Case study: IoT pricing
Fortune 100 industrial company

Our client, a Fortune 100 industrial company, aimed to make an entry into Automated Driver Assistance Systems (ADAS) space and faced highly price sensitive OEM buyers who were used to buying components from our client on a per sqft basis. The team required a new pricing metric and a value-based approach to pricing because the size of components to be sold were very small but their added value to the performance of the technology stack was very high.

Current state

Our client had been serving the same OEM customers for three decades, selling by the sqft of component. However, this metric was not aligned with the revenue model of ADAS applications as hardware components in the sensing and monitoring markets drove revenue on a per unit basis.

Future state

We identified opportunities in not only transforming pricing into a per unit metric but also offering new value-added services for high-value delivery and component application services. We improved our client’s competitive pricing position by quantifying the opportunity costs and costs of risk mitigation in case of choosing the competitive offerings.

Problem

All competitive options displayed similar technology performance

Product performance metrics alone were not enough to demand a price premium for our client’s offering.

Additional services might be required to assemble the components regionally in APAC and EMEA

Automotive OEMs rely on regional supply chains for component delivery however regional integrators introduce large variation in assembly costs.

OEMs' of willingness-to-pay beyond the technical performance factors were low

New services, delivery mechanisms, and assembly options that add value might exist however OEMs are very price sensitive.

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Insight

Environmental performance is as important as product performance

We identified new environmental performance factors for which our client’s product performed better than the competitions’.

 

There are additional cost drivers to consider for the assembly process

We quantified the differences in assembly yields and end-processing costs and translated them into pricing.

Sensor component buyers are risk averse which can translate into pricing

We quantified the economic value of supplier guarantees, liability responsiveness, and our client's track record for cross-platform readiness and translated them into pricing.

Break-through

We identified a phased go-to-market plan which not only positioned our client for entry into sensing and monitoring hardware component space but also enabled them to pivot one of their existing software offerings to supply to buyers in the same value chain - creating additional revenue potential over 5-7 years.

Results

Our client successfully executed a long, complex, and multi-national negotiation in North America, Europe, and Asia. They secured 5-7 year contracts and justified a 24-30% price premium above the opening price point. We also delivered a Pricing Canvas™ training for their product and marketing teams and established a pricing framework for creating future applications of their technology.

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