Value Selling – Creating Value

Lecture 3
Business Market Management: Introduction & Overview
Crafting Managing New Business
Gaining
Market Market Offering Channel
Customers
Strategy Offerings Realization Management

Sustain
Firms as Understanding Reseller
Creating Value Delivering Value
Customers Value Relationships

Guiding Principles
Market Sustaining
Sensing Customer
Regard Value as the Cornerstone Relationships

Focus on Business Market Processes

Stress Doing Business Across Borders

Accentuate Working Relationships and Business Networks

Crafting Market Strategy: Overview

• Combining Market Sensing and Understanding Firms as Customers supplier understands what market
segments and firm value.
• Combine with Resources to make decisions where and how to add value and be meaningfully different
• Resources provide capacity to deliver value
• Crafting Market Strategy is the process of studying how to exploit a business’s resources to achieve both
short term and long-term marketplace success, deciding on a course of action to pursue and flexibly
updating as learning occurs during implementation
• Deliberate Strategy vs. Emergent Strategy
• Crafting strategy calls for significant participation from different functional areas
• Strategy vs Operational Effectiveness
• Resources are basic building blocks of strategy.
• Concept of Entry Barriers
Crafting Market Strategy
Business Strategy

Resources Value Based Strategies

• Core Competencies • Product Leadership Update Business
• Capabilities • Customer Intimacy Strategy
• Orderly Advance
• Partners Resources • Operational Excellence
• Radical Change

d ge te
w l era t
e
o ib e n
Kn Del erg
Market Strategy • Em
•

What do we How will we Update Market Strategy

What do we want to • Orderly Advance
know? do it?
accomplish? • Radical Change
Resource based view of the Firm
Core Competencies
• Something that the firm does exceptionally well and is a distinctive competence
• Usually technical & production skills
• Should provide potential access, provide significant contribution to customer benefit and difficult for competitors to
imitate
• Track own and competitors unexpected success and unexpected failures
Capabilities
• More broad-based value chain behavior typically better than competitors.
• More visible to end Customers than Core Competencies.
Brands as resource (shorthand for identifying supplier and promise of value delivery)
• Brand Equity – reputation – helps get preferential treatment for trial - examples - Lexus (Toyota), ProLiant (HP)
• Establishing Brand Hierarchy – example HP ProLiant DL380
• Impacts valuation during M&A
Outside Partner Resources – like strategic alliances. It is a strategic decision.
• Firms may exchange or pool resources
Business Strategy as Context for Market Strategy
Doing different things as compared to competition not doing same things differently
Business Strategy harmonizes Market Strategy, Sourcing Strategy, Technology Strategy etc.
Resource Based view of the Firm
Threat of
• Resource are a basic building blocks – technical know how, equipment, people, capital New
Entrants
• Combines internal perspective of the firm with external perspective of the firm
• Resources must pass five external market tests
Rivalry
1. Inimitability among Threat of
Existing Substitutes
2. Durability Competitors
Porter 5
3. Appropriability Forces
4. Substitutability
5. Competitive Superiority
Bargaining Bargaining
Power of Power of
Suppliers Buyers
Fundamental Value Based Strategies
Product Leadership
• Pursues innovation relentlessly, seeks to obsolete its
own products before competition
• Appeals to technophiles & visionaries
Customer Intimacy
• Precise segmentation and deep understanding of
customer – measure share of wallet
• Anticipate changes in customers requirements and
preferences over time to sustain superior value
• Appeals to pragmatists
Operational Excellence
• Competitive pricing and ease of doing business
• Appeals to conservatives & laggards
Strategy Making
Who makes strategy?
• Top Management – usually have financial view
• Lower Management – closer to market – therefore marketplace view
• Middle Management – act as bridge – entrepreneurial ideas, leverage informal networks, attuned to employee motivation and
emotional needs and provide balance between continuity and change
• Management Values play crucial role – empowerment, encouraging feedback, listening and responsive
Defining Purpose
• Vision Statement & Mission Statement
• Strategic intent – may prove to be too narrow at times
• Purpose of the firm – ambition that engages employees
Nature of Strategy
• Stretch and Leverage Resources – concentrate, accumulate, complement
• Radical change – triggered by M&A, technology shift, entry of new competition, steady loss of business
• Orderly Advance punctuated by Radical ChangePlanning is a mechanism of learning
• Allows for management to validate their market views and help build institutional learning
• Meaningful planning steps – What do we know? What do we want to accomplish? How will we do it?
Planning Market Strategy in Business Markets Paralysis by
Analysis or
Extinction by
What do we know? Instinct
• Based on facts, not opinions & beliefs
• Recent Performance Review – review against previous plan objectives & assumptions – establish correct
causality & test alternative hypotheses. Establishes accountability.
• Gather Essential Market Information revalidate segmentation, growth assumptions, share of wallet, offering
value and SWOT analysis – Defensive Strategy vs Offensive Strategy.
• Real time indicators – pipeline, order, backlogs, inventory etc. The concept of Lead and Lag Indicators
• Scenario Construction – plausible future
What do we want to accomplish? Build consensus.
Focus on goals,
• Not just financial metrics but something higher! Achievement vs. Accomplishment. issues (not
• By when? Timelines are important personalities),
fairness & equity
• Targeting specific market segments – immediate profit, future profit or even learning!
• Setting Goals (long term) & Objectives (short term). Objectives are milestones to achieve goals.
Planning Market Strategy in Business Markets (contd.)
What do we want to accomplish? Contd.
• Measures – share of wallet, new customers, sales of new products or cash flows are good measure of bridge between market
performance and financial performance
• Balance Scorecard – customer, financial, internal business process and learning objectives
• Link objectives with appropriate individual performance plans and rewards
• Positioning – establish and sustain intended meaning for a market offering in the minds of targeted customers

