SIT Journal of Management - ejsit.org

SIT Journal of Management Vol: 5; Issue: 1, pp-12-28

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Price-Quality Matrix as a strategic tool for segmental communication for B2B market: A study on Builders of Jamshedpur

Koushik Dutta* & Sumanta Deb**

ABSTRACT:

B2B market has always been a major source of revenue for the industries. For the long run, these B2B

buyers are treated as “assets” rather than customers. Therefore, relationship marketing is very much

important for B2B market for sustaining in the long run and B2B relationship helps in meeting mutual

benefits for both the parties. But, the problem with B2B communication is that it is not a “one-size –

fit –all” approach like B2C market. This purpose of this paper is to identify important factors of B2B

buying behaviour based on primary data and literature review and see how these factors help in

developing a segmental communication strategy for various types’ buyers specifically to achieve

long term B2B relationship. This paper suggests the strategies like direct and indirect communication

which helps in building trust and relationship among buyer and seller to sustain in long run.

Keywords: B2B market, B2B buying behaviour, relationship marketing, direct marketing, strategic marketing, Price-Quality matrix

*Corresponding Author: Koushik Dutta

*Koushik Dutta; Student, School of Management Sciences, Indian Institute of Engineering Science & Technology, Shibpur, M: +91-8101004545, email: [email protected]

**Sumanta Deb; Faculty Member,School of Management Sciences, Indian Institute of Engineering Science & Technology, Shibpur, email: [email protected]


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Introduction

Offering low prices may be a short-term survival tactic, not a strategy for long-

termsustainable growth. A low price approach for the product may work until a competitor

initiates a price war or comes up with a new product. Then the B2B1 Company using a low

price tacticbecomes intensely vulnerable, easily replaced, and is certain to fail.

Competing on price is a losing strategy, and lot of researches have proved it as an

unnecessary one. B2B companies are more likely to be successful and secure in their

customer relationships if they retain them and help them grow. The more a B2B company

helps its customers perform, the more essential it becomes. That kind of customer

relationship transforms B2B companies from vendors into vital partners.There are some

differences between B2B and B2C2 markets, though, the process ofmaking a purchase seem

to be the same in both markets.The main difference between B2B and B2C markets is that

firms in B2B markets are buyingfrom other firms instead of private consumers buying from

firms, which is the case inB2C markets (Ford et. al. 2002).

However, today’s firms are facing a shorter product life cycles and the intensity of global

competition,which no longer provides the luxury of “build it and they will come” approach.

Therefore, in thepresent day situation firms need to focus more on marketing, and how to

communicate with the customers. (Olivia, R.). To begin the shift to an advice-based

relationship, a B2B company must have a tremendous amount of knowledge and expertise

in each customer's business and the marketplace in which it operates.

In our study we have tried to segment various buyers on the basis of their level of

importance on price, quality and other factors and identified different communication

strategy for each different segment buyers to achieve maximum revenue.

1B2B: Business to Business firms are the customers and not private persons, hence differentcharacteristics. 2B2C: Business to Consumer who are the customers and private persons.


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Literature Review

According to Coviello and Brodie (2001), within the marketing field there has always existed

a perceived dichotomy between Business-to-Business (B2B) and Business-to-Consumer

(B2C) markets. This is a general perception in the theory of marketing. The aspects, that

differ between B2B markets and B2Cmarkets,are the influences, buyer decision

processes,and buyer-seller relationships.

Lilien (1987) said, B2B markets must be handled differently than B2C markets because of

theiruniqueness due to a derived demand, long purchase cycles, and a market structure that

is shifting and fragmented.

Coviello et al(2002) in their paper raised the questions: Is there in fact a difference between

B2B and B2C markets and why do firms need to separate the marketing approaches towards

the two? Are the previousrecognized differences between B2C and B2B marketing practices

just a historical artefact rather than a current reality?

A distinction is made on B2B marketing by concentratingon the attributes of product

complexity, and buying process complexity (Webster,1978). This is also supported by

Håkansson and Snehota (1995) who adds to the assumption of the dichotomy by claiming

that B2B marketing is driven by relationships, which areto be considered different from

those in B2C markets. Ida et al (2006), framed a theoretical model in their thesis.


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Problem Specification

Even though there are some differences between B2B and B2C markets, the process

ofmaking a purchase seem to be the same in both markets. The process starts with

gatheringinformation about alternatives, processing that information, followed by learning

aboutavailable products and determining which alternative matches the perceived needs

mostclosely. Finally, the process ends by the action of purchasing. (Brown and Fern, 1984).

