Faster Product Development – How Customers' Cost Measurement Decisions Impact Your Product Pricing

Knowing which applications will be able to support your product selling price is important in getting your product to market faster. Chemists and engineers need to develop technical solutions for applications where the value of the solution to the customer will support pricing levels needed to develop the product.

In order to determine the value of the product to the customer, it is important to understand how the customer brackets the cost decision. Knowing how your product is of value to the customer and knowing whenever the customer will consider all those factors in the pricing decision can help you decide which opportunities to pursue.

Your product will have value to a customer if it is saving them costs that they are currently incurring. But if those current costs are not factored into the cost equation, then you will not get credit for reducing those costs. This is especially common in larger companies with divided accountability. If the business division at the customer that is making the decision does not get credit on its books for a consequential process improvement, it likely will not include it in its calculations. That will lower the potential value of your solution in the customer's eyes – maybe to the point of no longer making your product competitive.

There are other factors that will impact the value of your product to a customer. Here are just some of those factors: How is the customer calculating substitution cost in making their decision? Are they looking at a direct one-for-one replacement? Are they considering the whole sub-assembly cost? Will additional or less special packaging or handling be needed to use your product? Will extra processing steps be needed or will some processing steps be eliminated? Is there sufficient available floor space in the customer's current production footprint to install your solution? Will there be any additional processing requirements (eg venting) that will be needed or can some be eliminated?