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Business to Business Marketing
Review: Understanding Customer Value
June 16-July 2, 2012
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Business Markets
Business markets are firms, institutions or
governments that acquire products and services
for their own use, to incorporate into products
and services they produce or for resale along
with products and services they produce to other
firms institutions and governments.
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The Consumer Market (B2C) andthe Business Market (B2B) at Dell, Inc.
B2B
Customers
B2C
Individuals &
Households
Businesses
GlobalLarge
Institutions
HealthcareEducation
Government
StateLocal
Dell, Inc.
Small & Medium
sized businesses
Selected
ProductsPCs
PrintersConsumer Electronics
Simple Service
Agreements
PCs
Enterprise StorageServers
Complex Service Offerings
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Business Marketing
Business Market Management is the process of understanding,Business Market Management is the process of understanding,creating, and delivering value.creating, and delivering value.
Value in business markets is the worth in monetary terms of theValue in business markets is the worth in monetary terms of the
economic, technical, service and social benefits a customer firmseconomic, technical, service and social benefits a customer firms
receives in exchange for the price it pays for a market offeringreceives in exchange for the price it pays for a market offering
The fundamental value equation:
(Valuef Pricef ) > (Valuea Pricea )
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Classifying
Goods for theBusinessMarket
Classifying industrial goods by
the following questions:
How does the good or service
enter the production process?
How does it enter the cost
structure of the firm?
Source: Adapted from PhilipKotler,MarketingManagement: Analysis,Planning, and Control, 4th ed.(Englewood Cliffs, N.J.:Prentice-Hall, 1980), p. 172,with permission of Prentice-Hall, Inc.
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Classification: B.M Products/Services
Heavy Equipments: Engines, Compressors etc (high investments; plant
investment)
Light Equipments:
,
large no of customers; mass marketing;
distributors)
Systems
MIS; Turnkey project; (Selling: complex and time
consuming)
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Classification: B.M Products/Services
Raw Materials Crude oil, iron ore, cotton fibre (sold as
commodities; price; brokers)
Processed Materials
Rolled steel, fabric, plastic polymers,
Differentiation possible by adding value for special
applications
Consumable supplies
Coolants, abrasives, medical syringes,
Mfg.; MRO consumables
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Classification
Components
Engines, Motors, Tires, Disk drives, Monitors,
Keyboard
Different from supplies and materials
Close relationship (memory) Vs low cost efficient(keyboard) approach
Industrial Supplies
Engineering Services; Mgmt Consulting; Contractmaintenance
Comprehensive design, installation and operation
Vs support service (transportation)
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(ii) Characteristics: BM
External Linkages
Internal Linkages
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CUSTOMER MANUFACTURINGMARKETING
Key LinkagesExternal Environment Internal Organization
Derived Demand
Fluctuating Demand
Complex Buying ProcessConcentrated Customer Base
Relationships/ Business
Networks
Emphasis on Technology
High Level of CustomizationMade to Order
Cross Functional Relationships
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External Linkages
Derived Demand
Driven by consumer goods demand
AutomobileDashboard - ABS Plastic Pellets3
chemicals (Styrene)---ethylene---petroleum
conditions in strategic decisions
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External Linkages
Complex Buying/Selling Process
Individual / household vs Buying Centers
B.C (DMU): Members of engineering, purchase,
finance and manufacturing
Complexity: The influence of the formalorgan za on; ra eg c mpor ance o e
purchase item; cost of item being purchased;
complexity of the need being serviced;
centralization of purchase decisions
Professional sellers and buyers
Encourages long term relationships; Buyer
becomes dependent on a supplier
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External Linkages
Concentrated Customer Base Few Large Customers
Geographically concentrated ( industrial clusters-
silicon valley, auto component industry, diamond
cutting..)
