1、June 2023Technology,Media&Telecommunications PracticeThe art of software pricing:Unleashing growth with data-driven insightsSoftware companies struggling with shrinking margins can unlock the power of pricing by considering five actions for profitability in a market focused on efficient growth.This

2、article is a collaborative effort by Christian Fielitz,Mohit Khanna,Michelle Nguyen,Varshik Nimmagadda,and Paul Roche,representing views from McKinseys Technology,Media&Telecommunications Practice.One lesson for software companies has become abundantly clear during the last 18 months:pricing needs t

3、o be on the C-suites agenda.Before then,the industry had been growing so fast for over a decade that executives and investors tended not to view individual product margins as an overriding concern.Now,however,that has all changed.After years of rapid growth,the industry faces economic uncertainty,in

4、creased capital costs as interest rates rise,and a still-competitive talent market with accelerating wage growth.In the last year alone,84 percent of publicly listed software companies saw their valuations drop,and more than a quarter experienced a decline of more than 50percent.The message from the

5、 market is clear:top-line growth alone is not enough.Investors are increasingly pivoting from valuing growth at all costs to focusing instead on efficient growth.In this new era,the software companies that thrive will be those that grow revenue and margin simultaneously.Given these conditions,the le

6、aders of software companies increasingly push pricing to the top of their agendas,viewing it as a critical lever to grow efficiently and capture value.To understand what specific actions software companies can take to get the most out of pricing,we surveyed 184 software companies decision makers to