Page 222 - Marketing Management

ANALYZING BUSINESS MARKETS | CHAPTER 7 199

To develop compelling value propositions, business marketers need to better understand
how business buyers arrive at their valuations. 43 Researchers studying how business marketers
assess customer value found eight different customer value assessment (CVA) methods.
Companies tended to use the simpler methods, although the more sophisticated ones promise
to produce a more accurate picture of CPV (see “Marketing Memo: Developing Compelling
Customer Value Propositions”).
The choice of attributes and their relative importance varies with the buying situation.
Delivery reliability, price, and supplier reputation are important for routine-order products. For
procedural-problem products, such as a copying machine, the three most important attributes
are technical service, supplier flexibility, and product reliability. For political-problem products
that stir rivalries in the organization (such as the choice of a computer system), the most
important attributes are price, supplier reputation, product reliability, service reliability, and
supplier flexibility.

OVERCOMING PRICE PRESSURES The buying center may attempt to negotiate with
preferred suppliers for better prices and terms before making the final selection. Despite moves
toward strategic sourcing, partnering, and participation in cross-functional teams, buyers still
spend a large chunk of their time haggling with suppliers on price. The number of price-oriented
buyers can vary by country, depending on customer preferences for different service configurations
and characteristics of the customer’s organization. 44

marketing
Memo Developing Compelling Customer Value Propositions

To command price premiums in competitive B2B markets, firms must create 7. Compositional approach—Ask customers to attach a monetary value
compelling customer value propositions. The first step is to research the to each of three alternative levels of a given attribute. Repeat for other
customer. Here are a number of productive research methods: attributes, then add the values together for any offer configuration.
8. Importance ratings—Ask customers to rate the importance of different
1. Internal engineering assessment—Have company engineers use
attributes and their suppliers’ performance on each.
laboratory tests to estimate the product’s performance characteris-
tics. Weakness: Ignores the fact that the product will have different
Having done this research,you can specify the customer value proposition,follow-
economic value in different applications.
ing a number of important principles. First, clearly substantiate value claims by
2. Field value-in-use assessment—Interview customers about how costs concretely specifying the differences between your offerings and those of com-
of using a new product compare to those of using an incumbent. The petitors on the dimensions that matter most to the customer.Rockwell Automation
task is to assess how much each cost element is worth to the buyer. determined the cost savings customers would realize from purchasing its pump
3. Focus-group value assessment—Ask customers in a focus group what instead of a competitor’s by using industry-standard metrics of functionality
value they would put on potential market offerings. and performance: kilowatt-hours spent, number of operating hours per year, and
dollars per kilowatt-hour.Also, make the financial implications obvious.
4. Direct survey questions—Ask customers to place a direct dollar value
Second,document the value delivered by creating written accounts of costs
on one or more changes in the market offering.
savings or added value that existing customers have actually captured by using
5. Conjoint analysis—Ask customers to rank their preferences for alterna-
your offerings. Chemical producer Akzo Nobel conducted a two-week pilot on a
tive market offerings or concepts. Use statistical analysis to estimate the
production reactor at a prospective customer’s facility to document points-of-
implicit value placed on each attribute.
parity and points-of-difference of its high-purity metal organics product.
6. Benchmarks—Show customers a “benchmark” offering and then a new- Finally, make sure the method of creating a customer value proposition is
market offering.Ask how much more they would pay for the new offering well implemented within the company, and train and reward employees for
or how much less they would pay if certain features were removed from developing a compelling one. Quaker Chemical conducts training programs
the benchmark offering. for its managers that include a competition to develop the best proposals.
Sources: James C. Anderson, Nirmalya Kumar, and James A. Narus, Value Merchants: Demonstrating and Documenting Superior Value in Business Markets. (Boston:
Harvard Business School Press, 2007); James C. Anderson, James A. Narus, and Wouter van Rossum, “Customer Value Propositions in Business Markets,” Harvard
Business Review, March 2006, pp. 2–10; James C. Anderson and James A. Narus, “Business Marketing: Understanding What Customers Value,” Harvard Business
Review, November 1998, pp. 53–65.