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License Pricing

 

DisciplinesMarketing > Pricing > License Pricing

Description | Example | Discussion | See also

 

Description

Sometimes, rather than selling a product outright, you can license its use. There are many ways of doing license pricing, including:

  • Paying monthly for the use of a software product.
  • Paying for a license to sell a product within a given area or marketplace, with specific exclusivity and for a given time period.
  • An up-front price to buy into the license agreement, plus a regular 'maintenance' charge, including updates.

The license can include al kinds of restrictions, including how the product is used, legal responsibilities, the ability to change or resell the product, and so on.

Example

A software developer sells its product on a monthly licensing deal, including regular updates and support. Licenses are included for basic home and full-specification business users.

A famous chef licenses a restaurant to use his name on certain dishes he has created.

Discussion

Issuing a license rather than a sale means that the product remains owned by the licensor. The licensee only has the right to use the product under the conditions of the license. This can be used by the licensor to constrain all kinds of actions, including how the product is used and whether it can be re-sold.

The actual price to charge for a license and the conditions you apply to it will vary with factors including industry norms, the desirability of your product and what competition you have. In an unregulated market where you have a desirable product, you can charge a highly profitable amount.

Where the product is expensive, licensing offers a way to spread the cost over time. Licensing can hence be beneficial for the licensee, who may also give up the product at any time. Licensing deals can include complex services, which may be used to sell further benefits of using license pricing.

License pricing can overlap with other forms of pricing, such as subscription pricing and franchise models.

See also

Easy-Pay Pricing

 

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