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Chapter 4
Buyer-Seller Relationship
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Chapter Questions
• What are the dimensions of buyer – seller relationship?
• What are the types of buyer – seller relationships?
• How to develop effective relationship marketing (RM)
strategies?
• What are the various aspects of RM, CRM, and CLV?
• What are the methods used for influencing business
customers?
• What are the special dealings between a buyer and a
seller in business marketing?
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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.
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Types of Buyer – Seller Relationships
Broadly three types (in a range) of exchanges or
relationships between buying and selling firms:
• Transactional (distant) relationship.
• Value – added (continuing) relationship.
• Partnering / Collaborative (close) relationship.
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Transactional Exchange / Relationship
• One-time transaction / Exchange
• Buyers prefer this when:
• Many suppliers are available
• Supply market is stable
• Less complex purchase decisions
• Sellers prefer this when buyers’ sales and profit
potentials are low.
• Focus is on lowest / competitive prices and timely
availability
• Buyers are switchers; no loyalty to any suppliers
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Value-Added Exchange / Relationship
• Medium sales and profit potential of buyers.
• Focus 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.
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Collaborative / Partnering Exchange /
Relationship
• Foundation : Commitment and trust.
• 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
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Developing Effective Relationship
Marketing Strategies
The steps include:
• Linking CRM system with customer database
• Selecting customers
• Developing objectives and strategies
• Implementing relationship strategies
• Evaluating relationship objectives and strategies
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Linking CRM System with Customer
Database
• Build customer database using CRM software
• Customer database includes following customer
information:
• Basic : Name, mail-ID, mobile nos. etc.
• Company : Customer type, products purchased,
etc.
• Psychographic : Values, lifestyle of members, etc.
• Transaction history: Purchase transactions
• Other: Satisfaction, loyalty, etc.
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Selecting Customers
• Segment the total market
• Target segments with superior value offering
• Select customers with high profit potential from
target segments for collaborative relationship
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Developing Objectives and Strategies
• Relationship objectives: Based on
• The customer’s purchase orientation
• The customer’s specific needs
• Relationship strategies:
• Collaborative
• Value – added
• Transactional
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Implementing Relationship Strategies
• Done through sales and support people
• Sales groups serve different customer segments:
e.g. key accounts, transactional accounts, dealers.
Evaluating Objectives and Strategies
• Both buyer and seller evaluate if stated objectives
and strategies achieved.
• Relationships continued, upgraded, or downgraded
after evaluation.
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Relationship Marketing (RM)
RM focuses on collaborative / partnering relationship
• 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 (not all) situations
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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:
Salesforce automation and management
Customer service and support
Integrating marketing functions
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Customer Lifetime Value (CLV)
• CLV is the long-term economic value of a customer
• CLV = Lifetime profit less cost of acquiring a
customer
• CLV model / formula is a follows:
, Where
n= duration, t=time unit, = Profit contribution,
= Sales to customer ‘ ’, = Cost of products purchased by
customer ‘ ’, = marketing cost of customer ‘ ’, d= discount
(or interest) rate, ∑ Summation.
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Benefits and Cost Analysis of CRM
Benefits
• Unified customer database
• Retaining customers
• Acquiring customers
Costs
• CRM Software: Develop in-house, buy licensed,
or outsource creation
• Implementation –People and time
• Integration with existing systems
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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
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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
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Special Dealings in Business
Marketing
(1) Reciprocity, and (2) Dealing with customer’s
customers
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.
• Kept it minimum.
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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.
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Customer Service
Definition
Supplement to a core product or service, given
free of charge by a supplier to a customer.
Examples
Delivery of a product or service, technical
information, warranty service.
Quality of customer service depends on:
Timely delivery, prompt and accurate
information, speedy technical service.
High importance given by buyers and suppliers