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Title: Willingness to pay for customized solutions in a B2B environment : evaluating different buying groups based on a maintenance case study
Author: Dammann, Sven
Awarding Body: University of Strathclyde
Current Institution: University of Strathclyde
Date of Award: 2013
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Profitability of customized solution has been an extensively discussed subject in recent years. Solution providers fail to recoup the benefit of their initial investments due to a misinterpretation of customer needs and misfits with internal objectives. This thesis provides additional tools to solution provider to better understand customer value and their willingness to pay. The objective of this study was to apply conjoint analysis to evaluate the willingness to pay for customized solutions under consideration of a specific maintenance case in the chemical industry. Different groups of buyers were evaluated concerning their preference regarding the solution composition, their price sensitivity and their potential to reduce costs. The thesis is divided in different sections starting with exploratory research among marketing and purchasing professionals on the general terminology, the adaption of standard conjoint analysis as main analytical tool for the evaluation of the buying preferences and the application of the model to a relevant group of buyers within the chemical industry. A hypothetical maintenance related case study was created in which the respondents had to consider themselves in the position of a professional purchaser and ranked different "solution offerings/price" combinations according to their personal preference. The solutions were based on a 2007 published process by Kapil R. Tuli and his colleagues. The results indicate tendencies that different groups of respondents show a different willingness to pay in a specific buying situation (maintenance case) depending on their professional background. Firstly commercial buyers tend to prefer a full profile solution giving away most of the in house control but likely to provide the greatest benefit on cost and risk reduction. Operational buyers which in our case were engineers and technicians like to maintain control on the machine operation and are less likely to take advantage of post deployment service offerings. Secondly the consolidated price functions generated with the conjoint data show similar shapes for both groups but operational buyers seem to be less price sensitive which is reflected by the utilities of the price levels. Thirdly conjoint analysis provides the means to detect potential areas for cost reduction for the solution provider. Operational managers put a high positive utility on solution which can already been realized with little efforts on the provider side. Fourthly a modified price setting model is introduced combining 5 components which have been identified as relevant during the study. They are 1. Relate value to the next best competitive alternative 2. Evaluate solution over its life time 3. Define cost reduction potential 4. Customize composition of solution selling process with respect to buyers preferences 5. Price sensitivity of the buyer The thesis ends with a critical reengagement into the literature. And suggestions for managers and further research The findings indicate that conjoint analysis can help to optimize the profitability of solution by better understanding customer value with respect to different groups of buyers.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (D.B.A.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available