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Software Best Practices 3 Practical Strategies for Increasing Revenue

Software Best Practices 3 Practical Strategies for Increasing Revenue. Daniel Greenberg VP Worldwide Marketing Macrovision. Value Pricing. Feature Segmentation. Piracy Prevention. Best Practices. Overview of 3 Revenue Strategies Strategy 1: Value Pricing

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Software Best Practices 3 Practical Strategies for Increasing Revenue

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  1. Software Best Practices 3 Practical Strategies for Increasing Revenue Daniel Greenberg VP Worldwide Marketing Macrovision The Leader in Software Value Management

  2. Value Pricing FeatureSegmentation Piracy Prevention Best Practices • Overview of 3 Revenue Strategies • Strategy 1: Value Pricing • Strategy 2: Feature Segmentation • Strategy 3: Piracy Prevention • Summary The Leader in Software Value Management

  3. Value Pricing FeatureSegmentation Piracy Prevention “ 1% effective increase in pricing delivers an additional 7% increase in earnings on average.” McKinsey & Co., Oct. 2003 “Pricing is the Biggest Lever Affecting Profitability.” Raising price by 1%… …increases profit by 7% 101 15 14 Operating Profit 26 26 100 COGS 100 59 59 Sales Fixed Costs* Average economics for ISVs between $100 million and $10 billion in sales The Leader in Software Value Management

  4. Value Pricing FeatureSegmentation Piracy Prevention Piracy Prevention Value Pricing Feature Segmentation If You Can’t Raise Your Price….Raise Your Deal Size …Or Market Potential Raising price by 1%… 101 100 Current Revenues Sales The Leader in Software Value Management

  5. Value Pricing FeatureSegmentation Piracy Prevention Increase Your Revenue Potential Throughout Your Product’s Lifecycle Early Maturity Late Maturity Decline Introduction Growth + Protect Against Piracy + Offer Feature Bundles $ Revenue + Offer Value Pricing + Your Current Revenue Line Time or Product Maturity The Leader in Software Value Management

  6. Value Pricing FeatureSegmentation Piracy Prevention Best Practices • Overview of 3 Revenue Strategies • Strategy 1: Value Pricing • Strategy 2: Feature Segmentation • Strategy 3: Piracy Prevention • Summary The Leader in Software Value Management

  7. Value Pricing FeatureSegmentation Piracy Prevention Many Companies Set Pricing for OneMarket Segment .… &LeaveSignificant$Behind Potential revenue $ Revenue Current revenue Heavy Usage Medium Usage Light Usage The Leader in Software Value Management

  8. Value Pricing FeatureSegmentation Piracy Prevention Many Companies Set Pricing for OneMarket Segment .… &LeaveSignificant$Behind Heavy Usage Medium Usage Light Usage The Leader in Software Value Management

  9. Value Pricing FeatureSegmentation Piracy Prevention Light Usage Medium Usage Heavy Usage Many Companies Set Pricing for OneMarket Segment .… &LeaveSignificant$Behind The Leader in Software Value Management

  10. Value Pricing FeatureSegmentation Piracy Prevention extra Are You Leaving Money on the Table? Light Usage Medium Usage Heavy Usage The Leader in Software Value Management

  11. Value Pricing FeatureSegmentation Piracy Prevention Does Your Pricing Enable You to Penetrate All Customer Segments? Light Usage Medium Usage Heavy Usage extra The Leader in Software Value Management

  12. Value Pricing FeatureSegmentation Piracy Prevention 100% Usage 10% Heavy Medium Light Light Usage Medium Usage Heavy Usage extra Does Your Pricing Enable You to Penetrate All Customer Segments? The Leader in Software Value Management

  13. Value Pricing FeatureSegmentation Piracy Prevention Different Users Have Different Usage 100% Usage 10% Heavy Medium Light The Leader in Software Value Management

  14. Value Pricing FeatureSegmentation Piracy Prevention Licensing Locked Floating Usage 100% Usage 10% Heavy Medium Light $100/pc/year $300/floating user/year $5/user-day Pricing Offer Different Prices for Different Usage Patterns…and Your Customers Will Buy More The Leader in Software Value Management

  15. Value Pricing FeatureSegmentation Piracy Prevention Pricing Case Study Challenge Solution • Introduced FLEXnet Utility Pricing • Customers pay for the time they use the product. • Customers have flexibility to deploy on as many seats as required without publisher intervention • Customers don’t want to pay large upfront fees for software. • Customer don’t know exactly how many seats are required in a given quarter (demand is hard to forecast) “ “ FLEXnet is helping us to remain competitive in the market, and we can now relate and adapt to our customers’ needs more quickly and effectively.” Gary DransfieldCommercial ManagerAveva Engineering “ The Leader in Software Value Management

