Value Selling – Understanding Value

Lecture 2
Selling : Art or Science
B2C vs B2B

Characteristic B2C B2B

Product Standardized, Personal Use Complex, Customizable, Non-personal Use
Price Fixed, List Not fixed, situational, negotiated
Place Close to consumer, title transfer immediate Economic utility, form, timing, place, title transfer
complex
Promotion (Traditional) Advertising, One-Way Communication Personal Selling, Dialog, Multiple Channel
Market Structure Geographically dispersed, many buyers Geographically concentrated, fewer buyers
Buyer Behavior Personal or family buying. Social & Professionally trained buyers and multiple levels.
psychological motives predominate. Task motive predominate.
Buyer-Seller Relationship Less technical. No personal relationship. Technical expertise. Inter-personal relationships.
Short Term. Premium on long term.
Channel Mostly indirect. No customer involvement More direct. Customer involved and influences
in supply chain supply chain.
Demand Direct, elastic, less volatile Derived, relatively inelastic and volatile
Concept of Total Offering

Total Offering includes

• Product – features, functionality, benefits
• Service – warranty, break fix, disposal
• Image
• Availability
• Deliver Options
• Quantity
• Packaging – lot size
• Price
• Other Commercial Terms – credit, payment
milestones, guarantees
Business Market Management: Introduction & Overview
Crafting Managing New Business
Gaining
Market Market Offering Channel
Customers
Strategy Offerings Realization Management

Sustain
Firms as Understanding Reseller
Creating Value Delivering Value
Customers Value Relationships

Guiding Principles
Market Sustaining
Sensing Customer
Regard Value as the Cornerstone Relationships

Focus on Business Market Processes

Stress Doing Business Across Borders

Accentuate Working Relationships and Business Networks

 Guiding Principle 1: Value as the cornerstone

What is Value?
• (Value f – Price f) > (Value a – Price a)
• Value is expressed in monetary values.
• Value is always an estimate of technical, economic, service and/or social benefits
• Price is a hard reality
• Value minus Price is the customer incentive to buy
• Value and Price are both for a Market Offering (set of economic, technical, service or social benefits that
customer receives)
• Our firm is represented by f
• Context of an alternative a
• Value can change if performance & benefits change without change in cost or vice versa
• Value is assessed in context of customer’s usage through customer value management
• Value a is assessed through value analysis
 Guiding Principle 2: Focus on Business Market Processes

• Hierarchy – Management Processes, Business Processes and Work Processes

• Shareholder Value – revenue growth, operating profit margin, capital investment, cost of capital, cash flows
• Management Processes – determines organization vales, culture, philosophy, way of working,
communication style etc.
• Business Processes – three core processes - Product Development Management, Supply Chain Management
& Customer Relationship Management – role of marketing – make all three – more customer focused
• Work Processes – basic building blocks of how work is done – warehousing, invoicing etc.
• Business Market Process
1. Market Sensing – defining market, monitoring competition, assessing customer value, gaining customer
feedback
2. Understand Firms as Customers – rely on suppliers to add value, integrate purchasing function, purchase
decision making
3. Crafting Market Strategy – targeting, segmentation, positioning
 Guiding Principle 2: Focus on Business Market Processes

Business Market Process (Continued)

4. Managing Market Offering – putting product, services, programs and systems together to maximize value
5. New Offering Realization – transform idea to a commercial market offering – monetization
6. Business Channel Management – marketing & distribution arrangements to create superior customer value
7. Gaining New Business – Differentiating business opportunities, prospecting for new business, gaining initial
order and order fulfillment
8. Sustaining Reseller Partnership – fulfillment of commitment, address new opportunities collaboratively
9. Managing Customers – portfolio of customers to meet profitability objectives

