industrial marketing

BCO 316 Industrial Marketing

Class 5: B2B Relationship Marketing Management

Prof. Dessy Todorova

Spring 19/20

Prof. Dessy Todorova

BCO 316 INDUSTRIAL MARKETING B2B Relationship Marketing Management

Lecture Objectives

 Explain relationship marketing practiced in industry

 Understand what are the requirements in high performance relationships

 Discuss the synthesis and extention model of

relationship management

 Explain the role of trust in B2B relationship

 What are the outcomes associated with constraint-

based and dedicated-based relationship

 Suggestions for making B2B relationships last

Relationship Marketing

All marketing activities directed toward

establishing, developing, and maintaining

successful relational exchanges

for the mutual benefit of all involved parties.

• Transaction-based marketing Buyer and seller exchanges characterized by limited communications and little or no ongoing relationship between the parties.

-> Focuses on short-term, onetime exchanges.

• Relationship marketing Development, growth, and maintenance of long-term, cost-effective relationships with individual customers, suppliers, employees, and other partners for mutual benefit.

-> Based on promises of low prices, high quality, prompt delivery, and superior service.

Transaction-based v/s Relationship Marketing

The Shift From Transaction-based Marketing to Relationship Marketing

• Shift away from production-oriented marketing.

• Emphasis on individual sales and transactions. • Limited communication.

• No ongoing relationship.

• Still common in some markets, such as residential

real estate.

• Shift toward relationship marketing.

• Views customers as equal partners in transactions.

• Encourages long-term relationships, repeat purchases, and multiple brand purchases from the firm.

• Collaborative exchange between buyer and seller.

The Shift From Transaction-based Marketing to Relationship Marketing

• Focuses on long term rather than short term.

• Emphasizes retaining customers over making a sale.

• Ranks customer service as a high priority.

• Encourages frequent customer contact.

• Fosters customer commitment with the firm.

• Bases customer interactions on cooperation and trust.

• Commits all employees top providing high-quality products.

To Summarize Relationship Marketing

Focal

Firm

Goods

Suppliers

Services

Suppliers

Competitors

Non-Profits

Government

Ultimate

Customers

Intermediate

Customers

Employees

Business

Units

Functional

Dept.’s

Supplier

Partnerships

Buyer

Partnerships

Lateral

Partnerships

Internal

Partnerships

Partners in Relational Exchanges

Elements of Relationship Marketing

• Firms build long-term relationships in four basic ways:

• Gather information about their customers.

• Analyze the data and use it to modify the marketing mix.

• Monitor interactions with customers.

• Use knowledge of customers and their preferences to

orient every part of the organization.

• INTERNAL MARKETING

• External customers—people or organizations that buy or use a firm’s goods or

services.

• Internal customers—employees or departments within the organization whose success depends on the work of other employees or departments.

Internal marketing —managerial actions that enable all organizational members to understand, accept, and fulfill their respective roles in implementing a marketing strategy.

Improves employee recruitment and retention.

Increase employee knowledge and involvement.

Effective internal marketing also increases employee satisfaction.

Satisfied employees can affect the purchasing behavior of those around them.

Satisfied employees provide effective customer service.

The relationship marketing continuum

• Firms try to move buyer-seller relationship from the lowest to the

highest level of the continuum of relationship marketing to

strengthen the mutual commitment between them.

FIRST LEVEL: FOCUS ON PRICE

• Most superficial level, least likely to lead to long-term relationship.

• Marketers rely on pricing to motivate customers.

• Competitors can easily duplicate pricing benefits.

SECOND LEVEL: SOCIAL INTERACTIONS

• Customer service and communication are key factors.

• Example: Wine shop holding a wine-tasting reception.

THIRD LEVEL: INTERDEPENDENT PARTNERSHIP

• Relationship transformed into structural changes that ensure partnership and interdependence between buyer and seller.

• Example: Barnes & Noble’s member program that promotes repeat

purchases by customer and provides discounts to the customer.