Thus, it is said that the complexity of the decision itself makes the difference no matter

whatkind of environment a purchaser is in.

Wilson (2000) asks “Why should we assume that separate theories are necessary to explain

the exchangebehaviour adopted by the same individual when placed in different contexts?”

Objective of the Study

The objective of the paper is to critically analyse the attitudes towards different B2B

marketingtools and the possible appropriateness of using marketing tools in a B2B marketin

order to achieve brand awareness and maximum market share.

The following are the objectives of the study:

1. To develop a scale for ranking different factors which influences B2B builders in

purchasing of TMT bars.

2. To identify the various communication strategy for various segments and bases for

the segmentation.

3. To know the effectiveness of direct communication strategy in B2B buying process.

Except all these objectives, the study also tried to implement Pareto analysis on

consumption of TMT bars of various builders for better focusing on B2B buyers. We also

Figure 1: Theoritical model of B2B and B2C Market (adopted from Ida et al, 2006)


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tried to put various firms and formed a Price-quality matrix for better segmentation and

targeting of the builders.

We have identified the firms for which direct communication strategy is effective and how

to communicate to all those builders to gain market share.

Methodology

Study is typically focusing on the buying behaviour of real estate builders and developers.

Study was conducted on complete enumeration of builders (35 builders) in Jamshedpur

where we tried to gather builders’ opinion about TMT3rebars purchasing for their

construction business. Builders have shown positive view on direct communication strategy

which has already been introduced by various companies.

A set of structured questions were prepared and requisite information was collected

through personal interview of builders. Secondary datahave also been collected to know the

B2B market practice in India especially for real estate market and steel industry.Builders’

perception towards TMT rebars purchasing were collected for this study.Data collection

period was limited to 2 months, from June 2014 to July 2014.

3TMT: thermo-mechanical treatment (TMT), is a metallurgical process that integrates work hardening and heat-treatment into a single process. A description of its application in rebar steel follows.

35 Builders 14 years 4 2 Fe 500D

Sample Size Nature of

Firms

Age of the

Firm

(Median)

No of project

in progress

(avg)

No of

upcoming

project (avg)

Product

Type

Tonnes ₹ in Cr. Tonnes ₹ in Cr.

G+5 7374.5 tonne ₹37.06 Cr 3169.61 tonne ₹15.85 Cr

Height of

Buildings (Mode)

Annual Consumption of TMT in Jsr %age share of Tata Tiscon in Jsr

Figure 2: Demographic Profile of the sample


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Findings

I. Pareto Analysis or 80/20 rule of builders segment in Jamshedpur Market

In Pareto analysis or "80/20" rule, it says, in all situations, 20% of causes determine 80% of

problems, this ratio is merely a convenient rule of thumb and is not nor should it be

considered immutable law of nature.

The total annual consumption of TMT in builders segment in Jamshedpur is 7374.5 tonne

and Tata Tiscon is having 43% share (3169.61 tonnes).Only 6 builders (17% of the total

census size) consumed more than 80% of the total market share of Tiscon (2549 tonne,

80.42%) in builders segment in Jamshedpur.

From the survey results we have tried to measure the whole market turnover by summing

the annual turnover of all builders (only on the basis of census size). The total annual market

turnover of TMT bars in builders segment is ₹37.06 cr (7374.5 tonnes). There are only 4

builders who are having annual turnover of ₹1 cr and more. 7 builders are having the

turnover of ₹75 lakh and more.

Figure 3 Pareto Analys: Consumption of Tata Tiscon in builders segment


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There is only 4 builders who are exclusive buyer of Tata Tiscon for their construction. Among

these four builders Vijaya Homes Pvt. Ltd. (1200 tonnes) and Chatterjee Enterprises (120

tonnes) is big nature and other two are small in nature. These four builders consuming 68%

of the total market share captured by Tata Tiscon. 34% of builders do not use Tata Tiscon

and 26% builders only bill below 25% of their total annual billing amount for their

foundation phase of construction. Only 17% builders are using Tata Tiscon at a major

percentage (above 75% of their annual billing).

From this Pareto analysis, we can focus on bulk purchaser and non-exclusive buyers and we

can formulate better communication strategy i.e., whom to target and how and whom not

to target and why?