Business Marketing
• Value Segmentation – usage based
• Value Targeting – based on firm’s capabilities & competencies
• Value Positioning – updated 4 Ps – flexible product, price based on worth, promotion on
sustaining relationships and place to enhance marketplace equity
• Managing internal relationships as external relationships
 Guiding Principle 3: Doing Business Across Borders

• Interesting new principle – “The World is Flat” – globalization (lower trade barriers) e-marketplace
innovations (logistics & communication technologies)
• Why ? Increased profitability, government push, global competition
• Challenges
• Language and Culture
• Cross Border Negotiations – culture, setting (physical environment), ideology, role of government, legal
framework, socio-political uncertainties, dispute resolution and currency risks
• Cross Border Dispute Resolution - pre-agree, jurisdiction, role of arbitration
• Currency Exchange – choice of currency, exchange rate volatility
• Payment Risks – Letter of Credit, Confirmation, Correspondent Banking Units
• Legal Frameworks
 Guiding Principle 4: Working Relationships & Business Networks

• Working relationships are embedded in business networks comprising of connected relationships

• Internal - Work teams – expertise, problem solving and decision making and interpersonal skills – leadership style,
cultural fit, goal setting, performance management and reward system
• Working relationships operate at multiple levels – individual, functional, organizational
• External – Customer/Partner Working Relationships – transactional or collaborative
• Collaborative Relationships – “Gives & Gets”, “Who does What?”, Time Horizon, Dispute Resolution (e.g. : escalation
matrix)
• Collaborative Relationship Development – series of exchange episodes – purpose, boundary, value creation and
evaluating exchange outcomes
• Business Networks – two or more connected business relationships – concept of value chain
• Organized around developing and realizing an envisioned market opportunity
• Multiplex relationships
• Increasingly International in composition
• Actors, Activities, Resources
• Network horizon, network context, network identities, network roles
• Industry Alliances, Standards Organizations
Business Network

Other Supplier Other Ancillary Third Parties in Other Ancillary Supplementary

Unit Firms Common Forms Supplier

Supplier’s Supplier Focal Relationship Customer Customer’s

Supplier Business Business Customer
Unit Unit

Other Units in Other Units in Other Units in

Competing Focal Supplier Focal Supplier
Focal Supplier Other Customers
Supplier Firm Firm
Firm
Facets of Market Sensing

Defining the Market

• Market Segmentation
• Determining segments of interest

Monitoring Competition
• Competitor Analysis
• Improving monitoring performance
Market Sensing
• Formulate and test market views
Assessing Customer Value • Inform and guide decision making
• Value Assessment Methods
• Customer Value Management

Gaining Customer Feedback

• Customer Satisfaction measurement
• Net Promoter Score
Defining the Market : Market Segmentation
• In business-to-business marketing, segments are clusters of firms that are distinct from others in terms
of what they need and buy as well as how they buy.
• They have relatively similar requirements and similar preferences for market offering
• An effective segment has members that are homogeneous within the segment and those members as
heterogeneous as possible with the members of other segments.”
• Criteria to judge validity of segmentation
• Measurable
• Profitable
• Accessible
• Actionable
• Conventional Base for Segmentation – Industry Verticals, Customer Size, Customer Behavior and
Geography
• Progressive Base for Segmentation – Application (Use Case), Customer Capabilities, Customer
Business Priorities, Contribution to Profitability (Cost to Service, Payment Terms)

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Defining the Market : Determining Market Segment of Interest
• Whom “not to sell to”
• Market Segment Size and Growth – Market potential and total market demand – build up method,
chain ratio method and index method
• Sales potential and sales forecast (The Firm’s share of customer business)
• Sources of Estimation
• Industry Body Reports
• Analyst Reports
• Market Research – secondary & primary – annual reports
• Sales Team (and Competition Sales team)
• Customer Websites
• Ads
• Social Media (especially LinkedIn)
• Personal Network
• New Joinees
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 Factors in Assessing Segment Attractiveness

