B2B Sales &
Sales Management
Jakob Rehme
Linköping University,
Institute of Technology,
Industrial Economics
Daniel Chicksand
Aston University
Aston Business School
Operations and Information Management
Jakob Rehme & Daniel Chicksand
Importance of
selling
Jakob Rehme & Daniel Chicksand
Industrial Sales Development
Spare
Capacity
Demand
Supply/
Capacity
Order receiving/
Prioritisation
Sales Necessity
Sales Core Operations
From focus on internal production (MRP etc.) to the buyer/seller interface – CRM, KAM,
SCM, Logistics …
Jakob Rehme & Daniel Chicksand
Organisations and Sales
Comprehensive Business
Knowledge
Technical/Product
Knowledge
CUSTOMER
CUSTOMER
Few products/
hierarchy
Salesman
CUSTOMER
Many Products/Systems
Decentralised
Salesforce
CUSTOMER
CUSTOMER
Complex Solutions/
Cross Functional
Team
Jakob Rehme & Daniel Chicksand
Marketing Strategy Characteristics and the Relative Importance of
Personal Selling as a Promotional Tool
Mass marketing
Relatively Important
Large
Low
Small
Little
Low
Pull
Pre-set
Personal Selling
Relatively Important
Number and Dispersion of Customers
Buyers’ Information Needs
Size and Importance of Purchase
Postpurchase Service Required
Product Complexity
Distribution Strategy
Pricing Policy
Small
High
Large
Much
High
Push
Negotiated
Adapted from David W. Cravens, Strategic Marketing (Homewood, IL: Richard
Jakob Rehme & Daniel Chicksand
D. Irwin, Inc., 1987), p. 508.
Selling and Roles
Traditional sales people
• 
• 
• 
Sales Engineers (Outdoor)/ Export - Area sales
Order Receivers / Indoor Sales
Product Managers
Supporting roles – increasing importance
• 
• 
• 
• 
Engineers/Designers
Production Planning
Logistics
Finance
”CUSTOMER OMBUDSMAN”
Sales Organisations - The Coordination Interface In-between ”Your
Company” and the Customer
Jakob Rehme & Daniel Chicksand
Different Types of Sales
Operational Consequences
Coordination
Complexity
Planning
Horizon
High
Long
Low
Short
Large Scale Projects – One-Off
Small ”Standard” Projects
Standard Product Sales
Services & Spare Parts Sales
Jakob Rehme & Daniel Chicksand
Different Sales Organisations
Type:
Focus on:
Country/Regional Sales
Closeness, adapting to local conditions
Product Division Sales
Products/systems/ solutions
KAM-Sales
Individual customer requirements,
products/solutions
More often than not - a combination
Jakob Rehme & Daniel Chicksand
The personal selling process
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
Prospecting
Classifying Leads
Pre-call planning
Approach/relating
Needs discovery
Presentation
Handling Objections
Closing
Follow-up and servicing
Jakob Rehme & Daniel Chicksand
Kundvärde har alltid varit viktigt för säljorganisationer, men
håller på att bli viktigare?
§ 
Traditionellt har säljorganisationer arbetat med tre typer av värdeerbjudanden
§ 
Lista alla tänkbara fördelar med produkten eller tjänsten: standardiserade
säljpresentationer/säljmöten.
§ 
Lista de fördelar som särskiljer vårt erbjudande från konkurrenter: relaterat till
kundbehov och lyssnande säljmöten (behovstillfredsställelse).
§ 
Fokusering enbart på de fördelar som skapar värde för den enskilda kunden:
relaterat till säljmöten med fokus på att stödja eller stå för problemlösning för
kunden.
§ 
En ökad andel tjänster i det totala erbjudandet ger en ökad fokusering på att
arbeta med kundunika fördelar och därmed problemlösning.
§ 
Bra försäljning i komplexa affärer handlar om att förstå kundbehov, att arbeta med
kundens problem och förse kunden med erbjudande som löser dessa problem.
10
Jakob Rehme & Daniel Chicksand
Värde är något vi alla känner till, men har olika betydelser inom
olika områden
Definitioner (Business Dictionary)
§ 
Matematik: En storlek eller kvantitet som representeras av siffror.
§ 
Redovisning: Det monetära värdet av en tillgång, affärsenheten, såld vara,
tillhandahållen tjänst, eller andra tillgångar.
