Lecture Week 3

1. Lecture Week 3 Buyer-Seller Relationship -Recommended Text: Chapter 4

2. Recap from Lecture 2 • Understanding the Dynamics of Organizational Buying • The Buying Process • Types of Buying Situation • Organisations Role in Buying Process

3. Dimensions of Buyer – Seller Relationship • Basic building block of buyer – seller relationship is based on interactions of sales rep with buyer • Buyer’s perceptions of salesperson: stereotypical and salesperson’s company reputation • Behaviour of salesperson and buyer depend on: • Organizational needs or objectives • Personal needs • Social needs • For successful relationship, content and style of interactions should be compatible

4. 0 Spectrum of Buyer-Seller Relationships Buyers and sellers craft various relationships in response to: a) Market conditions b) Characteristics of the purchase situation

5. 0 Types of Relationships • Continuum of buyer-seller relationships • Transactional, Value-added & Collaborative exchanges The Relationship Spectrum

6. Transactional Relationship • One-time transaction & short-term relationship • Buyers prefer this when: • Many suppliers are available • Supply market is stable • Less complex purchasing decisions • Sellers prefer this when buyers’ sales and profit potentials are low • Buyers Focus is on lowest / competitive prices and timely availability • Buyers are switchers; no loyalty to any supplier

7. Value-Added Relationship • Medium sales and profit potential of buyers • Seller focuses on understanding and meeting buyer’s needs better than competitors • Seller’s objective is to get maximum share • Buyers are split loyals – i.e. have 2 or 3 suppliers • Buyers & sellers have a long-term relationship

8. Collaborative / Partnering Relationship • Foundation : Commitment and trust of both parties • Objective: Long-term mutually beneficial relationship • Buying firms prefer it when: • Few supply alternatives • High purchase complexity and uncertainty • Selling firms prefer it when: • Buying firms’ sales and profit potentials are high • Process includes strong social, economic, service, technical ties; and joint problem solving, multiple connections, integrating operations • Buyers are hard-core loyals to one supplier

9. Developing Effective Relationship Marketing Strategies • The steps include: • Selecting customers • Linking CRM system with customer database • Developing objectives and strategies • Implementing relationship strategies • Evaluating relationship objectives and strategies

10. Selecting Customers • Segment the total market • Decide target segments with superior value offering • Select customers with high sales & profit potential from target segments for collaborative relationship

11. Linking CRM System with Customer Database • Build customer database using CRM software • Customer database includes following customer information: • Basic: Name, mail-ID, mobile nos. of buying centre members • Company: Customer type, products purchased, sales potential, Competition, buying factors, etc. • Psychographic: Values, lifestyle of members • Transaction history: Purchase transactions • Satisfaction and Loyalty Compared to competitors

12. Developing Objectives and Strategies • Relationship Objectives are based on: • The customer’s purchase orientation • The customer’s specific needs • Relationship strategies: • Collaborative • Value – added • Transactional

13. Implementing Relationship Strategies & Evaluating Objectives and Strategies • Implementing Relationship Strategies: • Done through sales and customer support people • Sales groups serve different customer segments; e.g. key accounts, transactional accounts, dealers, Government • Evaluating Objectives and Strategies: • Both buyer and seller evaluate if stated objectives and strategies achieved, after 2-3 years • Relationship continued, upgraded, or downgraded after evaluation

14. Relationship Marketing (RM) • RM focuses on collaborative/partnering relationship with key accounts • Aims of RM: • Building mutually satisfying, long-term relationships between customers, suppliers, intermediaries • Gain and retain business • Develop strong customer bond/loyalty • Approaches/Strategies used in RM • Financial benefits • Social benefits • Structural or technical ties • RM is effective in right situations and not for low sales & profit potential customers

15. Relationship Management in Greater Washington, D.C. - Growing Small Businesses - Chase https://www.youtube.com/watch?v=SRLDxuFnJh4

16. 0 Customer Retention • Retention of profitable customers is crucial to business. However, due to competition and internal / external environmental factors, achieving this goal is difficult. • One method that is proving successful for customer retention is the use of CRM programs.

17. Customer Relationship Management (CRM) • Meaning of CRM (from many definitions): “Develop customer strategy, business processes, customer-centric culture, supported by a software.” • Main objective: Give shared customer data to all customer interacting persons • CRM applications: • Sales force automation and management • Customer service and support • Integrating marketing functions

18. Benefits and Cost Analysis of CRM • Benefits • Unified customer database • Retaining customers • Acquiring customers • Costs • CRM Software: Develop in-house, buy licensed, or outsource • Implementation –People and time • Integration with existing systems

19. 0 CRM Technology • CRM programs are software systems that capture information and integrate sales, marketing and customer service information. • CRM programs can gather information from many sources including email, call centers, service and sales reps. • The information is available to the right people in the organization in real time.

20. 0 CRM Software Programs There are many types of CRM programs: • Some companies develop their own proprietary programs. • Some companies purchase off-the-shelf programs.