Value of RM to Sellers

• Helps to ensure substantial and reliable purchase volumes at adequate margins.

• Helps to determine the buyer’s choice the next time around.

Value of RM to Buyers

• Costs of carrying safety stocks, and those of high return rates, numerous re-orders, & long lead times have steadily risen.

• RM helps to eliminate waste and improve system economies. • inventory reduction

• decreased line shutdowns

• purchasing labor savings

Electronic Data Interchange

• Electronic Data Interchange (EDI) involves computer- to-computer exchanges of invoices, orders, and other business documents

• EDI is rapidly gaining popularity because it allows firms to reduce their cost and to improve their efficiency and competitiveness

• Quick-response strategies can be implemented by businesses using EDI. Quick response strategies reduce the time that a merchandise is held in inventory and result in substantial cost savings

© PhotoDisc

Requirements for high performance relationships

• BEYOND THE FINANCIAL CONSIDERATIONS:

• INTEGRITY

• FAIRNESS

• LOYALTY

• FLEXIBILITY

• INPUT INTO YOUR PARTNER’S STRATEGY

• PARTNER’S INPUT INTO YOUR STRATEGY

• COMPLIANCE WITH PROCEDURES AND AGREEMENT

• HONOR COMMITMENTS

• STAND BEHIND YOUR PRODUCTS

Role of Trust in the Relationship

Cooperative

Strategies

Benefits

For Both

Unless Lack

Of Trust

Why is Trust So Important?

• The parties have confidence in their relational partner’s reliability and integrity

• Without trust, there is NO commitment

• Without commitment, future exchanges are questionable at best

• Without trust and commitment, negotiation costs are increased

• Without trust and commitment, monitoring costs are increased

Types of Relationships

• Discrete Transactions • have a distinct beginning, short duration, and sharp ending by

performance.

• Value-Added Exchanges • Focus shifts from attracting customers to keeping customers.

Begin focusing more closely on understanding & fulfilling needs.

• Relational Exchange • traces to previous agreements, and is longer in duration, reflecting

an ongoing process.

The Consequences

Constraint-Based

Relationship

Dedication-Based

Relationship

Propensity

To Leave

Interest in

Alternatives

Acquiescence

Cooperation

Enhancement

Identity

Advocacy

Different Customer Motivations

• Constraint-Based Relationships

• One party believes it cannot exit the relationship due to economic, social, or psychological costs.

• The strength of the constraints is a function of the party’s perceived dependence upon the other.

• Dedication-Based Relationships

• Party remains in relationship because he/she is committed to the relationship and wants to remain.

• Dedication generally arises due to dependence and/or trust.

Different Customer Motivations

Outcomes Associated with Constraint-Based Relationships

• Interest in Alternatives • lasts only as long as constraints

• individuals in constrained relationships attempt to restore freedom to chose.

• increased attempts to identify alternative suppliers.

• more environmental monitoring • more receptive to competitors’ relationship offers.

Outcomes Associated with Constraint-Based Relationships

• Acquiescence

• degree to which partner accepts or adheres to another’s specific requests or policies.

• passive agreement to maintain the relationship.

Outcomes Associated with Dedication-Based Relationships

• Cooperation • active participation for mutual benefit

• Enhancement • broaden/deepen relational bonds

• buying additional services

• providing capital, information, labor, or other resources

• participating in company events

Outcomes Associated with Dedication-Based Relationships

• Identity • thinks of relationship partnership as a team and

considers the partner in proprietorial terms.

Outcomes Associated with Dedication-Based Relationships

• Advocacy • ultimate test of relationship

• promote relationship partner to others

• defend relationship partner against detractors

• main purpose is to, of course, benefit from positive word-of-mouth.

How to make B2B relationships last

• Make on-site visits to your partner

• Trade personnel and offices

• Manage total dependence with an alternate supplier

• Make the pledge of continuous service

• Develop a relational contract

• Provide ownership by bringing functions or technology within boundaries of partner’s firm