B2B - module10

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PRICING

B2B Marketing

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Customer Value

CustomerValue

Benefits

Core

Add-on

Sacrifices

Acquisition

Processing

Usage

IIM Ranchi PGEXP 2014-16

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Total Cost-in-Use

Acquisition PricePaperwork cost

Transportation cost

Expediting cost

Cost of errors in ordering

Prepurchase evaluation costs

Processing InterestStorage costs

Quality control

Taxes & Insurance

Shrinkage & Obsolescence

General internal handling costs

Usage InstallationTraining

User labour costs

Replacement costs

Disposal costs


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Value-based Strategies

Shift selling proposition from current prices andindividual transactions torelationships built aroundvalue and lower total cost-in-use

Differentiator ranking (Ulaga & Eggert, 2006)1. Service support

2. Personal interactions

3. Suppliers know-how

4. Ability to improve customers TTM

5. Product quality & delivery performance

6. Operation costs

7. Price


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Pricing Process

Multi-dimensional

Elementary considerations

Pricing objectives

Demand determinants


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3Cs of Pricing


Price

Customer

Cost

Competitor

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Customer

Price sensitivity

Satisfied customers areless price sensitive

Product/servicecomplexity

High degree ofcustomisation

Search behaviour

Ease of search

ComparabilityAbility to pay

Switching costs

End use

Importance of theproduct/service in thecost structure of thecustomers product

End-market focus


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Customers & Demand


PerverseNormal

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Inelastic Demand

Urgent

Strongly differentiated

Few alternative solutions available to customer

Complex

Difficult to compare

High switching costs

Increased cost can be passed on downstream


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Other Customer Aspects

Value perceptions

Product/firm perceptions

Ability to pay


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Cost-based Pricing

Cost-plus

Break-even


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Cost Determinants

Cost-plus vis--vis Target costing

Profit management tool


Market-

drivenCosting

Product-levelTarget

Costing

Component-level Target

Costing

Consumerdemands

Product specificationchanges

Supplier costestimates

Cost-reductionpressure

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Competition

Sets the upper limit on price Differentiation

Hypercompetitive rivalries Create temporary advantages and destroy competitors

advantages by creating market turbulence

Gauging competitive response Estimate cost structure of direct competitors and potential

substitute manufacturers

Experience curve

Behaviours to prevent price war Price leadership

Price stability


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Price Attacks

Compete by providing superior value

Rules of competition (Cressman & Nagle, 2002)

Never participate in an engagement you cannot win

Compete from a position of advantagefight by your ownrules, not by the competitors

Evaluate the competitive threat


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2 More Cs


PriceCost

Competitor

Customer

Channels

Context

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Channels

Costs

Capabilities

Power centre

Dependence asymmetry


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Context

Also environment

Elements

Currency

Economy Regulations


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Relationships & Pricing

Influenced by pricing structure and rules over theexpected life of the relationship

Manufacturers gain from trusting supplier

relationshipsyet pushing for regular pricereductions

Also for suppliers to large retailers

Discounts

Trade discounts Negotiated

Confidential


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More IOR Issues

Transactional

Bundling vis--vis unbundling

Milking customers

Short-term ROI vs. CLV

Collaborative Premium pricing opportunities

De-featuring

Information sharing & value oflearning

Price reduction pressure and trust


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Intra-organisational Aspects


Finance More control and sayShorter-term perspectiveAll products must always make profit

Accounts Cost-plusAll costs fully allocatedLess inclined to respond to market pressures

Marketing Respond to competitive actionBuild customer relationshipsGenerate demand for complementary products

Sales Informed decision on pricingincentives based on bottomline

Lesser authoritymore marginsPricing decisions leading to sub-optimal profits

Path of least resistanceInsufficient knowledge of customer price sensitivityPrice warMore aggressive negotiation from buyers

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Thank You!!


B2B - module10

Documents