B2B Services: Contracting, Pricing, and Value-based Approach - Essay Example

B2B Services: Contracting, Pricing and Value-based Approach al Affiliation Introduction Business to business transactions have become very critical in the current business arena. This report starts by looking at the background of the study. The aims of the study and detailed research questions are also presented. It goes ahead to explore the importance of business to business (B2B) services before discussing the differences between the B2B services and the B2B goods. This is followed by a discussion of the research methodology, the data analysis approach and the ethical issues associated with the study. Background of the Study In the current business world, business to business (B2B) transactions are experiencing phenomenal growth. Businesses are working together in procurement, outsourcing, and consultancy to ensure sustainable growth and competitive advantage in the market (Wölfl, 2005). The trend is set to continue because of the emergence of innovative technologies and the growth of national economies. Technology has opened up the various organizational operations. According to Wölfl (2005), the growth of B2B and e-commerce in particular has also been promoted by the growth in the service sector. In the OECD economies, services are now accounting for over sixty percent of the aggregate employment and production. The service sector is made up of some of the largest global corporations who have grown to become among the major users and buyers of innovative technologies. The global entities are also active innovators whose activities have led to the growth in number of firms in almost all the sectors. Throughout the world, service firms have become the major stimulant for productivity as wells as efficiency in the business to business arena. They do so through e-commerce and in the long run accelerate the changes in the economy. According to Fill & Fill (2005) the B2B services have witnessed the fasted grown in the last ten years. In the United States and the United Kingdom, the sector accounts for about 50 percent of all employment opportunities (Achrol & Stern, 2008). In the academia, the B2B topic is well established. Scholars have investigated the issue in terms of the scope and the nature of business markets, employee and organizational behaviour, business strictures, management strategies and the critical success factors. Despite this being the case, there are only a few studies that have examined the critical B2B issues which come out of the service concept. Scholars have not widely studied the experiential, interactive and the process dependent aspects of B2B services. Minimal work has been done on B2B with regards to the benefits which are passed to the customers as well as the best delivery approaches. Existing literature tends to examine business to business issues in a service concept instead of looking at the impact that the service concept will have on critical B2B goods-centered principles. This implies that the B2B services are still being looked at from the manufacturing goggles. Others scholars have investigated B2B financial services, e-commerce and procurement processes without providing the required knowledge needed to understand the services at the abstract and theoretical levels so that the service firms can learn from each other. Research Aims The aim of this study is to explore the service specific characteristics that underlie the fundamental differences between the marketing of business to business services and the business to business goods. This will be done so as to contribute to the understanding of business to business marketing. Secondly, this study is aimed at coming up with measurement for the customer or consumer expectations based on the identified attributes. Finally, the research seeks to explore the impact that the service specific attributes of the BSB services have on buying behaviour. From this understanding, it will be possible to come up with a decision support model for contacting and pricing strategies. Research Questions There are several challenges that may arise from the valuation, co-creation and the separation aspects of B2B services. This treatise will focus on the impact of these characteristics on the contracting, pricing and the buying aspects of the transactions. This will be done by answering the following four research questions: 1. What are the theoretical value-driven B2B attributes that come out of valuation, co creation and separation in the B2B transactions? 2. How can the consumer expectations of the identified value driven traits of the B2B services be measured? 3. What is the impact of the identified attributes on the buyer behaviour during the B2B transactions? 4. How can a support model be constructed based on the identified attributes to guide pricing and contracting practices? Literature Review Business to Business Model According to Mirani, Moore & Weber (2011) the business to business model of operation involves two businesses dealing with each other. The seller and the buyer of the products are both business entities. This model focuses on the logic of the products which are being dealt with. This is done by concentrating on the features of that particular product. Garbade (2011) points out that there is usually minimal or no personal emotions involved when a business is transacting with another business or buying a product from a second business. As such, focus should be put on understanding the corporate buyers and how they operate within their procedures. Each organization has its own procedures. When relying on this model, in depth marketing materials must be used in order to enlighten the potential business buyers on how the products that are being sold will help the organization based on the features they have (Plant, 2001). In most instances, the business to business market is only interested in the logic behind any given product. They lookout for information on how a given commodity or merchandise will help them save money, time or their limited resources. Differences between B2B Goods and Services Different scholars have tried to identify the potential differences between B2B good and the B2B services. Achrol & Stern (2008) considers the transformation of goods into services to identify the main factors which influence the difference between the B2B good and the B2B services. The first factor is the value which is attached to the mode of delivery. In B2B goods, the consumer of the good buys the commodity from the seller and uses it to obtain the value on their own. On the other hand, the BSB service transactions entails the two firms maintaining contact for an elongated duration of time as the service is being used by the consumer. According to Shelly (2011) where such contacts have to be maintained, the price at the point of purchase is also affected. The