4MD3 Business to Business Marketing Lecture 3

1
4MD3Business to Business MarketingLecture 3

• Steve Howse
• January 24, 2008

2
Review of Last Class

• BM/CM Differences
• demand
• buyer purchase criteria
• buyer behaviour
• buyers

3
PREVIEW OF BUYER-SELLER RELATIONSHIPS

• transactional relationships
• preferred-supplier relationships
• benefits to customers and marketers
• relationship development
• customer switching costs

4
BACKGROUND

• many other relationships are valuable
• but customer relationships are crucial
• many similarities to human relationships
• concept of return on relationship

5
THE TWO EXTREMES OF THE RELATIONSHIP CONTINUUM  

• transactional relationships
• preferred-supplier relationships  
• most of the real world lies between

6
TRANSACTIONAL RELATIONSHIPS

• customer buys opportunistically
• mating metaphor
• common in case of commodities
• no relationship connectors i.e
• no adaptation
• no information exchange
• no operational linkages
• no long-term contracts (contd)
•  

7
TRANSACTIONAL RELATIONSHIPS (CONTD)

• no trust or loyalty
• no commitment, involvement or interdependence
• "multiple sourcing" is the norm
• bow-tie communication
• account for most of marketers cash flow
• what keeps marketer in line?
• closest real-world examples?

8
PREFERRED-SUPPLIER RELATIONSHIPS

• AKA "strategic partnering" 
• customer buys collaboratively
• increasingly common  
• many relationship connectors
• high trust and loyalty
• high commitment and involvement
• high interdependence
• single-sourcing the norm (contd)

9
PREFERRED-SUPPLIER RELATIONSHIPS (CONTD)

• multiple communication links
• limited freedom of action on both sides
• past, present and future merge
• all marketers become service firms
• but no surrender
• what keeps marketer in line?

10
CUSTOMER BENEFITS OFPS RELATIONSHIPS

• satisfaction of its specific needs  
• more unsolicited help from marketer
• assured access to critical inputs
• blockage of competitors access to critical
  inputs
• elimination of middlemen
• lower transaction costs
• lower checking costs
• protection of proprietary information
• the downside of single-sourcing?

11
CUSTOMERS USE PS RELATIONSHIPS WHEN

• the foregoing benefits are especially important
  also when.
• they must live with a single supplier
• customer switching costs are very high
• marketer has monopoly
• or they can live with a single supplier

12
MARKETER BENEFITS OFPS RELATIONSHIPS

• lower marketing costs
• assured demand

13
THE BUSINESS MARKETERS RELATIONSHIP PORTFOLIO

• we usually develop a mix from several places on
  the continuum
• why not all toward PS end of continuum?
• how choose customers for PS-end relationships?

14
RELATIONSHIP DEVELOPMENT STAGES

• awareness
• exploration
• expansion  
• commitment  
• dissolution

15
PROGRAMMED BUYING (A PURCHASING TECHNIQUE)

• customers use to ensure neither side dominates
  the relationship e.g..
• purchase 30 of needs from a given supplier
• representing 30 of that suppliers sales
• result is MAD

16
CUSTOMER SWITCHING COSTS

• the buyers cost of dissolving and replacing a
  relationship
• quantifiable costs
• non-quantifiable (i.e. soft) costs

17
QUANTIFIABLE CUSTOMER SWITCHING COSTS

• choosing and getting-to-know a new supplier
• new supplier's adaptation  
• redesign of own product
• subsequent retesting and recertification
• new office and shop routines (contd)

18
QUANTIFIABLE CUSTOMER SWITCHING COSTS (CONTD)

• retraining and remotivating employees
• disruption of operations
• purchase and installation of related products
• legal costs

19
NON-QUANTIFIABLE CUSTOMER SWITCHING COSTS

• poorer communication
• loss of personal friends
•  
• psychological harm

20
TACTICAL IMPLICATIONS

• in suppliers try to increase
• no. and depth of customer switching costs
• customers awareness of them
• out suppliers try to downplay or counteract
  them