Analysts report a record number of price increases for enterprise software products from Microsoft

One thing that can happen when the market gets tough, is businesses can increase prices knowing their users aren’t going anywhere, and in the case where you are largely locked into a product, you have no choice but to pay up.

Microsoft Corp. plans to raise the price of the Datacenter edition of the upcoming R2 release of Windows Server 2012 by 28 percent, adding to what analysts call a record number of price increases for enterprise software products from Redmond.... Read More

Why this works is very simple. It is the same approach used by the government which looks good in theory, but in practice nets the government increased revenue. The government increases the price of cigarettes, even by what is considered a considerable amount. This is done under the guise of being good for the health of the community (and none of us can really argue about that). But the government knows they have an addicted market. Yes a small number of people will give up, but the loss in revenue from the decrease is far outweighed by the price increase.

The detail is hidden in the maths. If you increase the price of a product by 10%, even if you lose 10% of your customers you’ll still be well ahead. The reason is you haven’t just increased the product by 10%, but for the business you’ve increased your margin by perhaps 20-25%. Thus in some cases the business would have to lose up to 25% of their customers, and if the customers are tied in, that isn’t going to happen.

When using any service which ties you in, keep in mind once tied in you have to tolerate the price increases and chances are, those price increases will continue to come.

- Kelvin Eldridge
www.OnlineConnections.com.au
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