strategic business marketing reflection

Session 3: Relationships and Networks

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• Purchasing Orienta1on and Nego1a1on • Chapter 3

3 • B2B Rela1onships and Networks • Handout

4 • Market Sensing / Price value • Chapter 2

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• B2B Strategy and Planning • Chapter 4

6 • Managing B2B Products and Services • Chapter 5, 6

7

• Integrated B2B Marke1ng Communica1ons and Consulta1ve Selling • Handout

8 • Business Channel Management • Chapter 7

9 • Gaining and Managing Customers • Chapter 8, 10

10 • The Digital Evolu1on in B2B • Handout

11 • Exam Briefing and Poster presenta1on

Understanding Value

Crea0ng Value

Delivering Value

B2B Marke1ng Framework

1.   Regard Value as Cornerstone. 2.   Focus on Rela0onship Interac0on and

Networks. 3.   Focus on Business Market Processes. 4.   Stress doing Business Across Borders.

Guiding Principles

Session Topics

•  By the end of this session you will understand:

•  Understanding the significance of relationship management: –  Understand IORs from an interaction perspective –  Examine relationship marketing from a .customer

to wider stakeholder perspective –  Overview CRM

•  Understand a Firms Network Position –  Compare different network positions –  Recognize the complexity of a firms network

position

Organiza(on

Technology Structure Strategy

Individual Aims

Experience Skills

Interac(on Process

Environment Market structure Dynamism Interna1onalisa1on Channel posi1on Social system

Atmosphere Power/dependence Co-opera1on Closeness Expecta1ons

Organiza(on Technology Structure Strategy

Individual Aims Experience Skills

Long term rela1onships Ins1tu1onalisa1on, Adapta1ons

Short term exchange episodes Products/services Informa1on Financial Social

Source: Adapted with permission from Håkansson (1982, p24)

B2B Interaction Model

Relationship Marketing

•  Establishing, •  Developing, and •  Maintaining successful exchanges with

customers.

Rela1onship Marke1ng centers on

Key issues in B2B Relationship Marketing

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Exchange

•  Central to every relationship is an exchange process where each side gives something in return for a payoff of greater value.

•  The “take $” side of the transaction must offer a perceived payoff of greater value to the buying side for the transaction to occur.

Collaborative Advantage

•  New era of business marketing is dependent upon managing relationships.

•  Collaborative advantage is: –  Demonstrating special skills with “key”

customers or –  Developing innovative strategies with alliance

partners –  Customer journey mapping

Types of Relationships

•  Continuum of buyer-seller relationships •  Transactional, Value-added & Collaborative exchanges

The Relationship Spectrum

Transactional Exchange

•  Centers on timely exchange of basic products at highly competitive market prices

•  These types of transactions are autonomous, meaning that there is little or no concern as to the needs of buyer or seller

•  Example: A person comes into a store and buys a hammer. The buyer wants a hammer and the seller sells him one. That’s all there is to it!

Transactional Exchanges

The business market includes items like:

•  Packaging, •  Cleaning products or •  Commodity-type products or service

activity where bidding is employed.

Transactional exchanges employ an Arms-Length relationship.

Collaborative Exchange

} Occurs when alternatives are few, market is dynamic, the purchase is complex and the price is high

} Features close information, social, and operational linkages, as well as mutual commitments

} Switching costs are extremely important to collaborative customers

} Trust is the key and it exists when one party has complete confidence in their partner’s ability and integrity

Value-Added Exchanges

•  Value-Added Exchanges fall between Transactional and Collaborative Exchanges

•  Value-Added Exchanges are those where the selling firms shifts from just attracting customers to keeping them by:

1.  Adding additional services 2.  Developing services that are customized to

meet the buyer’s needs 3.  Providing continuing incentives that promote

repeat business

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: 1.  Money 2.  People 3.  Training Costs 4.  Equipment 5.  Procedures and processes

Buyers and sellers craft various relationships in response to: a) Market conditions b) Characteristics of the purchase situation

Spectrum of Buyer-Seller Relationships

The development of buyer-seller

relationships in business markets

Customer Profitability

Managing Unprofitable Customers

Low margin / high cost customers offer the most challenge for marketing mangers.

•  Start with ways to reduce costs •  Next, work with customers to possibly

change their actions resulting in lowering costs or increasing profitability

Firing the Customer

•  We must try everything to make a customer profitable before firing them.

•  If after trying, and the customer continues to be reluctant to change, and the relationship remains unprofitable, we can say outright, “YOUR FIRED!” but…

•  There are better approaches. We can let customers ‘fire themselves’ by raising our prices, reducing or charging more for services, eliminating discounts, etc., until they become profitable or find another distributor.

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.

