adaptation Expenses
While pricing software often presents off-the-shelf or what are often referred to as ‘out-of-the-box’ solutions by pricing vendors, tailoring these tools to meet specific business requirements can sometimes result in additional expenses. Configuration costs may encompass the need for specific functionalities, user interface adjustments, or integration with existing systems, driving up the overall investment.
2. Training and Onboarding
Deploying new pricing software demands a learning curve for the team. Training sessions, onboarding programs, and ongoing professional development are essential to harness the software’s full potential and avoid underutilization. Inadequate training may lead to inefficiencies, increased errors, and, consequently, higher costs in the long run due to limited
A well-structured onboarding program not only mitigates these risks but also accelerates the integration process, reducing your return-on-investment (ROI) time and ensuring a smoother transition for the entire team.
3. Data Migration and Clean-Up
Transitioning to a new pricing software solution involves migrating existing data, a process that could require cleansing, restructuring, or even manual entry. These tasks, often time-consuming and intricate, contribute to unforeseen expenses that businesses might not initially consider.
4. Revenue Under Management (RUM) Changes
Many pricing software vendors employ Revenue Under Management (RUM) as a basis for charging their customers. Essentially, the charge amount is directly tied to the yearly revenue managed within the pricing solution.
The catch lies in potential unexpected increases in subscription fees due to changes in RUM. It is essential to inquire whether your vendor notifies you before such alterations.
At Pricefx, for instance, we proactively notify our clients if there is a change in the RUM-based pricing structure. This notification allows for a discussion regarding the price difference, ensuring transparency and clarity in cost adjustments.
To avoid unforeseen escalations in costs, it is prudent to check if your chosen pricing software vendors offer a similar notice service.
This type of proactive communication ensures that you’re not caught off guard with sudden and unplanned additional charges, enabling better financial planning and decision-making for your business.
5. Consultation and Support Services
Beyond initial setup, ongoing consultation and support services might be necessary. Technical glitches, updates, or troubleshooting could demand external assistance, leading to unforeseen expenses in the long run.
What’s more, you may know extremely well that your company can benefit by implementing a pricing software solution, but your internal IT Team do not have the resources to manage the pricing software implementation and integration tasks, or they are already committed elsewhere to other jobs such as updating your ERP or your CRM. If that is your predicament, you may need to consider working with a System Integrator (SI). But remember, depending on the pricing software vendor you are working with, that might come with an additional expense.
Check out the following article for more information on working with an SI:
6. Scalability and Additional User Licenses
As businesses grow, the need for scalability becomes apparent. Adding more users or expanding the software’s capacity might incur unexpected costs, often overlooked during the initial purchase or implementation phase.
It might be that your company has already implemented a pricing software solution, and that is fantastic. If so, the chances are that you have already noted the extra value and bottom-line fattening that it provides. However, with your organization’s pricing software profit and margin improvement successes, you have realized that other processes could be optimized with more software or different pricing capabilities. If your business has been able to expand operations, you may require additional functionalities to support the increased businesses scope.
For example, your company may have begun with a straightforward pricing analytics solution. However, with the increase in business outcomes it has provided for your organization with its insights, you now need to consider adding quoting and rebate management pricing software functionality to your original analytics package.
Sometimes, a hidden cost might not be such a dreadful thing for your organization, it may be a good opportunity opener for your business too.
However, remember, some pricing software providers might include certain features or upgrades as additional paid options. Over time, accessing these enhanced functionalities might lead to unexpected expenses beyond the initial subscription or licensing fees.
7. Compliance and Regulatory Costs
Changes in regulations or compliance requirements might necessitate software modifications or updates to ensure adherence. Overlooking these adjustments can result in non-compliance penalties or fines, impacting the budget unexpectedly.
8. Hidden Renewal Costs
Renewal costs might not be explicitly stated in the initial agreement. If overlooked, these expenses during renewal periods could strain the budget unexpectedly. Ask that ‘elephant-in-the-room’ question.
9. Integration with Existing Systems
Integrating pricing software with existing systems or third-party applications might incur unforeseen expenses. Compatibility issues or the need for specialized connectors can escalate costs.
10. Downtime and Productivity Loss
Technical issues or software downtime can significantly impact productivity, leading to indirect costs that arise from reduced operational efficiency or disrupted workflows.
11. Unplanned Upkeep and Maintenance
Software maintenance often involves unforeseen expenses, especially when dealing with unexpected bugs, security patches, or system upgrades that are not part of the regular maintenance plan.
12. Hidden Exit Costs
Should a business decide to transition away from a particular pricing software, there might be exit costs, including data extraction or migration to a new system, which could exceed initial expectations.
13. The Potential Cost of a Poor Implementation
The cost of a poor implementation will almost definitely lead to poor user adoption in your team.
It is worthwhile to consider that it is better to have a good system that will deliver results even if it’s more expensive and takes a little longer than a quicker and cheaper implementation that delivers no positive business outcomes.
14. The Cost of Choosing the Wrong Pricing Software
Pricing is hard. Pricing is difficult, and pricing is not easy to conquer. Similarly, choosing the right pricing software reflects those challenges.
Spend the time to choose wisely. Perhaps the greatest hidden cost of all is the cost of choosing the wrong pricing solution and having to do it all over again. Check out this article below for tips on what to avoid when choosing pricing software for your business.
The Hidden Costs of NOT Using Pricing Software
Now you know a range of possible hidden pricing software costs to be on the lookout for.
On the other hand, the most significant hidden cost might be the decision to refrain entirely from implementing a pricing software solution.
Can Your Company Afford NOT to Use a Pricing Software Solution?
If your organization lacks the digital maturity required to incorporate pricing software into your tech stack, or if your business model offers little in terms of price, product, transactional or customer differentiation, or if your pricing strategies remain constrained within the “cost-plus” framework, opting for pricing software might not align with your current needs.
Similarly, if there is a lack of comprehensive understanding regarding both the advantages and the associated expenses of a complete pricing software solution, it might not be the right fit—at least not yet.
For those falling into the latter category, it is crucial to assess the cost implications of choosing not to implement pricing software for your business. Understanding the repercussions of maintaining the status quo without leveraging pricing software can provide valuable insights into the potential opportunity costs and missed efficiencies that could otherwise be gained. To learn more about the potential costs of not using pricing software in an enterprise-level business, check out this handy article below:
Or, if you would like to learn more and get an estimate of the value and bottom-line numbers you could achieve with pricing software, based on your specific industry challenges and objectives, check it out for yourself on our free Margin Lift Calculator here.
Meanwhile, Happy Pricing!