Managing Business Markets

Term IV MBM : 2020-21

July 30 2021
 July 30 (Session 14/24)

• Module 1: Overview (PVT)

• Module 2: U. Value Process – Kunst 1600, SAP,
Cathay Pacific
• Module – C. Value - PSS; Indiamart,
– Realising value from new offerings
– Existing products; (2014)
Creating Value Process
• New Offering Realization- PSS
• Managing Market Offerings- INDIAMART
 Managing Business Markets
• Overview- MBM
– PVT, CVM
• Assessing Value- Process
– Quantifying Value; Kunst 1600
– Business Purchasing; Cathay Pacific
– Branding : SAP
• Creating Value- Process
– New Offering Realisation (PSS)
– Managing existing and new offerings
• Delivering Value
– Selling, Account Management
Creating Value
New Offering Realization
 New Offering Realization

• New offering realization is the process of

developing new core products or services,
augmenting them to construct market offerings,
and bringing them to market.
 New Offering Realization
Why pursue new offering realization?

• To strengthen market position

• To improve resource utilization
• To renew and reinvigorate the firm
 Crafting Realization Strategy
Technology Strategy

Technology
Assessment and
Forecasting

Development Goals Project

Aggregate
& Objectives Management &
Project Plan
Execution

Market
Sensing

Market Strategy

(Adapted from Wheelright & Clark 1992)

 Designing Realization Process Model
Common Features of Models

• a funnel process
• distinct phases of activities
• “gates” between phases
• timetables
• milestones
• periodic in-process reviews
 Designing Realization Process Model
How can a firm increase speed-to-market?

• move from sequential to concurrent engineering

• replace “stage gates” with “fuzzy gates”

 Designing Realization Process Model
How can a firm better utilize its business networks during the realization process?

• early supplier involvement

• outsourcing
• licensing
• cross-licensing
• collaboration
• agree to a “dominant design” early
on
 Designing Realization Process Model
How can a firm make model market-driven?

• Better linking technological developments to

customer requirements:
• create focused research centers
• conduct R&D in-the-field
• use Quality Function Deployment (QFD)
• conduct value assessments
• re-examine value proposition at each “gate”
 Creating Value:
Managing Market Offerings
 Supplementary Services

• Loyalty programs

• Service – Programs – Options targeting

• Consulting service

• Systems -
 Managing Market Offerings

1. Flexible Market Offerings

2. Becoming More Flexible
3. Getting an Equitable Return on Services
Key char of existing products- Competition – less
differentiation – segment customers -
-
 1. Flexible Market Offerings

Changing marketplace requirements appear to

create a paradox for the business market
manager:

– more customized offerings

– Customers increasingly expect differentiation and
added-value in the form of an augmenting
bundle of services, programs, and systems
– Yet, customers are demanding the lowest total
cost, or worse, the lowest price.
 Flexible Market Offerings
No matter how markets are segmented,
residual variation among firms within
segments remains.
To more closely meet customers’
varying requirements at low cost:

– On the product side, firms have responded with:

• product platform designs

• modularization
• flexible manufacturing

– On the services, programs and systems side, firms

are beginning to respond with:
 Flexible Market Offerings

Naked Solutions, With Options provide

Customers with:

– greater choice
– more-customized services
– superior value by better meeting their
individual requirements
Naked Solutions, With Options provide
Suppliers with:
– lower costs in service delivery
– greater latitude in pricing decisions
– a market offering for even the stingiest
accounts
– a platform for consultative selling
 2. Becoming More Flexible

To move to flexible market offerings,

suppliers need to:

1. Articulate Present Market Offerings

2. Assess Customer Value and Own Cost &

3. Formulate Flexible Market Offerings

for each market segment.

 3. Getting an Equitable Return
on Services

Decide upon a business model for service

provision:

1. No charge (Standard)– MS office

2. Partial cost recovery

3. Full cost recovery

4. Supporting profit center

5. Stand-alone profit center

 3. Getting an Equitable Return
on Services

Practical Considerations:

– Putting into practice a philosophy that products and

services generate value.

