Faculty Research: James Anderson, Marketing
marketing scholar shows how 'value merchants' gain edge
book by Professor James Anderson details how to capture more
business and prevent 'value drains'
By Adrienne Murrill
managers would jump at the chance to learn a proven method
for winning more B2B business and increasing profits.
they have a new resource to help, thanks to James
C. Anderson, the Kellogg School's William L. Ford Distinguished
Professor of Marketing and Wholesale Distribution.
Merchants: Demonstrating and Documenting Superior Value in
Business Markets, finds Anderson and co-authors Nirmalya
Kumar and James A. Narus presenting a systematic approach
for collecting and analyzing data to substantiate the superior
value that a company can deliver to customers.
managers, particularly purchasing managers, are under tremendous
pressure to reduce the cost of acquired goods and services,"
Anderson says. "One easy way to do this is to reduce
price, but if your company doesn't want to do that, then it
becomes more difficult."
says that to be the winning supplier, proposals must be backed
with data that distinguish a company from the competition,
numbers that will persuade purchasing managers that this firm
is the best choice to help them reduce costs. In Value
Merchants, Anderson calls such a fact-based approach demonstrating
tools that Anderson details — including how to create
value propositions that resonate with customers — have
been developed through years of consulting and research. Examples
from various industries and countries make the book's approach
one that today's managers can implement.
typically are awash in data, but they're starved for information,
which comes from analyzing the data," he says. "Somebody
has to get in there, generate or gather the data, do the analysis
and provide the results in a readily understandable way. That's
what the suppliers, and their sales people in particular,
do in our approach." This, he notes, is a critical part
of how a sales force can be transformed into value merchants,
rather than competing using price concessions.
a company must create a culture that rewards these value merchants.
Anderson says that getting price premiums, a natural way to
think about gaining a fair return for delivering superior
value, is only one of four ways a supplier can be rewarded.
possibilities are getting a larger share of the customer's
business, gaining a more profitable mix of the customer's
business and identifying and eliminating what Anderson calls
"value drains" and "value leaks." Value
drains are services, programs and systems that cost the supplier
more to provide than they are worth to the customers receiving
them. These drains have no strategic significance. Value leaks
are customer activities and practices that increase the cost
of doing business for the customer or the supplier and that
yield no offsetting greater cost savings or value to either.
essential message in Value Merchants, Anderson says,
is the importance of doing research to understand the customers'
preferences and how an offering fulfills these better than
the competitor's. "Everyone has perceptions, opinions
and beliefs, but the question is: Can you prove it?"
says this book, his second, is geared for general managers,
marketing managers and sales managers because it presents
a business philosophy and the process, concepts and tools
needed for implementing that philosophy.
the idea of how we can deliver superior value to targeted
customers and get an equitable return on the value we deliver,"
he says. "The perception of what's equitable can be influenced
by how well we demonstrate and document what that value is.
If we do a poor job of that, we have to give more of that
value away to the customer as an incentive to do business
with us. If we do a better job, we get to keep more of that