Total Cost of Ownership

Did you know most corporations don’t just buy on price?

They typically buy on the total cost of a business; from cradle to grave.

Let’s say the US government is looking for a copier and the market value $100. Your copier costs $91. Your competitor chooses to sell for $80. In the end the business selling at $80 is going to win the contract bid. This is a "competing on price" situation.

Using the same numbers above, you hear that the US government instead chooses a business selling copiers at $105. You’re thinking to yourself, “what the heck, my copiers are $14 cheaper per unit,” which is true.

But that’s not how a corporation sees it. They look at all related expenses:

• What is the annual cost of supplies, toner, paper?
• What is the annual cost of maintenance?
• The repair cost if a unit is damaged?
• The number of hours that they're onsite? 
• The cost of having the copier not operate?
• What is the cost of employees having to travel back and forth to the copier?
• Will the lifetime usage of this copier exceed or fall below the cost of employees walking back and forth?
• How much does it cost to dispose of this copier?

Throwing in random statistics, your $91 copier is now 75% more expensive per year over 5 years while your competitor’s $105 copier is only 50% more expensive per year over 5 years. This is a "competing on total cost of ownership" situation.

Remember total cost of ownership when thinking about pursuing a corporate contract.