2005 – Pricing Effects

As you’ll have read, when we first launched ARCHICADselect we’d had around a 15% uptake. With every subsequent ArchiCAD release we tried various pricing strategies to enable our customers to join Select and over time we had started to build up a healthy number of customers and the beginning of a recurring revenue stream for the business.

Recurring revenue is great for business as it helps with planning and providing a foundation for the year ahead. When Cadimage was based purely on sales and services the volume of both could go up and down easily (and quickly). While still in its infancy ARCHICADselect was providing us a regular income which allowed us to plan and also to fund key services like Customer Support which had been difficult to finance when it was reliant purely on sales.

Anyway, we still weren’t getting the traction with ARCHICADselect that we would like and this was especially apparent with new Sales, where people simply wanted to buy ArchiCAD and couldn’t understand or see the benefit of joining select.

We had various new pricing strategies in place and even though the list price of ArchiCAD was still around $8,000 on average we were selling licenses around $6,000.

We had a visit from our GRAPHISOFT Sales Manager and through a conversation that started in Auckland and ended at a restaurant at Darling Harbour in Sydney we reworked our price list and renegotiated our Distributor contract.

By 2005/6 GRAPHISOFT had started to put a strong focus on SSA (Software Services Agreements – GRAPHISOFT’s name for ARCHICADselect) and were also starting to see the benefits of the recurring revenue stream it produced. It especially helped flatten the sales graph and meant upgrade revenue wasn’t he major focus it once was. 

What we agreed was to reinvent our price list that while not making ARCHICADselect compulsory made it a compelling offer.

The offer was if you purchase ArchiCAD and join ARCHICADselect you would get a 25% discount on your ArchiCAD purchase.

Considering ARCHICADselect was $1,500 you ended up paying $7,500 instead of $8,000 and you joined ARCHICADselect.

Not surprisingly our ARCHICADselect attachment rate jumped from around 15-20% up to around 99%. (Surprisingly it wasn’t 100% but some people just couldn’t be convinced)

From Cadimage point of view, considering our average licence price had been around $6,000 anyway we still made the same income on the sale and got the ARCHICADselect income. It, in hindsight, was a no brainer.

From an existing customer point of view we adjusted our Upgrade Pricing in a similar manner (though due to the lower price point we couldn’t make it quite so compelling) but when coupled with ArchiCAD 10 which was a monumental release we saw a great conversion of existing customers as well.

Around the world different subsidiaries and distributors have tried different strategies to varying levels of success. There has been a constant debate regarding making ARCHICADselect compulsory or not, I always preferred to give customers an option.

While the pricing we introduced changed the dial on our ARCHICADselect figures I still only see that is one key to the overall success we enjoyed with Select, the other and most critical was delivering value. Yes, the regular (by 2005 ArchiCAD moved to an annual release cycle) ArchiCAD Upgrades contributed a lot to the value of Select but all the services and benefits added significant value too. We’ll see in the next post how a financial crisis led to further value add for customers as well.

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