Flexible Market

Flexible Market Offerings:

Naked Solutions, With Options

James C. Anderson

Northwestern University

James A. Narus

Wake Forest University

ISBM REPORT 7-1994

Institute for the Study of Business Markets

. The Pennsylvania State University

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University Park, PA X802-2801. U.Ed. BUS 94-067.

FLEXIBLE MARKET OFFERINGS: NAKED SOLUTIONS, WITH OPTIONS

James C. Anderson James A. Narus'

February 18, 1994

*James C. Anderson is the William L. Ford Distinguished Professor of Marketing and Wholesale

Distribution, and Professor of Behavioral Science in Management, J. L. Kellogg Graduate School of

Management, Northwestern University. He is also the AT&T ISBM Research Fellow at the Institute for

the Study of Business Markets (ISBM), located at Penn State University. James A. Narus is Associate

Professor of Management and a Babcock Research Professor, Babcock Graduate School of Management,

Wake Forest University. The authors gratefully acknowledge the financial support of ISBM, and the

tremendous contributions made by the managers who participated in the field research. Finally, they are

particularly indebted to Ame Bennbom of ABB Asea Brown Boveri Ltd. for his support throughout this

research and for the phrase "Naked solutions, with options".

Send correspondence to:

James C. Anderson

Department of Marketing

J. L. Kellogg Graduate School of Management

Northwestern University

Evanston, IL 60208

(708) 49 l-2724

FLEXIBLE MARKET OFFERINGS: NAKED SOLUTIONS, WITH OPTIONS

Firms in business-to-business markets are learning that success depends upon adroitly balancing

three ubiquitous and often conflicting marketplace requirements. First, markets are becoming highly

fragmented and buyers are requesting, and getting, more customized offerings.' Second, customers are

uncompromising in their demands that product offerings be sold for either the lowest price or lowest total

cost. Third, due to the success of the "total quality management" (TQM) movement, many purchasers

now take quality as a given and believe that there are few meaningful differences between competing

products. Customer firms increasingly expect that added-value and differentiation will be delivered in

the form of an augmenting bundle of services, nrograms, and systems such