Microsoft Stirs Up CRM Market With Price-Cut Strategy

Microsoft announced a new price point for Microsoft Dynamics CRM Online 2011 at Convergence 2010 Europe, which kicked off Thursday in London. When it is generally released at the beginning of next year, it will be available for US$34 per user, per month, for the first 12 months of service.

That price seriously undercuts the competition, according to Brad Wilson, general manager of Microsoft Dynamics CRM.

The pricing strategy complements an incentive announced this summer, which offers partners a 40 percent margin on the value of new subscriptions for Microsoft Dynamics CRM Online.

Global Maneuvering

Between the pricing and the incentives for partners, which are an integral part of Microsoft Dynamic CRM’s distribution channel — not to mention the functionality in the retooled version of the application — the company expects to drive a deep stake in the global market, Wilson told CRM Buyer.

The forthcoming release, which was made available in beta last month for both cloud-based and on-premises deployments worldwide, delivers significant upgrades in functionality, Wilson said.

“With this release, we are opening our data centers to support the custom code our customers and partners put up,” he noted. Up to this point, Microsoft supported point-and-click configuration in the cloud, but not .Net code customization.

Another enhancement is the addition of contextual business intelligence. Users can drill through various visualizations to find the precise data and scenarios they are looking for, Wilson said.

This release also marks the expansion of Microsoft Dynamics CRM Online into 40 markets and 41 languages worldwide.

Industry Shift?

Combining lower pricing with bolstered functionality is a compelling strategy, said Rebecca Wettemann, vice president of Nucleus Research.

“They are definitely driving a penetration pricing strategy that is significantly lower than most of their competitors,” she told CRM Buyer. “Low pricing coupled with tight integration with Office and Outlook are clearly helping Microsoft to gain ground in this marketplace.”

The price point may bring about a shift in the larger market as well — if not with prices, then with new services, continued Wettemann. “Competitors will have to compete on providing additional value to users on an ongoing basis to justify higher subscription fees.”

The same is true for Microsoft, though, she noted. “Like everyone else, it will have to deliver incremental value every time the subscription runs out, so customers aren’t just attracted to a lower-cost option.”