L6, Pricing and marketing communication and selling Flashcards
what is commoditization?
Convincing suppliers that no differences exists among offerings
- Business market managers need ro persuasively demonstrate to customers that their offering is different in valuable ways
What is a commodity magnet?
An inexorable pull on a market towards commoditization
what does market offerings contain?
- supplementary services, programs and systems that enhance the core product
- Provides additional value to the customers
How do you build a market offering?
- examine the differences between their offerings and competitors
- consider data to understand competitors prices’
- validate own marketing pricing
- gain estimate of their share of customer’s business
Which are the steps for rebuilding differentiation?
- Creating knowledge banks
- Search for knowledge valuable for customers, but it’s difficult for them to gain
- best practices database - building leveraging expertise
- Search for problems that a number of customers experience
- Offer solutions to solve problems - changing the customer’s frame of reference
- focus customer’s attention to total cost of product - building flexibility into their market offerings
- customers within a segment nay be the same in many requirements but remain different in others
How do you construct flexible market offerings?
Balancing 3 pervasive conflicting requirements.
- Markets are becoming highly fragmented
—> customers are requesting and getting more customized offering - Customers uncompromising in demand for lowest price or lowest total cost
- Purchasers take quality as a given and few meaningful differences separate competing products
Name some facts of flexible market offerings!
- Standard packages:
- Designed to meet the needs of the average customer - Vanilla:
- Offered across all segments - Naked solutions:
- Bare minimum of products or services that alls gement members uniformly value - Options:
- Offered separately for those segment members that value them - Mass customization:
- Capability to offer individually specified products or services on a large scale:
—> Elicitation
—> Flexibility
—> Logistics
Conclusion:
- keep the standard offering as naked as possible
- only services, programs and systems that all firms within a segment highly value should be standard
Important aspects when choosing a pricing strategy?
- The pricing strategy needs to be tightly related to the other dimensions of the marketing program
- the seller’s compensation for the offering
- the value equation
Describe the value equation?
Offering1=(value-price) > (value-price)=offering 2
what are the three major pricing strategies?
PERCEIVED VALUE
1. Customer value-based pricing
TRADITIONAL PRICING
- Cost based pricing
- Competition based pricing
What is value-based pricing?
- pricing are set on a customers’ perceived value of the product or service
- Focuses onsetting prices high enough to maximize profits and maintain a solid customer base
—> quantifying economic value - Different customer groups have different value
—> segmentation and willingness to pay
—> “What is the difference in the worth of the two offerings to my firm?”
Pricing strategies for new products?
- Skimming pricing strategy
—> high introduction price to use that the price sensitivity varies among buyers
—> requires safety arrangements - e.g. patents or that the firm is technologically ahead of competitors - Penetration pricing strategy
—> Low introduction price to take a large marketshare early and to scare competitors to follow
Name some more pricing concepts?
- Target pricing
- target costing
- price sensitivity/ elasticity
- competitive bidding
What is target pricing?
What is a customer willing to pay?
—> Estimate portion of the price for different components
What is target costing?
From total costs , the firm estimates the total cost for different systems, sub-systems. Then, a supplier is requested to come up with a product offering corresponding this total cost
What is price sensitivity/elsasticity?
The degree to which the price of a product affects consumers’ purchasing behaviors measures by price elasticity. E.g. gasoline
What is competitive bidding?
Might be regulated by law
What is the prospecting funnel?
There are different objectives for communication at different stages of the “selling process”. Early in the process it might be of big importance to e.g. create awareness and interest to create leads and inquiries. Later in the process the objective is rather to create evaluation, trial and adoption. What objective you have might depend on the number of customer ju aim to target. Earlier in the process it’s leads and inquiries and then later stages as prospects, new orders and customers and then to stablished accounts. Different promotional tools are suitable for different stages and should be selected according to in what stage you are in the process.
what are the different communications objectives at the different stages?
- awareness
- interest
- evaluation
- trial
- adoption
what is advertisement?
- A form of communication to persuade others
2. Different media can be used : print, online, direct mail
what is the role of advertisement for b2b companies?
- advertising should be used together with personal selling to facilitate personal selling
- cost efficient way to reach out to many of the target audience
- Create awareness of firms and products
- Strengthen the brand of a firm
name some steps in developing an advertisement program
- Set advertisement objectives and define target market
- Determine the budget
- develop the message
- select the media
- Evaluate advertisement effectiveness
Name some facts about why trade shows are important!
- reach out to many
- cost efficient
- new products can be displayed
- potential customers can feel the product
- potential customers can be identified
- identify decision influencers
- 83% ser influencers
- free publicity
- personal contact for further dialogue
- spread information about product
- get to know about potential application problems
- receive orders
- manage customer problems
- approach geographical markets
How do you manage a trade show?
- formulate trade show objectives
- select trade shows
- design the booth
- undertaking pre-show marketing
- participating the tradeshow
- carry out follow up and post-show events
how can u evaluate trade shows?
- are you measuring the right thing?
—> how many that enters the booth might not indicate how many that took in the message - important to find a good way to measure
- set objectives that can be measured
- do not set out objectives only because they are easy to measure
what is public relations PR?
- the management of beneficial relationships between an organisation and it’s publics, such as customers, suppliers, employees, competitors, shareholders, investors, politicians and the press
- offers a legitimacy and credibility that payed advertising does not have lack of control.
- “fall of advertisement, rise of the PR”
how can the selling effort be organized?
- product, geography, market
2. Key account managers and customer teams for the most important customers
Name different sales approaches?
- transactional selling
- consultative selling
- enterprice selling
what are the different selling stages?
- planning the call
- opening the call
- investigating requirements
- proposing solutions
- gaining the order
- after sales
what is SPIN selling`
Situation questions
Problem questions
Implication questions
Need-payoff questions
The role of personal selling/direct selling/direct channels`
- A central value creation in B2B
—> complex offering require personal selling - Personal relationships are important
- Input to marketing information system
—> provides information about customers and competitors - Important for internal information sharing
—> provides information to other functions in the firm
how is value created through direct channels?
- creating a sales force of value merchants
- internally promote a value-based philosophy and culture
- train value merchants
- compensate based on profitability
- using value merchants among prospective customers
- disigning integrated logistics system
what is a value merchant?
recognizes the suppliers own costs and the value to the customer for each market offering and works to obtain a fair return for both the supplier firm and customer firm
what is integrated market communication (ICM)?
Advertisement, online media, trade shows, PR and personal selling need to be integrated
Comprehensive integrated marketing communication program
What is a commodity?
— A product where price is the only thing that differentiates from competitors.
— Offerings tend to become undifferentiated over time, and become commodity in the eyes of the customers
two strategis for differentiating undifferentiated offerings?
- Market Focus
2. Offering reformation
Describe market focus?
Find subsegments that value market offerings differently
—> might loose some customers that are unwilling to pay for e.g. services etc. (stripped down product versions could be offered to these customers)
—> remaining customers are profitable
Describe offering reformation strategy!
— Reconstitute the product or augmented services, programs, system in ways that add value or reduce cost for the customer.
— Need for total customer cost perspective rather than an simple acquisition price perspective
— build value models
what is a value merchant?
— Value Merchants tailor their market offerings to varying customer requirements and preferences
— They put together naked solutions, with options for each market segment.