§ 
Ekonomi: Värdet av alla fördelar och rättigheter som följer av ägande. Två typer
av värde (1) den ekonomiska nyttan av en vara eller tjänst , och (2) den
ekonomiska motsvarigheten av en vara eller tjänst som kan utnyttjas eller bytas
mot andra varor, tjänster eller pengar, i ett frivilligt utbyte .
§ 
Marknadsföring: I vilken utsträckning en vara eller tjänst uppfattas av sina
kunder för att möta hans eller hennes behov och krav, mätt baserat på kundens
betalningsvilja. Det beror ofta mer på kundens uppfattning om värdet av
produkten än på dess egenvärde.
11
Jakob Rehme & Daniel Chicksand
Our view of value….
§ 
§ 
§ 
§ 
§ 
Value is the difference between benefits received and sacrifices
made
§ 
Value depends on the perception of benefits and sacrifices
(or costs)
§ 
Different actors view value differently
Value-in-use is always higher than value-in-exchange
§ 
Water & Diamond Paradox
Value can be seen as co-created between buyer and seller
Total value is the sum of buyer and supplier benefits and
sacrifices
Value creation is shared between producers and consumers in a
supply chain
§ 
The sharing of value is dependent on the the relative power
of the actors
(Vargo and Lusch (ed.), 2006; Ulaga and Eggert, 2006; Normann and Ramirez, 1993, McTaggart, Findlay
and Parkin, 2007; Zeithaml , 1988; Anderson et al, 1993, Ramsay, 1996, as well as Karl Marx and Adam
Smith)
13
Jakob Rehme & Daniel Chicksand
Value Creation
Buyer
Supplier
Sub- Supplier
Willingness to Pay:
The maximum $$ Buyer will pay
before rejecting Firm’s offer in favor
of at least the status quo
Total value created in a 3-level
commit chain = WtP - OC
Opportunity Cost:
The minimum $$ Supplier is willing to
accept from Firm before rejecting Firm’s
offer in favor of at least the status quo
Source: Brandenburger & Stuart 1996
Jakob Rehme & Daniel Chicksand
Value Creation
Perceived customer
value
Perceived customer
value
An actor’s claim on the
value pie is a function of
the actor’s marginal or
“added” value:
Buyer
Supplier
Sub-Supplier
V3
Value creation Added value
V2
Value creation Added value
Total value creation=
V1+V2+V3
V1
Value creation Added value
mvi = Vall – Vall-i
Jakob Rehme & Daniel Chicksand
Totalerbjudande är viktigt eftersom det är en källa till differentiering, men
ställer ökade krav på säljorganisationen att utveckla värdeerbjudanden
En allmän tro och känsla av att varor blir allt mer
konkurrensutsatta…
En känsla att vinster/marginaler minskar för
många produkter/varor
§ 
En ökande standardisering - ”commodisation ”av många produkter
§ 
Globalisering - en verkligt global marknad ( ? )
§ 
…resulterar i en ompositiering mot
totalerbjudanden med tjänster
§ 
Göra affärer mer lokala - tjänster
§ 
Ses som ett sätt att behålla och fördjupa
relationer med kunder
§ 
Skapar jämna intäktsströmmar.
§ 
Möjlighet att sälja mer totallösningar
§ 
Ur ett säljperspektiv är det viktiga i tjänstifieringen och leveranser av ”integrerade paket av
produkter och tjänster” att syftet och ambitionen är att ’skapa kundnytta och värde’ .
§ 
Detta ställer krav på säljorganisationen att klara av att rikta specifika värdeerbjudanden till
kunder men även att hantera kunder än mer individuellt.
(Lay et al., 2009; Hill, 2011; Baines & Lightfoot, 2013; Boehm & Thomas, 2013).
16
Jakob Rehme & Daniel Chicksand
Customer value offerings and service/product bundles offering
potentially affects pricing…
Factors associated with lower price sensitivity
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
Buyers are less aware of substitutes
Buyers cannot easily compare the quality of substitutes
The expenditure is a smaller part of the buyer’s total income
The expenditure is small compared to the total cost of the end
product
Part of the cost is borne by another party
The product is used in conjunction with assets previously bought
The product is assumed to have more quality, prestige, or
exclusiveness
Buyers cannot store the product
Source: Tom Nagle
17
Jakob Rehme & Daniel Chicksand
Defining servitization
Baines et al. (2009) declare servitization as “the innovation of an organisations
capabilities and processes to better create mutual value through a shift from
selling product to selling product-service systems”.
