You can describe the economics of all capital equipment purchasing decisions using a value metric derived from the comprehensive value expression for capital equipment. However, a piece of capital equipment can play various roles in the buyer’s pursuit of profit. These various roles lead to various value metric forms and value models. Value models capture the portion of your customer’s profit-making process that you must model to express the economics of their buying decision. To determine the best value model for your equipment type, consider these questions:
- Is the buying decision limited to the economics of the operation that your equipment performs?
- Does the decision to buy your equipment include consideration for how it affects the economics of other equipment or operations?
- Is the equipment being purchased for production or research and development?
- Is your piece of equipment employed to resolve production failures?
- Does the buying decision for your equipment include consideration for some future revenue source with different process requirements?
Your answers to these questions determine the value model that you will use to define your value metric. The number of value model variations you may encounter in your capital equipment career is probably uncountable. However, you are likely to face these five at some point in your capital equipment marketing career.
| Value Model | Description | |
|---|---|---|
| Simple | Use when the process your equipment performs alone drives the economics of the customer’s buying decision, and your equipment operates in series with the customer’s primary profit-making process. | |
| Adjacent Effects | Use when the customer’s buying decision for your type of equipment also considers the economic impact of your equipment on adjacent equipment or operations. | |
| Defect Processing | Use when the equipment is used to handle defects in the profit-making process. Defect processing equipment often finds itself in failure analysis labs and quality assurance departments. Defect processing equipment typically receives a workpiece anytime a defect stops the profit-making process or causes it to run inefficiently. | |
| Time to Profit | Use when the capital equipment is not used in the profit-making process but is used to “get ready” to make a profit. For example, if your equipment performs processes during product development, its job is to help its owner get ready to make a profit. | |
| Capital Life | Use when a customer’s buying decision considers the timeframe that your equipment can produce revenue. Two common situations where this applies. The first is when the buying decision considers when the equipment must be replaced due to failure. The second is when the buying decision considers the equipment capability over multiple generations of the customer’s product. |