Customer Value Proposition
Consists of
Answers the customer question
Requires knowledge of
Has the potential pitfall
All Benefits Favorable Points-of-difference
All benefits from market All favorable points-of-
offering difference of market offering
compared to next best
alternative
Why should we buy your Why should we buy from you &
offering? not from competitor?
Own market offering Own & next best alternative
market offering
Benefit assertion Value presumption
Resonating Focus (or DVP)
1 or 2 points-of-difference and
1 point of parity which deliver
greatest value
What is most worthwhile to
keep in mind when buying from
you?
How own market offering
delivers superior value
compared to next best
alternative
Requires customer value
research
Planning Market Strategy in Business Markets (contd.)
What do we want to accomplish? Contd.
• Building brands in business markets. Could be difficult & time consuming but rewarding.
Are we ready?
• How does the brand strategy support our business strategy?
• What is our aspirational brand identity and how do get there?
• What value proposition is most valuable to our customers?
• How do I align my organization to make the brand and value proposition a reality?
How to do it?
• Adopt corporate or family branding strategy and create well defined brand hierarchy,
• Link non-product-related imagery (based on social benefits like “ease of use”)
• Employ full range of marketing communications options
• Leverage customer equity
• Segment market carefully and develop tailored branding and marketing program
• Infosys example – employee recruitment, ESOPs, Mysore Campus, NASDAQ listing, NRN & NN brands, Charity, Chairs
& Awards, PR
Planning Market Strategy in Business Markets (contd.)
How will we do it?
• Implementation is the key. Coordination is critical.
• Develop an action plan
• What, Who, When and How.
• Gaining inputs for programs and commitment for execution
• Coordination & Governance plan.
• Provide necessary budgetary support
• Market and Sales Program
• Two external factors - quantifiable objectives and measures of feedback
• Four internal factors – actions to be taken, responsibilities, timing & budget
• Implementation skills – Interaction, Allocation, Monitoring and Organizing Skills
• Learning & Adapting – Customer Advisory Board, Reseller Councils, Pilot Programs – replicating best
practices
Business Strategy

Mission

Goals

Objectives

Marketing oriented efforts

Strategies

Sales oriented efforts Tactics

13
Business Market Management: Introduction & Overview
Crafting Managing New Business
Gaining
Market Market Offering Channel
Customers
Strategy Offerings Realization Management

Sustain
Firms as Understanding Reseller
Creating Value Delivering Value
Customers Value Relationships

Guiding Principles
Market Sustaining
Sensing Customer
Regard Value as the Cornerstone Relationships

Focus on Business Market Processes

Stress Doing Business Across Borders

Accentuate Working Relationships and Business Networks

Managing Market Offerings
Managing Market Offerings is the process of putting products, services, programs and systems together in ways
that create greatest value for targeted market segments and customer firms
• Core Product – fundamental functional performance
• Augment Core Product through:
• Services
• Fulfillment – availability assurance, emergency delivery, installation, training,
Core
maintenance, disposal, recycling Product
• Technical – specification, testing & analysis, troubleshooting, calibration, customer
productivity improvement Services