– Having capable systems support for service provision

business model

– Responsibility and compensation for selling services

– Breaking away from the pack

 3. Getting an Equitable Return
on Services

A Final Practical Consideration:

To achieve success, supplier managers need to develop a
most difficult to acquire skill:

• Adroitly saying “No” to some

customers

Practiced deftly, this skill builds a reputation for the

supplier within the industry as firm, consistent and fair.
IndiaMART: 1996-2014
 India MART

• DINESH –
– 2014 Business/ Marketing Plan

1. Generating 10 million buying enquiries every month

2. 2. Expanding customer base with over 100,000 paying
customers
3. 3. Generating ARPU of USD 1000
4. 4. Securing 33% EBITDA margins
 India MART- 2014 Plan
1. Customer Acquisition
Current Scenario – 40K (2013) , 48K (2014) paid subscribers
Goal – 100K
2. Customer retention – 26% to 20%
ARPU - $ 500 to $1000
3. USING MOBILE – Desktop– MOBILE (Creating V)
4. Future business
– consumer market place ; ecommerce; B2B
ecommerce – subscription versus transaction based
 Customer acquisition
Customer Acquisition
Current Scenario – 40K (2013) , 48K (2014) paid subscribers
Goal – 100K by 2014

125 Million+ Buyers | 6.5 Million+ Suppliers | 72 Million+

Products & Services.
 Indiamart

• 2014-
– Dinesh Agarwal
– 2014- 15 plan
– (i) Customer Acquisition-40K to 100K
– (ii) Customer Retention – 26% to 20%
– (iii) Mobile technology – creating value
– (iv) increase ARPU - $500 - $1000 (2010
– (v) New market places – e commerce -
Learning possibilities
 IndiaMART

• B2B market place

– Ecommerce- Tolexo

• Buyers – sellers – platform- Digital ecosystems

• UDAAN – tradeindia
 Way forward

• Company goals 2014-15

– CA- sellers – one lakh paying customers
• (Churn Rate- 26% - 20%)
• One million enquiries (buyers)
• Sales value- Rs 127 crores--- 2014- (500 crores)
– ARPU - $500 to $1000
– EBITDA- 33% -
– 1996- 2014
 August 02
• Process of Creating Value
– From new offerings – PDLC- PSS – Precise Insight
• ALIGNMENT OF MARKET STRATEGY AND TECHNOLOGY STRATEGY
– From existing offerings
• Supplementary services ( Fulfilment , technical services; programs;
systems)
• Continuous improvement ; new services
• IndiaMART ( 1996- 2014) – 21 years of story
» 1996; - 0- 6.5 lakhs
– 2013- 126 crores ( EBIT -56 crores)
– 2014-

– March 2020 – SALES/ NP- 691/146 crores (23% EBIT) , 756/ 280
cores in 2021 ( 47%/EBIT)
– ARPU – 2 lakhs -
 2014
1. Customer acquisition – paid customer – 50K- 100K
2. ARPU - $500- $1000
3. EBIT – 33%
4. New opportunities
 India Mart

Time Period Pages

2014: way ahead 18-21
2013-14:Turning Point (cost control measures) 16-18
2010-12: Rampant CA 14-16
2007-2010: Domestic Focus and Rapid Growth 12-14

2004-2007: Changing Landscape 8-11

After Y2K (cost control measures) 6-7
Early days: 1996-2000 4-6
 IndiaMART 2014- Challenges

1. Speed of customer acquisition

2. Improve customer churn rate- reduce from 26% to
20% in one year
3. Mobile opportunity with rapidly increasing
penetration
4. Decision to enter new market places; B2B; B2C
 IndiaMART 2014- Business Goals

1. Enquiries per month- 10MM

2. Customer base: 100,000 paying customers (40K-
2013)
3. ARPU- $1000/- ( $503- p.32)
4. EBITDA: 33%

No of employees- 2800 ( March 2014)

 SME
• 2012- 48MM
• Microscale business – 95%; small scale- 4.8%
• 5% of 48MM= 2.4 MM
• 10MM enquiries/ month – Target
• IndiaMART – 1.4MM business –in 2014
 IndiaMART in 2014

