Price versus market share versus business value. Where in this rebounding-but-not-ready-to-be-called-stable economy is the software vendor to place its emphasis? Cut prices, offer discounts, and you might get more market share. But what will that do to your margins? Raise prices without adding value and you might boost revenue. Will you turn customers away?
It's no secret that business-technology managers have had the upper hand lately, getting great deals and discounts that help them stretch their slimmer IT budgets a little further. It's enough to make one CIO I spoke with recently "giddy." But he also acknowledges that things can't stay that way forever.
Price, says Tim Matanovich, a partner at The Market Leaders Group, is the single most powerful driver of margins in many businesses, and increases are worth fighting for as long as you can show customers how they will bring value to a company, be it lowering expenses, raising efficiency, or creating new business opportunities. Customers should expect their vendors to "dollarize the value" for them, but there doesn't seem to be a lot of that going on with some of the customers we've spoken to recently. And, in some cases, when the vendor does offer something in exchange for a higher price, it isn't the kind of bells and whistles the customer is looking for.
Negotiating prices is but one slice of CIO-Vendor Relationships, a subject that's covered in the upcoming issue of Optimize (www.optimizemag.com). Stay tuned for articles by authors Clayton Christensen, Tom Davenport, and others who discuss growth opportunities and ways CIOs can forge better vendor relationships. You'll also find helpful tips on how to demand more accountability from vendors and create better partnerships.
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