• Programs Programs
• Economic – terms & conditions, payment terms, discounts, allowances, rebates,
warranty, guaranteed cost savings Systems
• Relationship – advice & consulting, design, process engineering, cost-performance
analysis, joint marketing
• Systems
• Linking – order management, extranet, automated replenishment, ERP, Service
Management
• Efficiency – information and design intranet, expert systems, integrated logistics,
asset management
Managing Market Offerings

Constructing Flexible Market Offerings

Assess Formulate Prepare to

Articulate Create Value for
Customer Value Flexible Market implement
Present Market targeted segments
and Supplier Offerings by Flexible Market
Offering in home market
Cost Segments Offering

Apply Value
Based Pricing

Managing Market Offerings Across Borders

Adapting Create Value for

Market Pricing Across targeted segments
Offerings Borders in other country
Across Borders markets
Conventional Thinking about Market Offerings
• Commoditization pressure due to market maturing & customers gaining experience
• The tunnel vision of commodity markets – there is no such thing as commodity
• Understanding the true extent of commoditization
• Rebuilding differentiation – look at overall delivery of value. Understanding usage.
• Service characteristics are fundamentally different due to
• Intangibility
• Inseparability of production and consumption
• Perishability
• Heterogeneity
• Product Services form a continuum

Product Tangibility Continuum Services

• Rebuilding differentiation – creation of knowledge banks. Best Practices Database. Building leveraging expertise.
• Change customer’s frame of reference.
Constructing Flexible Market Offerings
• Success depends on balancing three conflicting requirements
• Markets are getting highly fragmented and customers demanding customized offerings
• Customers are uncompromising in their demands for lowest price or lowest total cost
• Most purchasers take quality as a given and believe that competing core products cannot have too much
differentiation
• So, differentiation must mostly come from services, programs and systems
• Option I: Mass Customization is a capability to offer individually specified products or services on a large
scale
• Option II: Flexible Market Offering can be through a few well-chosen naked solution each wrapped in a few
well- chosen options. Typically, less expensive to implement than Mass Customization.
• Flexible Market Offerings can have Product component or Service component
• On Product side flexibility is through flexible manufacturing, modularization and product platform design
• On Service side flexibility is through naked solutions with options
• Articulate Present Market Offering by breaking down total offering into Service, Program and Systems
components and then categorizing them as standard, optional or not offered
Flexible Market Offerings
• Structured questioning of all stakeholders who touch customers reveal
• True breadth of Market Offering
• Arbitrary Nature of Charges
• Lack of variation across segments
• Assess customer value and supplier cost
• Assess services cost – ABC – service costs are buried, problems of allocation – levels of service - time & people equations
• Assessing values and costs correctly can reduce value drain
• Formulate Flexible Market Offering by Market Segment. Undifferentiated services as Standard. Unique services as Optional

Service Element Deployment

Service Element Status
Existing “Standard” Service
Existing “Optional” Service
New Service
Do Not Market
Prune from standard offering
Discontinue option
Keep on shelf
Market as “Standard”
Retain in standard offering
Enhance standard offering
Augment standard offering
Market as “Option”
Recast as surcharge option
Retain as value-added option
Introduce as value-added
option

• Pricing is a separate strategy – could be higher, lower or at par with the value delivered
• Pricing reinforces value of services to both customers and salesperson
Service Elements Deployment Examples
Service Element Deployment
Service Element Status Do Not Market Market as “Standard” Market as “Option”
Existing “Standard” Service Prune from standard offering Retain in standard offering Recast as surcharge option
Existing “Optional” Service Discontinue option Enhance standard offering Retain as value-added option
New Service Keep on shelf Augment standard offering Introduce as value-added
option

• Prune from standard offering – rarely used services, value drain services
• Retain in standard offering – highly valued services (online ordering), perceived as industry standards
• Recast as surcharge options – infrequent services. Litmus test for really valued services. Create different levels. Do
not pay option
• Discontinue option – whose costs are greater than what customers pay (like insurance cover)
• Enhance standard offering – to create more value
• Retain as value add – introduce bonus dollars with or without cashback
• Keep on shelf – market may not be ready
• Augment standard offering – to thwart or stymie competition (erect entry barriers) – incremental cost incurred
• Value added options – offers the greatest flexibility
Thank You