• India’s largest B2B market place for buyers to

source products from SME’s
• Listing, Storefront creation, Certification
(TrustSEAL), Access to buyers needs ( buy leads)
• Impacted 1.4MM businesses; to sell online; 10MM
users
• Planned activities: leverage mobile penetration;
offer location specific search; user profile based
personalisation for smart phone users
 SME’s in India-2012
• GDP contribution: 17%
• Composition: 95% microscale; Small scale; 4.5%;
Medium scale- 0.2%- (80,000 businesses)
• Location: 55% URBAN; 45% Rural
• No of SME ‘s : 48MM ( China 50MM)
• Employed 8.11 crores (40% of India’s workforce)
• SME Offerings: $5B ; 8000 products from 11MM
units
• 40% Exports: 1.3MM SME’s
 SME’s : Computer access

• O.5MM SME’s – Websites

• 2MM – Access to internet

• 4MM- Used PC’s ( growth at 30% 2011-15)

• IT Spends by SME’s- $15MM by 2015 (CAGR 15%)

 1996-2014

• Website – sme – exports-

• directory online – market place- charged sellers-
subscription - Rs5000- Rs 30,000
 IndiaMART: 1996

• Founder -Dinesh Agarwal- Software Development

professional
• ISP – business not materialised
• April 1996- Started offering website development
services for businesses
• Charged: Rs. 50-60K for 10 page website; 10K one
page microsite site; Rs. 6.5 lakh and breaking even
 Early Days : 1996-2000
• Brothers- salesmen cum developers
– Operational breakeven with 6.5 lakh sales in 1996
• Value creation Initiatives:
– Launched Indiamart.com- Online business directory
– Searchable online directory for exporters
– Compiled data from export promotion councils,
tradeshows, industry associations
– Mistook as Govt initiative ( smile@ page 5 second
para)
– Set up a team to optimise websites based on search
engine guidelines
– Client website with IndiaMART logo on bottom
– High search rank – attracted global buyers
 Early Days : 1996-2000
Challenges
1. Low internet penetration
2. Lack of credible SME information
Value Creation Initiatives
The Free Listing and The Free Enquiry Forwarding
Free Service – enquiries
Attracted business with no internet access; became
customers
Development
DEC 1997: Sabeer Bhatia sold Hotmail to Microsoft for
$400MM
 After Y2K- Challenges

• Low margin in website development

• Dependence on export market; global melt down

and business dipped- 40% reduction in export
volumes
• Attrition of manpower with IT outsourcing
 After Y2K
• 2001: 1000 paying customers; 2006 plan for
10Xcustomer growth (2006-10X; 5000 product
categories
• Operated from a small office in 3rd floor Delhi
( residential apt!)
• Business world- only profitable dot com
• 2001- Shifted to new office in Noida
• Subscription renewal – revenues; google search
rank on top
• No advt, promotion spends
 2001-2003: Challenges (Cost control measures)

• Forced to reduce prices to an all time low- Rs

5000/- for one year subscription
• New offering- Trade Offers- a business classified
service
• Product catalogue building – work underway
• Growth at 30% CAGR amidst slowdown
 2004- 2007: Changing Landscape (growth phase)
• Global economy rebound; outsourcing and growth
of domestic market
• Export market grew- during 2003-06 from $3B to
4.5B
• Online business directory (8 years of
development)
• New client acquisition led growth- 2006- 10,000
paying customers- target achieved; price Rs 5000 in
2003 to Rs. 9000/- in 2006 (Rs. 18 crores revenue)
• Naukri .com listed; online classified business
• IndiaMART raised 15 crores in 2006 from BCCL
 2004-2007 VC Initiatives

• India mart started generating 80% of leads for its

existing customers
• Premium listing service launched
• Launched a service to help buyers select suppliers-
TrustSEAL launched with CRISIL (page 9)
 2007-2010- Domestic Focus & Rapid Growth