Boehm & Thomas (2013) define product-service systems as “an integrated
bundle of products and services which aims at creating customer utility and
generating value”.
Servitzation route moves from base (products and spare parts), through
intermediate (maintenance, conditioning, monitoring etc.) to advanced services
(AS) such as power by the hour (Baines & Lightfoot, 2013).
Baines & Lightfoot (2013) argue that revenue and profits increase from base to
advanced, however margins can be eroded (the ‘service paradox’).
§ 
§ 
§ 
§ 
The nature of service
1. 
The immateriality of services and the “immediate perishability" of output;
2. 
The co-production, cooperation or interaction between producer and consumer
in obtaining the outcome
3. 
The non-storable and non-transportable nature of services. (Gadrey 2000)
18
Source: Tom Nagle
Jakob Rehme & Daniel Chicksand
INCREASED IMPORTANCE OF PRICE
§ 
§ 
§ 
§ 
§ 
Faster technological change reduces profitability
Product proliferation causes product blurring
Increased demand for performed and attached services
Increased competition
Government supervision – (Konkurrensverket)
PRICE IS THE ONLY MARKETING VARIABLE TO APPEAR
ON THE REVENUE SIDE OF THE PROFIT EQUATION
PROFIT = REVENUES - COSTS
Jakob Rehme & Daniel Chicksand
Pricing models value and servitization
… where value based pricing is getting to be
more important?
Pricing Models used in B2B…
Traditional Pricing Models
§ 
Cost Plus
§ 
Market Pricing (competitive-productcomparison) – above, below, parity
Value Based Pricing
§ 
Dynamic Pricing etc.
§ 
Contingency pricing
§ 
Based on Customer Value
§ 
Define Value for Money - (ValuesPrices)>(Valuea-Pricea) (Anderson and Narus,
§ 
§ 
§ 
A system of establishing customer prices
§ 
Based on the value which the customer
derives from the use of the product and
service.
§ 
Cost is used only as a consideration of
whether or not to offer the product/
service for sale at all.
§ 
Useful for situations when introducing an
improved product/service or going
against an established competitor
1995)
§ 
§ 
§ 
An objective measure (in economic terms) of customer value such as:
§ 
cost per unit of output,
§ 
savings,
§ 
increased productivity or some similar measure
A product and service bundle that costs less to deliver than the value received by the customer
Willingness of the manufacturer to assume some of the risk inherent in the sale
GE Aircraft Engines’ fastest-growing business was in the 1990’s in contracts where airlines pay a flat fee for every
hour their engine is in the air (in effect, outsourcing the risk for servicing it to GE).
1.  Maintenance Cost Per Set (MCPS)
2.  Material By The Hour (MBTH)
3.  Maintenance Cost Per Hour (MCPH)
Source: Economist, GE Homepage
Jakob Rehme & Daniel Chicksand
Värde=Fördelar-Uppoffringar
Investeringsbeslut
Kundvärde
Exempel på direkta fördelar
Intäktsförbättrande fördelar
Nya marknader
Prishöjningar
Differentiering
Etc.
Kostnadsfördelar
Mer effektiva processer
Lägre underhållskostnader
Mindre lager
Etc.
Fördelar
Direkta:
• 
Tekniska
• 
Ekonomiska
• 
Tjänster
Indirekta
• 
Effekterpårykte
• 
Sociala
• 
Rela<oner
Uppoffringar
Direkta:
• 
Pris
• 
Sökkostnader
• 
Lärkostnader
• 
Byteskostnader
Indirekta:
• 
Rela<onseffekter
• 
Psykologiska
• 
Förloradmakt
Att jobba med fördelar är enklast gentemot den avdelning som ska använda vår lösning
– men kan vi övertyga inköp?
Jakob Rehme & Daniel Chicksand
Alla vill gärna se sin egen organisation som kundcentrerad och
fokuserad på kundens värde…
§ 
Men vad betyder det?
