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Basecamp Pricing Case Solution
Basecamp is a software solution provider, and specializes itself as a project management software tool. Originally founded as a web design agency, the company evolved to become a profitable venture, offering customized project management solution to companies from diverse backgrounds like retail, banking, IT and others. The company has launched the latest version of its software tool, BC3, which offers three different pricing plans, catering to different customer segments. The company aims to achieve maximum Lifetime Value (LTV) from the price set by the company for these different plans. It intends to whether the pricing plan is appropriate for its stated goal.
Following questions are answered in this case study solution
Assumptions and Missing Information
Statement of the Problem
Development of Alternatives
Evaluation of Alternatives
Recommendation and Implementation
Evaluation and Control
Case Analysis for Basecamp Pricing
2. Situational Analysis
SWOT (Strength, Weakness, Opportunities, and Threats) analysis can be used to analyze the extent to which Basecamp is ready to face the challenges from the external environment. In the first phase, it is essential to discuss the strengths and the weaknesses of Basecamp. As far as the strengths are concerned, the company has a record of highly profitable financial performance, providing it with the financial flexibility to introduce new variants and products. It also has developed a respectable brand name in the software business, offering customized solution to its various customers. Products offered by the company are also used by the buyers, who can ascertain its effectiveness, and therefore, a trustful relationship can be developed. Moreover, it also enables users to have a more personalized communication, particularly when complexities arise in discussion during project management between the user and clients. When we consider the weakness, it does not offer per user charges, and this can although provide more benefit to the customer but might have negative financial prospects. Furthermore, it does not have an effective sales force that can be a disadvantage for the business, particularly when it comes to marketing the product to the skeptical consumers. It also does not have a focused strategy when it comes to reaching out to its target audience, providing a space to its competitors to capitalize to the detriment of the company.
In the next phase, it is important to consider the opportunities and threats in order to get awareness about the external environment of the market in which it is operating. Considering the strengths, Basecamp is operating in a $15 billion market of project management (PM) software market, which is growing at more than 10%. This offers huge prospects to the business in the future (Cespedes & Fitzsimmons, 2017). As far as the threat is concerned, it can be the sustainability of its offerings, keeping in view the fast changing nature of the software industry, as there are limited barriers to entry. With increased level of globalization and deregulation, a number of players have emerged that have the potential to make their place in the software market.
3. Assumptions and Missing Information
The information given in the case lacks information in detail about the target market in focus. Different businesses have distinctive organizational dynamics, and therefore, different software tool requirements. Keeping in view the requirements, it would have been much easier to get closer to the issue. Competitive landscape was also difficult to ascertain. Comparative financial analysis would have helped understand the differences between Basecamp and its competitors. This would have made it easier to judge the efficacy of the customized features offered by Basecamp software solutions.
4. Statement of the Problem
As discussed earlier, the goal of Basecamp is to maximize the LTV from sale of its latest version of project management software tool. For this purpose, it offers different pricing plans for its various customer segments. The problem is that there is a perception that the current prices will not be able to achieve the stated goal of the business. Current prices might make the product appear less attractive to the customers, or they might not continue to use the product in the longer run. Basecamp wanted to ascertain the best optimal pricing practices for its different plans, offering various features.
5. Development of Alternatives
Price sensitive surveys were conducted, and respondents recorded their response on different price points on which the product is marketed. The results showed that some customers considered the current prices to be low and others were indifferent or perceived the prices as too expensive. Three alternatives are given in the case: feature pricing, per-user pricing, and depth of usage pricing. The purpose of these alternatives is to get to know which of these options can get the highest LTV for the business, and so best possible revenue stream in the longer run.
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