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DISARI DE VATSALA GUPTA ROOPALI SAXENA

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EKTA GULECHHA E015 VARUN MALHOTRA E033 PRASHANT TYAGI E060

B2B Pricing is different


Objective of the purchase decision is to make profit Customized Pricing Long-term relationship with the suppliers Organizational purchasing is more complex Pricing decision depends on several factors

Transaction volumes are volatile


Pricing authority is distributed

B2B Pricing is different


Pace of change is medium to high Ever present risk of a price-war Third Parties have Greater Influence in the Buying Process B2B Sales Rely Heavily on Personal Interactions B2B Marketing Must Speak to a Different Set of Buying Emotions Business buyers demand hard facts to justify an expenditure

Price Elasticity in B2B???

At your own risk!

Index-Formula based Pricing


Index-3rd Party published price or cost

Other cost factorsSuppliers processing costs, any market advantages, etc


Negotiations

Index based Price (Updated monthly & the Index updated annually)

Using formula based pricing for competitive advantage


Consider building a weighted formula- Blend of materials Consider non-material indices as well Dont try to use formula pricing in all cases- Only for commodity-like products with little pricing power Leverage with large or sophisticated customers Give sales the ability to negotiate
There are two primary types of index based pricing: Pricing tied to a market index on the finished product. Pricing tied to raw material or component indices.

Non segmented Pricing


Unharvested values- Customers with high product perceived value Missed Opportunities- Customers willing to pay lesser

SEGMENTED PRICING
A situation that occurs when a company sets more than one price for a product without experiencing significant differences in the costs of producing or distributing the product Practice of charging different customers different prices

SEGMENTED PRICING
If charging different customers different prices were easy, everyone would do it. Yet that is not the case. So how can it be done?

PRICE FENCES
Criteria that customers must meet to qualify for a specific price Most effective tool for a marketer Care must be taken to prevent customers from somehow bypassing the fence The art of price fencing involves : Finding a natural separation of buyers by price sensitivity Means to enforce the separation.

FENCE 1 : BI
HAAS (Machine tool builder) charges as follows : Rs. 50 Lakhs for a CNC machine to Maruti, Rs. 30 Lakhs for same machine to BHEL. Why this difference? What kind of segmentation is this?
This is Segmentation by using

BUYER IDENTIFICATION
Depends upon Immediately observable or on factors a customer freely reveals How well-informed about alternatives a customer is. Expertise of salesperson trained in soliciting and evaluating the information necessary for segmented pricing.

FENCE 2 : PB
Your company needs to source 50 Laptops & also get their AMC done. You get the following quotes in response to your RFQ. Supplier 1 : Rs. 50,000 : Price per Laptop (MOQ 50) Rs. 5,000 : AMC price per laptop (MOQ 50) Supplier 2 : Rs. 52,000 : Price per laptop including AMC (MOQ-50) Which supplier will you give the order to? What kind of Segmentation is this?

This is Segmentation by using

PRODUCT BUNDLING

FENCE 3 : PL
ISCAR (Cutting tools manufacturer) located in Israel, offers the following prices to Automobile manufacturers for a particular tool :

India : $ 100 per tool (base price)

USA : $ 150 per tool (base price)

What is the reason for this price difference? This is Segmentation by using

PURCHASE LOCATION

FENCE 4 : PQ
Why are the following price differentials :
Steel price to Mahindra : Rs. 5000 per tonne Steel price to : Rs. 7000 per tonne

VOLUME DISCOUNTS
3Ms Floor cleaning pad prices to Oberoi Hotels :
Quantity Discounts

1 Box
2-5 Boxes 5 or More boxes

NIL
10 % 20%

STEP DISCOUNTS

FENCE 4 : PQ
TATA Photon price to company A (50 pcs) : Rs. 1200 per pc TATA Photon price to company B (100 pcs) : Rs. 1000 per pc

ORDER DISCOUNTS

Digital Law & Kenneth Media charges TATA Capital Ltd as follows :
Annual Contract : Rs. 15 Lakhs Price per Social Media Marketing campaign : Rs. 50,000 3,00,000/-

TWO PART PRICING

FENCE 5 : TI-M
KENNAMETAL (Cutting tools manufacturer) gives the following offer :

