Engineering procurement and construction companies in India: Which factors drive their willingness to pay

This research work in the context of Indian Industrial marketing, attempts to study the non-price attributes (desired values) affecting the willingness to pay (WTP) of Indian engineering, procurement, and construction (EPC) companies when buying medium-voltage (MV) and high-voltage (HV) switchgear from manufacturers. An initial experiential survey with 22 manufacturers revealed that among the top three business pain points with EPCs, insufficient price realization was the most frequently voiced, common across all electrical equipment, and particularly MV and HV switchgear. Experiential survey also revealed two types of EPCs; (i) Those that award contracts with price as their dominant decision consideration such as Public sector units (PSUs) and (ii) those awarding based on multiple criteria, besides price, such as private sector companies. The study was focused on private sector EPCs, procuring MV / HV switchgear. A review of literature until 2018, covering theoretical framework and empirical results in varied market environments was conducted. There was no relevant literature found directly relevant to the focus area of current research. These studies revealed associations between various constructs such as 'Desired values' with 'Perceived value'; 'Desired values' with 'Customer satisfaction'; 'Desired values' with WTP; 'Customer satisfaction' with `WTP'. Synthesizing these studies, the current research has proposed an integrated model between 'Desired values', `Delivered values', 'Value perceived', 'Customer satisfaction' and `WTP'. The research further set out the following objectives; (i) to find what are the desired values (non-price attributes) of the focus EPCs, (ii) what is the relative importance of these values, (iii) whether or not value perception results in customer satisfaction and (iv) customer satisfaction in WTP. A population of 578 EPCs (private sector) were found through secondary research studies. To obtain a comprehensive list of the desired values affecting EPC's WTP, another experiential survey was conducted with 15 manufacturer representatives and 22 EPCs, including in-depth interviews with some EPCs to deduce most important value elements. Thereafter a structured questionnaire, curated with insights from above survey, were administered to over 200 EPCs and 176 responses were obtained. Detailed sample statistics on the mean and variances were carried out to test various hypothesis and to make inferences about the relevant population parameters. The research identified 10 major attributes or desired values by EPCs. They are 'Bid support', 'Technology', 'past on-field equipment performance', `Engineering capabilities', 'Delivery capabilities', 'Quality capabilities', 'Service capabilities', 'Bilateral relationship', 'Make-preference', 'Adherence to terms and conditions'. Further, the study revealed that 'Bid-support' and 'Delivery' were critical to EPC's success for both MV/HV switchgear groups and across EPCs turnover categories, while the rest were important but hygiene factors largely. It was also found that EPCs agree that value perception causes satisfaction and in turn WTP. EPCs were willing to offer first right of refusal as well as pay a price premium of 3%-5% average to a vendor perceived as offering the highest value. Further, EPCs with annual turnover of less than INR 26 crores (low turnover sub-group), show higher propensity to WTP than the rest. The research claims originality of the findings in respect of creating a value driver guide to manufacturers serving EPCs, while reassuring them of a possibility to capture part of the deliver value delivered as price premium. The research on WTP is focused on only desired values that are supplier located and accordingly presupposes constancy of others such as customer located, and environment located variables. Though the results cannot be generalized for all equipment, the methodology however may be applied to conduct similar WTP studies in respect of other important electrical products such as motors, cables and so on. Further studies may also be focused on value quantification methods, creating a comprehensive sales recipe for value planning, value creation and value capturing.