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PRICING
B2B Marketing
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Customer Value
CustomerValue
Benefits
Core
Add-on
Sacrifices
Acquisition
Processing
Usage
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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
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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
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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
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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
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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
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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!!
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