Pricing factors in IT sector

Pricing in IT is decided taking into consideration the following factors:

Product characteristics

Important characteristics of information, which have influence on pricing, are accuracy, timeliness and fittingness with easy use and reproduction ability. More accurate, timely, and fitting the information, higher would it be the user and higher it would also cost to collect and provide to the buyer by the marketer.

As such we see that companies such as Infosys Wipro charge very high price and as a result their gross margin is as high as 60% to 70% of their sales.

Type of the product

Information can be into three broad categories:

• Product,
• Services and
• Value added services/product.

Pricing a product is very different from pricing a service or value added information. Better packaging, faster delivery or making it user friendly may add value of a physical product say an issue of current content. However in case of a service none of the above attributes is visible to the buyer before the service is bought. Services are primarily retailing activities with the seller/provider dealing directly with the intended user.

The Customer: who is buying

It is essential to study and know yours users before you become involved with the pricing frame. Everyone needs information. However, what prices will a customer pay for the information depend on answers to some key questions like:

• How important it is?

• How much they can pay?

• How much do they expect to pay?

Ability to pay

Even if the value of the information tho the customer can be ascertained, the ability to pay for the information differs across customers. The differences arise because of variations in the types of customers.

In general these are:

• Whether the customer is located in developed or developing countries?
• Whether the customer is an individual or an organization ?
• The type of customer within each class

Due to competition it is found that companies are reducing price and as a result there profits are adversely affected. In discussing the P’s of services it is important to note that IT industry plays a very important Role of supplementary to all other industries be it banking hotel etc.