21. 0 Responsive Strategies • A CRM program cannot help unless a company employs the proper strategy to secure and retain profitable customers. • Special attention must be given to five areas.

22. 0 CRM Strategy - Priorities • Acquire the right customer. • Craft the right value proposition. • Institute the best processes. • Motivate employees. • Learn to retain customers.

23. 0 #1 - Acquiring the Right Customer Account selection demands a clear understanding of: • Seller’s resources • Customer’s needs • Cost of serving various groups of customers • Potential profit opportunities • How customers define value and how to meet those expectations

24. 0 #2 – Crafting the Right Value Proposition • A value proposition encompasses the products, services, ideas and solutions that a business marketer presents to the prospect/customer that is designed to solve the customers’ problems. • They can be generic or customized.

25. 0 Value Proposition A value proposition may include: • Points of parity to a competitive option • Points of difference Best practice suppliers base their value proposition on their target market’s needs by communicating their offering of superior performance in a way that conveys they understand their customer’s business priorities.

26. #3 - Institute Best Practices The sales force plays a key role in establishing and growing a customer from a transactional account to a collaborative partnership. They can do this by aligning and deploying technical and service support units to match with their customers’ units. Technical groups can consist of research, logistics and customer service units. Through careful management and screening, transactional accounts can progress to partnerships. 0

27. 0 #4 - Motivating Employees Dedicated employees are the key to a successful customer relationship strategy. The best approach is to: • Hire good people. • Invest in them to increase their value to the company and its customers. • Develop challenging careers and align incentives to performance measures.

28. 0 #5 - Retaining Customers Retain customers by: • Providing superior value (more than expected) to ensure high satisfaction. • Nurturing trust. • Developing mutual commitment. • If possible, helping customers grow their business.

29. Established customers buy more. Cost of serving loyal customers declines. Less expensive than acquiring new customers. 0 Why Retain Loyal Customers?

30. Methods to Influence Business Customers • Major Methods: • Sales Presentation • Negotiation • Sales Presentation • Identify and respond to the customer needs • Have two sided discussion • Highlight superior value • Use technology for presentation

31. Methods to Influence Business Customers • Negotiation • Many purposes of negotiation • Meet customer before formal negotiation to collect information and build rapport • Adopt ‘win-win’ style out of various styles • How to defend when customer uses another style? • During negotiation: • Be positive, kind, and calm • Get agreement to the problem • Explore areas of agreement • Make concessions in small amounts • Conclude by summing-up what is agreed

32. Special Dealings in Business Marketing • Reciprocity • It means reciprocal dealings between a buyer and a seller • It is buying from a customer, or selling to a supplier • In practice, it often becomes complex • Hence, purchase and sales managers dislike it • Keep it minimum • Dealing with Customer’s Customers • Some times, business marketers need to deal with customer’s customers • It is a sensitive issue. • Planning and coordination required with customer

33. Customer Service The term ‘service’ and ‘services’ are not synonymous • Services (e.g. courier & legal) are Core services • Service (or customer service) includes basic & supplementary customer service that accompanies core product or service • Basic customer service is provided free of charge to customers • Supplementary service is an additional service for which a supplier may charge an extra amount to customers • High importance given by buyers to quality of core products & services, basic service & supplementary service • Examples of basic customer service : information on core product/service, availability/delivery, complaint handling system, etc. • Examples of supplementary service : Credit cards, demand drafts/locker facility (in banks) and maintenance & repairs of equipment

34. 0 Switching Costs • A major consideration before changing from one supplier to another is the switching costs. • Organizational buyers invest heavily in their relationships with suppliers. Investments include: • Money • People • Training Costs • Equipment • Procedures and processes

35. 0 Strategic Alliances vs. Joint Ventures • Strategic alliances involve a “formal long-run linkage, funded with direct co-investments by two or more companies, that pool complementary capabilities and resources to achieve generally agreed objectives.” • Joint Ventures involve the formation of a separate independent organization by venture partners.

36. 0 Benefits of a Strategic Alliance • Access to new markets • Access to new technologies • Economies of scale • Faster entry of new products into markets due to established distribution channels • Sharing costs and risks

37. 0 Social Connections in an Alliance

38. 0 Boundary-Spanning Connections Working relationships that span organizational boundaries: • Facilitate strong communication • Minimize misperceptions • Strengthens cooperation • Thus, uniting the partnering firms

39. 0 Successful Alliances • Are flexible • Let the alliance evolve as conditions change • Invest adequate resources • Pay attention to the relationship • Integrate their organizations so points of contact and communication are managed

40. 0 Five Levels of Integration • Strategic – Senior executives continuously define and communicate broad goals or changes in each company • Tactical – Middle managers plan joint ventures, transfer knowledge and work to improve inter-firm connections • Operational – Concerned with providing information, resources and personnel to carry out daily work • Interpersonal – Facilitate an environment for people to know each other, learn together and create new value • Cultural – Managers are required to have communications skills and be culturally aware to bridge differences

41. Introducing a term-Social Relationship platform https://www.youtube.com/watch?v=3-unR0cxm_M