Hello, Welcome to Chapter number three pricing at the eyes of the buyer, where we will go through the pricing process. What does price means to the buyer? And how can you leverage your return. So we have four lessons in this chapter. We have value versus costs. We have what is value in the eyes of the customer, we have creating value.

And we have things to avoid when you're proposing value creation of our Okay, let's go through it slowly so that you can understand what is at stake here. Value versus costs. So you have these two options first option is to make your proposals by creating value. And the other one is to make your proposals and the cost development where you come up with your costs. And then plus your headers, pleasure margins, etc, etc. These are two approaches there is no right or wrong.

There are things and they are they are positive and less positive things about each other. That's why it's important that you go through the text here, because each of them has things to where to be careful about because when you go for instance to pricing based on costs, there's first of all customer knows, will know your cost based. Is that something that you want? If they do Okay, that's absolutely fine. If they are, for instance, based on the market index, or if they know that they are built up under certain certain components, it's fine. So be aware that they will challenge you afterwards on your headers because they will know probably not hundred percent, but closely How much are you?

Are you gaining? So it's important that if you have a formula based on course that you have other items that can mix up a little bit so that the customer doesn't find out how much you earn. When you go to value creation, of course, you have a much wider range of possibilities. But customers are not stupid. And they often they want to know your cost. They want to know your cost breakdown and they will challenge you on your prices and they will Use everything in their power to know more about your pricing structure.

So try to define yourself, will you go for one or the other and try to protect yourself? no right or wrong here. But it's important to be aware which approach to take with each customer, not all customers need at cost plus base price. Sometimes it's important for instance, for customers that need a kind of a reference so that they know what is the base of their of the of the move of the pricing. But if that's not if that's not a worry for the customer so that we don't get to use this approach. So depends a lot on the customer and depends a lot on their needs, and how fast it challenge you and how far you want to go.

Okay? This explains how a customer will evaluate your offer and benchmark with what they have from other competitors. So, a pricing, a pricing for from a purchaser point of view has this relation benefits costs. That's the price for them. That's this is how much it costs. This is the benefit I get.

This is the price I pay. And they will benchmark that with every single supplier and that's where you can move up or down in their ranking of suppliers. When you're pricing false, falls down or up in this equation of benefits, that's costs. Remember that if you're selling one product to a customer and they have two other suppliers, and the three of you, for sure will not have the same price, it's very unlikely in most of the companies for instance, if I let's take the example of you nowadays, in most of the cases in some cases of course, I am sole supplier, but in the cases where our customers have three suppliers minimum, I am sure that the three prices are different. The products are basically the same. So why are the prices different?

Pay simple logistic costs, production costs cost advantages, payment terms, packaging, speed of delivery. So there are many other factors that play a role. And because we don't have all the same needs at the same time, so they can play with three suppliers on at different levels. So the price doesn't have necessarily to be equal, but they will bench market according to this equation, benefits cost, this is a value for them. This is the price that I pay, this is the benefits that they have. So this is my value for a purchaser and pick another one and this is the value and of course, if you have a supplier offering, let's say one product for $100 dollars, and you have another supplier offering the same product and the worse logistic conditions with a higher price, of course that the value for the purchaser is lower and that it's very likely that the supplier will rank lower afterwards in their purchasing decisions.

This is how it works. Take a look at it, take your time to understand it. This is value at the eyes of the buyer. Whenever you go with a price to a purchaser or to a buyer, they will have this in mind. Okay, I will have this product, this quantity at this price and this is the benefit that I have