Total cost of ownership (TCO) is a major Market Driver
According to Stephen Montgomery, chief analyst in the LED lighting group at ElectroniCast, the use of LED-based lamps in SSL General lighting is driven by promised savings in maintenance/ labor, as well as “Green-Tech” (ecology-oriented) issues. The lamps are lamps are used in new construction, as well as retrofitting/replacement of existing (installed-based) lamps. The Total Cost of Ownership (TCO) is a key marketing dynamic relative to LED Lamps, which typically have a premium price point versus other lighting solutions.
TCO, when incorporated in any financial benefit analysis, provides a cost basis for determining the economic value of an investment. Examples include: return on investment, internal rate of return, economic value added, return on information technology, and rapid economic justification. A TCO analysis includes total cost of acquisition and operating costs. A TCO analysis is used to gauge the viability of any capital investment. An enterprise may use it as a product/process comparison tool. Some of the key elements incorporated in the cost of ownership for LED-based lamps vehicle include:
- Depreciation Costs (LEDs last longer)
- Energy Costs (LEDs use less energy)
- Repairs (Especially true as a comparison vs. Ballasts in fluorescent tubes)
- Funding programs and other government-based financial incentives
- Maintenance Costs (Lower labor costs/less lamp replacements)
Opportunity Costs are also in the TCO mix, since ElectroniCast takes into account that using LED (energy-efficient lighting and other carbon footprint/pollution issues) depicts the organization, which installs them, as a good corporate citizen; therefore, increased sales revenue may be a benefit, since customers may prefer to reward the “green-oriented” company by purchasing products fro the company.
Contact: Stephen Montgomery
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