22
Jakob Rehme & Daniel Chicksand
Inköpsstrategi och försäljning
Finansiell risk
Inköpsvolym (SEK/£/$)
Hög
Använd
marknaden
Leverantörssamarbete
KRALJIC’S
MATRIS
Låg
Reducera
administration
Säkra
leverans
Låg
Hög
många
leverantörer
få
leverantörer
Leveransrisk
Komplexitet och antal
potentiella leverantörer
Jakob Rehme & Daniel Chicksand
Hur kan vi sälja värde till olika kundroller?
§ 
Användares påverkan på inköpet
§ 
§ 
Tekniska påverkare av inköpet
§ 
§ 
Stödjer i analysen av potentiell påverkan på processer, produktion etc. Har en stark
påverkan på synen av helhetslösningar, och de operativa fördelar eller nackdelar som
lösningen kan medföra.
Stödjer i urvalet av möjliga leverantörer, gör rekommendationer baserat på hur lösning
möter upp mot specifikationer; är inte de som kan besluta om att det blir affär, men kan
ofta förhindra en affär.
Ekonomisk påverkan av inköpsbeslut
§ 
Den eller de som fattar det slutgiltiga inköpsbeslutet. En eller flera personer, ofta
kopplade till en inköpsavdelning men kan även inkludera ekonomichef och/eller VD.
Jakob Rehme & Daniel Chicksand
Värde=Fördelar-Uppoffringar
Investeringsbeslut
Leverantörsvärde
Uppoffringar
Direkta:
• 
Produkteller
tjänst
• 
Anpassning
• 
Dediceratlager
Indirekta:
• 
Rela<ons
• 
Psychologiska
• 
Förloradmakt
Fördelar
Direkta:
• 
Ekonomiska
• 
Tekniska
• 
Minskadrisk
Indirekta:
• 
Rela<on
• 
FörbäGradimage
Exempel på direkta fördelar
Intäktsförbättrande fördelar
Säljvolym
Möjlighet till merförsäljning
Kundledd produktutveckling
Stöd för diversifiering
Etc
Operativa fördelar
Korrekt och punktlig information
Jämt orderflöde
Stöd för operativ utveckling
Etc
(Ramsay and Rehme, 2011)
Jakob Rehme & Daniel Chicksand
Value=Benefits-Sacrifices
Total value in a business relationship
Customer Value
Supplier Value
Benefits
Sacrifices
Sacrifices
Benefits
Direct&Indirect
Direct&Indirect
Costs
Direct&Indirect
Costs
Direct&Indirect
TOTAL VALUE
Jakob Rehme & Daniel Chicksand
Buyer power attributes relative to supplier
The power matrix
HIGH
BUYER
DOMINANCE
LOW
INDEPENDENCE
LOW
INTERDEPENDENCE
SUPPLIER
DOMINANCE
HIGH
Supplier power attributes relative to buyer
Cf. Cox et al Jakob Rehme & Daniel Chicksand
Types of Power
§ 
§ 
§ 
§ 
§ 
Coercive Power
§  Do this or else!
Reward Power
§  Here is what I can do for you.
Persuasion
§  Here is an offer you can’t refuse
§  Information power
§  Expert power
§  Referent power
Image Power
§  I’m the expert with the contacts.
Authority Power
§  I’m in charge. Do it my way.