Personal Selling; Direct Marketing
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The Supply Chain
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Relationships, Networks, Technology
Relationship Perspective: Implications
Task of selecting, developing and managing customer
relationships for the advantage of both customer and
supplier with regard to their respective skills,
resources, technologies, strategies and objectives Variety of relationships (critical for survival;
contribution large or small; friendly/antagonistic;
close/distant; simple/complex); Profitable; Leading to
technological developments; Provide access to other
companies
Need to manage a portfolio of relationships
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Relationship Perspective: Implications
Unit of analysis: relationships--- rather than single purchase; sales
territory or market
Each transaction to be seen in the context of relationship
Relationships as primary assets; value can only be delivered through
relationship channels
Business relationships develop, integrate and use the skills resources
and technologies of both supplier and customer; Links activities of the
companies, ties their resources to each other and form bond between
individuals from each company
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Relationship Perspective: Implications
Business Buying:
Similar Activity to Business Marketing
Choose suppliers on the basis of their resources and
skills Persuade that they are good customers
Manage based on mutual interest
B.M: Interaction between two active parties
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(iii) Relationships, Business Networks, Technology
Business Networks Relationships do not exist in isolation
Embedded in network of relationships
Work Teams - Working Relationships -Collaborative
Relationships (Strategic Alliance) - Business
Networks
Business Network : Two or more connected businessrelationships
Example of a business network: Alliance Network- tocreate new markets; to bring together resources; toagree on common standards; to spread risk across ano of firms
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Business Networks
Characteristics Organized around a market opportunity
Multiplex relationship between firms
Increasingly international in composition (domestic : Chaebol,
Keiretsu)
na yz ng e wor s
Actors; Activities; Resources
Network Horizon; Network Context; Network Identities;
Network Roles : Architect; Lead Operator; Care Taker
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Business Networks
Supplier Networks: Toyota
50,000 companies
First Tier: system suppliers; Second Tier: Deliver
System Parts; Third Tier: Standardized, non
adapted components; Fifth tier: homeworkers
Indirect relationships
Co-ordination between relationships (Quality /Eff.)
Influence of large companies (invest, long term,
others interests)
Problems with a single perspective
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Relationships, Networks, Technology
Inextricably linked technology on which the offer isbased and the supplier technology
Increasing use of technology eg. Electronic
technology in automobiles
Need a wide range of know-how , skills and abilitiesor ec no og es o prov e mprove o er ngs
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Technology
Increasing cost of new gen. technologies
Competitors in a race to use new technologies (Al
replacing steel in car bodies construction)
New competitors arrive with new technologies
Increasingly difficult to develop and maintain alltechnologies required- Hence becoming more dependent
on business networks
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Technology
Acquiring (Internal/External/Outsource Offerings)
Exploiting (Internal/External)
Managing Technology (Commercializing)
Understanding and using technologies in relationships
and networks
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CUSTOMER MANUFACTURINGMARKETING
Key LinkagesExternal Environment Internal Organization
Derived Demand
Complex Buying Process
Concentrated Customer BaseBusiness Networks
Emphasis on Technology
High Level of Customization
Made to Order
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Internal Linkages
Emphasis on technology
Technology: Visible
Performance, functions and features important in
design, manufacturing and marketing of a product
Price/Performance ratio (semiconductors; memory)
High Level of Customization Meet users technical requirements
Cross Functional Relationships
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Marketings Cross Functional Relationship
Business marketing planning mustbe coordinated and synchronizedwith corresponding planning efforts.
Developed by Cool Pictures and MultiMedia Presentations
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Marketing is perhaps best understood as
1. The customer-product connectionlinking thecustomer to the focal offering.
2. The customer-service delivery connectionthe
design and delivery actions involved in providing arm s goo s an serv ces.
3. The customer- financial accountabilityconnection. Activities and processes that linkcustomers to financial outcomes.
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Marketings Role in Managing Three Customer Connections
Customer
Human Resources,
Marketing,Operations
Product Service Delivery Financial Accountability
Top Management
Operations
,
Accounting
Accounting, Management
Information Systems
HumanResources
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Cross-Functional Connections Explores the Interrelationships Between Marketing and
Four Business Functions
Formulating Business Marketing Strategy:Vital Cross-Functional Connections
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Business Vs Consumer Mktg. Strategy
Business Markets Consumer Markets
1 MarketSegmentation
Industry Characteristics;
Organization Characteristics; End
user markets; Product Application
Consumer demographic, Psychographic
variables
2 Positionin
Positionin on Value monetar
On s cholo ical attributes
Product Policy
worth of benefits; (technology,capabilities, performance,features)
3 Pricing Flexible / customized Standard
4 Channels ofDistribution
Personal Selling Wholesalers / Retailers
5 MarketingResearch
Customer specific; Relationship
specific; Internally generated
Market specific; Survey; External
Agencies
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Customer Value Management
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What is Value in Business Markets?
