Expert's Panel

A collection of timely and important topics posed to our panel of experts.

What is "Cost of Ownership" and how do you sell it?

 (ep1064)
1. The SEMI/SEMATECH model is from Wright Williams & Kelly. They produce the software and teach its use in a SEMI class. The name of the program is Too Cool.
2. You sell it by demonstrating it. Cost of Ownership or COO is a formula that was originally developed by SEMATECH people and purchased by Wright Williams & Kelly and their parent company, IDC. For $10,000 you buy a copy and get trained in its use. You list both yours and your competitor's variables and constants into the computer. You then sit in front of your customer and you show them the screen and say, "This is what it really costs you to own my stuff, and this is what it costs you to own their stuff." The formula is such that it can be legally and ethically manipulated so I can take almost any two products and show you how either one has a better COO than the other. If you are smart you will be able to do the same thing.
3. I have a little bit of a different perspective. Some customers will force you into an analysis based on their model of COO, but if there is only going to be a few percentage change from one product to another, is Cost of Ownership really the answer to the question, "Why should I buy your product?" If it is not the answer to the question, then you can't sell that way because nobody cares. What's the cost of ownership for both a $20,000 Chevy and Ford? I don't think there is very much difference per mile or per year, but if you can produce something dramatic with COO then you can get people's attention. COO was one equipment manufacturer's key selling feature. The company went in with a 3x improvement in productivity per capital dollar. That is the most important thing in the COO model; everything else runs about the same. If you win in this measurement you will be dominant, proving everything else is characteristically close. When you are selling, the question is "Why should I buy your product?" If the customer doesn't care about COO, but some performance, safety or convenience issue is key, that is the answer he is seeking, not COO.