II. Construction of Interval Scale (Thurstone Case V Scale) to rank different criteria or

factor which helps to choose any TMT bar.

For developing above paired-comparison scale (Table 1), two factors of an e-commerce

were chosen at a time and the respondents were forced to answer one alternative in each

of the ten cases as the maximum number of paired comparison was ten for this study.

Finally, the responses were aggregated.

These observed proportions will tend to imply the distance between different factors that

helps to choose an e-commerce while a people buy online.

For the basic Case V, the frequency dominance matrix is translated into proportions and

interfaced with the standard scores. The scale is then obtained as a left-adjusted column

marginal average of this standard score matrix (Thurstone, 1927). Using these proportions

as probabilities, ordinates for each proportion were obtained from any normal distribution

table. These ordinates are symbolically represented as Z values. In general, Z values have a

symmetric pattern around zero.

To determine if the data set is normal, Kolmogorov-Smirnov Z test was performed and

results show the data are normally distributed. Under the assumption of normality, these


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proportions can be interpreted as the distance between those two factors which affect their

buying decisions.

If the proportion is less than 0.5, the corresponding Z value has negative sign, and

conversely, if the proportion is greater than 0.5, the Z value is positive. In the next table

(Table 2) Z values have been summarized. After finding out the Z values, sum total of each

columns are done. If the total is negative then highest negative total will be added with

each value and therefore we will get one value which is zero and others will be positive.

Then we will find out the ranks from highest value as rank 1 to lowest values as rank 5.

Table 1 Observed proportions preferring Criteria or Factor X (Column of the table) to

another Criteria or Factor Y (Row of the table)

Criteria or Factor Y ↓↓ Price Credit Facility

Quality Distribution Brand Image

Price - 26% 49% 20% 31%

Credit Facility 74% - 77% 29% 63%

Quality 51% 23% - 11% 17%

Distribution 80% 71% 89% - 34%

Brand Image 69% 37% 83% 66% -

(Source primary data)

Table 2 Observed proportions preferring Criteria or Factor X (Column of the table) to

another Criteria or Factor Y (Row of the table) with Z value and ranks.

Thurstone Case V Scale Z Values

Criteria or Factor Y ↓↓ Preferred Criteria or Factors X

Price Credit Facility

Quality Distribution Brand Image

Price - -0.7704 -0.6915 -0.7881 -0.7549

Credit Facility 0.7704 - 0.7794 -0.7611 0.7357

Quality 0.6915 -0.7794 - -0.8133 -0.7967

Distribution 0.7881 0.7611 0.8133 - -0.7454

Brand Image 0.7549 -0.7357 0.7967 0.7454 -

Total 3.0049 -1.5244 1.6979 -1.6171 -1.5613


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Mean (Z) 0.60098 -0.30488 0.33958 -0.32342 -0.31226

R* Case-V Scale Value 0.9244 0.01854 0.663 0 0.01116

RANK 1 3 2 5 4

(Source primary data)

Table no 2 reflects that builders choose Price of the TMT bars as the most important factor

while buying. Being a business entity, builders often talks about the price of various TMT bar

for their buying decisions.

The 2nd most important factor or criteria is Quality of the product. The product should be

genuine and original. Price and quality should be in a parity that means price of a products

should be on the basis of the quality of the product.

The other important factors are Credit facility given by either dealer or distributor (3rd),

Brand Image of the product (4th) and then the Distribution (5th) quality of the TMT bars. So

we will, in this study focus on Price and Perceived Quality as important factors for

defferentiation

III. Price-Quality Matrix | Nine quality-pricing strategy

Price-Quality Matrix is also called Nine quality-pricing strategy since it is a matrix covering

nine options. The aim is to help companies position their products or services relative to

competitors as perceived by the market, and consider their pricing strategy accordingly.

So, there are 19 firms which are highly

price sensitive (P=5,4, Q=1,2) and lies in

Rip-Off segment and 10 firms are quality

sensitive (Q=4,5 P=1,2) which are lies in

Super Value segment.There is only one firm

in each High Value & False Economy

segment. Firms lies in Over Charging

section in the matrix.

Figure 4 Price-Quality Matrix: Characteristics of firms


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On the basis of nature of firms and their position in the price-quality matrix, different

strategies will be taken from the company end.Tata Steel is quality conscious brand which is

offering TMT bars for more than last 3 decades. Jamshedpur market is basically focused two

segment: Superb Value & Rip-off.