  16. Value Pricing FeatureSegmentation Piracy Prevention Best Practices • Overview of 3 Revenue Strategies • Strategy 1: Value Pricing • Strategy 2: Feature Segmentation • Strategy 3: Piracy Prevention • Summary The Leader in Software Value Management

  17. Value Pricing FeatureSegmentation Piracy Prevention Lite Standard Many Companies Build Products for One Market Segment.… And Leave Significant $ Behind Potential revenue $ Revenue Current revenue Premium The Leader in Software Value Management

  18. Market Many Potential Users Novice 4 Professional Lite User 4 Heavy User Consumer 4 Corporate User Price Sensitive 4 Price Indifferent Only 1 User Buys Today Product Many Features Oils Watercolors Acrylics Canvas size # of Colors supported # of Paintings that can be worked on at a time All Features Available in 1 Package Today Value Pricing FeatureSegmentation Piracy Prevention Example: Studio Artware The Leader in Software Value Management

  19. Value Pricing FeatureSegmentation Piracy Prevention Example: Studio Artware Studio Artware “Software for all your graphics needs” License by Product Components The Leader in Software Value Management

  20. Value Pricing FeatureSegmentation Piracy Prevention Example: Studio Artware Studio Artware “Pro” Edition “Standard” Edition “Jr” Edition Fingerpaints Watercolors Oils License by Product Components The Leader in Software Value Management

  21. Value Pricing FeatureSegmentation Piracy Prevention Example: Studio Artware Studio Artware Related Products “Pro” Edition “Standard” Edition Sketch Sculpt “Jr” Edition Fingerpaints Watercolors Oils License by Product Components The Leader in Software Value Management

  22. Value Pricing FeatureSegmentation Piracy Prevention Example: Studio Artware Studio Artware Related Products Canvas Size # of Colors “Pro” Edition “Standard” Edition # of Concurrent Paintings Sketch Sculpt “Jr” Edition Fingerpaints Watercolors Oils License by Usage Metrics License by Product Components The Leader in Software Value Management

  23. Value Pricing FeatureSegmentation Piracy Prevention Example: Studio Artware License by User Site License Disconnected Network User Networked User Single User Studio Artware Related Products Canvas Size # of Colors “Pro” Edition “Standard” Edition # of Concurrent Paintings Sketch Sculpt “Jr” Edition Fingerpaints Watercolors Oils License by Usage Metrics License by Product Components The Leader in Software Value Management

  24. Value Pricing FeatureSegmentation Piracy Prevention Feature Segmentation Case Study Challenge Solution • Different customers needed different feature sets • Too expensive to stock multiple versions of products • Using flexible licensing Nokia “turns on & off” features for different customer segments “ “We’re now maximizing revenue through flexible, feature-driven pricing and packaging. Thanks to the FLEXnet platform we’ve been able to create a license model that closely matches how our customers perceive the value of our products.” Chandra ShekarProgram ManagerSoftware LicensingNokia “ The Leader in Software Value Management

  25. Value Pricing FeatureSegmentation Piracy Prevention Best Practices Value Pricing FeatureSegmentation Piracy Prevention • Overview of 3 Revenue Strategies • Strategy 1: Value Pricing • Strategy 2: Feature Segmentation • Strategy 3: Piracy Prevention • Summary The Leader in Software Value Management

  26. Value Pricing FeatureSegmentation Piracy Prevention Prevent Unlicensed Use…. …And Convert Into Paying Customers Potential revenue $ Revenue Current revenue Executive Admin Manager The Leader in Software Value Management

  27. Value Pricing FeatureSegmentation Piracy Prevention $30 Billion of Software Is “Pirated”(IDC & BSA) Worldwide Piracy Rate = 33% The Leader in Software Value Management

  28. Value Pricing FeatureSegmentation Piracy Prevention Most Enterprises Are Not Tracking License Compliance “Do you track software compliance?” No Yes N = 99 Source: IDC’s Future of Software Licensing Study, 2004 The Leader in Software Value Management

  29. Value Pricing FeatureSegmentation Piracy Prevention Anti-piracy: Easy Way to Grow Revenues The Leader in Software Value Management

  30. Value Pricing FeatureSegmentation Piracy Prevention Best Practices • Overview of 3 Revenue Strategies • Strategy 1: Value Pricing • Strategy 2: Feature Segmentation • Strategy 3: Piracy Prevention • Summary The Leader in Software Value Management