• Global financial meltdown in 2008; Rs appreciation

against $
• Increase in customer churn
• Reengineered business to reduce cost ( as in 2001)
• Subscription offer- 3 year offer ; third year free; to
check customer churn; mini-dynamic catalog
• Shift to locally relevant search in Google ; fuelled
customer conversions
• Domestic business became a key business growth
avenue
2007-2010- Domestic Focus and Rapid Growth
• 2008- sensed growth opportunity; raised capital
$10MM from Intel Capital
• Two liner business description catalogue
transformed to giant product catalogue (8+4= 12
years)
• IndiaMART- Chief source of buyleads
• $750 ARPU in 2009
• 2010- 14000 paying customers; ARPU of $1000-
Revenue – 61 crores
• Aggressive CA plan presented to board- 1MM listed
business and one lakh paying customers (p13)
2007-2010- Domestic Focus and Rapid Growth

• $750 ARPU in 2009

• 2010- 14000 paying customers; ARPU of $473 ( $500
in 2011)
• Revenue –30 crores (2011-69 crores)
• Aggressive CA plan presented to board- 1MM listed
business and one lakh paying customers (high cash burn)
• Alibaba versus IndiaMART (P14)
 2010-2012- Rampant CA (Sales focus)
• Focus on sales; weekly monitoring compared to monthly;
attractive sales incentive plans
• New office opened @one per week; 2010- 52 offices in 52
weeks; a sales person not needing to travel more than 30
minutes to meet a customer
• Acquired 21K new customers in 2010 and 28K in 2011 (15K to
50K)
• Domestic business – 80% of IndiaMART Volumes
• Customer acquisition speed from 400 - 2500
customers/month
• Rs 40 crore spend in CA activities; Office re-location
 2010-2012- Rampant CA-Challenges

• Acquisition of non relevant customers ; churn

• Suppliers did not present good content; increased
search cost for buyers
• Lowered ARPU - $742 in 2011 to $500 in 2011
• Transaction originating via IndiaMART concluded
outside; responsiveness of sellers not possible to
be tracked
 2010-2012- VC initiatives
• Launched preferred no service (PNS) in 2012 for
buyers to connect with suppliers
– All calls included missed calls could be tracked
– PNS implemented for all clients; although initially meant
as a premium service
• March 2012- Customer base increased to 48,000
from 14,000 in March 2010
• Customer churn rate matched the acquisition rate
– affecting growth
• Target of 100,000 paying customers – Half way!
 2013-14 Turning Point (Cost control measures)

• Negative signals- Processes, team inadequacies;

High cash burn (4 cr/month); High customer churn-
poor customer value
• Reduced sales team; offices- 5000- 3000 employees
in two quarters
• Flippant sellers removed; negative customer list
prepared
 2013-14 Turning Point

• Four category classification system to rank

customer content; product team to follow up for
specific content
• Order booking process changed; Pre-printed
proforma invoices and OVP set up
• No of products listed- Removed cap, max 400
• PNS- proactive customer sales management
• 1MM suppliers; 10MM products- cumbersome for
buyers to search
 2013-14 Turning Point

• Helping buyers- Buy Leads program; free for

buyers; suppliers charged a nominal fee; Rs
200/lead
• One lakh leads on the platform
• 2013- 40,000 suppliers with an ARPU $503;
subscription revenue 127 crores ( 36 crores in 2010)
• 2013- Loss of 8.8 crores
• Employees – 2010 – 2013; 1412- 2689
 2014: Challenges

• Paying customers- To increase from 40,000 to one

lakh
• Feb 2014- 60 offices; 2800 employees;
• Revenue sources-
– Supplier subscription services
– Premium listing of suppliers
– Buy leads
– Advertising
• Launched TOLEXO- ecommerce for business
supplies
 2014: Challenges
• The mobile opportunity
– 67MM in 2013- m.indiamart.com
• Ranking of suppliers (5-10 search results – ranked
on relevance)
• Expanding supplier base- manage NPS
• Encouraging sellers to be buyers- Advt spends
• Reducing Supplier churn- 26%in 2014 to bring down
to 20% by 2015
• Managing employee attrition- 60% sales; 30%
technology
IndiaMART 2014: Way Forward?