Rob Allison, senior accountant manager at for Boise Automation, has lost an order of $1. 2 million from Northern Paper. There are various things which he could have done differently while approaching Northern Paper for this order to design, supply and install an automated control system for its wood-chip handling system. Price Analysis The initial price offered by Boise was $1. 35 million. According to Jason Li from Northern, this price was approximately 30% more than the price offered by the lowest priced contender.
Assuming that this contention is true, the lowest price offered by competition was $0. 945 million. Considering that the initial price offered by Boise was at a 20% premium, the cost price of the automation system can be calculated as $1. 08 million. This means that it was not possible for Boise to lower its price to match the lowest price offered by the competition, without suffering losses. 2. Decision Making Unit Rob was not able to identify correctly who the key decision maker was, in the selling process. Identifying the roles played by different people in a DMU is critical to the selling process.
Rob incorrectly identified Mr. Jennings as a decider and tried to cultivate a close customer relationship with him and most of his subsequent decisions were based on the feedback received by him from Mr. Jennings. He failed to understand that Mr. Jennings was an outsider and the final decision was to be taken by the Rocky Falls team. Identifying the Participants in the Buying Process In a competitive B2B market, Boise must propose a compelling business value proposition to Northern Paper Inc. o that it can command a high price premium. Boise needs to target the finance department of Northern to show the advantages of the better technology it offers and its benefits in financial terms. The finance department was a critical influencer in this case as it gave the final approval of the budget. On a higher budget, Boise can get its own product specifications in the bidding process eliminating competition with older and cheaper technologies. The table below shows the role played by Northern Paper personnel in the buying process. Source: Marketing Management: Philip Kotler) 2. Overcoming Buying Pressure The buying center had repeatedly emphasized on the importance of competitive pricing as an important premise for arriving at a final decision. Since Boise was not in a position to offer the lowest price, there were various ways in which price pressure from the buyer could be circumvented: ? Life Cycle Cost: It was important to make Northern understand the added benefit of buying the Boise system over competition in terms of life cycle cost.
Boise could project its offering as having a greater economic life than that of its competitors, since it had better and newer features which would take longer in becoming obsolete. ?Benchmarking: The competitive products which match the minimum technical specifications set by Northern should be set as a benchmark and then Boise should make Northern understand the added value of new feature it provides over and above the benchmark. ?Solution Selling: Boise can work out a process improvement model with Northern where the new features available in the Boise system can be used to improve process time which will reduce costs for Northern.