  31. Value Pricing FeatureSegmentation Piracy Prevention Increase Your Revenue Potential Throughout Your Product’s Lifecycle Early Maturity Late Maturity Introduction Growth Decline + Protect Against Piracy + Offer Feature Bundles $ Revenue + Offer Value Pricing + Your Current Revenue Line Time or Product Maturity The Leader in Software Value Management

  32. Value Pricing FeatureSegmentation Piracy Prevention New Costs Sales Operations Your Application FLEXnet Functionality New Sales + • Piracy Protection • Creative Pricing • Flexible Packaging • Streamlined Operations • Automated Updating • End User Mgt. Tools & Reporting Current Sales Current Costs Next Steps: Executing on the 3 Strategies • Prioritize your strategies • Identify key team members • Add FLEXnet to your application • Collect revenue! The Leader in Software Value Management

  33. Value Pricing FeatureSegmentation Piracy Prevention Early Maturity Late Maturity Introduction Growth Decline + Protect Against Piracy + Create Feature Bundles Pricing & Licensing Pricing & Licensing $ Revenue + Offer Value Pricing Applications + Modules Applications + Modules + Your Current Revenue Line Time or Product Maturity Key to Implementation: Separate Your Business Model From Your Application The Leader in Software Value Management

  34. Value Pricing FeatureSegmentation Piracy Prevention QUESTIONS? • On 500,000,000 desktops … 90%+ of market • 100 of top 100 ISV’s use our technology • 70,000+ customers • 700+ patents worldwide in licensing & DRM danielg@macrovision.com Make your software smarter The Leader in Software Value Management

  35. BACKGROUND ON MACROVISION

  36. Macrovision FLEXnet Publisher™ enables software and hardware vendors to increase revenue and reduce operational costs by flexibly pricing, packaging, protecting, and updating their product offerings. It is a core element of FLEXnet, the industry’s only Software Value Management (SVM) platform. SVM solutions bridge the gap between pricing and packaging software on the developer side and purchasing and managing that software on the enterprise side. Over 50,000 software publishers and hundreds of Fortune 1000 companies use Macrovision technologies for Software Value Management, which include FLEXnet license management and software updating solutions and the InstallShield® suite of software installation and application packaging tools. The Leader in Software Value Management

  37. Partial List of Macrovision’s 70,000 Customers The Leader in Software Value Management

  38. OUR CORE COMPETENCY:Get a Great Return on Our Investment Our Core Competency Industry Standard Platform Benefits Extreme Flexibility R&D • $110 million invested in R&D • 580 person-years invested • 15 years of development Proprietary Technology • 700+ Patents Worldwide in Licensing & DRM • Patent for Concurrent Licensing & Borrowing Proven in Real World • Battle-tested on millions of desktops • 4 FLEXenabled apps launched every second The Leader in Software Value Management

  39. INDUSTRY STANDARD:Our Market Leadership Secures Your Future Our Core Competency Industry Standard Platform Benefits Extreme Flexibility + • Major corporations require their software to be “FLEXenabled” • Launching new chip (Prescott) in Spring ’04 • Pre-production version not compliant with Macrovision licensing • Intel, at great expense, changed chip • Sun ships new OS, Solaris 9.0, in 2002 • Not compliant with previous versions of Macrovision licensing • Sun changes operating system The Leader in Software Value Management

  40. PLATFORM BENEFITS:Freedom to Choose the Best Options Our Core Competency Industry Standard Platform Benefits Extreme Flexibility Broadest possible range of capabilities • “One-stop shopping" for all needed capabilities • Large community of FLEXnet providers • More than could be provided by any one vendor • Much more than you could build yourself! The safest choice: Lowest risk to implement • Certification program ensures that "everything just works" • Modular platform architecture means new capabilities can easily be added whenever needed • Platform standards ensure that systems will interoperate seamlessly now and in the future The Leader in Software Value Management

  41. EXTREME FLEXIBILITY:Unparalleled Market Agility Our Core Competency Industry Standard Platform Benefits Extreme Flexibility • Change pricing, licensing & packaging at any time, without changing your software • 1000’s of license models supported • 25+ platforms (Windows, UNIX, Mac, Java, etc.) • Supports the entire software license lifecycle: • Demo and Evaluation • Initial purchase • Incremental purchases (through multiple channels) • Version upgrades • Licenses can be sent via multiple means • Web, email, phone, FAX or paper certificate • Also using automated license installation technology The Leader in Software Value Management

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