B2B

ANDSOLUTION SALESPRESENTATION 2

Debatosh Roy
Managing Business Marketing Channels

TOPIC
Debatosh Roy
B2B Marketing Channels

Manufacturer

Direct Channels
Indirect Channels
Direct
Sales

Online
Marketing

Telemarketing

Manufacturers Representatives
Industrial
Distributors

Customer Segments

Debatosh Roy
 Customers are large and well defined.

Direct Sales Approach: Viable When

Customers insist on direct sales.

Sales involve extensive negotiations.

Seller must control the process to ensure proper

implementation of total product package and to
guarantee quick responses to market conditions.

Debatosh Roy
Indirect DistributionGenerally Found Where:
.Markets are fragmented and widely dispersed.
.Low transaction amounts prevail.
.Buyers typically purchase a number of items.

Debatosh Roy
Lead Generation
Triggered by sales call, by customer s response to
direct mail, or by Web request for information, firm
makes initial contact with prospect.
Lead Qualification
Potential customer screened: prospect s need for
product or service, buying interest, funding, and
timeframe for making the purchase all assessed.
Bid and Proposal
Bid and Proposal prepared to meet customer s
requirements (a complex task for large technical
projects)
Negotiations and Sales
Closure
Negotiation of prices, terms, and conditions, followed
by agreement on a binding contract.
Fulfillment
For standardized product or service, delivery of
offering to customer. Configuration, customization,
and installation for more complex sales.
Customer Care and
Support
Post-sale problem resolution, customer guidance, and
ongoing contact to ensure customer retention, loyalty,
and growth.

Typical Sales Cycle

Debatosh Roy
Multichannel Integration Map:
Simple Example of High-Coverage Partnering Model
Salestask
Channel

Lead
generation

Qualification
Bid &
proposal

Negotiation/
sale closure

Fulfillment

Customer care& support

Direct saleschannel(field reps)
Businesspartners
Telechannels

Direct mail
Internet
Sales Cycle
$$$

Occasional support
by sales reps to
help partners
close keystrategic deals
Debatosh Roy
General-line distributors
Stock extensive variety productsSpecialists
Focus on one or few related linesCombination House
Operates in two markets: industrial and consumer

Primary Distributor Classifications

Debatosh Roy
Manufacturer-Rep Channel Used When:

Product is not standard--closer to made-to-order.

Product tends toward technical complexity.
Gross margin is not large.
Relatively few customers, concentrated geographically and
concentrated in few industries.
Customers order relatively infrequently and allow fairly long lead
times.

Debatosh Roy
 Channel design is dynamic process--developing new channels
where none existed and modifying existing channels.
Channel design is active rather than passive task.

Channel
Design
Process

Fig
Debatosh Roy
 Frequently, manager has little flexibility in selecting channel structures
because of trade, company, environmental, and competitive factors.
Firms may impose channel design on managers.

Factors Limiting Choice of Industrial Channel

Availability of Good Intermediaries
Traditional Channel Patterns
Product Characteristics
Company Financial Resources
Competitive Strategies
Geographic Dispersion of Customers

Debatosh Roy
Channel Alternative Issues

.Number of levels in the channel

.Types of intermediaries to use.

.Number of channel intermediaries at each level.
.Number of channels to use.

Debatosh Roy
Evaluating Alternative Channels
Considers all elements of channel design process and important
customer requirements
Need to create ideal channel system that fully addresses customer
needs.

Table14
Channel Administration
Must choose channel participants and arrange to ensure all
obligations are assigned.

Motivate members to perform tasks necessary to achieve

channel objectives.

Control any inter-channel conflict

Control and evaluate performance regularly

Debatosh Roy
Motivating Channel Members
Partnerships
Dealer Advisory Councils
Margins and Commission

Debatosh Roy
Supply Chain Management

Debatosh Roy
Supply Chain Management
Innovative approach to distribution processes that
bolsters links between suppliers and customers and
integrates production and marketing initiatives.
Formal Definition:
Integration of business processes from end user
through original suppliers to provide products, services,
and information that add value for customers at each
stage.

Debatosh Roy
Note key elements of supply chain management and important integration that
must take place among business functions across different organizations within
the supply chain.

