Hill-Rom is a leading B2B firm that dominates a niche in the healthcare industry. Go to http://www.hill-rom.com/usa/, and analyze the product and services offered to hospitals by this firm.Using theor
MBA 5871, Business -to-Business Marketing 1 Cou rse Learning Outcomes for Unit VI Upon completion of this unit, students should be able to: 1. Differentiate between business -to-business (B2B) and business -to-consumer (B2C) marketing. 1.1 Describe how a product line might affect overall cost -in-use within the B2B and the B2C sectors. 4. Discuss the organizational buying complexities, including the long sales cycle, multiple buyers, complex purchase process, and the high volume of sales. 4.1 Explain the B2B buying process that is involved with a purchase within the healthcare industry. Reading Assignment Chapter 12 : Pricing Strategies for Business Markets Unit Lesson Pricing strategies for B2B markets are quite different than that of the B2C model. The underlying idea is similar in that the customer value is the most important concept within the process. Whether B2B or B2C, the price setting process involves a look at the strategic objective s, estimation of demand and its level of elasticity, analysis of costs involved with the production of the product, review of competitor’s prices, and fina lly, establishing the actual prices. Beginning with strategic objectives, a marketer needs to develop an overall list of strategic objectives and goals with respect to their overall pricing policies. For instance, the strategic objectives for a store such as Nordstroms reflect a premium pricing model, while the strategic pricing objectives for Walmart is more about low prices. Elasticity refers to the affect that price changes would have on the quantity sold (demand). In other words, with respect to many Apple products, increases in prices do not seem to have a negative effect on demand. As the B2B organiz ation goes about the process of price setting, they also need to keep a watchful eye on the costs to produce the product with an eye on obtaining the largest profit margin possible in keeping the stakeholders happy. Having said this, they also need to main tain an understanding of the target customer’s price maximum. In other words, the maximum price the target market will pay for the product before they shift their allegiance and buy from the competition. Since B2B involves more decision makers, the prici ng strategies should appeal to the entire group instead of the needs of an individual. While the needs of the entire group should align, this presents a complexity simply because of the human nature of different personalities involved in the B2B buying dec ision. The value proposition within the B2B arena is also much more complex, as there are so many additional factors involved with the purpose. Another area of difference is the higher transaction value. B2B buyers are typically buying tens of thousands of dollars’ worth of products, which will obviously increase the level of scrutiny involved with the purchase decision. Finally, because of all this, decisions within the B2B arena tend to take a longer time, thus increasing the overall costs involved with t he buying process. This suggests that a more process -driven approach might be effective when selling within the B2B sector. Several ideas within this process -driven approach might include understanding that the B2B buyer is interested in being educated and provided with information. Use industry jargon and detailed content when communicating the benefits of the product/service. Another idea is to emphasize the efficiencies that will be realized by the company with the purchase of the product/service. The B2 B buyer is truly interested in how this product will create cost efficiencies and benefits to their organization. Finally, understanding and facilitating the fact that the B2B buyer is looking to develop and maintain a close relationship with their supplie rs. The sales cycles are inherently longer and the decision making process is also longer for each transaction. The pricing model within the B2B world tends to be much more flexible than in the B2C. Concepts like penetration pricing, which involves a low initial price (purpose to attract new customers to try the product) and UNIT VI STUDY GUIDE Pricing Strategies MBA 5871 , Business -to-Business Marketing 2 UNIT x STUDY GUIDE Title skimming, which involves a high initial price (purpose to tap upon those customers that will buy the product no matter the price). The B2B world tends towards a more balanced pricing system. The use of flexible pricing models including bidding is quite apparent. What this means is that the pricing varies, sometimes dependent only on who the buyer actually is. Hutt (2013) discusses several competitive bidding strategies as identified be low: Closed bidding : A bidding process that requires each potential supplier to secure a formal invitation before submitting a written, sealed bid. Since there is no negotiation, this process tends to be fast.
The bids are submitted by the designated date and all are opened at the same time. The selection tends to be made primarily based upon the lowest bid. Many times, those that are bidding do not feel a sense of allegiance as their only motivation is “winning” the bid. Open bidding : A bidding process that allows suppliers to make offers (oral or written) up to a certain date. The advantages of open bidding are that it allows for more creativity on the part of the seller as well as the buyer. Additionally, the buyer psychologically feels that they have control over the pric ing component which tends to instill a greater sense of loyalty. Open bidding also will require a longer buying cycle with negotiation being a part of the process. Advances in technology through the internet have changed the B2B buying process significantly. First, buyers have access to a tremendous amount of information on the internet, which theoretically will reduce their research time and provide a much more accu rate scenario. Competitive pricing can be researched as well as new product information; even in the most technical of B2B fields. In essence, customers can engage in self - directed learning instead of always looking to the sales person for this information . Outwardly, this looks to be positive, as it could reduce the overall selling costs if the sales person is not spending as much of their time “teaching and informing.” It also creates additional expectations on the part of the customer. Customers have a certain level of expectations, whether it be in the product/service quality and benefits, pricing strategies or even distribution offerings. The B2B marketing world is adapting to this new highly informed customer base. Online marketing and social media are becoming a natural part of the B2B landscape much like its B2C sister. Within the current business culture, website development is mandatory, no matter the size of the business. The website needs to be targeted at the appropriate market, appear clean a nd organized, provide necessary information, and the functionality must be understandable and fast. The use of search engine optimization (SEO) should focus on using keywords frequently and appropriately, minimize the use of tables and leverage the links. Another useful tool is that of webinars which have been used as a method to generate leads for quite a while. They have evolved into a tool that is useful for engaging the customer through education and the communication of important information. The B2B marketer must address the pricing strategies with utmost caution to ensure that they understand the pricing expectations and needs of their market. Additionally, B2B marketers need to move beyond traditional thinking that B2B products are commodities with the assumption that they must accept what the market wants to pay. Instead, marketers should look to differentiate their products, service and flexibility allowing the B2B company the opportunity to charge premium prices. Building the confidence to become a disruptive business model with respect to pricing, without having to sacrifice the core business model, can be a reachable objective. Finally, assimilating a method by which the B2B business can share in the value assumed by the customer, will perpetuat e a solid pricing strategy. Reference Hutt, M. D., & Speh, T. W. (2013). Business marketing management: B2B (11th ed.). Mason, OH: South - Western. MBA 5871 , Business -to-Business Marketing 3 UNIT x STUDY GUIDE Title Suggested Reading Carsharing is sl owly becoming a norm in overseas markets. Th is article explains the importance of carsharing and the emergence of this con cept in new markets. Clark, M., Gifford, K., Anable, J., & Le Vine, S. (2015). Business -to-business carsharing: Evidence from Britain of factors asso ciated with employer -based carsharing and its impacts. Transportation , 42 (3), 471 -495.