Pricing Hardware Products
Question: "Request your feedback/opinion on the applicability of the 'Blackblot MVP Model' for pricing hardware products (e.g. routers, telecom switches, network platforms, etc.), where:
- There is significant cost on the Manufacturing and Supply Chain sides.
- Most organizations are consistently trying to reduce the input costs.
- The product is sold as a transferred asset to the buyer rather than a 'license to use' like in software."
Answer: Developed by Blackblot, the PMTK Market-Value Pricing Model (MVP Model) is a market-value centric pricing process which guides sets of managerial decisions that help determine a product's price.
Technology hardware products, specifically those used for infrastructure and sold in a B2B scenario, are considered utilitarian and the MVP model is of lesser relevance and applicability to them.
- Most large vendors of infrastructure related technology hardware products price their products according to the cost-plus model (specified amount or percentage is added to the unit cost of production).
- Most small vendors of infrastructure related technology hardware products price their products according to the Going-rate model (uses the large competitors' prices as the primary pricing decision factor).
- Often the infrastructure related technology hardware products are sold as part of a project or a huge bundle. The overall price is then negotiated and supplemented with service/training/support contracts.
So the MVP model is less useful to price infrastructure related technology hardware products.