Keeping an Eye on Technology Futures, No Hidden Agendas, New Attitudes, No Platitudes!
The tactical response by large automation suppliers is to offer broader ranges of products, software, systems and services. But this still has the effect of reducing overall profit margins. The problem lies in obsolescent cost-based pricing.
Pricing is a zero-sum game between the supplier and customer. The focus must move to win-win - simultaneously providing greater customer value and higher supplier profitability. Performance-based pricing is the answer. It allows the up-front cost to the buyer to be relatively low, and offers the seller a high return based on performance.
Performance-based pricing is "insurance". It guarantees that when suppliers provide more, they're paid more. Buyers also receive insurance through paying only for the performance delivered.
With performance-based pricing, suppliers get the opportunity to manage customer value and be closely involved with generating additional profits for both sides. With the risk comes added revenue and profit opportunities for the suppliers.
