To any company which is involved in software development, Josh Melick is a name which you have got to know about. Josh has a background in math and engineering, and he is a business expert to boot. Josh has written a great blog post recently about what he calls the all important ‘third dimension’ of sales pricing, which he believes that too many companies are missing out on.

The way hat Josh describes this in his piece actually makes perfect sense and it is wonder that more companies are not taking the approach which he discusses. The bottom line here is that with this pricing structure companies are going to be able to make much more money than they currently are. Let’s look at a brief summary of what his pricing is, and then focus on how it can help increase revenue.

What Is The Third Dimension of Sales Pricing?

When it comes to selling a software package most companies focus on offering a variety of options which offer different levels of users and usage. These are considered to be the two dimensions of pricing. The third tier which Josh recommends is length of time that the package can be used. Instead of just rolling on month to month, this approach will see a fixed duration of time for which the customer can use the product.

The Ability to Raise Prices

Raising prices is always a challenge for businesses as they wish to do so in a way that keeps their customers on side. The contract renewals which this third dimension offers, gives the company the perfect time to hike up their prices to fit in with inflation and with growing costs. This is also the best way to manage a customer through the price increase. Customers can be notified early on, and given fair warning about the hike.

Chance to Upsell

Upselling is so important for businesses but if they try to do this out of the blue then it can put the customer’s guard up. This is why the contract renewal period offers the perfect time for a company to try and upgrade their customers. The price hike allows for an opportunity to upsell, as they can offer a discount on the new price of a customer moves up to the next tiered package.

Maintaining Loyalty

This setup is a surefire way to get solid loyalty from your customers as you will have so many chances to connect with them, sell to them and showcase the high level of customer service which your company offers. This loyalty and the improved reputation of your business as a result will mean better reviews and write ups, which in turn will bring in more revenue now and in the future.

The third tier setup which Josh talks about makes so much sense for businesses and what is abundantly clear is that those who do implement it, are going to make much more money as a result.