The invention relates generally to results-based pricing methods and systems for any application, such as methods and systems for pricing products or methods that effect improved production or manufacturing efficiencies. The invention relates, for example, to methods and systems for pricing products that facilitate or enhance growth of agricultural products, such as feed additives for administration to livestock and, more specifically, to results-based methods and systems for pricing such productivity-enhancing products.
Conventionally, feed additives, fertilizers, and other products that facilitate or enhance growth of agricultural products have been sold to end users (e.g., ranchers, farmers, other agricultural workers, and etc.) in customary fashion at fixed prices upon delivery to the end user. The prices of growth-facilitating products are typically based upon a package price, a per unit price (e.g., price per unit weight, price per volume, and etc.), or the like.
The realized prices and futures prices for agricultural goods fluctuate constantly. When the price of a particular agricultural product is particularly low, agricultural businesses are more reluctant to spend money on growth-facilitating products that are sold at fixed prices.
The invention includes methods and systems for pricing goods or techniques that facilitate or enhance manufacturing or production efficiencies, including, but not limited to, growth of agricultural products. Such goods and techniques, which may include use of specialized equipment, or particular materials, processes, or programs, are collectively referred to herein, for the sake of simplicity, as “productivity-enhancing products.”
In a method that incorporates teachings of the invention, an end user, or recipient, such as an agricultural business (e.g., ranch, farm, and etc.), may obtain a productivity-enhancing product (e.g., feed additive, fertilizer, and etc.) from a supplier, or source, at a price that represents an expected or actual added (e.g., financial) benefit to the end user. The price of the productivity-enhancing product may be based on a predetermined portion of the expected or actual added benefit to the end user.
In another aspect, the invention includes a program (e.g., a computer program, and etc.), for quantifying the price of productivity-enhancing products that have been used to grow agricultural products.
According to another aspect, the invention includes a system for determining the expected or actual added benefit provided to an end user by a productivity-enhancing product. Such a system includes a quantification element for determining the total amount of, for example, an agricultural product grown with the productivity-enhancing product, as well as computation unit for setting a price for the productivity-enhancing product based on a number of fluctuating factors, which may include the total amount grown with the productivity-enhancing product. As an example, the computation unit may be configured or programmed for comparing the total amount to a corresponding “normalized” amount, such as the amount historically grown without the productivity-enhancing product, and for comparing an actual or expected value for the total amount to a value of the “normalized” amount. Such a comparison provides a value of the added benefit expected to be received or that has actually been received by the end user. The computation element may also calculate the portion of the added benefit to be remitted to the supplier of the productivity-enhancing product.
Provided is a pricing system that provides agricultural businesses with flexibility that represents variations in the value that these businesses may receive for their agricultural products.
In the drawings, which depict embodiments of various aspects of the invention:
While the flow charts of
With reference to
At reference character 12 of
Additionally, the initial transaction between the supplier and the end user may be preceded by or accompanied by an enumeration of the quantity of agricultural products (e.g., “heads” of livestock, crop size (e.g., acreage), and etc.) with which the productivity-enhancing products are to be used by the end user. Such information may be used to determine the amount of productivity-enhancing product to be provided to the end user.
Once the initial transaction has occurred, the end user uses the productivity-enhancing product to grow agricultural products, as shown at reference character 14 of
Once a growth phase for the agricultural products is complete (e.g., livestock have reached a predetermined age, livestock are brought to market, crops are harvested, and etc.), the agricultural products are sold, or “taken to market,” as indicated at reference character 16 of
The benefit that the productivity-enhancing product provides to the end user is quantified at reference character 18 of
An embodiment of a method for quantifying the benefit that an end user may expect to receive or has received by use of a productivity-enhancing product is depicted in the flow chart of
At reference character 20 of
At reference character 22 of
At reference character 24 of
A per unit basis value, which is also referred to as an “external pricing point” (EPP), may be assigned to the per unit basis quantification amount at reference character 26 of
The per unit basis value is, of course, normalized to the per unit basis quantification amount. As an example, if the per unit basis quantification amount is in terms of weight, a price per unit weight (e.g., pounds, kilograms, and etc.) may be multiplied by that weight to determine the per unit basis value.
The per unit basis value and the per unit revenue value are then compared, at reference 28 of
Examples of the manner in which such a calculations may be made follow:
The productivity-enhancing product ZILMAX®, available from Intervet, Inc., of Millsboro, Del., is to be fed to cattle at a rate of 75 mg per head per day for the last 30 days of a five-month feeding period. Thus, each head of cattle will receive about 2.25 g of the productivity-enhancing product before being slaughtered and sold.
The average beef carcass weight (i.e., the per unit basis quantification amount) is determined from USDA published data. When compared with the average carcass weight of cattle to which the productivity-enhancing product has been administered, it is determined that, when sold, the average carcass weight, per head of cattle to which the productivity-enhancing product was administered exceeds the average carcass weight of cattle that did not receive the productivity-enhancing product by 25 pounds.