§  Traditional legitimate power
§  Legal legitimate power
Jakob Rehme & Daniel Chicksand
Capturing value: A power-based model
BUYER DOMINANCE
(>) (High/Low)
HIGH
Attributes of
Buyer Power
Relative to
Supplier
LOW
High buyer power - derived from a
combination of: item of spend being
low utility, low scarcity of suppliers &
there being low information scarcity
High buyer power - derived from a
combination of: item of spend being low
utility, low scarcity of suppliers & there
being low information scarcity
Low supplier power - derived from a
combination of the buyer being high
utility for supplier, high scarcity & there
being high information scarcity
High supplier power - derived from a
combination of the buyer being low
utility for the supplier, low scarcity and
there being low information scarcity
INTERDEPENDENCE
(=) (Low/Low)
SUPPLIER DOMINANCE
(<) (Low/High)
Low buyer power - derived from a
combination of: item of spend being high
utility, high scarcity of suppliers and
there being high information scarcity
Low buyer power - derived from a
combination of: item of spend being
high utility, high scarcity of suppliers
and there being high information
scarcity
Low supplier power – derived from a
combination of the buyer being high
utility for the supplier, high scarcity and
there being high information scarcity
LOW
Chicksand & Cox
INDEPENDENCE
(0) (High/High)
High supplier power - derived from a
combination of the buyer being low
utility for the supplier, low scarcity and
there being low information scarcity
HIGH
Attributes of Supplier Power Relative to Buyer
Jakob Rehme & Daniel Chicksand
Creating and appropriating value
Value appropriation
Total value creation
Reservation price / willingness to pay
Customer
value
Delivery
price
Supplier
value
Cost of production
Long term
Total
Total
Total
benefits sacrifices value
The delivery price indicates how the total
value created is distributed between the
buyer and the supplier
Adapted from Jelassi and Enders (2008, Exhibit 8.2, p. 154), also cf. Brandenburger and Stuart (1996)
Jakob Rehme & Daniel Chicksand
Value Creation from a purchasing perspective
Buyer
Additional
revenue
generating
benefits
Cost
reducing
benefits
Products
or services
Money
(available
revenue)
Cost
reducing
benefits
Additional
revenue
generating
benefits
Supplier
Jakob Rehme & Daniel Chicksand
Customer value, supplier value and money flows
Goal: maximising end-user and the next customer up the chain’s perceptions of
customer value, and thus the quantity of money that is available for appropriation/
division within the dyad.
Perceptions of
supplier value
The consumer
Money
Perceptions of
customer value
Perceptions of
supplier value
Supplier
Money
Buyer
Perceptions of
supplier value
Supplier
Perceptions of
customer value
Within each dyad, the more power the
organisation has, the larger the share of the
money it can retain.
Buyer
Money
Supplier
Perceptions of
customer value
Within each dyad, the more perceived
customer/supplier value an organisation can
generate, the larger the share of the money it
can retain.
Combination
Chicksand, Ramsay and Rehme 2012
Jakob Rehme & Daniel Chicksand
Purchasing’s contribution to value creation in the Supply Chain
§ 
§ 
§ 
Value is derived from suppliers
§  But not without the support of the buyer
Purchasing has a prominent role in creating benefits for suppliers AND for their
own internal organisation
§  Revenue generating benefits
§  Cost reduction benefits
The available value for individual actors in a chain is dependent on:
§  Total value created in the chain (the SCM goal)
§  Your customer’s perceived value
§  The ability to create value together with your supplier
§  Your (power) position in the chain, and your general ability to retain value
35
Jakob Rehme & Daniel Chicksand
Value creation in supply chains
WtP
Buyer
Reserva<onprice/WillingnesstoPay:
Themaximumthebuyerwillpaybefore
rejec<ngthesupplier’sofferinfavorofat
leastthestatusquo
Totalvaluecreatedina3-level
commitchain=WtP-OC
Supplier
Sub- Supplier
OC
Produc<oncost/OpportunityCost:
TheminimumtheSub-supplieriswillingto
acceptfromSupplierbeforerejec<ng
Supplier’sofferinfavorofatleastthestatus
quo
Source: Brandenburger & Stuart 1996
Jakob Rehme & Daniel Chicksand
Value=Benefits-Sacrifices
Total supply chain value
THE EXTENDED SUPPLY CHAIN
Customer Value
Benefits
Direct&
Indirect
Supplier Value
Sacrifices
Sacrifices
Direct&
Indirect
Costs
Direct&
Indirect
Costs
Benefits
Direct&
Indirect
Customer Value
Benefits
Direct&
Indirect
Supplier Value
Sacrifices
Sacrifices
Direct&
Indirect
Costs
Direct&
Indirect
Costs
TOTAL VALUE
Benefits
Direct&
Indirect
TOTAL VALUE
TOTAL SUPPLY CHAIN VALUE
Jakob Rehme & Daniel Chicksand
Creating and appropriating value
Value appropriation
Total value creation
Reservation price / willingness to pay
Customer
value
Delivery
price
Supplier
value
Cost of production
Total
Total
Total
benefits sacrifices value
The delivery price indicates how the total
value created is distributed between the
buyer and the supplier
Adapted from Jelassi and Enders, 2008, Exhibit 8.2, p. 154, also cf. Brandenburger and Stuart, 1996
Jakob Rehme & Daniel Chicksand
Value=Benefits-Sacrifices
Supply-Chain Value or Value Co-Creation
THE EXTENDED SUPPLY CHAIN
TOTAL VALUE 1…n
Firmn
WtP
Firm..
