Pricing in business markets is important in its application. Understand some key B2B pricing approaches for solution selling.

1. Price, Cost and Value in
Business Markets
Overview

2. Pricing importance!
IF OTHER ASPECTS OF MARKETING STRATEGY ARE
SOUND, BUT PRICING POLICY IS FLAWED THEN A
COMPANY MAY FAIL.

3. The Problems of Pricing
• Business marketers may have to negotiate
individually with each customer.
• They may to work to a fixed specification that
includes price.
• They may have long-term contracts that specify
that the price reduces each year.
• They may not be able to identify their actual
costs.
• They have to estimate the customers full costs.
• They must also think about the value of his
customer relationship.

4. Profit
COMES BY PROVIDING A SOLUTION FOR A
CUSTOMER’S PROBLEM AT A PRICE THAT EXCEEDS
THE SUPPLIER’S COSTS.

5. But!!!!
• The value of a solution varies for each customer.
• Customers often find it hard to judge value.
• Problems vary in difficulty and costs vary accordingly.
• Customers may not appreciate this or pay for it.
• The difficulty of solving a problem depends on the
customers skills.
• Minor changes in an offering may have a dramatic
effect on supplier’s costs.
• Customers may value some relationships differently
from others.

6. B2C Vs B2B Pricing

7. The price that the customer is prepared to pay
will depend on:
• The importance of the problem of the customer.
• The extent to which the offering provides a
solution to its problem.
• The value to the customer of its relationship
with the supplier.
• The total costs that the customer must incur in
order to obtain the solution.
• The number and characteristics of alternative
suppliers and offerings.

8. Pricing skills for the business marketer
• To identify the problems of different customers.
• To assess the price and other costs that each
customer is prepared to incur.
• To choose which customers and which of their
problems it will attempt to solve.
• To develop an offering within its own cost
structure and the price the customer is
prepared to pay.
• To manage the process of fulfilling the offering
so as to ensure that received price exceeds
costs.

9. Pricing for simple customer problems
• Customer will have no need uncertainty.
• Customer has no market uncertainty.
• Main concern is its transaction uncertainty.
• Supplier must compete by reliably providing a
fixed offering at the lowest price.
• Profit will depend on its transfer abilities.

10. Pricing for complex customer
problems
• It may be difficult for a customer to identify
a suitable solution.
• It may also be difficult for a potential
supplier to immediately provide an
offering.
• Solution may require adaptations by both
the customer and supplier.
• Solution requires complex relationship.

11. Pricing for complex customer problems
(continued)
• Both customer and supplier find it difficult
to identify costs of solving the problem.
• If there is no relationship there is no
relationship then the supplier will have to
develop one.
• The supplier will need to include costs and
risks of relationship building and
adaptations in pricing calculations.

12. This depends on:
• The costs of solving the problem.
• The likely revenue.
• The effects of solving it on this and other
relationships.
• The effects on the relationship of not
solving it, or of failing to solve it.

13. Value Assessment in Business
Markets

14. Value Assessment Methods
Value Assessment: work process of
obtaining an estimate of the worth in
monetary terms of some present or
proposed market offerings or elements of
it.
Business Market Management, 3rd edition 14

15. Value Assessment Methods
Internal
Focus Group
Engineering Benchmarks
Value Assessment
Assessment
Field Value-in Use Direct Survey Compositional
Assessment Questions Approach
Indirect Survey
Conjoint Analysis Importance Rating
Questions
Business Market Management, 3rd edition 15

16. Customer Value Management
Goals:
1. Deliver superior value to targeted market
segments and customer firms
2. Get an equitable return on the value delivered
To gain an equitable return on value, suppliers must
be able to persuasively demonstrate and document
superior value relative to next-best alternative
16

17. Customer Value Workshop
1. List all the elements for the marketing
offering under consideration
2. Write a list of value elements, in a quick
fashion, drawing on collective experience.
3. What are the next best alternative offerings
in the minds of the customer for all
segments to be investigated.
4. Apply the value equation

18. Customer Value Workshop
Product Solution Example: High end photo copier
(cost saving)
Paper Jam Cost Savings B, A =
[(paper jambs per day x
(Valuef – Pricef ) > (Valuea – Pricea ) minutes to fix jam) A - (paper
jams per day x minutes to fix
(Valuef – Valuea) > (Pricef – Pricea ) jam)B ] / 60 minutes per hour
x operator wages per hour x
annual work days
Valuef, a > (Pricef – Pricea )
Paper Jam Cost Savings B, A =
[(3 x 10)A – (1 x10)B ] /60 x
$31.82 x 240 = $2,545.60
Business Market Management, 3rd edition -18

19. Customer Value Workshop
Product Solution Example: 3M Abrasive Disks
used by auto panel beaters. (cost saving)
Auto Repair Cost Savings B, A =
[(discs used per day x minutes to
(Valuef – Pricef ) > (Valuea – Pricea ) change disc on sander) A - (discs
used per day x minutes to fix disc
on sander)B ] / 60 minutes per hour
(Valuef – Valuea) > (Pricef – Pricea ) x operator wages per hour x annual
work days
Valuef, a > (Pricef – Pricea )
Auto Repair Cost Saving B, A =
[(50 x 5)A – (30 x5)B ] /60 x
$35 x 240 = $14,000
Business Market Management, 3rd edition -19

20. Tailored Pricing in Business
Markets

21. Tailored Pricing

22. Summary
• Price is only one of the customer costs.
• The offering and the relationship have value
to the customer and the supplier.
• A Supplier costs are not limited to those of
producing and delivering its offering.
• A marketer must have accurate and timely
information on costs and revenue.

23. Summary
• A marketer must control discounts.
• The marketer must tailor price to
customer views and problems.
• The marketer must standardise price
wherever possible.
• Use value assessment and tailored
pricing methods to demonstrate
customer value,

24. You are welcome to contact Nigel Bairstow at B2B
Whiteboard your source of B2B Asia / Pacific
marketing advice
http://www.linkedin.com/pub/nigel-bairstow/6/41b/726
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