In the rapidly evolving world of construction technology, pricing strategy plays a crucial role in driving adoption and ensuring long-term success. As the industry embraces digital transformation, tech companies must rethink traditional pricing models to align with customer needs and value creation. Let’s explore innovative pricing approaches and how they can benefit both providers and users of construction tech.


Traditional and Emerging Pricing Models

Historically, construction tech has relied on familiar pricing structures like perpetual licensing, annual subscriptions, and per-user pricing. However, new strategies are gaining traction:

  • Volume-based pricing: Charges based on construction project size or cost
  • Pay-what-you-want (PWYW): Allows customers to determine the price
  • Outcome-based pricing: Fees tied to measurable results
  • Freemium models: Basic features free, premium features paid
  • Token-based pricing: Customers purchase “tokens” to use various features
  • Processing/Resource-based: Pricing determined by computing resources used

 

Each model has strengths and challenges in the context of construction technology. The choice depends on factors like the specific product, target market, and company goals.

 


Case Study: Buildots’ Volume-Based Approach

Buildots, specialising in AI-powered progress tracking, has adopted a volume-based pricing model. Amir Berman, Director of Strategy and Go-To-Market, explains:

“We price our product based on construction volume because we think it correlates the best to what’s the possible kind of reward that you will get as a construction organisation.”

This approach aligns the cost of the software with the potential value it can deliver on larger projects, encouraging wider adoption within organisations and ensuring that costs scale with potential benefits.


Pay-What-You-Want (PWYW) in Software

The concept of PWYW pricing, while unconventional in B2B markets, has sparked interest in the software industry. A famous example from the music industry illustrates this approach. In 2007, the band Radiohead released their album “In Rainbows” with a revolutionary pricing model. They allowed fans to download the album and pay whatever amount they wanted, including nothing at all.

In construction tech, a PWYW model could potentially:

  • Lower barriers to entry for smaller firms
  • Allow customers to pay based on perceived value
  • Encourage wider adoption and feedback


Aligning Pricing with Value Creation

Regardless of the pricing model chosen, it’s crucial to demonstrate clear ROI to customers. Buildots faced a significant challenge in creating a transparent and rigorous ROI formula for their clients. They developed a formula that allows clients to input project details and see concrete outcomes focused on:

  • Measurable increases in productivity
  • Reduction in project delivery time
  • Improved project predictability

 

This approach goes beyond simple time-saving calculations, offering tangible metrics that resonate with construction firms.


Challenges and Considerations

Adopting new pricing strategies in the construction industry can be challenging due to resistance to change, the need to educate customers on new structures, and internal financial planning complexities. Overcoming these hurdles requires clear communication, robust financial modeling, and a willingness to adapt based on market feedback.

As Tooey Courtemanche, CEO of Procore, notes, even successful volume-based pricing models can be “wildly unpopular” with customers initially. However, he believes it provides the ultimate yardstick and flexibility for customers to scale usage.


Expert Insights on Pricing Strategy

Dev Amratia, CEO of nPlan, emphasises the importance of iteration: “Expect your initial pricing to be incorrect. Iterate rapidly with customer feedback and actively seek opinions on fair pricing.”

Patric Hellermann of Foundamental highlights the growing popularity of hybrid models, combining a base subscription or freemium model with pay-as-you-go options for additional functionalities.

Rohan Jawali, Founder of Joist AI, stresses the importance of understanding the market, providing value to customers, and keeping the pricing model simple.

Parker Mundt, VP Platform at Suffolk Technologies, recommends a phased approach: “Start with project-by-project pricing to gain initial traction and demonstrate value. As companies grow, transition to enterprise agreements with tiered pricing based on usage.”

Mike Powers, Founder of BuildVision, takes a contrarian view, arguing that the industry can’t support another $100 million/year revenue business based on SaaS fees outside of project management. His company focuses on facilitating more efficient transactions and offering additional services, with a dynamic pricing structure based on buying volume.


Recommendations for Construction Tech Companies

When developing pricing strategies, construction tech companies should consider a multi-faceted approach. Begin with project-based models to demonstrate value before transitioning to tiered enterprise agreements. Continuously refine your pricing based on customer feedback, focusing on value capture rather than flat fees. 

Encourage broad adoption within client organisations by designing accessible pricing structures. Understand the decision-makers in your customer base and tailor your approach accordingly. Maintain simplicity in your pricing to facilitate sales, but don’t shy away from innovative models if they align with your product’s value proposition. 

Leverage early adopters for social proof, and strive to balance recurring revenue goals with the project-centric nature of the construction industry. Regular re-evaluation is key to ensuring your pricing reflects your product’s evolving value.


Future Trends in Construction Tech Pricing

Looking ahead, we may see:

  • AI-driven dynamic pricing adjusting to project specifics
  • Blockchain and smart contracts automating payments based on milestones
  • Ecosystem-based pricing leveraging partnerships across the construction tech stack


In conclusion, there’s no one-size-fits-all approach to pricing in construction tech. The most important thing is to tailor a pricing model that you feel comfortable with and that your customers are willing to accept. By focusing on value creation, adaptability, and clear communication, construction tech companies can develop pricing strategies that drive adoption and foster long-term success in this rapidly evolving industry.