Firm5
TotalSCValue=Σ(TotalValue1…n)
Firm4
Firm3
TotalSCValue=WtP-OC
Firm2
Firm1
OC
TOTAL SUPPLY CHAIN VALUE
Jakob Rehme & Daniel Chicksand
Value=Benefits-Sacrifices
Supply-Chain Value or Value Appropriation
THE EXTENDED SUPPLY CHAIN
Appropriation
of Total Valuen
Firmn
WtP
Firm..
Power
balance
Firm5
TotalSCValue=Σ(TotalValue1…n)
Firm4
Firm3
TotalSCValue=WtP-OC
Firm2
Firm1
OC
TOTAL SUPPLY CHAIN VALUE
Jakob Rehme & Daniel Chicksand
‘[W]ithafewexcep<ons(e.g.,Teece,1986),scholarlydiscourseonthetopicoforganiza<onal
capabili<eshasfocusedlargelyonthedifferencesbetweenfirmsintheirabilitytocreate
value,ratherthantheirdifferen<alabilitytocaptureandprotectthereturnstovalue
crea<onfromtheforcesofcompe<<on’(ReitzigandPurnham,2009,p.765).
Interdependence
=
Unbalanced
0
Balanced
>
Independence
6 Box Relationship Management Type Matrix
Adversarial
Arm’s-length
(Buyer Skewed)
Adversarial
Collaborative
(Buyer Skewed)
Non-Adversarial
Arm’s-length
Non-Adversarial
Collaborative
(Partnering)
Adversarial
Arm’s-length
(Supplier-skewed)
Adversarial
Collaborative
(Supplier-skewed)
Arm’s-length
Collaborative
Supplier dominance
Unbalanced
Attributes of Buyer Power
Relative to Supplier
High
Low
Buyer dominance
RELATIVE SHARE OF VALUE
4 Box Power Matrix
<
Low
High
Attributes of Supplier Power
Relative to Buyer
WAY OF WORKING
Jakob Rehme & Daniel Chicksand
Question
number
Q1
Question to pose
What are the commercial goals for the buyer and supplier (i.e.
strategic ends, such as security of supply) of entering into the
business relationship?
Q2
Are commercial goals fully or partially realised?
Q3
Is there an equal distribution of relationship-specific investments? If
not, who invested more in relationship-specific adaptations and what
evidence is there to support this?
Q4
How close to the reservation price (willingness-to-pay) is the
purchase?
Q5
How close to the cost of production is the delivery price?
Value appropriation
Total value creation
Reservation price / willingness to pay
Customer
value
Delivery
price
Supplier
value
Cost of production
Q6
What evidence is there in the business relationship or contract to
indicate an equal or unequal sharing of the value (payment terms,
length of contract, detrimental clauses, allocation of risks, relationship
commitment etc.)?
Factors
Total
Total
Total
benefits sacrifices value
Buyer-skewed adversarial
Non adversarial
Supplier-skewed adversarial
Goal
attainment
Buyer’s commercial goals fully
achieved
Each party’s commercial goals
partially realised
Supplier’s commercial goals
fully achieved
Adaptations
Supplier invested more in
relationship-specific
adaptations
Equal distribution of
relationship-specific
adaptations
Buyer invested more in
relationship-specific
adaptations
Price
bargaining
The buyer is paying a price
which is substantially lower
than their utility function
The buyer is paying a price
which is mid-way between
their utility function and the
supplier’s mean cost of
production
The buyer is paying a price
which is close to their utility
function
Contractual
implications
The terms of the contract
favour the buyer (i.e. pricing,
payment terms, exit clauses,
etc.)
The terms of the contract
favour neither the supplier nor
the buyer (i.e. pricing,
payment terms, exit clauses,
etc.)
The terms of the contract
favour the supplier (i.e.
pricing, payment terms, exit
clauses, etc.)
