Product Positioning and

Solution Marketing in B2B -

CO4

MODULE 4
Segmentation Targeting and Positioning
Framework
Segmenting
Industrial Market (10
Bases)
https://www.yourarticlelibrary
.com/marketing/market-
segmentation/segmenting-
industrial-market-10-
bases/48602
Target Marketing
 MASS MARKETING
• Also known as undifferentiated marketing, mass marketing does not
segregate the target market and offers one strategy for the entire
market.
SEGMENT MARKETING
• Segment Marketing known for its differentiated targeting strategy
focuses on a section of people known as the ‘target audience’. The
target marketing concept is to attract customers to their products.
MICROMARKETING

Target Market Micromarketing focuses on a much smaller section of people than niche
marketing. Micromarketing definition is customized marketing or one-to-
Strategies one marketing. The products are customized to the requirements of the
customer.
NICHE MARKETING
• Also called concentrated marketing, niche marketing targets only a few
specific groups of consumers. The company first chooses its image and
defines its narrow target market.
LOCAL MARKETING
• Local marketing strategy involves nearby and neighbourhood areas.
The organizations use this marketing strategy to thrive on local
connections and make their presence felt. Amazon Local is a good
example of a local marketing strategy.
 Pricing strategies
for B2B Marketing
1. Competition-based pricing.
• One of the most common pricing models in B2B, competition-based
pricing involves analyzing competitor pricing as a baseline and
setting prices slightly lower or higher depending on factors such as
product quality, target market and B2B marketing strategy.
• Competitor-based pricing is commonly used in saturated markets
with homogenized products, such as consumer goods, retail and
telecommunications.
2. Value-based pricing.
• In industries with a high degree of differentiation and demand — eg:
luxury goods, software and consulting services — businesses will
set prices according to the product’s perceived value.
• A value-based pricing strategy captures the maximum amount a
customer is willing to pay, rather than focusing on the cost of
production or competitor pricing. This is common for innovative or
premium products.
Pricing strategies for B2B Marketing
3. Dynamic pricing.

Dynamic prices change in real-time and are set by algorithms that analyze data on market demand,
competitor prices and other factors, such as the cost of raw materials.

For example, a hotel might raise its prices during peak travel season and lower them during the off-
season. Or the price of a custom shed might fluctuate based on the cost of lumber.

4. Cost-plus pricing.

After calculating the cost of production, businesses add a markup — typically expressed as a percentage
of production costs — to achieve a desired profit margin.