Fig
Supply Chain Model

Debatosh Roy
Effective supply chains conduct business as partners and openly
share information across supply chain
Fig
Stages That Move Firms Towards Adopting Supply Chain Management
Debatosh Roy
Supply Chain Management (SMC) Goals
Waste reduction:minimizing duplication of efforts,
harmonizing operations and systems, and enhancing quality.
Time compression:compression of order-to-delivery cycle
time.
Flexible response:meeting customer s unique requirements
in cost-effective manner.
Unit cost reduction:reduce cost per unit to end user by
determining performance level that customer desires

Debatosh Roy
SCM Efficiency & Effectiveness

Internet technology

Supply chain software

Debatosh Roy
Logistics Product Flows
Physical Supply:flows that provide raw
materials, components, and supplies to
production processes

Physical Distribution: flows that deliver

completed products to customers and
channel intermediaries

Debatosh Roy
Managers
can make
virtually
no
logistical
decision
without
evaluating
how it
might
affect
other
logistical
areas.
Table6
Controllable Elements in a Logistics System
Debatosh Roy
Total-Cost Approach Performance variables
1. Total distribution costs.
2. The level of logistical services provided to customers.

Debatosh Roy
Logistical
service
relates to
the
availability
and
delivery of
products to
the
customer.

Responsive logistical service advances customer satisfaction and

develops seller-buyer relationships.
Table6
Common Elements of Logistics Service
Debatosh Roy
B2B Logistics Management
Logistical Facilities
Transportation
Inventory.

Debatosh Roy
Importance of Inventory

.Production and demand not perfectly

matched
.Operating deficiencies in logistical system
often result in product unavailability.

.Business customers cannot predict their

product needs with certainty.

Debatosh Roy
Managing Innovation and New Industrial
Product Development

Debatosh Roy
Product Life Cycle
29
productlifecycle
Debatosh Roy
Product Families
Products that share common platform but have different
specific features and enhancements required for different
consumer sets.
Strategists argue that firms should move away from
planning emphases that center on single products.
The move toward product family perspective requires
close inter-functional working relationships, long-term
technology strategy view, and multiple-year resource
commitment.

Debatosh Roy
Three Approaches to Creating New-Growth Businesses

DimensionsTargeted perform-
ance of productor service
Targeted customersor market applicationEffect on required
business model
(processes and
cost structure)
Sustaining
Innovations
Performance improvement
in attributes most valued by
industry s most
demanding customers.
These improvements may
be incremental or break-
through.
The most attractive (i.e.,
profitable) customersin
mainstream markets who
will pay for improved
performance.
Improves or maintains
profit margins by exploiting
existing processes and cost
structureand making better
use of current competitive
advantages.

Low-EndDisruptionsPerformance goodenough along traditionalmetrics of performance

at low end ofmainstream market.
Overserved customersin
low end of mainstreammarket.
Uses new operating orfinancial approach or both
different combination of
lower gross profit margins
and higher asset utilizationcan earn attractivereturns at discountprices require
d to winbusiness at low end ofmarket.
New-Market
Disruptions
Lower performance in
traditional attributes,
but improved performance
in new attributes typically
simplicity and convenience.
Targets nonconsumption:
customers who historically
lacked money or skill
to buy and use product.
Business model must make
money at lower price per
unit sold, and at unit pro-
duction volumes that will
initially be small. Gross
margin dollars per unit sold
will be significantly lower.

Debatosh Roy
Innovation Winners: High-Technology Characteristics

1.Limited StructureCreating successful products to meet changing customer needs

requires
flexibility but successful product innovators combine this flexibility with a
few rules that are never broken.
2.Real Time Communication and ImprovisationImprovisation involves design and exe
cution of actions that converge with
each other in time.
3.Experimentation: Probing into the FutureSuccessful product portfolios creators
did not invest in any one version of
future but instead used variety of low-cost probes to create options for
future.
4.Time PacingProduct innovators carefully manage transitions between current and
future
projects, while less successful innovators let each project unfold according
to its own schedule.
Debatosh Roy
Product Development Process
33
Debatosh Roy
Market Driven Vs Market Driving
34
Market Driven Strategy
Market Driving Strategy
Nature of
Product/Service
Incremental Innovation
Breakthrough Innovation
Creates
New Product, Line Extension
Truly New Product Platform
Customer Goal
Satisfy/Delight Current
Customers
Create Customers
Nature of customer
Needs
Expressed
Latent
Nature of Market
Research
Quantitative Research
Methods (e.g. customer
surveys, test markets
Qualitative Research
Methods (e.g. lead-user
observations. Focus
groups)

