"Our Take" - Price and Value of CRM Solutions

(Past Editions by: Date, Title, Topic)

 
About "Our Take" 
"Our Take" is a collection of daily vignettes covering a wide range of CRM topics. It's an attempt to add our own spin to the world of CRM. We will use the column to share our perspectives, opinions, epiphanies, web nuggets, or quite frankly anything that moves us. Get ready to expect the unexpected. And, don't be shy about sharing your thoughts.
 
 
11/8/06 - CRM Prices are Dropping
While it is difficult to find a comprehensive view of current prices for CRM solutions, there is a general belief that vendors have experienced downward pressure on what they can charge for their solutions.
 
Some say it is because many CRM functions have become more commodity in nature. A lead is a lead; an incident is an incident, etc. Others say there are more vendors going after each opportunity creating a more competitive environment. Others offer the emergence of hosted solutions creates a completely different cost structure.
 
One measure of cost is the total cost of ownership over a three period on a per user basis. Do you feel you would pay more, less, or the same on a per user basis than you did three years ago? Let me know what you think.
 
Gary Lemke, Publisher
(Share your thoughts)
 
11/10/06 - CRM Prices are Dropping - Part II
Earlier this week, I talked about how CRM solution prices have trended downward suggesting heightened competition as well as trends towards commoditization of CRM functionality. One reader wrote, "I agree with your assessment that there is downward pressure on prices. However, I don't feel all vendors are created equal. As such, vendors with a vertical or enterprise approach should be able to charge more."
 
Allow me to extend that thinking a bit more. I believe that certain CRM functions have indeed reached commodity status. More importantly, organizations are getting better at recognizing value and ROI and are willing to pay for it. It all comes down to differentiation with features that really make a difference.
 
You might remember that Gartner research suggests that price is not as big a buying factor as it used to be. It's not the number of features (a laundry list approach) anymore. It's all about effectiveness of solution and people are willing to pay for it. It's interesting to watch the gap widen between high value and commodity functionality and how it will impact the way solutions come to market.
 
Gary Lemke, Publisher
(Share your thoughts)
 
11/13/06 - Does Price Equate to Effectiveness
One element of the discussion last week was about how organizations buying CRM solutions are focusing more on effectiveness rather than cost. It seems the justification for paying the higher price comes from a more promising ROI.
 
In other words, "I don't care what I have to pay as long as I get more out of it than I put in." I realize that states the obvious but observations tell me that the obvious is not always the case. Some buy based on cost and that might sometimes be the right answer. However, the trend made me think. Does a higher priced solution suggest higher value?
 
So when you get quotes from two CRM solution providers, do you think about the relative cost or the relative value? Cost is a very straightforward comparison while value can be a bit dicier to quantify. But does the higher price suggest that the vendor's installed base has actually seen a better ROI? Is a higher price actually a turn on rather than a turn off?
 
Gary Lemke, Publisher
(Share your thoughts)
 
11/14/06 - Does Price Equate to Effectiveness - More Thoughts
In yesterday's column, I suggested that higher priced CRM solutions might be the better value because of a better ROI. I received some excellent feedback to the concept and I'll share some of those thoughts today.
 
One VAR wrote, "Price certainly equates with effectiveness. We sell a very low priced CRM tool that has extensive functionality but it needs the same type of implementation support as more expensive tools. However, because of the low price, customers are unwilling to spend the necessary amounts on services. This results in poor performance and poor ROI."
 
He goes on to say, "The low price also means lower total dollars for VARs. This means that the VAR channel is primarily a small operation without the expertise and processes to support large or complex implementations." Isn't it interesting that often the success of a CRM implementation is dependent more on the implementation services than the software itself? More thoughts on price tomorrow.
 
Gary Lemke, Publisher
(Share your thoughts)
 
11/15/06 - Price and Commitment
Today, I'd like to wrap up the conversation about the relationship of price and value among CRM solutions. The primary question has been: does a higher priced CRM solution equate to a higher value?
 
Interestingly, we see many lower priced solutions designed for small and medium size operations successfully running in business units of very large companies. They get great value from these solutions without the big enterprise price tag. Other instances indicate that low price means low commitment because CRM initiatives may not be on the executives' radar map.
 
Because CRM solutions run head on into business processes, almost every consultant will advise that executive sponsorship is imperative. Thus, even if you don't have to go to the board for budget approval, it's still a good idea to seek their support. Reminds me of a credit card commercial: CRM user license - $1,000; Executive Sponsorship: priceless.
 
Gary Lemke, Publisher
(Share your thoughts)
 
1/29/08 - The Price is Right
There is nothing like a glass of wine in the evening hour to calm the senses after a busy day. Last night I had the opportunity to open a bottle of wine and enjoy some quiet moments. I'm not what one would call a wine snob, but I like to think I appreciate the "good stuff." But can I really tell the difference between a $10 bottle and a $90 bottle of wine? I'd like to think so.
 
However, a recent study reported in Proceedings of the National Academy of Sciences suggests that I might not be as discerning as I think. Applicants took five different sips of wine while still connected to a machine that pinpoints specific brain activity. They were told each sip was a different wine, and each wine was a different price. The study showed that alleged $90 wine tasted better than the exact same wine priced at $10.
 
I have this picture of people nodding approval for the $90 wine while drinking the exact same grape extract as the $10 bottle. I can't help but smile. Price and value. These are two very powerful levers in the marketing of your product. Do you cheapen the perceived value of your product by playing the price game?
 
Gary Lemke, Publisher
(Share your thoughts)
 
1/30/08 - Taste Buds Get Trumped (Again)
Yesterday, I shared the results of a study that suggested people thought a $10 bottle of wine tasted better when it had a $90 price tag. Of course, they didn't know it was the same wine when they tasted it. It goes to show you how the price tag can affect our perception of value. The study reminded me of a story about ice cream (another favorite of mine).
 
The study was conducted to determine the best tasting ice cream. People were blindfolded and served various types of vanilla ice cream - gourmet ice cream, homemade ice cream, cheap ice cream, and everything in between. It seems the top factor was the percentage of fat in the ice cream and not the type - the more fat content, the more people liked it.
 
I've also read other studies about low-fat versions beating the fat full versions too. But people don't buy the product blindfolded, do they? Among other factors, price, packaging, and brand can easily beat taste buds. We humans are funny beasts, aren't we?
 
Gary Lemke, Publisher
(Share your thoughts)