What being market-orientedmeans in business marketsis changing:
Features of an offering
Supplier needs to translate
Benefits of an offering
What the offering is worthin the customersapplication
Supplier needs to translate
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What is Value in Business Markets?
Value in business marketsis the worth in monetaryterms of the technical, economic, service, and socialbenefits a customer firm receives in exchange forthe price it pays for a market offering.
The fundamental value equation:
(Valuef Pricef ) > (Valuea Pricea)
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Customer Value Management
The essence of customer value management:
-- Deliver superior value to targeted
market segments and customer firms.
-- Get an equitable return on the
value delivered.
Increasingly, to get an equitable return, suppliers must be able
to persuasively demonstrateand documentthe superior value
their offerings deliver.
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Customer Value Management
To understand customer requirements and preferences, and
what it is worth in monetary terms to fulfill them, progressivesuppliers rely on customer value assessment.
They then put this understanding of customer value to use in:
-- Crafting market strategy
--
-- Guiding new offering realization
-- Gaining customers
-- Sustaining customer relationships
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Customer Value Management
Customer value management can be implemented as a processfor improving specific business performance:
Translating business issues into projects
Customer value workshop: Build an initial value model
Customer value research: Data collection and analysis
Constructing a business case for change
Value realization
More broadly, customer value management can be an underlyingphilosophy for running a business.
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Building Customer Value Models
Building the initial value model:
Generate a comprehensivelist of value elements.
Decide which competitors market offering customers ineach (sub)segment regard as the next-best-alternative.
Revisit the value elements to delineate:
o nts o par ty
Points of difference
In initial customer visits, determine points ofcontention.
Focus the model and data-gathering on points ofdifference and points of contention.
Construct a word equationfor each one and be explicitin the assumptions made.
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Building Customer Value Models
An example of a word equation:
A point-of-difference between two large-format, document reproductionsystems was the number of paper jams a customer wouldexperience each day. The word equation for this was expressed as:
Paper Jam Cost Savings B,A =
[(paper jams per day x minutes to fix jam)A
(paper jams per day x minutes to fix jam)B] / 60 minutes perhour
x operator wages per hour x annual work days
An explicit assumption made was that if operator hours could bereduced, he/she can be reassigned for doing to other value-addingtasks.
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Building Customer Value Models
Customer Value Research:
Gain customer co-operation
Data Collection
Analysing the data
Constructing a Business Case for
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Constructing a Business Case forChange
What specific action does the team recommend basedon research?
What resources would be needed to accomplish therecommended changes in doing business?
What are the specific concern in implementing thebusiness case?
What milestones can be specified to chart the progressin accomplishing the change?
What would be the profitability impact if the businesscase for change were approved?
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Building Customer Value Models
Building customers value models takes time and
money, and is not easy.
Yet, can suppliers afford notto build them?
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Value Realization
Senior management approval and continued support ofbusiness case
Refining or extending customer value models
Action plan for implementing business case:
Supporting changes in performance review andcompensation
Devise system for tracking incremental profitability
Create value-based sales tools and sales force training
V l R li i
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Value Realization
Use the customer value model results to create
value-based sales tools:
Value in-use case histories
Value calculators
Value documenters
-- Value assessment as a consultative selling approach
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Understand what customers value
Constructing Customer Value Models
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Constructing Customer Value Models
Generate a comprehensive list of value elements
Identify the economic, social,technical and service
benefits;
Less tangible elements: value placeholders
Conduct a customer value workshop to gather data to
estimate the monetary worth and understand the relative
importance of the benefits compared to BASE
Focus group discussions/ indepth interviews Field visits: Spend a day in the life of your customer
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Constructing Customer Value Models
