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Focus Research Insight: How would you like to pay for technology?
Buyers are constantly reinforcing the importance of price, regardless of the type of technology. But cost can be broken down in many ways: What do you prefer? Short term contracts with higher cost per month? Long term contracts with lower fees? Costs per features, costs per users, costs per [phones]? Should pricing depend more on what you bring to the table (i.e. synching with or using existing infrastructure, equipment), or more on what the vendor can offer to fit? What other pricing structures do you prefer?
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3 Answers
This depends on the item and who you’re selling it too.
Speaking from a large company point of view, there are a number of factors I review before purchase and depending on how the product scores on these topics depends on how much I am willing to pay or will refuse at any cost.:
1. Vendor. - Large companies buy in large quantities and it is critical that the item will be around for a long time to buy again. It is extremely costly to upgrade items or change vendors. Picking an item means that it has to be around for a long time and supported by the vendor for a long time. Start up companies loose a lot of ground in this area. Start up company items could be better, faster, half the price and still wont get purchased by a big company unless they provide a unique solution.
2. Companies depreciate purchases and the return on investment (ROI) should be realized with in the first year or worst case at least by the end of the depreciation which is usually 3 years. Price should consider ROI and sample ROI should be provided as part of the sales pitch.
3. Cost per feature is a great model if it works for that item. Risk here is that it is a management nightmare to track which item can do what .. what is the cost to increase a feature, etc. This tracking could be costly for the vendor and the purchaser. Also companies will buy the bare bones item and wont be able to depreciate the upgraded features later so they wont add features.
4. Depending on the item, big companies look for end to end purchasing. A department head might not have a training budget but if it was included in the price .... support contract, on site installation, etc .... package deals.
5. Volume discounts
... if you haven't noticed in large companies payment type isn't realy an interest for the IT guy who picks the item ... it is up to the finance department to figure something out after the IT guy says "buy it".
May be this post should go in a finance forum as finance departments have policies and guidelines about how stuff should be purchased.
Now if your selling the same item that everyone else has to sell that’s a different story .. there is a purchasing department to figure out which company to buy from ...
... I am sure I am just scratching the surface others will have more to add ..
Good luck
It is totally depending upon the industry. In my are field, telecom, the trend is 'long term contracts with lower fees'. I have been supporting that idea for a decade. Now, glad to see it is happening.
my contribution: our contract/proposal need to adress at least 2 issues: 1) personal issue 2)business issue. The buyer need to demonstrate that the contract is signing is an optimization for the company and enable the company to achieve the business needs but he needs to see also a personal value, (we help him/her to achieve his/her objective).
So as long as we build our contract in the way that address the 2 component above, we will have more chance to be attractive.
Rgds,
CS
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