Debatosh Roy
Although definitions of failure somewhat elusive,
research suggests that 40 percent of industrial products
fail to meet objectives.
Fig
Major Drivers of
Firm s New
Product
Performance
Debatosh Roy
New Product Development Process
Successful companies employ high-quality new product development
process give careful attention to execution of activities and decision
points. Benchmarking characteristics:
Firms emphasize upfront market and technical assessments.
Processes feature complete descriptions of product concepts,
product benefits, positioning, and target markets.
Process include tough project go/killdecision points and kill
option was actually used.
New product process are flexible.

Debatosh Roy
Resource Commitments
Three main ingredients:
1.Top management committed resources necessary to meet
firm s objectives for total product effort in firm.
2.R&D budgets were adequate and aligned with stated new
product objectives.
3.Necessary personnel were relieved from other duties and
assigned specifically to new product effort.

Debatosh Roy
Lead user projects are conducted by cross-functional teams that include four to
six
managers from marketing and technical departments; one member serves as project
leader. Team members typically spend 12 to 15 hours per week on projects.

Fig
Lead
User
Method
Debatosh Roy
Four Types: Development Projects
Derivative projectscenter on incremental product enhancements,
incremental process improvements, or incremental changes on both
dimensions.

Platform projectscreate design and components shared by set of

products.

Breakthrough projectsestablish new core products and new core

processes that differ fundamentally from previous generation of
process and product.

Research and developmentcreates knowledge of new materials and

technologies that eventually leads to commercial development more
like pure science.

Debatosh Roy
Quality Function Deployment

First QFD task: identify customer needs.

QFD strength: comes from translating
customer needs into product design attributes.
QFD provides important framework for
bringing critical information on customer
needs together with appropriate engineering
data.

Quality function deployment, or QFD, is a method used to identify

critical customer attributes and to establish a specific link between
customer attributes and product design attributes.

Debatosh Roy
Four Strategic FactorsFor New Product Success
Product advantage refers
to customer perceptions of
product superiority with
respect to quality, cost-
performance ratio, or
function relative to
competitors products.
Marketing synergy
represents the degree of fit
between project needs and
the firm s resources and
marketing skills.
Technical synergy comes
from the fit between project
needs and the firm s R&D
resources and
competencies.
International orientation--
new products designed and
developed to meet foreign
requirements, and targeted
at world or nearest-neighbor
export markets.

Debatosh Roy
Fig
Landscape of
Technology Adoption
Life Cycle
Debatosh Roy
B2B
ANDSOLUTION SALES
PRICING
Debatosh Roy
The PM framework

Pricestrategy

Price
determination

Priceimplementation

Pricecontrolling

Pricing
roadmap

1
Productprices

4
Organization& functions

Price intelligence &

monitoring

11

Price response
framework

Customer
prices

5
Coaching& training

KPIs
12

Communication
in pricing

3
Serviceprices

6
Price
incentives

10

Projectprices

The PM framework covers 12 elements in 4 phases

Debatosh Roy
Know and fulfill your customers' needs
Focus on your customer s need, and take your competitor s
value proposition in account differentiate your offer!

Customer
company

Competitor

Macro
analysis

Market and economic

environment

Micro analysis

Analysis of customers
.Value provided to the
customer
.Customer needs and
benefits
.Willingness to pay

Debatosh Roy
Performance or price not both
the same time
Quality

Service

Distribution

InnovativeProducts

Brand /
Image

Special
Targeting
Customers benefit

Price
Performance

swatch
carlotn
nesp
OR

Debatosh Roy
More for more:Premium strategy: more value for higher price
More for the same:A broader product-or service offering to a given price
The same for less:A comparable product offered for a lower price
Less for much less:Lower quality for a much lower price
More for less:Broader service or product range by offering a lower
price

Value positioning: 5 positions to choose from

company positions itself as premium supplier
with higher prices for more value wherever
possible