Validate the model and understand the variance in the
estimates
Create value based sales tools
Value case histories; Report savings to the customer
Value assessment and consultative selling
Tailor supplementary services
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Spend a day in the life of your
customers
Spend a day in the life of your customers
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Spend a day in the life of your customers
No substitute for managers instincts, imagination and
personal knowledge of the market
Single most important skill: instinctive capacity to
empathize with and gain insights from customers
Imaginative probing keeping aside pre-conceived idea
about a clients situation
Market focused leadership essential to meet new marketneeds
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Brands & Branding in
Business Markets
Branding in Business Markets
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Branding in Business Markets
Powerful B2B Brands
GE, ABB, L&T, Caterpillar, Dupont, Fedex, IBM, Intel,
HP, Siemens, 3M, Cisco
Branding as Differentiation Strategy
Products and services associated with a brand and
what attribute sand befits make it distinctive
Top 20 Brands: Brand Finance 2012
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2012-Ranking
Company Brand Value
1 Apple $70.6B
2 Google $47.4B
3 Microsoft $45.8B
Top 20 Brands: Brand Finance 2012
4 IBM $39.135B
5 Walmart $38.319
6 Samsung $38.197
7 General Electric $33.214
8 Coca Cola $31.082
9 Vodafone $30.044
10 Amazon $28.665
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2012-
Ranking
Company Brand Value
11 AT&T $ 28.379
12 Verizon $27.616
13 HSBC 27.597
Top 20 Brands: Brand Finance 2012
14 NTT $26.324
15 Toyoto $24.431
16 Well Fargo $23.229
17 Bank of America $22.91018 McDonalds $22.230
19 Shell $22.021
20 INtel $21.908
Branding
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Branding
Bran Essence
Key point of difference that are the essence and spirit
of the brand in 3-5 words
Nike:
Internal brand mantra: authentic athletic
per ormance
External brand slogan: Just Do it
Brand Slogans:
GE: Imagination at Work HP: INVENT
Xerox: The document company
Branding
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Branding
Brand Charter:
Summary of history and positioning of a brand
Marketing actions should be evaluated against the
brand charter
Strong Brands:
Consistent brand image across customer population
Aligned with the firm strategy
Branding Derived Demand & Fewer
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Branding , Derived Demand & FewerCustomers
Derived demand & ingredient branding
Every firm in the value chain benefits from a strong brand
Business Goods and Services
Raw materials, processed materials, component parts,
subassemblies, Li ht e ui ments; construction: MRO and
services
Services: Supplementary services or standalone intangibleservices like tax advice / investment banking
Brand name differentiates- Bechtel (construction); Cargill
(raw materials), caterpillar (heavy equipment), Dupont(processed materials); Mckinsey consulting; MorganStanley (Banking); Xerox: Light Equipment
Branding and Business Buying
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Branding and Business BuyingBehaviour
Characterised by profit motivated and Budget
constrained customers; rather than products
Buyers: Fewer, Larger, nature of relationship demanded
& importantly buying process
any ac ors; ong per o s; mu p e ec s on s ages
Combination of individual and organisational decision
making process; brands to influence both processes
Branding and Business Buying
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Branding and Business BuyingBehaviour
Decisions made interacting with internal and external
people
Decisions made within organisational goals, resources,
strategy and structure
Organisation in a dynamically changing business
environment (changing technology, products)
Branding and Buying Situation
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g y g
Situation characterized by complexity of the problem
solved, significance, newness of the buying requirement,no of people involved, stages and time taken
Buyers: Branding receptive; highly tangible and low
interest Branding receptive: Found in more risky situation;
formal; thorough and open minded; Use more
suppliers; sophisticated ; better educated and buy in
volumes
Branding and Buying Situation
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g y g
Highly receptive buyers
Typical product oriented re-buys and went by the
book in a structured process
Low interest buyers
Transaction oriented, straight re-buy procurements
ase on conven ence an ow nvo vemen
Over time: New buy- Re- buys- Routine purchase
Brand play different role in different situation
Buying Centre and Branding
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y g g
Initiators, Users, Buyers, Deciders, Influencers,
Gatekeepers Strong brand awareness and favorable attitudes among
dispersed buyers can exert major influence throughoutthe process
Buying authority; veto power; consensus & group
decision makin Self interests; functional area; organizational interests &
multiple buying criteria
