Oscar Wilde wrote that a cynic knows the price of everything and the value of nothing — but, of course, he never experienced the inflationary pain brought about by a Liz Truss government, a war in Ukraine and a global pandemic.
You can understand, given the myriad circumstances that have led to high levels of inflation in the UK and around the world, why we have all become rather more focused on price in recent years — particularly for those services that we have no choice but to purchase.
New entrants often use price to win market share at pace
Moments in time where price becomes the key factor in decision making create opportunities for new business models to emerge, challenging the status quo of market pricing.
Often these pricing models see new entrants try to monetise a service in a different way from that of the incumbents, selling advertising or data analytics in return for providing users with a ‘free’ or heavily discounted service, for example.
We have seen this in the adviser technology market over the past few years, with a number of new products using pricing models that are fundamentally different from those that have come before.
Winning combination
New entrants to a market often use price, or indeed new pricing models, to win market share at pace. It’s something we did successfully in the early years of Twenty7tec, with SOURCE: we brought a premium product to market, at a discounted price — a winning combination.
The future cost of poorly thought-out purchases today can be far higher than the short-term discount of a low-price deal
The problem, however, with sustaining any pricing model so demonstrably different from the norm is that it requires either a committed and patient financial backer or fast and aggressive growth in a race to profitability before you run out of cash.
Uncertainty over the longevity of pricing models can cause big issues for advice firms. What happens if the technology and pricing model that you have signed up to has to change because the provider realises it cannot continue to exist without changing tack? Advisers can face either being forced into changing technology provider or accepting a large price increase for the same solution.
True barometer
Price is certainly one component in the decision-making process of whether to purchase a product or service. But the true barometer of a good purchasing decision is not finding a solution for the lowest price; it is finding one that offers true value for money over the longer term — a quality product, at the right price.
Moments in time where price becomes the key factor in decision making create opportunities for new business models to emerge
Hence the true value of a great technology partner is not just in the quality of the product they have today but in the continued investment being made in that product in the long term to ensure it continues to meet the needs of advisers.
Continued investment ultimately requires a sustainable and robust business model — without it, product development will cease and the technology that seemed both cheap and functionally rich at the start of a contract can, over time, become neither of those things.
Uncertainty over the longevity of pricing models can cause big issues for advice firms
In determining the true value of the technology on offer today, advisers should of course be cognisant of price, functionality and future planned roadmap. However, paying careful attention to how the business model of the provider will enable it to continue to invest in its product, to deliver value over the longer term, can be just as important.
Future cost
We have all, rightly, become more price sensitive in recent years. However, as Oscar Wilde suggests, understanding the relationship between price and value is an important part of making the right purchasing decisions.
Oscar Wilde saw the relationship between price and value
The future cost of poorly thought-out purchases today can be far higher than the short-term discount of a low-price deal.
James Tucker is chief executive of Twenty7Tec
This article featured in the December 2023/January 2024 edition of MS.
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