INDIAN INSTITUTE OF MANAGEMENT RANCHI

B2B Marketing
Presentation on
PRICING IN B2B MARKETING

Group Members:
1. Jafar Ghori (X012-18)
2. Manish Kumar (X015-18)
PGEXP Batch: 2018-20 3. Ujjwal Kumar (X021-18)
4. Shyam Kumar Paswan (X019-18)
Term-4
5. Rohan Kumar (X017-18)
 Customer Value

Core
Benefits
Add-on
Customer
Value Acquisition

Sacrifices Processing

Usage

IIM Ranchi PGEXP 2018-20

 Total Cost-in-Use (Sacrifice)
Price
Acquisition
Paperwork cost
Transportation cost
Expediting cost
Cost of errors in ordering
Prepurchase evaluation costs
Interest
Processing
Storage costs
Quality control
Taxes & Insurance
Shrinkage & Obsolescence
General internal handling costs
Installation
Usage
Training

User labour costs

Replacement costs

Disposal costs

IIM Ranchi PGP 2018-20

 Value-based Strategies

• Shift of selling proposition from current prices and

individual transactions to relationships built around value
and lower total cost-in-use
• Relationship benefits display stronger potential for
differentiation than cost considerations
• Differentiator ranking
1. Service support
2. Personal interactions
3. Supplier’s know-how
4. Ability to improve customer’s TTM revenue
5. Product quality & delivery performance
6. Operation costs
7. Price

IIM Ranchi PGP 2018-20

 Pricing Process

• Multi-dimensional (not a sticker price)

• Elementary considerations
• Pricing objectives
• Demand determinants
• Assessing value
• Economic value
• Commodity value (PoP)
• Differentiation value (PoD)

IIM Ranchi PGP 2018-20

 3C’s of Pricing

Cost

Customer Competitor

Price

IIM Ranchi PGP 2018-20

 Customer

Price sensitivity Search behavior

• Satisfied customers are • Ease of search
less price sensitive • Comparability
• Product/service Ability to pay
complexity
• High degree of
customization

End use
• Importance of the
product/service in the
Switching costs cost structure of the End-market focus
customer’s product

IIM Ranchi PGP 2018-20

 Suppose you are a marketing consultant for a
new entrant into the market. What advice would
you offer?
• Review a variety of competitors
• Make observations
• on the pricing practices of this industry
• the cost based estimates and value based estimates

IIM Ranchi PGP 2018-20

 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
• Behaviors to prevent price war
• Price leadership
• Price stability

IIM Ranchi PGP 2018-20

 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 • Technology
competitors and potential • Economies of scale
substitute manufacturers • Product/market
• Experience curve; follower knowledge
• Behaviors to prevent price war • Shared experience
• Price leadership • Experience of
suppliers
• Price stability

IIM Ranchi PGP 2018-20

 PLC Pricing Strategy

Harvest

Penetration

Skimming

IIM Ranchi PGP 2017-19

 Price Attacks

• Compete by providing superior value

• Rules of competition
• Never participate in an engagement you cannot win
• Compete from a position of advantage – fight by your own
rules, not by the competitor’s
• Evaluate the competitive threat

IIM Ranchi PGP 2018-20

 Evaluation Framework

• Cost of price reduction < loss of sales

• Price cuts on customers expected to be enticed
• Price cuts in affected geography / channel
1 • Capitalise on competitive advantage to offset the higher price

• Willingness and ability of competitor to reduce again

2
• Cost of chain of responses < loss of sales
• Competitor likely to cut further prices
• Allow competitor to win in low-stake segments
3 • Create barriers to enter profitable segments

• Position of strength under jeopardy

• Value of markets lost < cost of response
4

IIM Ranchi PGP 2018-20

 2 More C’s

Customer

Competitor Channels

Cost Price Context

IIM Ranchi PGP 2018-20

 Channels
• Costs
• At each stage
• Capabilities – value addition
• Power centre
• Dependence asymmetry

IIM Ranchi PGP 2018-20

 Context

• Also ‘environment’
• Elements
• Economic outlook
• Currency fluctuations
• Regulatory environment
• Price discrimination

IIM Ranchi PGP 2018-20

 Relationships & Pricing

• Influenced by pricing structure and rules over the

expected life of the relationship
• Manufacturers gain from trusting supplier
relationships – yet pushing for regular price
reductions
• Also for suppliers to large retailers
• Discounts
• Trade discounts
• Negotiated
• Confidential

IIM Ranchi PGP 2018-20

 Impact on relationship - IOR

Transactional
• Bundling vis-à-vis unbundling
• Milking customers
• Short-term ROI vs. CLV
(Customer Lifetime value)

Collaborative
• Premium pricing opportunities
• De-featuring
• Information sharing & value of
learning
• Price reduction pressure and trust
 Intra-organisational Aspects
Finance More control and say
Shorter-term perspective
All products must always make profit
Accounts Cost-plus
All costs fully allocated
Less inclined to respond to market pressures
Marketing Respond to competitive action
Build customer relationships
Generate demand for complementary products
Sales Informed decision on pricing – incentives based on bottom-line
Lesser authority – more margins
Pricing decisions leading to sub-optimal profits
•Path of least resistance
•Insufficient knowledge of customer price sensitivity
•Price war
•More aggressive negotiation from buyers
IIM Ranchi PGP 2018-20
 Leasing

• For very expensive products

• Restructure debt on most strategic areas of the
business by reducing exposure for purchasing high-
ticket assets
• Types
• Operating
• Capital
• Sale and leaseback
• Committed to a piece of equipment – restriction to
change in case of change in operating
environment

IIM Ranchi PGP 2018-20

THANK YOU!!

IIM Ranchi PGP 2018-20