business selling session 13

8/3/2019 Business Selling Session 13

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Customer Value in Business MarketsBENEFITS:

Core Benefits:Product quality,

pre & post sales service,

trust based relationship and open sharing of ideas.

Add-on Benefits:

Joint working relationships in product development,qualitycontrol,Logistics,delivery etc.

Supplier Flexibility:To accommodate unique business needs ofcustomer.

Commitment: Desire to make the relationship work.


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2.SACRIFICES:Total cost of using a product or service

Acquisition cost

Suppliers Admin costsCost of delivery error or any other errorsTransportation cost

Processing cost

FinancingTaxesInsurance

Usage cost:

Employee trainingInstallationRepairReplacement


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Value based strategy

Buyers measure Cost /Value of dealing with alternative suppliers

Marketers focus on providing low cost -in -use solution.

VBS moves selling proposition from individual transactions to along term relationship.

Provide ad-on benefits rather than reducing the price.


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Value based strategy -Example

Pharma companies can reduce the cost of clientsin following ways:

Electronic ordering system to reduce acquisition

cost

JIT deliver to reduce possession cost

Disposing used products to reduce usage costs


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Pricing process in business markets

1.Set strategic pricing objective

2.Estimate demand and price elasticity of demand

.3.Determine costs and their their relationship to volume.

4.Examine competitors prices and strategies.

5.Set the price level


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Price objectives

1.Achieving target rate of returneg. Dupont, pricing high ,high margin products and reducing price as

market expends.

2.Achieving market goal.eg. Dow pricing low margin products at low price to gain market share.

3.Meeting competition.


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Demand determinants

Attributes of a total product offering

Understanding importance product attributes to specific market segment.

Various attributes Quality Delivery Systems Innovation Training Service


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Strategy implications of cost benefitanalysis

Help to manage marketing mix and establish aPrice:Improve marketing communication to highlight certain attributes valued

by customer but not well known to customer.

Elevate the importance of certain attributes.

Value proposition can be changed by improving performance on certain

Attributes.

Focus on segments that value specific attributes


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Elasticity and market segment1.Satisfied customers are less price elastic

2.Switching cost:

Internet provides low cost of procuring information regardingVendors. Products in which comparison is easy to make.

3.End use:Contribution of firm's product to total cost of finishedProduct

4.End market focus: If final user is more price sensitive the demandis elastic.

5.Value based segmentation:Identifying applications( product lines) in

which firm has clear advantage(sealed air corporation)


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Cost Determinants

Cost plus basis Target costing Classifying costs: Direct , Indirect & general costs

Cost implications: Proportion of product cost accounted for direct or

indirect expenses Can economies of scale be expected. Costs at various levels of production Does firm enjoy cost advantage over competitor

Proportion of cost accounted for while purchasing rawmaterial.


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Assessing competition

Hyper competitive rivalries: Competitors create temporaryadvantage and destroy advantages of rivals.

eg:Intel's innovationHP's price reduction

Stable market:Rigid strategy for a sustainable strategicadvantage over a period of time


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Gauging Competitive response

Knowing cost structure of competitor: To estimate reaction toprice cut.

Understanding price advantages of late entrants: For betterassessment of their cost.

Understanding competitor's strategy: Competitor enjoying

high product differentiation may not reduce prices as areaction to competitors pricing.


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Exercises

A University Library recently purchased 60PC's from Dell.Illustrate how a purchasingmanager could use a total Cost -in -use

approach in evaluating the value of Delloffering in relation to the value provided by itsrivals

Illustrate the process a firm would follow inusing target costing while developing faxmachine for the home office user.

business selling session 13

Documents