You’re probably familiar with the term “reassuringly expensive”. This is a perception issue that’s made a lot of people very wealthy for not doing very much and led to much FUD within the IT Industry. The long history of overcharging in the government sector alone is well documented. The open source movement has had a hard time competing with the marketing machines of the big vendors and systems integrators. Highly competitive bids are often seen as naive or artificially low. Clients have often asked me how we can charge so little for a CRM platform, when they’re paying so much at the moment.
The simple fact is that we assess our cost base, the clients’ needs now and in the future, and the time it will take to maintain and continuously improve the cloud services in question. This gives us a reliable pricing model which we know will make us some profit, as long as we keep delighting the users.
Too often suppliers price their proposals on the size and perceived affluence of the client.
Another example is charging per member for a membership CRM database. A decent SaaS CRM product, such as CiviCRM, will scale to many thousands of contact records without any additional overhead on support or infrastructure resources. It’s more about the number of membership administrators rather than number of members. Depending on the organisations’ processes and user behaviours, a single administrator could manage 10k or 20k memberships with minimal cloud resources.
The potential consequences of unethical pricing practices, including overcharging or basing prices on perceived client affluence, include Damage to reputation (Unethical pricing practices can harm a company’s reputation, leading to a loss of credibility and trust.), Loss of clients and business opportunities (Clients may choose to take their business elsewhere if they feel they are being unfairly charged, leading to a decline in revenue and growth opportunities.), Legal and regulatory issues (In some cases, unethical pricing practices may violate consumer protection laws or industry regulations, resulting in fines, legal fees, and potential legal action.), Negative impact on the industry (Unethical pricing practices can contribute to an overall lack of trust in the IT industry, making it more challenging for all IT professionals to establish fair and transparent pricing models.) and Decreased employee morale and productivity (Employees may feel conflicted about engaging in unethical pricing practices, leading to lower job satisfaction, decreased productivity, and higher turnover rates.).
By understanding these potential consequences, suppliers can make more informed decisions about pricing strategies and prioritise ethical practices that promote trust, transparency, and therefore long-term relationships.