Debatosh Roy
Price premium due to superior product quality

Polish imports
Customer statements
Polish cement was not useful
for production because quality
was low and not consistent ...
they still lack quality today.
-Customer A-
Never tried Polish cement;
there was a time when cement
was very expensive and I
considered it but I heard the
quality was not up to what we
needed.
-Customer B-

company'score market

Market allows for a price

premium of 10% on top of
import parity prices

Example

Debatosh Roy
Price premium due to better service offer

Example
Shop furnitureGroup purchasing organizationSelf service terminalMix design, gran
ularometryB2B Credit CardWrapped palletsConcrete analysisTechnical service onsit
ePallets returnOnsite silo program (masonry)
Rail station pickupShop furnitureGroup purchasing organizationSelf service termi
nalMix design, granularometryB2B Credit CardWrapped palletsConcrete analysisTech
nical service onsitePallets returnOnsite silo program (masonry)
Rail station pickupGENERICBAG
BULK
A special masonry
onsite silo is valuable
for small construction
sites

company supports its

bag / retail customers
doing business

company bulk
customers have 24/7
access to cement

very good

not good /
not offered

Service offer
company
Competitor

Debatosh Roy
Price premium due to higher brand equity
Cordoba

Salta/Jujuy

Santa Fe

Cordoba -South

Capital
Federal

Buenos Aires -
North
Lower than competitor

Higher than
competitor

Consumption
center

Relative brand equity

Cordoba -
East

Mendoza

+x $/t-y $/t
End-user
price
premium

Potential for price

increase

Legend

In the Argentinean cement market a strong brand can justify a price

premium

Example
Debatosh Roy
> Price Strategy > Price Premium

A premium strategy should be supported by

premium prices
The main drivers of a price premium usually are:
the product quality
the services provided
the brand (especially in bag markets)

Be aware that these drivers vary from country to

country and from customer segment to customer
segment.

Debatosh Roy
It is crucial to observe your competitors closely

Customer
company

Competitor

Macro
analysis

Market and economic

environment

Micro analysis
Competitive
issues*
.Objectives, pricing
strategies,
behavior
.Capabilities (cost
structure, quality)

Always make sure that you gather competitive information / data

independently!

Debatosh Roy
The four elements of a competitor analysis*

Evaluation of the objectives of relevant

competitors

Analysis of pricing strategies of relevant

competitors

Identification of assumptions which set the basis

for the pricing strategies of competitors

Evaluation of the capabilities and qualities of

relevant competitors

.Matrix of
Competitive
Advantage

.Competition
map
.Target market
shares

Porter suggests:

To do s for company:

Debatosh Roy
Matrix of competitive advantage (MCA)

acceptable

strategic
competitive
advantage

strategic
competitive
disadvantage

over performing

Importance to
the customer

Relative performance

weaker than
next best
competitor

stronger than
next best
competitor

less
important

very
important

We have to be aware what is relevant for our customer and where we are better th
an
our competitor

Debatosh Roy
MCA for external benchmarking

Comparing the relative performance of company GU cement to the

competitor s products shows that the company product does not deserve
a price premium

50100150
Relative Performance

Importance to the
customer

low

high
Brand
equity

Supply reliability

Setting time

Workability

low

high

Holcim

Comp.1

Comp. 2

Competitor 1 providing
higher quality at a lower
price

Competitive Strength

Relative Price
low

high

low

high
Comparing company GU cement (bag) to GU cement (bag) of the two strongest
competitors:

Debatosh Roy
Pitfalls in price determination

Gross price

Net sales

List price

.Regional adjustment (+/-)

.Product premium (+)
.Packaging premium (+)

Base price

.Outbound freight invoiced (+)

.Off-invoice rebates (-)

Justification not
valid any more

Freight invoiced does

not cover freight cost
Project price
below regular
RMX price

Granted
discount not
authorized

Additional services
not taken into
account

No time limit

Product value not

reflected in
premium

Bag premium too low

/ bag price < bulk
price

Customer
price
sensitivity

.Volume discount (-)

.Project adjustment (+/-)
.Promotional discount (-)
.Negotiation discount (-)

Invoice price

Debatosh Roy
Basic rules to set the target price

Customer
Benefit
Costs
Competitors

Cost Based
Pricing

Competition
Based Pricing

Value Based
Pricing

Try to move away from a purely cost and / or

competition driven pricing and start developing a value
based pricing approach

Debatosh Roy
Cost based pricing
Characteristics

Costs

+
=

Price

Markup

.Basis: Cost which need to be

covered
.Markup on top of these costs
(margin)
.The sum of costs and markup result
in the price

