EFFICIENT PRODUCT PRICING MODEL AS A FACTOR IN INCREASING AN IT COMPANY COMPETITIVENESS

This article analyses the most popular product pricing strategies as a factor in
increasing an IT company’s competitiveness. We are analyzing the best practices
used by most IT companies.
There are two main pricing approaches in the market: cost-based and valuebased.
The cost-based approach includes three models: Dedicated Team, Time
and material, and a Fixed Price.
A Dedicated Team is a model in which a company provides a team of specific
professionals for a specific time. Such a scheme minimizes product-related risks
for a team provider but also does not give control over the final product. Such a
scheme would increase the competitiveness of companies with decent expertise
in a particular domain but with limited resources for their own production. In a
Time and Material model, one divides a project into several tasks, estimating them
approximately. Such an approach allows for a more objective assessment of the
cost. This model would increase a company’s competitiveness by minimizing the
uncertainty risks of both parties – the IT company and their client (regardless if it
is a B2C or a B2B solution). A Fixed price model stands for paying a fixed amount
for a certain amount of work. It is advantageous due to an accurately predicted
result and minimal risk for the customer. This model can increase a company’s
competitiveness by making its service or product more attractive to customers (in
both B2C and B2B sectors).
A value-based approach is more innovative. This approach is based on the
customer’s perception of the service, not on the cost of the service. Such a
pricing approach allows companies to build long-term relations with customers,
increasing their loyalty and even allowing the company to set a price that has
nothing to do with the actual spent on a product or a service.
To sum up, an effective product pricing strategy may increase the IT company’s
competitiveness.