Reduce the Rate of Cost for the Input Used to Produce the Output

Use the same type of input and the same activities, but pay less for the unit of input employed in producing the output. A reduction in rate is equivalent to a reduction in the number of inputs for the same ICD. For example, if a person who makes $10 per hour could produce the same amount of output as a person making $20 an hour, the substitution of the $10 person for the $20 person in the process would be equivalent to cutting the number of people required to do the work by 50%.

F. Change source of supply to a less expensive supplier:

A change in the supplier relationship may enable the company to switch to a less expensive supplier. The supplier may be less expensive because it has lower costs or because it reduces the company’s logistic expenses.

Use customers

No. Industry SIC Year Notes
1 0 2005 Whirlpool wants to tap into an online community of customers who would be able to make digitized changes to their designs for home appliances and then send the suggestions to their company. The company expects to trim research time by a month and expenses by 30%. Dannon's Light n' Fit yogurts were being challenged by rivals who were offering a slimmer product. Dannon enlisted customers to evaluate yogurt names, package designs, nutritional labeling, and size. The activity took 6 days. Based on the research, Dannon named the new yogurt "Carb Control", put it in a red container, and highlighted the 80% less sugar for dieters. "The product took off very quickly."
2 3571 2006 IBM is pulling people together for the online equivalent of a town meeting, an “Innovation Jam.” Sixty-seven clients will have first-row seats as the company hashes out its strategies for the future. It's possible that competitors could lurk in virtual chat rooms, listening in on new ideas. Teams of IBMers will spend the next month sifting through the posts to identify the most promising. During phase two, which takes place September 12-15, everyone is invited to the jam site to refine and rate the best ideas based on their business value.
3 4911 2005 Consumer Powerline is making it big by saving electricity. Twice a year, Consumer Powerline signs up huge office tenants, including Morgan Stanley, to volunteer in advance to shut off nonessential lighting or turn down a building's chillers a bit on heavy usage. When the New York power grid is under stress, Con Ed calls in the favor with Gordon to ease demand – and pays 50 cents a kilowatt hour for the energy it saves. That's half the price of juice on the spot market. In addition, New York's Consolidated Edison, writes Consumer Powerline and its clients a check based on the avoided cost of building more peak-usage power plants.
4 5411 2004 Albertson's is using new technology to gather information and build customer loyalty. The hand-held devices, Shop 'n' Scans, are being tested at more than a 100 stores in Chicago. The devices allow customers to tally and bag groceries as they shop, eliminating time on check-out lines. They also remind customers about items they may have forgotten. Albertson's customers who use the Shop 'n' Scan devices are on average buying twice as much as they used to on each store visit. One reason: Because they can track the amount they are spending as they shop, they know exactly when they hit their budget limit and feel freer to buy until they do.
5 6411 2005 The insurance carriers have not reduced the agent's costs, in fact, they have increased them. In addition to reducing commissions, they are passing work back to the agents. This work includes issuing certificates of insurance within guidelines and printing policies for the agent.
6 6531 2005 The competition between old-line real estate agents and online discount brokers is heating up as industry-backed state regulations are coming into question. Traditional real estate brokers usually charge a service commission of 5%-6% on every house purchase, while online discounters like Foxtons North America Inc. charge only a 3% commission, or offer a 25% rebate on the 5%-6% commission fee like ZipRealty. In return for such huge savings, the online customers have to do more of their own work or pay fees for additional services. The industry-backed state regulations that black discounts on commissions, however, keep online brokers from expanding.
7 7011 2005 Hilton has begun to install computerized check-in kiosks in lobbies of its larger hotels last year. It also placed a check-in kiosk at Honolulu International Airport.
8 7372 2004 When Microsoft Corp. launched Windows 95 operating systems, the company consolidated its market position and greatly enhanced its equity valuation by negotiating a billion dollar subsidy from many of its best customers and developers. During the product development the company sent out 400,000 beta version copies of Windows 95 to thousands of beta sites worldwide. Individuals and organizations would help track bugs and suggest improvements in exchange for receiving the software in advance and in effect influence the program's development and getting help with any problems that may arise. Microsoft essentially came up with a valuable technical population the size of a major city to help improve the quality and capabilities of its new operating system. The final stage of Windows 95 development was $900 million which is far more than the company had invested. The subsidy has enabled the company to produce a far better product for less money and time.
9 7372 2007 Companies often reduce labor costs by sending customers with questions and complaints to their website. However, search tools are often unsophisticated and inadequate. Some companies are investing in new technology which will improve the discussion forum feature. Especially knowledgeable customers are often willing to offer help to others at little cost to the company. A good discussion forum can build customer loyalty and promote future ventures. However, the company must monitor the forum to ensure that users get answers. When faced with diminished customer satisfaction, Palm beefed up its forum. It now relies on 20 active contributors who moderate forums and step in to answer user questions. Palm rewards them with products and giveaways. Questions that are not answered are passed along to customer support.
10 7812 2006 Walt Disney Co. is launching a new marketing campaign in China in hopes of getting consumers to help it weed out counterfeit products. In the first three weeks of the promotion, the company received 250,000 entries for the anticounterfeiting contest and has to print more entry forms. Some customers have even called the company to alert it to retailers selling products without the stickers. The calls help Disney alert those retailers selling pirated goods unwittingly that they aren't stocking legitimate goods.
11 7841 2007 Netflix offered a prize for anyone who could improve the program to predict which films customers will like. While no one has achieved a 10% improvement. The system shows potential for any area where consumers might have preferences.

<<Return to Reduce the Rate of Cost