Easy to calculateEnsuring marginsPrecise knowledge of cost

structure necessaryoften: random mark-upsCustomers willingness to pay is
disregarded .giving away
possible profitsCompetitive prices are ignored:
Threat of setting the prices too
high or too low
Advantages and
disadvantages

+
+

Debatosh Roy
Competition based pricing

Characteristics
<

.The higher the competitive intensity,

the higher the adjustment
.The competitive intensity depends
mainly on the relative distance of the
suppliers to the market / the number
of suppliers in one market

Reflects competitive situation in

the market
Takes into account the (freight)
cost advantages and
disadvantages of the competitors
Strategies of competitors need to
be considered
Willingness to pay of consumers
is disregarded -> giving away
possible profits

Advantages and
disadvantages
Competitive intensity
BP*
BP*

LP*
LP*
* BP = Base price, LP = List price
Low low
adjustment

High high
adjustment

+
+

-
Debatosh Roy
Value based pricing
Characteristics
Competitive
reference
Added
value
company

Added
value
competitor

Economic
value
customer

=
.Competitive reference = base offer /
product
.Adjusted by added value company
minus added value competitor
.Total value company = Economic value
for the customer buying from company

Sustainable base for pricing

since additional value is hard to
copyCaptures the customers
willingness to payTranslates the premium strategy
( more for more ) into actionDifficult to quantify (additional)
valueDepends very much on soft
facts
Advantages and
disadvantages

+
-

+
Debatosh Roy
How to estimate the value

Stage 1:
Link features to
value drivers
Stage 2:
Preliminary value
quantification
Stage 3:
Test and validate
model
.Determine competitive
alternative
.Develop initial list of
value drivers addressed
by differentiated
features

.Identify competitive
alternative
.Hypothesized value
drivers
.Feature-Benefit value
map

.Assess feature-specific
differential value relative
to competitors
.Develop preliminary
value algorithms

.Differentiate value
quantification formulas
.Total economic value
calculations

.Collect customer data

and finalize value
drivers
.Quantify the monetary
value delivered by value
drivers

.Finalize economic value

model
Process stages

Objectives
Outputs

Debatosh Roy
Service classification

Consider the importance of the services per segment, and assess the
relative performance / value added compared to your competitor

Competitive
disadvantage
Competitive
advantage
Hygiene
"Over-performing"

Importance to
the customers

Relative performance

high

low

weaker

stronger

Improve performance /
improve communication

Raise importance orreduce performance (costs)

Debatosh Roy
Willingness to pay for services

Services

Standard("must haves")

Special

Performance
advantage company

No perceived
performance
difference

Willingness
to pay

No willingness
to pay

Examples

Performanceadvantage
competitor

.Flexible delivery
.Special delivery
needs
.Laboratory services

.R&D support
.Onsite tech
support
.Technical training

.Emergency
delivery
.Site safety audit

.Pallet
housing

.Online ordering

Before pricing the services, the willingness to pay has to

be assessed first

Debatosh Roy
Price Management: Price implementation

The price implementation aims to get the prices company deserves.

Organization & functions

Coaching & training.

Price incentives

10

.check organizational requirements: structure /

process for pricing and the pricing routines

.coaching, training, workshops to enhance the

pricing confidence of management and sales

.for management and sales in the respective

reward systems in order to align incentives and
targets

Price
strategy
Price
determination
Priceimplementation
Pricecontrolling

.Building a comprehensive price data and information base

.Enhancement of pricing confidence and strength across all organizational
layers
.Alignment of incentive/remuneration scheme to pricing strategy and targets

Debatosh Roy
company Price Management: Price implementation

The price implementation aims to get the prices company deserves.

Price
strategy

Price
determination

Priceimplementation

Pricecontrolling

Price intelligence& monitoring

11
KPIs

12
.provision of tools and analytical
concepts for the decision support of
management in pricing

.(additional) price performance indicators

to steer and control according to
strategy targets

Additional pricing KPIs (e.g. price gap to target, deviations from target share
/
margin)
Debatosh Roy
Thank You

Debatosh Roy