Tata Tiscon is having huge share in superb value segment and also having share in rip-off

segment but firms which are in rip-off segment, using Tata Tiscon only in foundations of the

construction. Rip-off firms are mainly the consumer of other brands are they are highly

focused on price factor for their project.

#1. Characteristics of Super Value Segment | 10 firms

Nature of business - Mainly new and some old firms

o Age in business - 18 years (median)

o Project in-projects - 3 projects (avg.)

o No of upcoming projects - 0 project- 4 firms, 2 projects- 4 firms

3 projects – 1 firm, 5 projects- 1 firm.

TMT Bar - 90% firms only buy Tata Tiscon (3 firmsfullyexclusive, 3 firms

buy more than 80%, 3 firms buy more than 65% of their total TMT purchase)

Market Share - 1182.75 tonnes (66% in this segment)

Opinion about dd of other brand - Jindal Panther (6 votes), SRMB (3 votes)

Factors affecting in buying decisions - 1. Quality, 2. Brand Image, 3. Credit,

(Rank wise) Facility,4. Price, 5. Distribution

Recommendations (most two) - Suggestions for

Mainly Price adjustment (score 44/50) and Credit Facility (score 37/50)

Opinion about CRS, CAB & Fe 600 - CRS & Fe 600- May or may not get

success, CAB - Will get success.

#Findings

Company is already having huge market share in this segment and most of the firms

buy Tata Tiscon for whole construction.


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Most of the firms are not big nature i.e., these firms do not consume TMT bars at a

large scale. Their average consumption is only 179.1 tonnes per firm which is less

than the average consumption of whole sample (210.7 tonnes per firm).

#2. Characteristics of Rip-off Segment | 19 firms

Nature of business - Mainly old firms

o Age in business - 10 years (median), 16 years (avg.)

o Project in-projects - 4 projects (avg.)

o No of upcoming projects - 0 project- 8 firms, 1,4,6,9 projects- 1

firm

2 projects- 5 firms, 5 projects- 2 firms

TMT Bar - 32% firms mainly buy SRMB, 21% firms buy Kamdhenu bars,

12 firms mainly buy local brands. 63% firms never buy Tata Tiscon.

37% firms sometimes buy Tiscon for foundation.

Market Share - 3886.5 tonnes (14.5% in this segment)

Opinion about demand of other brand- SRMB (11 votes), Jindal Panther - 4 votes

Factors affecting in buying decisions - 1. Price (score 92/95), 2. Quality (74)

(Rank wise) 3. BI, 4. Distribution, 5. Credit Facility

Recommendations (most two) - Suggestions for

Highly Price adjustment (score 94/95) and Credit Facility (score 78/95)

Opinion about CRS, CAB & Fe 600 - CRS& CAB- Will get success

Fe 600 - May or may not get success

#Findings

Company don’t have a good market share in this segment and the firms who buy

Tata Tiscon for foundations only.

Their average consumption is only 204.5 tonnes per firm which is less than the

average consumption of whole sample (210.7 tonnes per firm) but higher than

superb value’s figure.


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IV. B2B Buyers Point of View

Most popular and demanded brand in the market (except Tata Tiscon): On the basis of

opinions collected from builders, we have derived that SRMB is having more demand in the

market (51% votes) and followed by Jindal (29%) Tmt bars and SAIL (17%) Tmt Bars. The

study has also tried to find out why other brands are having higher demand in the market.

89% builders said that due to price issue SRMB, JSW and SAIL is higher demand in the

market. 4% builders raised the issue of quality.

V. Industry Practices

From our survey, we have also generated a view point of builders to find out the reason why

the builders do not buy Tata Tiscon. Due to premium price builders do not buy Tata Tiscon

bars. Except the price factor, due to late distribution and lack of communications from

distributors end, builders do not buy Tata Tiscon. But the major issue is Price.

From the survey results, it has been found that company representatives and dealers of

other brands (rather than Tata Tiscon) create a positive impact in builders buying process.

Mainly dealers of SRMB and Jindal Panthar generate huge sales in builders segment.

Whereas, study also identified that no company representatives from Tata Steel visited

builders and Tata Tisconbdealers also do not visit regularly to generate sales. Most of the

Builders widely accepted that company people (company representatives and dealers)

create huge positive impact in buying process.