Financial
outcome for
supplier
The supplier is receiving only
slight profit
The supplier is able to earn
average profits for their
comparable industry sector
The supplier is able to earn
sustained above average
profits for their comparable
industry sector
Jakob Rehme & Daniel Chicksand
Account
Segment
Component adaptation
for individual account
Component adapted
segment strategy
None
Level of Customization
Understanding your Offer
Component
None
Adaptation to individual
account
Solution/System
Selling
“Turnkey” solution for
customer
Solutions based on
Segmentation
System selling on
segment level,
standardised options
for different segments
Standardised
Standardised system
solution
Bundling
Bundling and
Functional
Degree of Integration
Source: Krishnamurthy, Johansson and Schlissberg
Jakob Rehme & Daniel Chicksand
Att leverera totalerbjudanden – ”The servitization issue” – men
också vår historia
“Within recent years there has been … [a] tendency to define
selling as a process of [providing] service.
Thus a manufacturer of automobiles does not sell automobiles;
he sells transportation. And he uses as his strongest selling
point the argument that the buyer of his car will have
uninterrupted transportation.
Similarly a manufacturer of tires does not sell tires; he sells
mileage. And if one casing does not give satisfactory mileage
he will furnish another.”
Kitson, H. D. (1922) The Growth of the "Service Idea" in Selling.
Journal of Political Economy, Vol. 30, No. 3 (Jun., 1922), pp. 417-419
44
Jakob Rehme & Daniel Chicksand
Tackar!
Jakob Rehme & Daniel Chicksand
Why is servitization important?
A general belief and feeling that products are increasingly under competitive
pressure….
Profits/margins are decreasing for many
products
§ 
§ 
Globalisation – a true global market(?)
§ 
An increasing ‘commodisation’ of many
products (also special purpose)
Everything is service!?
§ 
Customer retention
§ 
Sell a total offer
§ 
Provides continuous
revenue stream
§ 
Profits/margins
(Lay et al., 2009; Hill, 2011; Baines & Lightfoot, 2013).
§ 
“Service Migration” where companies move into services because
§ 
1) margins are seen to be relatively high (?);
§ 
2) expansion into services is based on product selling and does not involve
major investments (if compared to investments in production units) and
§ 
3) when the installed base is greater than the yearly sales.
47
Jakob Rehme & Daniel Chicksand
Service-dominant logic
• 
• 
• 
• 
The goods-dominant logic (GDL) assumes that ultimate value generation is through the goods
production in exchange for money,
The service-dominant logic (SDL) considers goods and service offerings solely as a value
propositions.
To create value the offering function or purpose intended must be realised by service/product
utilisation or consumption.
According to this: value is created by the use of goods through the customer as final resource
integrator and not by the production through the goods manufacturer.
(Vargo & Lusch, 2004; Vargo et al., 2008).
48
Jakob Rehme & Daniel Chicksand
Value, what does it mean?
Definitions (Business Dictionary)
§ 
Accounting: The monetary worth of an asset, business entity, good sold, service rendered,
or liability or obligation acquired.
§ 
Economics: The worth of all the benefits and rights arising from ownership. Two types of
economic value are (1) the utility of a good or service, and (2) power of a good or service to
command other goods, services, or money, in voluntary exchange.
§ 
Marketing: The extent to which a good or service is perceived by its customer to meet his
or her needs or wants, measured by customer's willingness to pay for it. It commonly
depends more on the customer's perception of the worth of the product than on its intrinsic
value.
§ 
Mathematics: A magnitude or quantity represented by numbers.
49
Jakob Rehme & Daniel Chicksand
Our view of value….
§ 
Value is the difference between benefits received and
sacrifices made
§ 
Value depends on the perception of benefits and
sacrifices (or costs)
§ 
Different actors view value differently
§ 
Value-in-use is always higher than value-in-exchange
§ 
Water & Diamond Paradox
§ 
Value can be seen as co-created between buyer and
seller
§ 
Value creation is seen as shared between producers and
consumers in a supply chain
§ 
The sharing of value is dependent on the the relative
power of the actors
§ 
Total value is the sum of buyer and supplier benefits and
sacrifices
(Vargo and Lusch (ed.), 2006; Ulaga and Eggert, 2006; Normann and Ramirez, 1993, McTaggart, Findlay
and Parkin, 2007; Zeithaml , 1988; Anderson et al, 1993, Ramsay, 1996, as well as Karl Marx and Adam
Smith)
50
Jakob Rehme & Daniel Chicksand
Value=Benefits-Sacrifices
Investment decision
Customer Value
Examples of direct benefits
Revenue improving benefits
New markets
Price increase
Differentiation
Etc.
