Jim Pinto's pricing paradigm sounds like a win-win situation for both seller and buyer (Jan/Feb InTech). My question is: How can "value" be determined?
We make widgets that become part of a process control system. The sale of our products is through intermediaries. We seldom see where the products are actually used. Besides situations where, for example, IBM installs a system for a state's DMV and can charge for the number of customers processed, how would you determine value in our situation?
Maris Graube, Relcom
Performance-based pricing is typically for large systems (like DCS and SCADA systems), which need major budgeting and planning. The buyers already have a break-even analysis based on review bids. This is where performance-based pricing makes it easy-some of the price is based on future performance, which of course must be jointly evaluated based on the buyers objectives.
"Widgets" are harder to price based on performance and typically priced competitively.
The question becomes what is a "widget?" And what is a "system." The key is to talk to the customer to find out why they're buying, and what they expect. The attitude of "performance based" is itself a welcomed idea for many customers.
The key: Find what works for your company. I wish you success.
I object to the notion that the Detroit automakers "... forced cars they produced down the public's throat." I know that's not exactly what you said (September "Talk to me"), but that's the implication. The public is going to buy what it wants to buy, neither the government nor the automakers can or should do anything about that. Detroit has been slammed for making big SUVs and trucks rather than the small cars "people want." It is interesting that Ford sells three times as many F series trucks as it does the economical Focus. It is interesting that the small carmakers-Honda, Toyota, Nissan-have entered the big truck, big SUV, big luxury car markets. If anyone wants to know what the public wants, just look at what's on the road, and don't blame Detroit for making what people want to buy.
Our pollution footprint
Regarding the InTech October 2009 "The Final Say," I agree the sun is the main source of the atmospheric heating of our planet; however, I've been in the controls industry for over 40 years and have worked in most industries, petro-chemical, steel, etc.
Even as a young guy, I realized that dumping human generated waste into the environment was bad (industrial or otherwise). I worked at a plant in the U.K., which at the time dumped untreated hydrocarbon waste into the local river.
That the current drive to limit CO2 emissions is driven by global warming fears, I for one believe it is a good thing. We should be at all times looking at what we can do to mitigate our pollution footprint on our home planet.
With regard to Mars, if it is proven that no life exists there, then by all means, use it as a laboratory.
Industrial System Arts Inc.