1 milling cutter for Rs. 50000/- on purchase of 100 inserts (Rs. 500 per insert) 1 milling cutter free on purchase of 200 inserts (Rs. 500 per insert) This is Segmentation by using

TIE IN PRICING
Xerox had the following lease offers to other companies :
Fixed Monthly Charge Meter Rate per Copy

Upto 10,000
$ 50 $0.046

10,000 50,000
$0.03

50,000 & above


$0.02

This is Segmentation by using

METERING

FENCE 6 : TP
Infomedia Yellow Pages offer :
Time of Advertisement Space Booking 6 - 9 months before publication 2 - 5 months before publication 1 month before publication Price Rs. 70,000 Rs. 1,00,000 Rs. 1,25,000

This is Segmentation by using

TIME OF PURCHASE

Segmented pricing

By Buyer Identification

By Product Bundling

By Purchase Location

By Purchase Quantity

Tie-Ins & Marketing

By Time of Purchase

Contract Pricing : Objectives


To cover costs Operational Objectives

Pricing approaches
Cost based pricing Market based pricing

Pricing objectives

Contracting situations

Pricing Approaches
Cost Based Pricing
Mark Up

Market Based Pricing


Profit Maximization

Margin
Rate Of Return

Market Share
Market Skimming Current Revenue Promotional Demand Differential Market Competition

Contract Pricing : Objectives


To cover costs Operational Objectives

Pricing approaches
Cost based pricing Market based pricing

Pricing objectives
Presence of competition Relative analysis of products and relation

Contracting situations

Price Negotiations
For Buyers :
Minimize price / Increase profits Build relation Exploit competition

For Sellers :
Maximize price Build relation Stay competitive

7 basic factors which effect price negotiations


Type Of Buyer Bargain Hunters Financial Buyers Corporate/Industry Buyers Strategic/Synergic Buyers Company Attractiveness Earnings Balance Sheet Market position Management Market and economic conditions Favorable Unfavorable Future Financial Parameters Available Cash Readiness to pay Cost Of Capital Reaction of markets

Relative Skill Deal Relation Time Expectations

Prior Experience Company value Industry competitiveness Risks and advantages Strengths/Weakness es

Risk Factors Premium Dependency risk Payment risks

Agilent Technologies
Products: Atomic Spectroscopy, Gas Chromatography, Liquid Chromatography, Magnetic Resonance
Imaging Mass Spectrometry, Microarray Scanners, Molecular Spectroscopy, Nuclear Magnetic Resonance, PCR/ QPCR

B2G (Business to Government) Mainly through closed tenders. Need to quote prices according to competition First bid : analyze the lowest bid Consecutive bids: place yourself accordingly

B2B (Business to Business) Manufacturers Distributors Clients Products distributed are only Consumables Similar margin for all distributors Percentage discount to clients by distributors also similar

B2C (Business to clients)


Classified Clients: Tier 1 : Big Corporates Tier 2 : Mid Scale Corporates Tier 3: Startups Discounted accordingly Different Contracts: Rate Contract ( 6 month contract , Same exchange rate throughout) One time Purchase Discounted accordingly One time Bulk Discount

All Discounts decided keeping the competitive situation in hand

Harvel Agua India Pvt. Ltd


Products: Sprinkler system, Low flow systems, Micro/mini sprinklers, Filtration Products, Etc.
B2G (Business to Government) In Gujarat, A.P , H.P
Sold to Government + final consumers : according to government set prices. No Dealer or Distributor involved Rate by Govt. includes: Raw Material Prices Processing Charges Margin for Co. ( in consultation with companies) : same for all

B2B (Business to Business)


Manufacturers

B2C (Business to clients) Prices decided upon following factors: Actual Cost No. of days in cash cycle Risk Factor ( 3%, 2% etc.) Risk is entirely on the Company

Distributors Distributor is a financially sound party Dealers Risk is mitigated ( Revenue End of Subsidy by comprises Users govt. + Share of the end user) Margins same for all distributors Price to end user by dealer / distributor : i( in consultation with Co. ) : Product differentiation can be generated

Market Forces play an important role in deciding the pricing in this industry

Thank You!!!