The per unit basis value is determined as a USDA-published average beef carcass price (e.g., $140 per 100 pounds of carcass). The added, per carcass value is calculated by multiplying 25 pounds per carcass by $1.40 per pound, which equals $35 per carcass. The supplier receives 67% of the added value, which amounts to $23.45 per carcass, or $23.45 per 2.25 g of the productivity-enhancing product.
The price per bag of feed, which includes the productivity-enhancing product as an active ingredient, is determined by multiplying the price per gram (i.e., $23.45/2.25=$10.4222 . . . in this example) by the amount of active ingredient in each bag of feed (in this example, 480 g in each 10 Kg bag of feed, which results in price of $5,002.67 per 10 Kg bag).
This calculation may be condensed by providing a pricing factor, which is based on predetermined carcass weight, pricing, and benefit values, and may be normalized to a value per unit weight of carcass (e.g., in terms of dollars per 100 pounds of carcass weight). In this example, a pricing factor based on the foregoing data may be rounded to 35.7, which, when multiplied by the average carcass price of $140/100 pounds of carcass, results in a per feedbag cost of $4,998.
Again, the productivity-enhancing product ZILMAX® is to be fed to cattle at a rate of 75 mg per head per day for 30 days. Thus, each head of cattle will receive about 2.25 g of the productivity-enhancing product before being slaughtered and sold.
The cost of each bag of the productivity-enhancing product is to be based on live cattle weight (e.g., live cattle futures, and etc.), with an assumption that a specific portion of the live weight (e.g., 62.5%) will provide a useful carcass weight. This specific portion is referred to herein as a “useful percentage” of the agricultural product. The live cattle weight per pound is multiplied by the useful percentage, the average (per head of cattle) added weight, and the pricing proportion (e.g., 67%, 2/3, and etc.) to determine the cost of the productivity-enhancing product to the end user per animal, or per administered amount (e.g., 2.25 g) of the productivity-enhancing product.
The per animal cost of the productivity-enhancing product may then be used to determine the price of a bag of feed that includes the productivity-enhancing product.
A pricing method may also be based on an added premium. In the example of added benefit that an end user may expect to receive or that has been received by the end user when a productivity-enhancing product, such as ZILMAX®, is administered to cattle, pricing of the productivity-enhancing product may be based on an increased value per unit weight. Such a calculation may include consideration of an increase (e.g., a disproportionate increase) in valuable cuts of meat (e.g., steaks) in treated cattle relative to less valuable cuts of meat (e.g., chuck roasts).
With returned reference to
The invention also includes computer programs and systems that are configured to effect a pricing method that incorporates teachings of the invention.
A non-limiting example of an embodiment of a system 100 according to the invention is shown in
As an example, quantification element 110 may comprise a scale. As another example, quantification element 110 may be an element by which data regarding an expected added benefit of using a productivity-enhancing product may be obtained. Examples of such elements include, without limitation, computer systems, communications devices (e.g., cellular telephones, and etc.), publications, and the like.
Computation unit 120 may be configured or programmed to set a price for the productivity-enhancing product based on a number of fluctuating factors. For example, the computation unit may be configured or programmed to compare the total amount to a corresponding “normalized” amount, to compare a value that the end user may expect to receive or has actually received for the total amount to a value of the “normalized” amount, to determine a value that corresponds to the added benefit that the end user may expect to receive or that the end user has actually received, and to calculate the portion of the added benefit to be remitted to the supplier of the productivity-enhancing product. As another example, computation unit may be configured or programmed to calculate a price for the productivity-enhancing product based on a pricing factor, which may be multiplied by a unit price that the end user may expect to receive. Without limiting the scope of the invention, computation unit 120 may comprise a computer system, a calculator, or simply a writing instrument and an element to be written upon (e.g., a piece of paper).
Although the foregoing description contains many specifics, these should not be construed as limiting the scope of the invention, but merely as providing illustrations of some of the presently preferred embodiments. Similarly, other embodiments of the invention may be devised which do not depart from the spirit or scope of the invention. Features from different embodiments may be employed in combination. The scope of the invention is, therefore, indicated and limited only by the appended claims and their legal equivalents, rather than by the foregoing description. All additions, deletions and modifications to the invention as disclosed herein, which fall within the meaning and scope of the claims are to be embraced thereby.
This application is a divisional of co-pending U.S. patent application Ser. No. 11/803,928, filed May 15, 2007, (U.S. Pat. No. 7,921,060 on Apr. 5, 2011) and claims the benefit under 35 U.S.C. §119(e) of U.S. Provisional Application No. 60/900,478, filed Feb. 8, 2007, the disclosure of each of which is hereby incorporated herein, in its entirety, by this reference.
Number | Date | Country | |
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Parent | 11803928 | May 2007 | US |
Child | 13065947 | US |