"How should I determine the price of the product or service I will sell?"
"What should be the optimum price of the product or service I will buy?"
In the business world, the most complex issue that confuses the minds of those sitting on both sides of the table (selling and receiving) is the determination of the price level of the product or service being discussed.
From the point of view of selling companies, the most basic pricing strategy in our country during the periods of low competition and demand inflation (1970-1980) was “what could be achieved”. Thanks to the increasing competition towards the end of the 1980s, this strategy of “what could be achieved” was substituted by determining the price “according to the cost”. However, in the global-level mega-competition environment that emerged in the early 2000s, “what could be achieved” or “according to the cost” strategies were substituted by pricing “according to the competitor”.
From the point of view of purchasing companies, the increase in competition and thus the successive application of discount policies by the suppliers to make sales may seem like an advantage, but this is not the case. In price-oriented markets where the game “Win-Lose” is played, or where manipulative negotiation techniques are used to get the cheapest, the picture becomes “Lose-Lose” for everyone after a certain period of time. The price factor (especially in the works with a service aspect) minimizes the value factor so much over time that it can become the cheapest and most expensive choice for the purchaser over time.
So, how and especially according to what should the optimum price for both parties be determined? The answer is very clear: “According to the value that the product or service will provide to the purchaser”. Both parties should put aside sharp statements such as “money”, “offer as soon as possible” or “discount rates” and focus on and negotiate on the value of the solution offered or received. Considering the business philosophy, nobody buys a “drill”, everyone buys a “hole”. First of all, it should be discussed for what reason the wall will be drilled and what kind of work result is expected in the end. After the quality of the “hole” is clarified, the features and price of the “drill” appear automatically. The emergence of business value is possible with the focus of the buyer and the seller on two points:
TSOM is the whole of all operational costs and risks during the acquisition and economic life of the purchased product or service (visible and confidential). The common mistake is only to take into account the cost (invoiced figure) incurred during the purchase and to neglect the actual investment cost and especially the risks that will occur during the product usage or to make the necessary analyzes properly. In certain solutions, the purchase, i.e. acquisition cost, may remain a very small percentage of TSOM.
Value has different aspects. Of the offered solution, economic aspect such as reducing costs, increasing income or loss, affecting operational efficiency or customer loyalty; trust aspect such as complete and timely fulfillment of promises, collective attitude and financial power to be exhibited by the seller company, after-sale attitude; quality aspect such as long economic life, ease of use, minimization of environmental problems, waste-free and error-free usage, failure frequency; speed aspect such as entering the market quickly, realizing time guarantees, presenting the solution without disrupting the processes, fast adaptation in times of change.
Briefly, pricing for the sellers should be based on the “value to be offered” and not on the “what could be achieved”, “cost” or “competitor”. In terms of purchasers, budgeting should be determined according to the “value to be obtained”, not according to “old purchasing habits”, “relatively or the cheapest”. Without determining the value and TSOM, the price factor has no meaning. Determining the business value reveals the lower and upper limits of the optimum price at the end of the day. The discount is the determination of the point to be considered between these limits -only-.
