Lokad news - Integrated business forecasting

Customer feedback is critical to us in order to move forward. When it comes to making the right choices, most software editors agree that customer feedback is gold. Well, if it's gold, why not giving some financial incentive to our customers to provide the feedback we desperately need?

For this reason, we have published our very first online customer survey. Filling the survey should take about 10min, and the customers who go through this survey will be granted 100 USD of pre-paid Lokad services (see also the Lokad Pricing for the big picture).

Lokad delivers forecasts and we charge by the forecasting task. Simply put, the more forecasting tasks you have and the more you pay, but with a quantity discount. This post is a small attempt to explain a bit the mysterious rationale behind the Lokad pricing formula.

The power 2/3 formula 

Yet, if you have  10x more forecasting tasks, you do not pay 10x more with Lokad because we provide bulk "implicit" discount in our pricing formula. Indeed, the price formula is (number of tasks)^2/3 .Although the power 2/3 might look complicated, the effect is quite simple:

If number of tasks is x8 ==> total price is x4 

 As other way to express this formula is to say (it's completely equivalent)

 If number of tasks is x8 ==> price per-forecasting task is 1/2.

Thus, if you are using 80 tasks, you are charged only 4 times more than if you were using only 10 tasks, although you are consuming 8x more tasks. If you are not comfortable by multiplying the number of tasks by 8, then you can also consider that this formula is equivalent to a 25% discount (roughly) if you take two times more forecasts. The discounts pile up. So if you multiply the number of tasks by 64 = 8x8, then the per-forecasting task price gets divided by 4. 

The reasons for the quantity discounts

Most software companies provide bulk discounts, but few of them would actually explain why. They are many different reasons for adopting such a pricing scheme. A common reason is that the marketing costs are lower if you sell 1000 licenses at once as opposed to sell 1000 licenses to 1000 customers. This reason somehow apply to Lokad but it's only a small part of the explanation. The key factor when defining the price of a software is to figure out the benefit that the customer gets from using the software.

How much benefits do our customers get from a marginal forecasting task? Let's consider the situation of a small retailer selling 1000 products. The first 50 products are top selling products, thus the retailer needs accurate sales forecasting for those products because those top selling products represent a really big percentage of the business. Then, the next 100 products involve moderate sales. It's still interesting for the retailer to get forecasts but the benefits are lower because those products represent a smaller part of the business. Then comes the remaining 850 low profile products. The sales of those products are not really worth to be forecasted because those products represent only a small percentage of the business anyway.

From the Lokad viewpoint, it's clear that Lokad cannot charge the same price for the sales forecasts of the 50 top selling products (that are really useful for the retailer) as opposed to the sales forecasts of the 850 low profile products (that are much less useful to the retailer due to the limited business impact). Thus, Lokad must charge less per-forecasting tasks as the number of forecasting tasks increase, because the per-forecasting task benefit of the customer is decreasing too.

One of the goal of Lokad is to deliver its forecasting technology to businesses of all sizes, including very small companies. Micro-companies tend to be highly cost sensitive, thus we have devised a new subscription plan named Partner Plan for eCommerce retailers who can't afford the Entreprise subscription plan.

The key idea behind the Partner Plan is simple: in exchange of a single web link toward lokad.com, you get a significant discount on your subscription plan. In most cases, for eCommerce retailers, the discount is sufficient to get a zero-cost (gratis) subscription plan on Lokad.

Our objective is not to hurt your business, thus we have loose requirements concerning the actual placement of the required backlink. We suggest to put the link at the bottom of your About Us page or wherever it makes sense in your website. 

Currently, Lokad provides 3 subscription plans

• Free: cost nothing, no 3rd party integration
• Professional: paid, no 3rd party integration, CSV reports
  
• Enterprise: paid, 3rd party integration available, CSV reports
  

 CSV = Comma Separated Reports, a downloadable report available from the Lokad Web Application.

But all subscription plans are not born equal, and the level of interest among our customers for the "Professional" plan (that is supposed to provide downloadable reports from the Lokad Web Application) has been close to zero so far. There are several reasons for this situation, the main reason being that those "reports" are just very weak and unpractical when compared to a complete integration with one of the Lokad add-ons.

The path taken for the Professional plan was wrong (my idea, mea culpa), and as a result, it can potentially confuse prospective customers. Thus, the Professional subscription plan will be removed soon. The very few customers relying on this plan will be upgraded  to the  "Enterprise"  plan at no extra cost (we will compensate for the transition).

The initial idea was to provide an intermediate plan between Free and Enterprise for customers with very limited needs. I still believe that there is some particular needs for small eCommerce retailers who can't afford the Enterprise plan. We have already started to design a new subscription plan to fill-up this need. Stay tuned...

We are very proud of our rock-bottom prices for our business forecasting services. Still unconvinced that Lokad is deadly cheap? Then I suggest you hire a consultant for a market study to check whether or not it exists a cheaper solution on the market :-). Warning: this advice may cost you more than 10 years of Lokad services. Yet, thinking again about our prices, it did appear to us that our terms and conditions were obscure somehow.

Thus, we have added a whole new section on top of our pricing page.

In a nutshell

• nothing is ever paid upfront.
• payment happens only if you are amazingly satisfied.
• no remorse, 90-days-money-back-no-question-asked.
• community contributions are rewarded.

Thus, now there is no excuse left not to give a try on Lokad.

(note: those conditions have been largely inspired from Joel Spolsky on customer services )

We have started to work a sales forecasting module that will integrate the Lokad forecasting technology within osCommerce, a major open source webshop application (with more than 10,000 shops worldwide). Sales forecasts are used to improve the inventory planning, the ultimate goal being to have "just enough" inventory to match the customer demand.

If you're interested in having sales forecasting integrated within your osCommerce application, register now. Customers that register to be notified of the Lokad osCommerce integration release will be awarded 6 months of free Lokad services.

In order to be more competitive on the webshop market, Lokad has revised its prices. All base prices have been lowered. Existing customers will benefits from the new prices starting from today. The new prices are available from our Pricing page.