PRICING MODELLING
Commonly we use this method
- Cost-plus:
The contract is written so that the client pays the supplier for its actual costs, plus a predetermined percentage for margin.
Such as :
- Human
- Operation cost
- Intellectuals property
- Professional indemnity
But, we could be tailored the pricing method as describe below:
The customer pays a fixed price at the low end of a supplier’s provided service, but this method allows for some variance in pricing based on providing higher levels of services.
Pricing is based on the value delivered by the vendor beyond its typical responsibilities but deriving from its expertise and contribution.
For example, an automobile manufacturer may pay a service provider based on the number of cars it produces.
With this kind of arrangement, the customer and vendor each have skin in the game. Each has money at risk, and each stands to gain a percentage of profits if the supplier’s performance is optimum and meets the buyer’s objectives.
Provider and customer jointly fund the development of new products, solutions, and services with the provider sharing in rewards for a defined period of time. This model encourages the provider to come up with ideas to improve the business and spreads the financial risk between both parties. It also mitigates some risks by sharing them with the vendor. But it requires a greater level of governance to do well.