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The 2016 conference of the Globalization and Localization Association (GALA) offered three full days of fascinating presentations for attendees to choose from. One extremely popular session was "Abolish the Per Word Pricing Model," led by Tuyen Ho, senior director of Corporate Development at Welocalize.
In her presentation, Ho, a self-professed relative newcomer to the field, offered up the "provocative notion" of a world in which price-per-word pricing was no longer an option. Without belaboring the challenges and limitations of the price-per-word model, Ho instead focused on sharing her insights into a couple of alternative pricing models for companies to consider.
The AYCE Model
The graphic for Ho's seminar — a neon sign reading "All You Can Eat Buffet" — alludes to the AYCE, or "all-you-can-eat," business model. Ho explained that while the AYCE model is understandably often associated with the food industry, it is also prevalent in many other areas of everyday life as well, such as unlimited cellular data plans and unlimited-use passes for public transportation. Efficiency and waste-minimization are both important priorities under the AYCE model.
In her discussion of AYCE, Ho noted that when it comes to all-you-can-eat buffets, "people set their expectations of the quality of the food based on the price that's associated with it." She cited a study in which two groups of people were charged different amounts for the same buffet. Surveys showed that those customers who paid the higher amount had a higher opinion of the food they had eaten, suggesting that people believe that food that costs more actually tastes better.
The Managed Services Approach
Ho then introduced the Managed Services approach, a model which her company, Welocalize, has had particular success with. Managed Services calls for offering a defined set of services for a fixed fee, all backed by a service-level agreement. The benefits of this model include a defined project scope, predictable costs, and a focus on outcomes, allowing for flexibility in approach.
After outlining the general framework of the Managed Services model, Ho gave a detailed, real-world example of the approach in action, using as her case study a software provider whose user interface required localization and testing.
According to Ho, one of the most important steps in the Managed Services approach is having a pricing conversation with clients early on in order to establish a thorough price breakdown. She emphasized the importance of being transparent about upfront costs, while at the same time drawing attention to areas where the client will enjoy savings down the line.
Ho also pointed out the correlation between specialization and pricing, using an example from the medical profession: "We use the term 'doctors' fairly broadly," she said, "but we're going to pay a heart surgeon a lot more money than we would pay perhaps a general practitioner."
A Mutually Beneficial Outcome
As the session drew to a close, Ho cautioned that the Managed Services approach is not for the faint of heart, as it is much more involved than a simple proposal process, essentially requiring an ongoing series of meaningful consultations with the client. That said, she seemed confident that the long-term benefits were worth the effort involved.
Ho summed up her presentation with three important steps for providers: first, they must truly understand their client's business. Once they have this understanding, they can then focus on the desired results. And finally, when it comes to something as complex as a pricing strategy, they must be prepared to make adjustments in order to arrive at an outcome that is economically beneficial to both parties.
Tuyen Ho's complete GALA 2016 session "Abolish the Per Word Pricing Model," including follow-up questions from the audience, is available on the GALA website. Access to the conference video is free for registered attendees and $60 for non-attendees.