DDBA 8531 Week 7 Customer Value Case Example

From Reliability to the Ledger: A Value Case for Vibration Monitoring on a Bottling Plant's Filling Lines, Converting Each Benefit Into a Figure in a Named Account and Assigning It to the Person Who Would Verify It

Student Name

Walden University

DDBA 8531: Seminar in B2B Marketing

Instructor Name

Month Day, Year

From Reliability to the Ledger: A Value Case for Vibration Monitoring on a Bottling Plant's Filling Lines, Converting Each Benefit Into a Figure in a Named Account and Assigning It to the Person Who Would Verify It

The Offer and the Buyer

A composite sensor supplier offers wireless vibration sensors and a monitoring service for the filling lines at a beverage bottling plant in Texas. The plant runs four high-speed lines filling 20-ounce bottles, each producing about 600 bottles a minute. The offer covers 96 sensors on fillers, cappers and conveyor drives, installation and a three-year monitoring subscription, at a total of $412,000. Unplanned stoppages on the filling lines averaged 210 hours a year across all four lines over the past three years, according to the plant's maintenance records. The plant's buying committee includes the plant manager, the controller, the maintenance supervisor and the corporate engineering lead.

The Value Table

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Each figure rests on the plant's own records where possible. The stoppage reduction of 35 percent is the most uncertain assumption; it comes from the supplier's results at three comparable plants and is tested below.

Table 1

Benefits Converted to Accounts

How the Figures Were Built

The lost margin figure starts with 210 stoppage hours a year. A 35 percent reduction avoids about 73.5 hours. The plant's margin report shows contribution of about $5,140 per line hour at current volumes. At $5,140 an hour, 73.5 hours comes to about $378,000. The working capital figure comes from the stores list, which shows $288,000 in bearings, gearboxes and seals held for the filling lines; condition monitoring allows a third of that stock to be released over the first year. The overtime figure applies a 30 percent reduction to $137,000 in emergency maintenance call-ins last year.

Ulaga and Chacour (2001) argued that customer value in business markets should be measured as the customer perceives it, comparing benefits and costs across the attributes that matter to that customer, rather than as the supplier imagines it. Building the figures from the plant's own records follows that advice.

Focusing the Case

Anderson et al. (2009) urged suppliers to build what they called a resonating focus, narrowing the offer's case to the few advantages this particular buyer prizes instead of cataloging everything the product does well. The table contains four rows, but the case presented to the committee leads with two: avoided stoppage margin, for the plant manager, and released working capital, for the controller. Overtime and parts savings are included in the appendix for the maintenance supervisor, who will verify them, but they are not the headline. A case that led with nine benefits would ask the committee to believe all nine, and the weakest would undermine the strongest.

Payback and Sensitivity

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The annual recurring benefit adds stoppage margin to the overtime and parts savings, which are held at $59,000 in every row; working capital is a one-time benefit and is excluded from the payback figures, which makes them conservative. Even at a 20 percent reduction, well below the supplier's results elsewhere, payback falls under two years.

Table 2

Payback Under Three Stoppage Assumptions

Who Confirms What

Assigning each figure to the person who would verify it serves two purposes. It shows the committee that the case was built from their own data, and it tells the supplier whom to meet before the committee does. Webster and Wind (1972) described buying as a group decision in which each member applies their own criteria, and a value case written for the group should give each member a figure they can check.

What the Case Leaves Out

The case does not claim benefits the plant cannot verify, such as improved product quality from steadier filler operation, though the maintenance supervisor believes it is real. Leaving it out keeps every figure checkable.

Limits

The stoppage reduction is uncertain and depends on the plant acting on alerts. Margin per line hour assumes the plant could sell what it would have produced; in a slow season, lost production might be recovered later, reducing the benefit.

References

Anderson, J. C., Narus, J. A., & Narayandas, D. (2009). Business market management: Understanding, creating, and delivering value (3rd ed.). Pearson Prentice Hall.

Ulaga, W., & Chacour, S. (2001). Measuring customer-perceived value in business markets. Industrial Marketing Management, 30(6), 525-540. https://doi.org/10.1016/S0019-8501(99)00122-4

Webster, F. E., Jr., & Wind, Y. (1972). A general model for understanding organizational buying behavior. Journal of Marketing, 36(2), 12-19. https://doi.org/10.1177/002224297203600204