Really! A Patent for Cost-Plus Pricing! Really!

My friend and Sage business partner Gary Crouch from CS3 Technology in Tulsa, OK sent me this story from the Tulsa Business Journal.

The article details the fact that a local company Fee Technology Inc. has acquired a patent for “a mathematical process for creating a direct relationship between the prices charged to the cost structure of a business.”

Correct me if I am wrong, it is called cost-plus pricing and the patented process is called multiplication.

11 thoughts on “Really! A Patent for Cost-Plus Pricing! Really!

  1. You are way off base. Before you write, why didn’t you check out our demos on our website. Our method breaks the P & L into Profit Centers separating Labor from Inventory. The Patent office does not give patents on cost plus.

  2. I did check out your site and found nothing that indicated it was anything but cost-plus pricing on steroids.

    Price is not based on cost. If you believe that it does you are a Marxist.

  3. Ed: You can look up their patent # 7742957 at http://patft.uspto.gov and decide for yourself if this is just another case of mis-use of the patent concept, ultimately for the benefit of “patent troll” attorneys bent on leeching all value from those who actually produce value in the U.S. Don’t let me bias you on this…

    It’s possible, after all, that this actually DOES represent a novel approach to setting professional service pricing in a manner that bears no relation to the actual value being delivered: That this is a true advance in the field of price-setting by navel-gazing, without regard to that superfluous entity known as “the customer”.

    I look forward to widespread adoption of a program that attempts to tell service providers that they need only punch in their desired profit, and will receive scientific advice on pricing. It will simply provide another glaring contrast for those of us focused on providing extraordinary service at high value to our markets.

  4. Ed,

    Ref to Dan Zalta’s comment. I too have had a look at their demos on their website. This is very plain cost-plus accounting in it’s purest form. All they appear to have done is put some nice formatting around it.

    I wish it was as easy as they seem to make out that you just “dial up” your profit to the required level. I believe my customers would have a problem with this approach.

    It would appear to be somewhat amazing that they received a patent for this.

    Applaud Jon’s comments too – yes, we are in the vanguard Jon. Glaring contrast indeed and the product being peddled seems to foster a culture of paralysis by analysis.

  5. What a fucking mess. I cannot believe what is allowable for patents these days. Our government should be ashamed of itself for allowing this broken system to continue.

    I first woke up to this when Amazon started suing people for using “one click” technology. Seriously… what can be done about this nonsense?

    More on topic – I’m glad that we are using value pricing these days. Ed – has VeraSage patented it yet or do I need to pay a royalty to use that pricing system?

  6. Yes, patent trolling is definitely a problem, but this is one I am not at all worried about. If you think pricing intellectual capital is hard, you can only imagine what litigating it is like. Even Libertarians have a difficult time with the idea and are split on the issue.

    Rest assured, Peter, VeraSage has no intention of trying to patent pricing on purpose as we view it as a non-rival asset like, well, math operators.

  7. Ed –

    Small comfort.

    I have recently learned that it doesn’t matter who is right or wrong in regards to litigation. The guy with the biggest pocketbooks can pick a fight with and ultimately bludgeon the other guy out of business.

  8. All,
    Isn’t this a very similar thing that happened when Intuit came out with Quickbooks? Accountants all over the world said that it was too basic and wondered how the product would ever be taken seriously…. But SERIOUSLY, if you aren’t an accountant, the basic math, debits and credits, doesn’t make sense. So, why not have a program that helps the lay person make sense of it?

    Many business owners, doctors, hardware stores, or pizza parlors, aren’t accountants! They have very little accounting skills and rely heavily on their CPA or bookkeeper. If this product helps them to better understand how to reach their desired end result, then why should you bash it?

    I don’t think this software solution this anything to do with ignoring customer service or bludgeoning the competition out of business. I think it has to do with figuring out how to help a business STAY in business. We all need that extra edge in this economy.

  9. Hi Jill, thanks for your comment.

    The issue I have is that I believe it does not help small businesses, in fact, I think it hinders them. This program (patented or not) fosters the notion that price is based on cost. It is not! Pricing is not about cost recovery, it is about capturing value created.

    Using this program will keep people mired in that false premise.

  10. It’s not just multiplication, it’s *conditional* multiplication. Sometimes it multiplies and sometimes it doesn’t. That’s really hard, and I’m relieved that the application of patent law has been stretched to the point where it covers such a novel invention. I mean, it’s not like it’s just addition.

    I’m really glad they filed for a patent disclosing the workings, because otherwise I’d be left scratching my head, wondering “How’d they DO that?” I have some great ideas on how this idea could be extended through the use of “division” technology. Glory! I’d better hurry up and file.

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