Some merchants, especially small businesses just now upgrading from a cash register, are attracted to free point of sale (POS) software or apps. These business owners may be attracted by the offer to try an app for free or to not have an additional software expense if they purchase a tablet for mobile POS or a stationary POS terminal.
So is this the model ISVs should use for selling POS software?
Pat Ward, VP of ISV Sales for North American Bancard, says your POS pricing model depends on your business goals. “If you’re selling entry level entry-level, it may work,” Ward says. “It’s good for short-term merchant acquisition. But most merchants will either abandon that POS system or upgrade within a year.” Merchants that are larger than one-man shops will begin to realize the benefits of a system with features like labor management, inventory control, and back office functions. “They’ll see there are better things out there, and they’ll switch.”
POS Pricing Strategy for Long-Term Customer Relationships
Ward says if your goal is to build a client base with more than just trial users, a better strategy may be to develop POS software that offers greater value to your customers and then price based on that value and on the market.
He says a range of common price points are emerging for POS software — for example $59 to $129 per terminal per month for tablet-based solutions. In addition, many legacy systems are converting to the cloud and are also sold on a subscription basis, with prices ranging based on their feature sets and enterprise demand.
Does Your Solution Qualify for the High End of the Price Range?
Your company’s position in the market will play a role in determining whether your solution can sell at the high end or the low end of the POS solution price range. If your ISV is a relatively new player in the POS space, you may need to keep your price low to attract customers while you build brand recognition. You also need to evaluate what sets your software apart from competitive solutions. Ward says some North American Bancard ISV partners find success tailoring their solutions to specific niches, such as nightclubs or pizzerias. “Play to your strengths,” Ward says. You can find success with a robust, competitive solution as well as a simple solution that can sell at a lower price and attract a sizeable customer base. “There’s a place for both in the market,” Ward says.
Pricing for New Tools You Introduce to the Market
If you are an ISV with a novel POS add-on, it may be more difficult — if not impossible — to set a price based on industry norms. A North American Bancard ISV partner, for example, developed an accounting plug-in that saved their customers a significant amount of time each month. Although the solution was simple, it was in demand. “Even if it’s a simple solution, look at the value it provides to the merchant,” Ward says.
Pricing for Your Company’s Future
Ward also points out that if your goal is to sell your business, your pricing structure will be different. “Look at what you want to accomplish and your timeline,” says Ward. If you are building business value to position your business for acquisition, you will need to price your software in a manner that helps you reach your goals. “You need to base your pricing decisions on how they will affect your business and your growth plans,” Ward says.
Don’t Go It Alone
Ward also advises ISVs to investigate all the resources and support available that can help them successfully bring software to market. Partnering with North American Bancard, for example, will enable 4,000 ISO agents to sell your product.
“It’s a good time for ISVs and merchant service providers to be in the industry,” Ward says. “The closer we can work together the better chance we can have for success.”