These include direct costs (such as labor, materials, and equipment) and indirect costs (overhead
expenses including rent, utilities and payroll). Cost-plus pricing is often used in industries with a high
degree of standardization and competition, such as manufacturing or construction.
 Flat-rate pricing.
• Businesses may charge a fixed price regardless of
usage or purchase volume. This is the de facto pricing
model for industries with predictable production costs,
such as software or consulting services.
• Flat-rate pricing eliminates the need for complex
calculations or negotiations, simplifying the purchase
for the business and the customer.
B2B • Here are examples of businesses that offer flat-rate
pricing:
Solutions b. SaaS (Software-as-a-Service) businesses: Many
SaaS companies charge a flat monthly or annual fee for
their software products, regardless of the number of
users or volume of data used.
• Web hosting providers: Customers pay a fixed
amount regardless of website traffic or data use.
• Consulting firms: Firms charge a flat fee for a specific
project or deliverable, such as content marketing or IT
consulting.
 c. Usage-based pricing.
• Also known as pay-as-you-go, usage-based
pricing is commensurate with consumption. For
example, utility companies charge based on
electricity usage.
• This pricing model is typically used by B2B
businesses whose products are used on a
recurring basis or require ongoing support, such
as technical troubleshooting and after-sales
B2B care.
• Here are examples of businesses that offer
Solutions usage-based pricing:
• Cloud computing providers: Companies like
Amazon Web Services allow businesses to pay
only for the computing resources they use.
• Equipment rental companies: Companies
charge according to the amount of time the
equipment is used.
• Ride-sharing services: Customers pay based on
travel distance and trip duration.
 d. Tiered pricing.
• Tiered pricing offers different price points based on
features, functionality and access. For example, the
basic tier for project management software lets users
create a limited number of projects, the standard tier
provides advanced features like team collaboration
and time tracking, while the premium tier includes
custom reporting and advanced analytics. Tiered
pricing offers upselling opportunities.
• Some B2B companies include a “freemium” tier for
B2B lead generation purposes that lets new users access a
limited version at no cost in the hope they’ll convert to
Solutions paying customers.
e. Per-user pricing.
SaaS businesses often charge a per-user fee according
to the number of licenses purchased.
Per-user pricing is based on the idea that the more users
a business has, the more value it gains from the product
or service. This lets businesses capture more value from
enterprise customers while providing an affordable
option for smaller businesses.
 Determine the value of your product.
• Identify your target market
Best • Conduct market research
Practices for • Calculate your costs
Developing a • Determine the perceived value
B2B Pricing • Experiment with various pricing
models.
Strategy
• Make data-driven decisions
 Key metrics to Watch
• a. Customer acquisition cost (CAC): By tracking CAC, businesses
can evaluate the cost-effectiveness of their pricing process and
determine whether they are acquiring customers efficiently. This is
calculated by dividing the total sales and marketing costs by the
number of new customers acquired during a given time period.
• b. Customer lifetime value (CLV): This metric measures the total
revenue a customer will generate for a business over their lifetime.
By calculating CLV, businesses can evaluate whether their pricing
strategy generates sufficient revenue per customer.
• c. Gross margin: Gross margin is the difference between revenue
and the cost of goods sold, expressed as a percentage. This
indicates the profitability of your pricing approach.
• d. Churn rate: Churn measures the percentage of customers who
stop doing business with you over a given time period. A high churn
rate may indicate your prices are not competitive.
• e. Price elasticity: By measuring how responsive your customers
are to price changes, you can determine how much you can raise
or lower prices before it impacts customer behavior.
 a. Making pricing too complicated.
b. While some businesses offer a mixture of pricing models to
accommodate customer segmentations (eg: small business
versus enterprise), you must reduce complexity for the customer
by showing pertinent pricing information.
c. Relying exclusively on undercutting your competition.
Focusing exclusively on competitors in your pricing strategy can
prove detrimental, kicking off a “race to the bottom” price war
Common where businesses slash prices to undercut the competition,
driving down profit margins.
B2B Pricing d. Neglecting competitor responses to your price.
B2B businesses can’t afford to disregard competitor pricing.
Mistakes to Setting prices too high or low leads to lost sales and reduced
profitability. Don’t be misled by overconfidence or a lack of
Avoid market research. Continually monitor competitor pricing to gain
an edge in the market.
e. Misaligning pricing and business goals.
Pricing is intimately linked with business goals because it
determines a business’s profit margins and the volume of B2B
sales required to break even. While low prices attract customers,
the business might not generate sufficient revenue to recover
costs.
 f. In luxury markets, low pricing may
Common undermine the business’ reputation.
B2B Pricing • Businesses should also consider customer
needs in setting prices. Offering flexible
Mistakes to pricing options like pay-as-you-go or fixed
pricing lets customers purchase according
Avoid to their budget and preferences.
 Caselet
OptimaTech is a mid-sized software company specializing in supply chain
management solutions. They have recently developed a new software,
"ChainMax," that streamlines inventory management and predicts supply
needs using AI.
The supply chain management software market is highly competitive, with
both established giants and emerging startups. OptimaTech's main
competitors have similar products, priced on a per-user basis. However,
ChainMax offers unique AI-driven insights, which competitors don't provide.
OptimaTech initially adopted a cost-plus pricing model, setting ChainMax's
price at a 30% markup over the cost of development and support. However,
this made ChainMax significantly more expensive than competing products.
Despite ChainMax's advanced features, sales have been slow. Feedback
indicates that while customers recognize the added value of AI insights, they
are hesitant due to the high price. OptimaTech is considering revising its
pricing strategy to better align with the market and customer expectations.
• Questions:
• Should OptimaTech switch to a value-based pricing model for ChainMax?
How might they determine the perceived value of the AI-driven features to
their B2B customers?
• What other pricing models could OptimaTech consider to enhance
ChainMax's market penetration while maintaining profitability? Discuss
the potential benefits and drawbacks of at least two alternative models.