second major factor is the price at the point of purchase and the ability of the customer to predict the price. The third factor is the ability of both firms to impose the conditions and terms of purchase and selling of the said goods and services. Davis (2006) illustrates the theoretical differences between the business to business goods and the business to business services on the basis of the service encounter, separation and the con-creation concepts. In the case of the B2B goods, once the commodities have changed hands, the buyer firm has the sole responsibility of unlocking the value of the commodity. According to Barton & Jap (2005), the benefit of the good bought by the firm will be seen and experienced when the products are used even without the selling firm getting involved. It is for this reason that the dealings involving B2B goods are taken to be transactional rather than rational exchanges. In the case of the BSB services, the act of buying and selling is followed by delivery and consumption. Shelly (2011) refers to this process as a service encounter since the selling firm is still involved as the buying firm uses the services. In some instances, the interaction between the two firms can take place for a long time. The contact is very critical as it affects how the service will be contracted and priced during the buying and the selling process. The second fundamental difference between B2B goods and the B2B services comes from the separation aspect. According to Temporal (2005), the mere existence of the service encounter brings about the second main difference between the two products. From the aspect of pricing, the separation between the purchase and the consumption of the commodities can be better understood from two angles. The first view is that the price is always a reflection of the value that the client expects to get when the service is consumed or delivered. Secondly, the separation between the buying/ selling and delivery and consumption affects the value of the product at the time of contracting. The value of the service tends to be state dependent in that it is affected by the state of the commodity and the world at the time of delivery. A very good example is the purchase of IT support services. In the case where a firm buys these services, they will only be consumed when the computer systems are not working. The final difference arises from the co-creation concept. The service encounter process requires the involvement of the buyer and the client. Davis (2006) defines this be the con creation process as it requires the involvement of both firms for the value of the service to be unlocked. According to Shelly (2011) the service encounter usually include the obligations of the two involved parties. This involvement is defined at the contacting process and it impacts on the price at which the service will be sold. Therefore, the con-creation process entails a dyadic relationship between the buyer and the selling firm in terms of delivery and consumption. Temporal (2005) informs that the existing business to business literature tend to be focused on the goods which exchange hand between business entities. The literature is more focused on the organizational buying traits of such entities with minimal attention being directed to the consumption and the delivery processes. The literature on B2B services seem to neglect the dynamics of the co-creation process thus making it difficult to understand the buying behaviour as well as the selling and delivery dynamics in the global and domestic business arena. Methodology Research Philosophy The aim of this study is to explore the service specific characteristics which underlie the fundamental differences between the marketing of business to business services and the business to business goods. This will be done so as to contribute to the understanding of business to business marketing. To be able to achieve this aim and the other two goals of the research which had been stated earlier, it is necessary to explore the nature of B2B services. Understanding the B2B services on the other hand requires knowing the perspectives of different respondents and parties who are involved in the transactions. Interpretivism is the most appropriate philosophy that can be used in this treatise. According to Asbury (2005) interpretivism aims at understanding the differences that exists between humans in their roles as social actors. In the B2B transactions, the buying and selling firms are the social actors and to be able to get an accurate and comprehensive insight into the issue, it is paramount to get their perspectives on the research questions. In the interpretivism approach the researcher enters the social world of the particular research field in question; understand the world from their point of view, which then results in the adjustment of their own meaning and actions (Jha, 2008) Interpretivism is related to subjectivism as it entails exploring the subjective meanings motivating social actors. When this is done, it is possible to understand the actions which take place in particular setting. It involves continuous revisiting and analysis from a critical perspective of the motivating actions of various social actors. This is done so that the researcher can understand the changes that occur in the area or topic of study that the researcher is interested in. In the interpretivism approach, the researcher cannot be separated from the social setting or the field of the research. The researcher takes part in the research and its processes through the interaction with the respondents. As a result, the research comes out to be subjective. It allows for the understanding of the various influencing factors and the changes that take place among the social actors and thereby giving a clear insight into the subject matter that is being studied. Research Approach An analysis of various philosophies used to carry out research work reveals that the best research philosophy that can be used in this is the inductive approach. According to Warren & Karner (2005), inductive approach is involves the use of a small sample and in depth investigation to be able to have clear insight into the subject matter. The inductive approach is known to benefit the researcher by permitting him to draw a conclusion from one or more facts of evidences that support one another. This goes a long way in helping to reach a close understanding of the research context and providing an enriched insight into the meaning that humans attach to a particular issue. Research Strategy To be able to achieve its objectives, this study will rely in qualitative research strategy. Qualitative research will be used will to explore the issue of B2B contracts and the pricing approaches. According to Cormack (2011), qualitative research provides an insight into the settings of a given particular problem and also