• Size of segment • Match between segment needs and

• Growth rate of segment supplier’s strengths

• • Differentiability of supplier’s offering

Intensity of unmet need(s)
• • Opportunity to achieve strategic goal by
Reach ability of segment through
communications channels addressing segment

• • Opportunity to achieve learning goal by

Readiness of segment to seek and adopt a
solution addressing segment

• Likelihood of competitive intensity

• Sufficiency of channel reach
• Likely value contribution by channel(s)
Targeting & Positioning

Targeting
• Producing an offering that meets the needs of customers in the segment better than
the competitor’s and reach segment through communication and distribution
channels so that customers realize the superior value offered.
Positioning
• Relationship of product and marketing activities
• In comparison to other segments, participants must demonstrate superior value to
consumers
• Positioning is in the mind of consumer
• Resources are often managed to ensure successful positioning

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Monitoring Competition: Competition Analysis
• Porter’s Framework for Competitor Analysis
• Future Goals – what does the competitor want to achieve?
• Assumptions – on which competitors are working on? Legacy issues,
blind spots
• Current Strategy – actions in the marketplace
Take
• Capabilities – SWOT analysis – technical, financial, people, execution Actio
track record n
• Improving Monitoring Performance
Analyze the data
• Competitor Intelligence Systems – structured - Fuld Intelligence Pyramid
• Data Collection - Sources – Same as Customer (Previous Slide)
• Analyze the Data – Benchmarking (financial, operational) Timelining Build the Foundation – Data Collection

• Take Action – Information summary, key highlights, SWOT analysis

• Time is of essence
• Seeking Disconfirming and Confirming Evidence – avoid confirmation bias -
• Role of Devil’s Advocate!!
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Understanding Firms as Customers

• Is the process of learning how companies rely on a network of suppliers to add value to their offering, integrate
purchase activities to other functional areas and outside firms and make purchase decisions

Supplier 1

Buyer’s
Buyer 1 End User
Buyer

Supplier 1

Benefits to the Supplier

• Detailed understanding of customers requirements, preferences and purchasing process enables supplier managers to
know
• Where their resources and capabilities have the potential to deliver greatest value
• Key Decision makers – Top Management, Business Managers, End Users, Purchase Dept
• Tailor Market Communication to satisfy their individual needs
Concept of the Buying Center
External Factors

Customer needs Independent

and buying Internal Factors standards-setting
behavior organizations
Technology Accounting
Management Marketing
Government Legal Production
agencies Finance Service Various
Publics

Stakeholders in each discipline within the buying organization contribute expertise such that internal
and external factors are accommodated and are driven by professional responsibilities
Members must meet 3 needs in the decision process:
• Organization Needs - Benefits of the product or service
• Individual Needs - Based on professional activities and functions of the job
• Individual’s Personal Needs - Career, quality of life, recognition
BuyGrid Framework: Consumer Decision Process
Need Recognition
Purchase Process
varies according to
purchase situations
Product Specifications
• New Task
• Straight Rebuy
• Modified Rebuy
Evaluation of Alternatives

Purchase Decision

Supplier Review
Process Flow Model of Buying Decision Process

Process Flow Stages Buying Decision Process - Steps

 Problem recognition
Definition Stage  General need description
 Product specification

 Supplier/Source Search
Selection Stage  Proposal Solicitation
 Contract for supplier(s)

Deliver Selection Stage  Make the transaction routine

End Game Stage  Evaluate performance

 Resell the job
Business Market Management: Introduction & Overview
Crafting Managing New Business
Gaining
Market Market Offering Channel
Customers
Strategy Offerings Realization Management

Sustain
Firms as Understanding Reseller
Creating Value Delivering Value
Customers Value Relationships

Guiding Principles
Market Sustaining
Sensing Customer
Regard Value as the Cornerstone Relationships

Focus on Business Market Processes

Stress Doing Business Across Borders

Accentuate Working Relationships and Business Networks

Thank You