Value selling at SKF Service (A)

Kamran Kashani

Congratulations to Kamran Kashani and Aimée DuBrule of IMD who have won this year’s Overall Award for their 2009 case, Value Selling at SKF Service (A): Tough Buyer Confronts Strategy.

This coveted accolade celebrates the case that has been used by the largest number of organisations across the globe in the past year. (Cases published in the past five years are eligible.) Kamran discusses his outstanding achievement and why he believes the case is such a success.

Issues and storyline

I think the popularity of this case is directly related to two elements: the issues that the case raises, and its storyline. The issues relate to fighting the commoditization of a core product through value (or solution) selling. These issues are on the agenda of many industrial companies, yet there are no good cases on how to negotiate these challenges, including how to overcome buyers' resistance to premium prices or how to sell a bundle of premium-priced product and services while actually saving the customer money. This case about a global leader in the bearings business provides a successful illustration for doing all these things.

Sweet ending

bearings The case tells the story of the difficulties SKF faces in selling its high-priced bearings to a large but increasingly price-sensitive customer. The storyline is divided into three 'acts', each described in a separate case. The teacher introduces the problem with the first case (A), reveals what happened next in case (B) and concludes the story with case (C). This gives the teacher the option to design his or her teaching plan as a chronological development of the story – from a tough beginning to the sweet ending, in three acts. The students like this phased discussion, moving from ‘what happened next’ to the final outcome. The management dilemmas explored in the case (such as, should SKF refuse to participate in a reverse auction? What if it loses a big order and a key customer as a result?) are also very engaging for students.

A colleague said recently that the case series teaches itself! Well, perhaps not quite, but the storyline is gripping enough to keep the students awake during the session.

Reverse auctions

I learned first-hand how reverse auctions (RA) work. It is a procurement strategy that is meant to commoditize the seller's core product, forcing competitors to compete on one dimension only: the price. It can be devastating to the seller’s profitability. As I have learned, RA is still being used by industrial firms but to a much lesser extent than originally feared by suppliers. In many sectors, customers (not always the procurement managers!) have learned the value of working in close collaboration with their suppliers and this is one reason behind RA's relative fall in popularity.

Opening doors

I had followed SKF for some time because I had learned about their customer value orientation from a case study developed by Sandra Vandermerwe and Marika Taishoff back in 1990 (SKF Bearings: Market Orientation Through Services (A): Restructuring the Before and After Market). Through a colleague, I was introduced to the company's CEO who agreed to my case proposal. This opened all kinds of doors in the organisation, providing me access to the information I was looking for and the people. Plus, it's a lot easier to get a company to agree on a case about their successes rather than their failures. SKF is about a near failure turned into a triumph, and so they were interested in telling us their story.

Overcoming challenges

Finding an incident, or a trigger issue, to write a case about is always challenging. I was pretty depressed after my first round of interviews at SKF because I couldn't find a ‘hook’ to hang the case on. Then I was introduced to the executive featured in the case, Todd Snelgrove, who was in charge of ‘Customer Value’ – a high-energy missionary bent on educating the world about SKF's concept of Total Cost of Ownership (TCO). I found the trigger issue by listening to him describe an incident with a key customer. It solved my problem and I found what I was looking for.

Target audience

The case is written with the more experienced students and executive participants in mind. It should be positioned in the B-2-B marketing strategy segment with a particular emphasis on innovations in customer value propositions.

Supporting material

There are three video clips of the manager in charge of Customer Value at SKF, Todd Snelgrove. Students can hear first-hand what SKF means by TCO and what really happened with their tough customer. The DVD adds a real-world dimension to the case and brings into focus a practitioner's perspective on the issues students have discussed in class.

In addition, there is no shortage of articles on solution selling and the ones I would use include,

How to Sell Services More Profitably, by Werner Reinartz and Wolfgang Ulaga, Harvard Business Review, May 2008; The Riddles of B2B Marketing, by Jean-Pierre Jeannet et al, European Business Forum, issue 30, Autumn 2007; and Fighting Commoditization, by Kamran Kashani, IMD Perspectives for Managers, No. 137, 2006.

Case writing advice

Based on my own experiences, my advice to case writers is to first identify a hot issue that is preoccupying practitioners in many companies and business sectors; next, find a willing company that is dealing with that exact issue; then tell the story in an engaging style. This is my open secret to writing cases!

Case details

Value Selling at SKF Service (A): Tough Buyer Confronts Strategy
Ref IMD-5-0751
Kamran Kashani and Aimée DuBrule 
IMD
Also available:
DVD: Value selling at SKF: Interview with Todd Snelgrove
Ref IMD-5-0751-V

Related cases

Value Selling at SKF Service (B): Facing a Tough Buyer
Ref IMD-5-0752
Kamran Kashani and Aimée DuBrule
IMD

Value Selling at SKF Service (C): Meeting John Elliott
Ref IMD-5-0756
Kamran Kashani
IMD 

About the authors

Kamran Kashani is Professor of Marketing and Global Strategy at IMD
e kamran.kashani@imd.ch

Aimée DuBrule was a Research Associate at IMD in 2009.

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