Leandro's avatar
$130.8m follower assets
What makes a product/service compelling from an investment POV?
Products where price is secondary for customers exhibit pricing power and high retention

In the context of business management software (such as $INTU's QBs), there's too much hassle to go through to justify a change due to price unless competing software is much much better

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Pricing power and high retention is further strengthened if a product makes up a small part of a customer's overall costs.

There will be other places where customers will look to cut costs:

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It all boils down to how mission-critical a product is and how much it costs to the customer as a proportion of total costs

This is what, for example, Constellation Software $CNSWF goes after when investing in VMS software.

Can you think of any other examples? Let me know in the comments!

Btw, images above are from AlphaSense, a platform for expert calls. You can sign up for a free trial (a work email of some sort is required, but no credit card) and download all the transcripts you want, in the following link.
Joshua Simka's avatar
Your question brings to mind Motley Fool co-founder David Gardner's "snap test." To paraphrase: if I snapped my fingers and a company/product disappeared from the face of the earth, how many people would notice? How many people would care? In $AAPL's case--a bunch! $PTON though? Not so much. In terms of business softwares, a lot of businesses would probably be affected if $PAYC, $DDOG, $CRWD disappeared. For something like $MDB the answer isn't quite clear yet.

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