Is Pay-Per-Unit a unique and profitable way to change the name of the game?
“Nike are just producers of sports shoes and sports wear. They are not the only ones but they are the only ones selling the shoes the way, they do. They do not sell the shoes at all, you see. They sell the experience of using Nike, the winning experience, compressed into three words: Just do it.
Stop and do something radically. You cannot just continue drifting along, spending the time watching your competitors and finding out what the customers want. What do you want? – underlining you. What is your future contribution to the world?
If the answer is “er, not really anything” you might as well leave your office right away. You will have to find out how you are going to enrich the world, believe so firmly in it that you become unique at what you are doing.
In order for your company to offer something unique, you must focus. You must appeal to narrower segments and compensate for rejecting the broad segments by selling your brand globally. So more communication in order to be accepted on more markets by narrower segments, and consequently more added value.
This means that you as a manager must be capable of rejecting a lot of things, be capable of cutting away, and believe in something and pursue it without compromise. This ultimate belief in something should then spread to the whole organization and this should be the thing to steer by.”
The above paragraphs are extracts from the Danish “Brand Name Guru” Jesper Kunde’s book: “Unique now…or never” (“Kunde” actually means customer in Danish!).
I believe that there is a lot of truth in the above but if you are a “Business-to-Business” unit manager then unlike Nike you cannot rely on image and perception alone. Your products or services have to bring measurable added value to your customers.
“Business-to-Business” companies have traditionally seen themselves as suppliers of components, be it as products or services that their customers integrate into their products or services.
In order to differentiate from competition and bring more value to customers many B2B companies increasingly focus on fewer types of customers for whom they develop customized applications (systems) that fit uniquely into their customers products or production processes.
Maybe the ultimate customer adaptation that differentiates you from competition and brings high customer value is “Pay-Per-Unit”?
Pay-Per-Unit means that the customer shall only pay you when a unit of his product or service is produced successfully using your product or service.
The added value to the customer is of course that he only pays you when he has been able to produce a sellable unit – his economic risk is thus minimized. Likewise if your product or service does not perform in an optimal way and fewer units can be produced, the customer pays less and you are strongly motivated to get your product or service to work right again.
The benefits to you?
Firstly it will change the name of the game and give you a unique competitive position.
Secondly with the economic risk of your customer minimized you should be able to get a good selling price.
Thirdly I expect that before you venture into your first Pay-Per-Unit contract, you may need to develop new improved products or services whose customer value can be documented and most likely improve the performance over and above what is offered today.
Also you must of course look into ways of reducing or minimizing your costs while offering Pay-Per-Unit.
Are you ready for Pay-Per-Unit?
PSB-Management helps BtB-unit managers develop unique strategies that may increase the profitability by focusing resources on attractive segments where the company is able to fulfill important customer needs better than competition.
Contact PSB-Management to find out how we can help your company.