Case study

Case study

Software pricing: issues of client billing
Infosys, one of the major IT companies in India, has developed a new method of pricing software maintenance project. The new method is called as ‘ticket – based pricing. The customer payment will be based on three types of client request or ticket. First, customer may request for small enhancement in the software application. Second, customer may request for big enhancement in the software application and third, request may be for a bug fix. Earlier the methods used for pricing were ‘fixed price’ and ‘time and material-based pricing’. Under the ‘time and material based pricing’, customers are billed based on the number of man-hours spent on a project, while under the fixed price, the customer pays an agreed price that doesn’t vary with the manpower deployed on the project.
Infosys developed this new pricing strategy after examining the current pricing methods. Software application methods become more stable after some time. If the client opted for fixed pricing and his request for software maintenance reduced, still has to pay fixed maintenance charges. Ticket based pricing will provide flexibility to the client. Many IT majors have been trying to decrease the dependence of revenue growth on manpower addition. But this is for the first time such an attempt has been made to bring a transaction-based pricing model. The new move is expected to increase the revenue without a proportional increase in the number of employees. Contrary to this view many industry observers still feel that fixed price or time and material based pricing provide continuous revenue. The excess revenue available from these two methods can be used for reserves or hedging. In case of ticket based pricing client has to negotiate with the company every time.

a. Do you think ticket based pricing will provide continuous revenue to Infosys in the long term? Comment
Answer: Since Infosys may have two type of client that is Big & Small.
a) General small kind of client prefers to outsource their project to avoid the expenditure incurred on the installation of software and maintenance. But because of the ticket based pricing strategy the small client will also think to install the software on the basis of requirement. I think ticket based pricing is one of the best strategy adopted by the Infosys which will definitely a source of continuous revenue in the long run because of the following reason, because now they know that they are able to upgrade or may fix the problem on the basis of demand arise end have to pay accordingly. They need not to pay the fix amount of money regardless of the work alone through which the share of market for Infosys will increase amazingly.
b) Due to the fearness of fix maintenance charged occurred while the fixing of problem any big or small enhancement the big client will generally install the software of which some of its feature may not be useful for the company at all. It may unnecessary become the capital burden for the company and Infosys may not get the business of after sales and service but because of this strategy the company will install the software according to the need and utility. Further the need will arise, the company will be required for the big enhancement or small enhancement of the software end the company have to pay accordingly.
In case of any troubleshoot in the software the company is asked to pay the large fix amount on the basis of installed software

b. Compare three pricing strategies discussed here and choose any one as your choice
Answer: In case of fix price the big client will prefer to purchase new software because the amount to pay for its fixing might have purchase the new one with the enhanced technology this will further shrink the market share and attract the new entrants in the market.
In case of time any material based pricing the company may not incurred profit because The Resource involved in the fixing of problem may be the greater than the actual cost received from the client. But now the company can decides the resource factor to oversee due problem and same the cost.

Psychographic Segmentation

In Psychographic segmentation, buyers are classified into different groups on the basis of lifestyle or personality and values. People within the same demographic group can exhibit very different psychographic profiles.
a) Lifestyle:
People exhibit different lifestyles and goods they consume express their lifestyles.
Many companies seek opportunities in lifestyle segmentation. But lifestyle segmentation does not always work.

example

For example, HUL launched ‘pepsodent kids’ for small children.
b) Gender: Gender segmentation has long been applied in clothing, hairstyling, cosmetics and magazines. For example, Emami segmented its personal care business on the basis of gender. For women, it is having Emami naturally fair, and for men it is fair and handsome.
c) Income: Income segmentation is a longstanding practice in such product and service categories as automobiles, clothing, cosmetics and travel. However, income does not always predict the best customers for a given product.
For example, Baja Auto limited, a leading automobile company, different bikes for different commuters. For entry level (less than Rs35000) it is Bajaj CT 100, for mid segment (greater than Rs35000 but less than Rs60000) it is pulsar and for the upper segment greater than Rs
60000 Avenger and Eliminator is positioned.

Demographic Segmentation

: In demographic segmentation the market is divided into groups on the basis of variable such as age, family size, family lifecycle, gender, income, occupation, education, religion, race, generation, nationality and social class. Demographic variables are the most popular bases for distinguishing customer groups. One reason is that consumers’ wants, preferences and usage rates are often associated with demographic variables. Demographic variables are easy to measure. Even when the target market is described in nondemographic terms, the link back to demographic characteristics is needed in order to estimate the size of the target market and the media that should be used to reach it efficiently. Some of the demographic variables used are :
a) Age and LifeCycle Stage: Consumers’ wants and abilities change with age. On the basis of age, a market can be divided into four parts viz., children, young, adults and old. For consumers of different age groups, different types of products are produced. For instance, different types of readymade garments are produced for consumers of different age groups. A successful marketing manager should understand the age group for which the product would be most suited and determine his marketing policy, pricing policy, advertising policy
etc., accordingly.

Geographic segmentation

Dividing the market into different geographical units such as nations, states, regions, cities or neighborhoods. The company can operate in one or a few
Geographic areas or operate in all but pay attention to local variations. For example, Bennett, Coleman and co Ltd divided markets according to geographical units for their tabloids. In Bangalore the tabloid is known as Bangalore Mirror where as it is Mumbai Mirror in Mumbai.

Habitual buying behavior

The low involvement between the brands and few differences between the brands leads to the habitual buying behavior. For example spice powder marketed by MDH, Everest or MTR have very few difference between them and customer do not search the information to purchase particular product. Marketers whose customer represents this category should follow below listed strategies
a. Use price and sales promotions to stimulate product trial.
b. Use more visual aspects than the wordings in the advertisements
c. Television is the better media for this type of products.
d. Use classical conditioning theory to create advertisements.

Variety seeking buying behavior

When there are significant difference between the brands existing but customer will not involve more while purchasing, marketer identify this behavior as variety seeking buying behavior. Let us discuss the purchasing behavior of customer for biscuits. There are many varieties of biscuits available. One can purchase salt biscuits, cream biscuits, Marie biscuits, and milk biscuits of Britannia, Parle, ITC sun feast and others. The customer who purchased Britannia tiger earlier may purchase Sun feast cream biscuit next time. This doesn’t mean that quality of Britannia tiger is inferior to other brands but customer would like to try the varieties available in the market. In this situations marketer should undertake following steps
a. The market leader should encourage customers to buy repeatedly.
b. Make the product available and visible to the customer in the shopping places.
c. The firm who are not market leader should come out with sales promotion techniques to encourage customer to purchase the product.