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System and Method for Quality based costing Disclosure Number: IPCOM000243792D
Publication Date: 2015-Oct-17
Document File: 2 page(s) / 31K

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Disclosed is a method for quality based costing of the sellable products which can have a definitive measure for defining the quality quantitavily. In case of software, quality can be measured in terms of defects with defined set of rules for assigning a severity to the defect.

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System and Method for Quality based costing

In any industry, it is evident that we sell products and help customers with their goals for which they took decision to use the product. There have been multiple ways to sell the products for example, taking the cost up-front, taking some cost and provide annual maintenance contracts, sell based on usage, give product for free with some other consumable for which one has to pay or free products to make name for the company and then sell the actual products etc.

When till now we talk about quality promise, either it is advertised based on company name, product track record and reviews or providing guaranty or warranty with predefined rules. In this disclosure we are linking the quality to the price of the product, to actually sell, based on the quality promise which makes it honest quality promise. This may seem alarming at first as, when a product is made, no one can guarantee that it will not have any defects so why take the risk of linking the risk with the price but actually if one starts to think, there are advantages of selling by quality based costing.

For explaining the method for quality based costing we will take example of sellable product as a "software" and hence quality in terms of "defects" with predefined "severity".

Quality based costing can benefit in:
1. Making the brand value and upping the selling point of other related products in the company stack since the company would be seen as investing heavy for the quality,
2. Making "planned to be free products " as "products with some up front cost" in some specific cases and customers will readily agree based on quality promise.

3. Solving greater problem of product usage and adaptability by customer as when one sells a product on quality guidelines, the buyer would try and use the product to at least take the cost advantage which in turn will benefit the company in the longer run.

Proposed method of costing in current example:

Currently when company sells the product, for example, in Software products let the defined cost be "c" and yearly maintenance be "m". If it is life time maintenance then suppose that "m" is average year...