How do B2B software companies determine the price of their product if there are no close competitors?

*sticks finger in mouth*

*Trying to feel the direction of the wind with wet finger*

The advice for profit margin is different depending on your industry and who you're asking, but here's my two cents:

If you're selling physical goods, you generally want to sell the product for at least 4x – 6x more than what you're buying it for.

When it comes to digital goods (software, information, SaaS) it's not unusual to have a 20x – 100x markup.

But look at your industry. Even if you don't have any close competitors, you're probably operating in an established niche or area of business.

Are you selling to the big dogs, large enterprises? Or are you selling to the solopreneur?

Solopreneurs won't afford paying top market prices + a 6 months consulting retainer.

Price it based on who you're selling to, and based on what they need.

I once heard some pricing advice from Ramit Sethi that totally blew me away:

You don't want a too high conversion rate"

…and this can sound way off at first, but when you think about it, he's totally right.

Business is about balance. A balance between you getting paid what you're worth, and your customer paying what they think whatever you’re selling is worth.

Let's say…

If you're selling brand new Volvo XC90's for $5000 – you're going to sell a lot of them.

Volvo XC90 retail for at least $60.000 and as a result, people are going to flock around you because they're getting the deal of a lifetime.

You are going to have a way too high conversion rate – and you won’t be able keep that up if you want to make a living.

You need to raise prices to lower your conversion rate.

Ideally, you want to have a 2% – 5% conversion rate.

Because at that level you're not giving away too much value, and your customers feel that they're buying something valuable.

My suggestion is that you adjust your pricing until you convert between 2% – 5% of your leads into customers.

4 Replies to “How do B2B software companies determine the price of their product if there are no close competitors?”

  1. Hey! Thanks for your question.

    This kind of marketing evolves the creation of lead generation campaigns, which mean ways to get people to know your product/service via outbound/inbound methods.

    Many people ask me how to generate leads properly, and the answer is that there are many different ways and approaches to do that. In any specific case we need to study on how your company’s target answers to each strategy and use the most cost-effective one.

    Obviously, during the time I’ve worked with lead generation and marketing, I’ve seen some patterns and answers being formed.

    Although many waves might be showing Inbound Marketing, it must be matched with Outbound strategies in order to get the most of your leads. Cold prospecting is a very effective strategy that you can use, and with the current tools, you can match it with social media, PR and even websites.

    One tool I find particularly good for it is The simplest tool for prospecting, it’s really handy because it works with many social medias and I can access it straight from my Gmail inbox. It works with credits, so you basically just have to use them as you find new people, so you can easily control how many new leads you’re finding.

    The best of it is that their software works in real time, which is more than awesome for PR prospecting. After you find your people, the software itself helps you with email sending and the next steps of prospecting.

    For social media, have a look at Twitter, LinkedIn, and even your target’s website, in any case, their software is useful to predict people’s contact information and saves time with prospecting.

    Just to make sure you got the idea, the step-by-step is:

    1. Build your prospects list;
    2. Let the software find their emails;
    3. Create your follow-up sequences;
    4. Manage replies as you see your clients list growing.

    I hope this answer was helpful!

  2. Well your product helps to solve a problem, right? One of the option is to understand the cost of the problem for the client and to provide a solution which will cost from 10 to 20% of that cost. This helps to sell this solution as efficient in terms of money/efforts (for 10–20% percent of your cost you get 100% solution with guarantee with no efforts from your side)

    If you want me to show how it works in my case – write down dr@marketing.ua and we could have a skype call, it will take 15 minutes to understand how you could benefit from my approach.

  3. I have no idea what that was below, looks like an ad rather than an answer… To actually answer your question, some companies check their product against others alike because by now there is SOMETHING out here close to. Literally it is a series of total hours it took to develop, marketing and advertising costs, some forecasting and overall value. I stated it in simple fashion yes, but overall it’s also checked against some “feeler pricing”. I’ve seen tech startups actually send feelers out only to see who bites. Then they make adjustments and increases before the final cost…COST is also factored in too.

  4. The answer is that B2B companies test their price points, combining or eliminating features to justify the different price points. In some cases, they charge what the market will bear and when sales drop off, they lower the price point.

    TEST – TEST – TEST

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