helps in generating ideas and hypothesis that can be used for future studies. The sample in a qualitative study uses a small number of non-representative cases. Such representations are normally selected to fill a given quota. The sample population in this study will be selected from two organizations in the banking sector Advantages of Qualitative Research 1. Qualitative research study reviews details about the human behaviour personality, perspective ad characteristics that are important to a given area of study and cannot be obtained through the quantitative methods 2. Qualitative study normally contain information on the respondents’ behaviour, needs, desires, and routines that is essential in drawing conclusion on a particular are of interest under study 3. While quantitative study requires the standardizations of data that is obtained to allow for statistical comparison, this is not the case with qualitative research as it needs flexibility to allowing the researcher to respond to issue that arise during the course of the study 4. This approach allows the research to follow data collection rather than performing statistical analysis and hence allow the researcher to look for the trends that are inherent in the topic or issue under study 5. Qualitative research does not require the use of a large sample group like the one that is used in quantitative research and this therefore mean that if planned and executed well, the study may take a shorter time than the quantitative research since not a large volume of data will require to be analyzed. Limitations of Qualitative Research 1. The outcome that are obtained from the qualitative research studies cannot be used to make conclusive statements on the particular topic of discussion 2. Qualitative research tends to be more subjective and dependent on how the researcher’s view what the respondents say about a particular issue that is being studied. 3. The data that is obtained from the qualitative studies through the identification of common trends cannot be subjected to statistical analysis and this means that it is difficult to validate the results and outcome 4. Qualitative studies cannot be automated during the data collection stages the same way the quantitative data collection can be effectively automated. This makes the study to be time consuming and expensive especially in cases where a large sample group has been selected for the study. 5. Since the data collection process cannot be automated, it is normally common for the qualitative studies to use a small sample group. As a result the study tends to have less statistical power as compared to the quantitative studies when it comes to identifying and varying the main issue that are associated with a particular topic of study (Warren & Karner, 2005). Data Analysis The study will utilize various statistical and data analysis techniques. Analysis of the results of the interview process will aim to determine the fundamental traits of the B2B services and how they relate to contract and pricing approaches. The obtained data will be coded and then categorized to determine the value based traits. The information collected the interview will be analyzed though discreet choice method (DCA). The method offers a very systemic approach for identifying the tradeoffs and the weights with regards to the specific attributes. Possible Ethical Issues One of the main ethical issues which may be encountered during the research is the confidentiality of the information obtained from the interviewees. Some of the B2B transaction are very confidential. Businesses guard such transactions to maintain their own integrity. To be able to deal with this issue, it is imperative to ensure that the data which is collected is well secured. The other concern is the consent of the interviewee. It is important to seek the consent of those who will be involved in advance and also enlighten them on why the study is being carried out. Limitations of the Research In qualitative research, unstructured and semis structured questions are used in depth interviews or group discussions. In the analysis of the data that is obtained from the study, no statistical method of data analysis is used. Due to this, it tends to be subjective. Krueger (2008) indicates that the outcome of qualitative research is normally explanatory and investigative. The findings are not usually conclusive and cannot therefore be used to make generalized views about the interests of a given population. The outcome of the study is however one that can be used to develop initial understanding and in making sound base for future or further decision making. Moreover, the collected information on the attributes associated with B2B services can assist in coming up with innovative strategies that can be used to create value to the customers and deliver the B2B services in a more effective way. Project Plan June July August September W1 W2 W4 W4 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4 Topic identification Background study Literature review Methodology design Data Collection Data Analysis Report Writing and presentation Reference List Achrol, RS & Stern, LW 2008, “Environmental Determinants of Decision-Making Uncertainty in Marketing Channels", Journal of Marketing Research, vol. 25, no. 1, pp. 36-50. Asbury, J 2005, “Overview of Focus Group Research”, Qualitative Health Research, vol. 4, no. 4, pp. 414-420. Barton, W & Jap, S 2005, "Relationship marketing and distribution channels", Journal of the Academy of Marketing Science, vol. 23, no. 24, pp. 305-20. Cormack, DS, 2001.The Research Process. Oxford: Black Scientific. Davis, D 2006, Managing Technological Innovations, Jossey-Bass, San Francisco. Fill, C, & Fill, K 2005, Business-to-Business Marketing: Relationships, Systems and Communications, Financial Times Prentice Hall, New York. Garbade, M 2011, Differences in Venture Capital Financing of U.S., UK, German and French Information Technology Start-ups A Comparative Empirical Research of the Investment Process on the Venture Capital Firm Level, GRIN Verlag GmbH, München. Jha, NK 2008, Research Methodology, Global Media, Chandigarh. Krueger, R 2008, Focus Groups: A Practical Guide to Applied Research, SAGA, Newbury Park. Mirani, R, Moore, D & Weber, J 2011, "Emerging technologies for enhancing supplier-reseller partnerships," Industrial Marketing Management, vol. 30, no. 5, pp. 101- 14. Plant, R 2001, Ecommerce: Formulation of Strategy. Prentice Hall Professional, Upper Saddle River. Shelly, G 2011, Systems Analysis and Design, Cengage Learning, Boston. Temporal, P 2005, B2B Branding–A Guide to Successful Business-to-Business Brands, International Enterprise, London. Warren, B & Karner, T 2005, Discovering Qualitative Methods, Roxbury Publishing Company, Los Angeles. Wölfl, A 2005, “The Service Economy in OECD Countries”, STI Working Paper 2005/3, OECD, Paris. Read More