Seven Reasons Why Unit Pricing Misleads Loc Buyers
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Seven Reasons Why Unit Pricing Misleads Loc Buyers

Seven Reasons Why Unit Pricing Misleads Loc Buyers

Seven Reasons Why Unit Pricing Misleads Loc Buyers

Buying by the unit—whether by the hour or by the word—might be out of date, and can do a disservice to your enterprise by setting traps for you along the way. Yet many enterprises still buy this way, hoping it will bring maximum savings, control, and ease of financial measurement.

Here are the seven reasons why it’s no longer in the best interests of your enterprise, and how you can structure pricing requests differently.

The unit rate:

  1. Makes localization a commodity, rather than a service. Localization is not widgets: it’s best viewed and purchased as a holistic, customized program. If you are buying units only, you are probably not considering the value of factors such as relationship, breadth of capability, approach, and continuous improvement—none of which can be captured in a pricelist.
  2. Doesn’t consider the big picture. A forest is not merely a discrete collection of trees: it’s a living ecosystem. It’s the same thing in localization, which consists of many tasks in addition to translation that work together to resolve your business needs. A unit-based rate structure doesn’t show how the tasks interrelate.
  3. Doesn’t include everything you need to run your program effectively. You can’t capture ongoing tools or process work or continuous improvement in unit-based quotes, yet these value-adds are a large and critical part of any localization program that wants to grow and mature.
  4. Focuses on volume over value. Often, procurement expects that the higher the volumes promised, the higher the discount. But what are you getting for your money? Beware that vendors may cut corners—say, in quality processes—in order to be able to honor a low price per word.
  5. Represents cost savings in the wrong way. In a localization program, cost savings are enabled in the long term via initiatives to improve processes, time-to-market, and technology integration. The value of these initiatives will show up in reduced program costs, the ability to increase language sets, or an increase in volumes translated—not a drop in the word rate.
  6. Encourages comparing vendors on price alone, which does not take into account the vendor’s capabilities, focus on customer service, breadth of services, or company culture—all important factors when deciding which vendor to work with.
  7. Impacts the concept of project success. In a unit-based model, a successful project is one in which a certain number of words are bought, and a certain number of words are completed. Instead, a program’s effectiveness should be measured on the quality delivered, savings achieved, and turnaround improvements over time.

Program-level pricing shows the bigger picture

Instead of using a unit-rate basis for pricing localization services, consider talking with your vendor about program-level pricing related to the outcomes. For example, you would establish certain KPIs around turnaround time, cost savings over time, quality, and project management, allowing you to measure your program based on how effectively you bring your product to market, how well the provider is meeting your needs, and how the program improves over time. Then your vendor can provide you with program-level pricing—such as by monthly or per-deliverable volumes—that reflects the ecosystem of a localization program over time.

When an enterprise moves away from the unit-based model, the program moves up the value chain to deliver better outcomes than just one-cent-at-a-time reductions.

Has this blog post got you thinking? If so, read our ebook on developing KPIs, and this blog post on why we should be skeptical about rigid procurement systems.