Except, premium price, lack of communication from company people of Tata Steel Limited,

Credit Facility provided by dealers and distributors of other brands is creating huge impact

in the market. Company like SRMB, Jindal and SAIL generally provides minimum 7 days

credit without interest and on the basis of purchase, they also provide credit facility for 1-2

months.

According to builders, Tata Tiscon Tmt is the best qualitative brands with highest brand

image but due to premium price this brand is not famous among medium and small scale

builders.


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Competitive Positioning

On the basis of Three levels of product4, we have tried to analyse the competitive position

of Tata Steel than its competitors.

Core Product: Fe 500D, higher in quality than other brands.

Actual Product:

Dimension 1: Brand Image: Highest brand image.

Dimension 2: Features: Coupler, Stirrup, CRS and CAB

Dimension 3: Quality: Fe 500SD and Fe 600.

Augmented Product:

Dimension 1: Credit facility: Tata Steel do not provide this but others do.

Dimension 2: After Sales Service: No relationship with buyers from Tata Steel

end but others are mainly focusing on relationship marketing.

Being marketing professionals, our primary aim is convert Rip-off firms into super value

firms through proper communication and relationship building for long term benefit.

Conclusions

Low price offering can be effective for short time but if competitors also initiates a price war

or new product, then this strategy will led to failure.B2B companies are more likely to be

successful and secure in their customer relationships if they help their customers succeed.

The more a B2B company helps its customers perform, the more essential it becomes. That

kind of customer impact transforms B2B companies from vendors into vital partners.

To begin the shift to an advice-based relationship, a B2B company must have a tremendous

amount of knowledge and expertise in each customer's business and the marketplace in

which it operates.

4We have taken those dimensions where either Tata Steel has advantage of disadvantage. We have not taken those dimension which are common for all companies like delivery, warranty, packaging, styling or installation.


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A survey was conducted to know the factors which creates impact on the sales figure of

various TMT bars. The study was

typically focused only on builders’

segment. The survey results show

that every builders were using only

Fe 500D Tmt Bars. There is no

builders who are using Fe 500SD,

coupler, stirrup and CRS product

offered by Tata Tiscon. Fe 500D is

basic rebars for construction

whereas Fe 600SD is more ductile

than Fe 500D. From the nature of

various these rebars, we found that

buyers are mainly focused on core product among all other variables.

Fe 500SD, coupler, stirrup and CRS are actual products of three levels of product. These

products are nothing but the extra quality,

features and styling of the core product. From

the survey we found that credit facility is very

much important factor for the builders and

competitors of Tata Tiscon is enjoying higher

market share in terms of number of firms.

So, after three levels of product, we identified

that B2B buyers are mainly focused on Core

Product and somehow on Augmented product

rather than focusing on Actual Product. On the

basis of this, sellers should more focus on core

product and augmented product.

Buyers widely &strongly agreed that “company people influence in their buying decisions”.

Figure 5 Three levels of Product

Figure 6Frims-Communication Matrix


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Due to price issue and regular visit from company’s end & dealers, SRMB is highly

demanded in the market. Distribution of Tata Tiscon is not also regular from dealers’

end. Like other company’s distributors and dealers, Tata Tiscon dealers and

distributors are not providing credit facility to the builders, due to which builders

generally buy either local brands or SRMB. Due to high price of Fe 500 super ductile

bars, builders generally prefer to use Fe 500 TMT.

In builders’ segment, brand image of TMT bars are no longer important for the

buying decisions as 23 builders are highly price sensitive. Brand Image ranked as 4th

important factor among 5 factors.

o Superb value firms are very much focused on quality and brand image but

rip-off firms not focused on brand image at all. They are mainly focused on

price and quality.

Every company regularly sends their representatives to inform about products and

they influence builders’ concern person to buy their product.

o Superb value segment mainly indirect communication influence in their

buying process but in rip-off segment dealers’ and company people’s regular

visit created huge impact on consumer’s buying decisions.

Small price adjustment will surely grab the market share and most of the builders

have suggested to improve faster distribution which may resulted in sales figure.

Both the major segment of Price-Quality Matrix have suggested to adjust price and

providing credit facility to the builders to grab the market share.

As it can easily said that Relationship Marketing is very effective for B2B buyers. As Tata

Steel is having huge brand value and highly qualitative products which is exception in the

market, so, competitors with lower brand value and less qualitative products are enjoying

market share just because of the power of relationship with buyers.


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