Cost benefits
More efficient processes
Less maintenance costs
Less stock
Etc.
Benefits
Direct:
• 
Technical
• 
Economical
• 
Service
Indirect:
• 
Reputa<oneffects
• 
Social/
rela<onships
• 
Environmental
Sacrifices
Direct:
• 
Price
• 
Searchcosts
• 
Learningcosts
• 
Switchingcosts
Indirect:
• 
Rela<onship
effects
• 
Psychological
• 
Lossofpower
Jakob Rehme & Daniel Chicksand
Value and Supplier Benefits (benefits the buyer can provide the
supplier with)
§ 
Revenue improving benefits
§ 
Sales volume,
§ 
Operational benefits
§ 
Correct and timely information
Forecast reliability,
§ 
Attractive payment format,
§ 
Cross-selling opportunities,
§ 
Demand Stability
§ 
Risk sharing,
§ 
Support for operational development
§ 
§ 
§ 
Stable revenue in unstable times
Buyer business competence,
Administrative flexibility,
Efficient order and delivery process, .
§ 
Customer-led technology innovation,
§ 
Technical competence of buyer and
support for product diversification
§ 
§ 
”Intangibles”
§ 
Good market reputation
§ 
Etc.
Examples of purchasing’s role in providing benefits and
value in the supply chain
Ramsay & Rehme 2011
Jakob Rehme & Daniel Chicksand
Value=Benefits-Sacrifices
Investment decision
Supplier Value
Sacrifices
Benefits
Direct:
• 
Productorservice
• 
Learningand
adapta<on
• 
Dedicated
inventory
Indirect:
• 
Rela<onship
• 
Psychological
• 
Lossofpower
Direct:
• 
Economic
• 
Technical
• 
Reducedrisk
Indirect:
• 
Rela<onship
• 
Ethical/
environmental
• 
Corporateimage
• 
Generalmarket
Examples of direct benefits
Revenue improving benefits
Sales volume,
Cross-selling opportunities
Stable revenues
Customer-led innovation,
Support for diversification
Operational benefits
Correct and timely information
Demand stability
Support for operational development
See also Ramsay and Rehme 2011
Jakob Rehme & Daniel Chicksand
Value=Benefits-Sacrifices
Total value in a supply chain relationships
Customer Value
Benefits
Direct:
• 
Technical
• 
Economical
• 
Service
Indirect:
• 
Reputa<oneffects
• 
Social/
rela<onships
• 
Environmental
Supplier Value
Sacrifices
Direct:
• 
Price
• 
Searchcosts
• 
Learningcosts
• 
Switchingcosts
Indirect:
• 
Rela<onship
effects
• 
Psychological
• 
Lossofpower
Sacrifices
Direct:
• 
Productorservice
• 
Learningand
adapta<on
• 
Dedicated
inventory
Indirect:
• 
Rela<onship
• 
Psychological
• 
Lossofpower
Benefits
Direct:
• 
Economic
• 
Technical
• 
Reducedrisk
Indirect:
• 
Rela<onship
• 
Ethical/
environmental
• 
Corporateimage
• 
Generalmarket
TOTAL VALUE
Jakob Rehme & Daniel Chicksand
Conclusions and Discussion
§ 
§ 
§ 
Servitization is getting more important.
Servitization is concerned with delivering a value proposition towards customers.
However, the value ‘equation’ involves customer and supplier and the benefits and
sacrifices they both perceive.
§ 
This is not factored into neither the work on servitization nor in the writings
about the SD-logic
§ 
We refer to this as total value – that is the sum of customer and supplier value.
§ 
The servitization literature and the debate surrounding value does not adequately
consider how value is shared.
Power will help to explain the sharing of total value in a relationship.
This model can also be applied on a supply chain level.
§ 
BUT….
§ 
Need of a better understanding of the supplier and buyer benefits and sacrifices –
particularly the indirect less tangible elements.
Need to better elaborate on the different ways that value is shared in supply chains
Test our thinking empirically – methodological concerns?
§ 
§ 
§ 
§ 
Jakob Rehme & Daniel Chicksand