Customer Relationship Management

Customer Relationship Management (CRM) is a cross-functional process for achieving:

a. Continuing dialog with customers across all contact and access points

b. Personalized service to the most valuable customers

c. Increased customer retention d. Continued marketing effectiveness

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.

Customer Relationship Life-Cycle

Understanding Customer Journeys

•  Customer Journeys - is a term commonly used by digital marketers to describe ‘touch points’ or different types of paid, owned and earned media which influence B2B customers as they access different types of website content when selec1ng products and services.

Checklist Journey Mapping

How to create a customer journey map

Buyer Personas •  Buyer personas are iconic representations of

your ideal B2B customer. They are research- based, grounded in data, facts and actual interviews with recent buyers (and may even include perspectives from people who deferred a purchase decision or purchased a competitive solution).

•  Properly constructed buyer personas dig deeper to reveal the attitudes, feelings and goals that motivate customers during the buyer journey.

Developing Customer Personas

Network Thinking

“No business is an Island”

Networks, the context of relations

•  The environment(s) of firms in business markets: economic, competitive, social, legal/ethical

•  Networks are another way of thinking about environment - this time the environment of business relationships and their participants

Levels of relationship and network management

Networks and Network Management

•  It is not feasible to examine any inter-company relationship in isolation. Relationships are influenced by other organisations that also interact and influence the parties to a dyadic interaction

•  Network forms-inevitable & strategic •  Network uses -Descriptive and analytical

Networks Characteristics

– Collection of firms – Inevitable, but can be used strategically – Informally organised – Work together cooperatively

•  common goals •  separate goals

– Benefits for the network and for the members – Direct and indirect links – Strong and weak ties between the firms

Networks come alive

•  Find a partner (that’s a dyad) •  Each establish link with another dyad(s) •  At least two in the network extend the network further to

include another network •  How many networks have we got? •  In other words, they grow fast if you are not careful.

How can we envisage networks •  Spider web, wheel with hub and spokes, ball of wool,

something with no center •  Examples: Italy, Germany, Silicon Valley •  Each of these network has different characteristics and

has emerged for different reasons but has some of the same characteristics – Geographic concentration – Interaction between participants

•  However even these are not universal, networks can include distant members and have little interaction

Adaptive Networks

Complex Adaptive Systems

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How can we depict networks? Picture includes -position/connections -nodes -size/importance

Could also include

• strength/valence (of connections)

• actor/activity/resource

Single Relationships

•  Activity Links

•  Resource Ties

•  Actor Bonds

Resource Ties

Figure 2.5 Resource ties between five companies.

Activity Structures and Links

Figure 2.4 Activity structures, links and pattern over five companies.

Actor Bonds

Figure 2.6 Actor bonds between five companies.

Substance of Three Relationships

Figure 2.7 The substance of three relationships.

Figures 2.4, 2.5, 2.6 and 2.7 Source: Håkansson and Snehota, Developing Business Relationships in Industrial Networks, Routledge, 1992.

Supply Relation Management

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Business Network Characteristics

1.  Organized around developing and realizing an envisioned market opportunity

2.  Multiplex relations where firms are: –  suppliers, –  customers, –  and competitors to one another

3.  Increasingly international in composition

Different types of Networks

•  Supplier Networks – Example: Toyota

•  Distribution Networks – Example: IBM

Toyota’s Supply Network

Figure 2.1 Toyota’s supply network.

Source: D Blenkhorn and AH Noori, What it Takes to Supply Japanese OEMs, Industrial Marketing Management, vol. 19, no. 1, 1999.

THE TOYOTA SUPPLIER NETWORKS ILLUSTRATES……..

•  Indirect relationships. •  Co-ordination between relationships. •  Influence of large companies. •  Problems with a single perspective.

IBM’s Distributor Network

Figure 2.2 IBM’s distribution network.

Source: Ford (ed) Understanding Business Markets and Purchasing, London, Thomson Learning, 2001.

THE IBM NETWORK ILLUSTRATES:

1.  Variety of Companies. 2.  Variety of Relationships. 3.  Difficulties of Control.

Points about Networks

•  To examine a Network we need a focal point.

•  A Network means opportunities and restrictions.

•  No one company controls a Network. •  The key task of Business Marketing (and

Purchasing) is to manage each single relationship.

Points about Networks

•  A company can influence a large number of companies even without a direct relationship.

•  Each company in a Network needs connections between its different relationships.

•  Drawing a company’s Network can make you believe that it is more important to others than it actually is!

Network Position

A companies network position consists of it’s portfolio of relationships and the activity links, resource ties and actor bonds that arise from them.

Summary

•  Customer relationship marketing is important in retaining customers

•  One company is only part of the Network that provides a final consumer offering.

•  Business marketing occurs between two active companies.

•  Each relationship is part of a Portfolio and a wider Network.