In my day-to-day life at TBR, I regularly interact with clients seeking to undertake pricing research. Their needs are varied. Some want to understand pricing for a new product or service or sustain their competitive position for an existing offering, while others seek to design an overarching commercial strategy or to increase the effectiveness of their sales teams by arming them with tactical data and insights — and nearly all are focused on influencing revenue and margin.
Capturing pricing data that can be utilized defensibly for decision making is challenging. All pricing is situational and can be influenced by any number of factors. Pricing decisions influence, and are influenced by, nearly all organizational departments, from sales and finance to product management and business strategy, and thus are often highly politicized within ICT enterprises.
Based on our regular experience in serving the pricing research and consulting needs of our client base across ICT industry segments, we have identified five critical success factors that can help clients navigate these challenges:
- Start with outcomes: We often find that our customers come to us with a research concept in mind, but not a defined goal or set of operational plans for how the research will be deployed in their organization. Sometimes the request is: “We need to know what vendors like us are charging.” But the real goal of the team may be to answer the question: How can we be more efficient in resourcing deals? By starting with the end goal and use case in mind, we find that we often explore areas adjacent to pricing, and that insights on those topics, in concert with pricing data, unlock business value for our client base.
- Focus on business impact: For all the research we do at TBR, including in pricing, we advise our clients to frame all research needs around the underlying business impact. We design projects, including the questions we propose to cover in primary research and the data that we seek to capture, to ensure that the recommendations we deliver around pricing aim directly at influencing business strategy, revenue and profitability.
- Focus on context: Our pricing research methodology relies on interviews with vendors and customers. This approach allows us to capture not only pricing data but also contextual data and insights on topics such as discounting, commercial incentives, pricing structures and portfolios. When paired with core quantitative pricing data, these types of interview-driven insights provide predictive value focused on vendor and customer pricing and consumption behavior.
- Build market constructs: To normalize against deal-specific influencers that can impact a true view of market pricing, we design our research to focus on deal constructs. These constructs are used in all interviews to ensure apples-to-apples comparisons and that we are characterizing a full spectrum of potential price points. Context on topics such as discounting is addressed through qualitative conversations.
- Consider adjacent markets: Many times, particularly with clients seeking to stand up pricing models and price levels for new offerings, we find that the direct peer landscape may not be the best basis of comparison. By looking at adjacent offerings and considering how similar-yet-adjacent offerings are packaged and delivered, clients are able to gain a broader foothold in their peer landscape in its entirety, and often identify areas to elevate value proposition and raise prices accordingly.
AWS (Amazon Web Services) is the leading IaaS provider by revenue, but Microsoft Azure and Google Cloud are growing revenue faster than the incumbent due to years of data center investment across geographies. Microsoft is closing the gap quickly and will challenge AWS in the short term, while Google, which was later to the market, is more of a long-term threat. Beyond data centers, webscale companies are making undersea cable investments to support cloud and video traffic growth. Alphabet, Amazon, Facebook and Microsoft will continue to build these networks to carry traffic across oceans and typically partner with each other as they do so. — Senior Analyst Michael Soper, TBR’s 1Q18 Webscale ICT Market Landscape