Quick Guide to Choosing the Best Pricing Model for an IT Business

The price you choose for your IT services can make or break your business.

Set the price too high, and you risk scaring away smaller companies who will suddenly find themselves unable to afford your services. Pick a price that’s too low, and there’s a chance you could damage your reputation, convincing customers that your solution isn’t worth as much as they thought.

Unfortunately, a lot of companies choose their pricing model without considering the options carefully. Some studies suggest the average IT brand spends about 6 hours overall determining how to price their service.

If you’re in a hurry to launch your business as soon as possible, but you don’t want to scare away potential clients with the wrong strategy, this quick guide will help you to choose a pricing model that makes sense for your specific needs.

IT Pricing Models: Why You Need to Nail Your Pricing Strategies

Having the right pricing strategy helps to demonstrate your position in your chosen marketplace, boost your chances of attracting long-term customers, and improve overall revenue.

The price you choose doesn’t just determine what kind of audience you can attract—it can also make an impact on the kind of image you project.

Here is how the pricing strategy affects your business.

First of all, it highlights your company value and position.

As soon as a customer sees your pricing, they’ll know whether you’re a small company targeting other small brands, or innovators targeting larger enterprise companies.

It also helps you connect with the right customers.

Your pricing will help filter the people who arrive on your website, so you attract the people you’re most likely to help with your services.

Finally, the right pricing demonstrates brand equity.

A good pricing model sets you apart as a professional brand, while simultaneously helping you to carve a space for yourself in a competitive market.

Common IT Pricing Strategies and Their Benefits

Some companies will benefit from choosing a price similar to what the competition can offer, while others will look at value-based pricing.

Some of the most common pricing options include:

• Value-based pricing: This involves choosing a price based on what customers think your products or services are worth. To choose the right price, you’ll need to learn as much as you can about your target audience, and what they think is fair for your technology.
• Competitive pricing: With a competitive pricing strategy, you choose your prices based on the competition and what they’re charging. The idea is to leave yourself some room for growth and avoid getting into a “race to the bottom” by trying to always have the lowest price.
• Cost-plus pricing: This is a common pricing structure among IT teams selling hardware. If you’re not selling services or software, you can simply charge people for the costs of the materials behind your product, plus a little extra for the time it takes to put those tools together and deliver them to your clients.
• Dynamic pricing: This involves occasionally updating and changing your pricing based on the situation at hand. In the case of the COVID pandemic, when people were working from home and needed access to more software, many companies changed their pricing to make their technology more accessible.
• SaaS pricing: SaaS pricing often takes a different approach to most IT pricing strategies, as it involves charging for a specific technology solution your customers use as a service. SaaS pricing can be appealing for modern IT companies because it allows you to access a consistent amount of repeat income through a subscription.

As you can see, the pricing will depend on the type of company you’re running, the product you offer and the clients you target. SaaS companies in particular have their own set of specific considerations, so we’ll go over the pricing strategies in that sector in more detail.

How Are SaaS Pricing Strategies Different?

SaaS companies are rapidly taking over in the digital landscape, as SaaS solutions become more appealing to both buyers and services alike.

In the subscription-based SaaS pricing model, customers pay a fee on a regular basis for consistent use of a product or service.

SaaS companies can charge customers based on usage, which means they only pay for the services they use. Alternatively, there are options like:

• Per-user pricing: Where each user pays for access to a specific set of features per month
• Flat rate pricing: When customers pay a specific fee for access to unlimited products or solutions per month.
• Tiered pricing: Where customers pay for pricing in a tiered strategy, paying more for extra users, access to new features, and advanced options.

Unlike standard pricing strategies, SaaS pricing allows customers to pay a reasonable cost for just the solutions they need, while your SaaS company maintains revenue.

Choosing the Right Pricing Strategy

Regardless of whether you choose a basic traditional pricing strategy, like cost-plus pricing, or you opt for something more flexible, like SaaS pricing, there are plenty of ways to make a profit in the IT world.

Remember, paying attention to your customer’s feedback can be an excellent way to ensure that you continue to attract and retain the best clients with your pricing options.