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SKF Service Division Value Selling

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by

Ghita Wallin

on 21 March 2014

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Transcript of SKF Service Division Value Selling

Value Selling at the SKF Service
Case question:

What decision do you recommend SKF to make and why?
Clement Chapelet
Kristina Gerasimova
Ghita Wallin
Yuying Zhang
Educate entire sales force to use DSP

Reduce fixed salary to 60%, and make 20% incentives to use DSP

Differentiate between hunters and farmers through different incentives, and reward both
SKF's most important channel partner in the US
SKF and ITC were equally surprised by Steelcorp announcing RA
DSP had not agreed to use DSP with their major customers
Refuse RA, but work
together with ITC towards
regaining the appreciation
for the TCO of bearings
Create a more versatile and educated sales force
10% margins for all products
Build-up of inventory as a result of economic down turn

FINANCES
Group 2
COMPANY Profile
$40bn
$8.2bn
Founded in 1907
Diverse product portfolio
Premium brand; margins 10-50%
Over a dozen competitors globally
Estimated two million customers globally
"no rival matches the vast array
of products and services"
The Global and US Markets
Low cost producers in emerging markets
?
New Entrants
Competitors
Porter's 5F
Substitutes
Suppliers
Customers
ITC
Globally
US
SteelCorp
$4M p.a.
$168M p.a.
Channel Partner
End Customer
Problem Definition I
Should SKF
comply
or
refuse
ITC's invitation to participate in the reverse auction organized by Steelcorp?
Problem Definition II
How can SKF minimize the
risk
of harming its
relationships
with
Steelcorp
and
ITC
respecively?

Documented Solutions Program
Last defense on commoditizing market

Key tool for supporting the premium brand image and pricing

A computer based sales tool that:
Quantifies and measures customer benefits
Allows SKF to quantify a customer guarantee

Opportunity to deepen understanding of user requirements

Unsatisfactory adoption of tool within own and distributors' sales force
Steelcorp
ITC
RELATIONSHIP WITH SKF
Third largest producer of raw steel and steel-based products --> $30bn sales
Sharp decline in sales has resulted in a 20% target of savings in total purchases --> introducing RA

All interaction with SKF happens through ITC
Steelcorp buys 50% of its bearings from ITC, one third being produced by SKF
FINANCES
RELATIONSHIP WITH SKF
Thank You! Questions?
Value Selling at SKF Services
RECOMMENDATIONS
STEPS
Strengthen the relationship with ITC
Strengthen relationship with Steelcorp in collaboration with ITC
Address the "good enough" mentality on the market
Use own sales force to educate ITC sales force on the use of DSP

Promise free support for ITC to apply DSP with all major bearing clients
Agree to meet with Steelcorp before RA jointly with ITC in order to showcase the TCO benefits of SKF bearings

Suggest the main decision point in the RA to be TCO opposed to purchasing price
Make customer surveys in order to get qualitative support for the arguments about superior quality

Create a TCO based RA software tool or add-on
"ITC would not only lose its profitable sales of SKF products but also damage its own relationship with Steelcorp”
"An opportunity to increase SKF's share of Steelcorps total bearings business"
"Loss of sales volume and possibly harming the historically good relationship with ITC if SKF didn’t participate in the auction”
comply
"Falling into a commodity trap that is in no ones interest"
“the ultimate commoditization tool”
price
benefit
less than 0.05% of global sales
refuse
Full transcript