Brand as a major tool for building consensus inorganisational perceptions; predisposition and buying
action
Business Buying and Branding
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Individuals take decisions
Individual goals vs organizational goals
Individuals are buying solution to two problems
Or anisations economic and strate ic roblem Their own desire to obtain individual achievement and
rewards
Rational & Emotional Basis
Product related brand association are likely to playmore importance
Branding and Customer relationships
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Customers on the relationship continuum
Chemical company: Low price seekers, dial toners;
techies. Win-win partners
Branding to address different segments
Relationship seekers value corporate brand; reliability
an rus wor ness
Transaction customers: Product performance, pricing
and tangible service attributes
Intel and Microsoft has successfully managed their
complex relationships with OEM and Users throughbranding efforts
Branding Strategy
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Corporate Brand
Sub-brand for different product lines ( Intel- Pentium;Dupont- Teflon)
Firm may be more important than the products
Branding will increase in significance with increase in
user base Brand Value proposition: meaningful to buyers; users;
influencers and deciders in the organisational buying
decision process
Guidelines for B2B Branding
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Differentiate your offer
Symbolic identifier or a shorthand descriptor for the set
of economic, social, service benefits that customers
receive from a suppliers offering
Brands get endowed with meaning through consistent
Dupont brands: Lycra, Teflon, Kevlar etc
Brand associations
Guidelines for B2B Branding
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Capture the value of value placeholders (the intangibles)
Demonstrated value and brand equity may not be the
same
Ingredient Brands: Conveys values of a suppliers
offering to its customers Increases marketing effectiveness: lowers cost of new
product launched
Create emotional attachment or loyalty to an offering
through their association with customer experiences
Guidelines for B2B Branding
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Emphasise a corporate branding approach
Build the corporate brand around brand intangibles such
as expertise, trustworthiness, ease of doing business
and likeability
Internal Branding
Guidelines for B2B Branding
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Branding to be aligned with suppliers business model
and value delivery strategy
Understand the role of brand in the organisatonal buying
process
Basic value proposition to be relevant to all significant
members in the DMU
Examples of Value Models Used in thei d t
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industry
Value Model:Siemens- Value Calculatorshttp://www.energy-efficient-production.siemens.com/en/cost-saving-
potential/calculation-examples.htm
https://www.industry.siemens.com/topics/global/en/energy-efficient-production/energy-saving-tools/energy-saving-calculator/Pages/energy-saving-calculator.aspx?HTTPS=REDIR
Value proposition
http://www.mckinsey.com/client_service/marketing_and_sales/expe
rtise/digital_marketing
Examples of Value Models Used in theindustry
http://www.energy-efficient-production.siemens.com/en/cost-saving-http://www.industry.siemens.com/topics/global/en/energy-efficient-http://www.mckinsey.com/client_service/marketing_and_sales/expertise/digital_marketinghttp://www.industry.siemens.com/topics/global/en/energy-efficient-http://www.energy-efficient-production.siemens.com/en/cost-saving-http://www.mckinsey.com/client_service/marketing_and_sales/expertise/digital_marketinghttp://www.industry.siemens.com/topics/global/en/energy-efficient-http://www.energy-efficient-production.siemens.com/en/cost-saving-7/31/2019 Review- Module I - Understanding Value
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industry
Value -Case studiesInfosys
http://www.infosys.com/global-sourcing/case-studies/Pages/information-services-casestudy.aspx
http://www.infosys.com/global-sourcing/case-
studies/Pages/networking-casestudy.aspx
White Paper: Benefits of Cloud Computinghttp://www.infosys.com/cloud-computing/white-
papers/Documents/realizing-value-proposition.pdf
TCSYou may refer to http://www.tcs.com/Pages/default.aspx to understand
their value prosposition and value based sales tools
http://www.infosys.com/global-sourcing/case-http://www.infosys.com/global-sourcing/case-http://www.infosys.com/cloud-computing/white-http://www.mckinsey.com/client_service/marketing_and_sales/expertise/digital_marketinghttp://www.tcs.com/Pages/default.aspxtohttp://www.tcs.com/Pages/default.aspxtohttp://www.tcs.com/Pages/default.aspxtohttp://www.infosys.com/cloud-computing/white-http://www.infosys.com/global-sourcing/case-http://www.infosys.com/global-sourcing/case-http://www.tcs.com/Pages/default.aspxtohttp://www.infosys.com/cloud-computing/white-http://www.infosys.com/global-sourcing/case-http://www.infosys.com/global-sourcing/case-http://www.mckinsey.com/client_service/marketing_and_sales/expertise/digital_marketing7/31/2019 Review- Module I - Understanding Value
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Thank You