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Profit Impacts
Case> A B C
Mktg Supply
The Character of Particulars Base % Effort % Mgt %

Net Revenue 12,000 100 13,200 100 12,000 100

Business Marketing
CoGS 9,000 75 9,900 75 8,100 68

Gross Profit 3,000 25 3,300 25 3,900 32

Promotion 1,000 8 1,200 9 1,000 8

Admin O/H 1,500 13 1,500 11 1,700 14

Net Earnings 500 4 600 5 1,200 10

B2BM_02_SG ( S. Goswami) Slide No. 1 B2BM_02_SG ( S. Goswami) Slide No. 2

BUSINESS TO BUSINESS:
BUSINESS TO BUSINESS: The Marketing Mix

WHAT DETERMINES A SUCCESSFUL RELATIONSHIP?
The Relevance of the P’s :
MOTIVATION

THE SELLER’S MOTIVATION TO RELATE
Product

Place

THE BUYER’S MOTIVATION TO RELATE
Price

Promotion

IF THEY AREN’T EQUALLY MOTIVATED,

Process
IT WON’T BE AN EQUAL RELATIONSHIP
People

Physical Evidence
B2BM_02_SG ( S. Goswami) Slide No. 3 B2BM_02_SG ( S. Goswami) Slide No. 4
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BUSINESS TO BUSINESS: THE TYPES OFRELATIONSHIPS

GOING FOR HIGH PERFORMANCE RELATIONSHIPS
SELLER’S MOTIVATION TO RELATE SELLERS BUYERS
Want to: Want:
HIGH

BUYER’S MOTIVATION
•Sell Large •Reliable delivery
Volumes DEVELOP without interruptions

TO RELATE
STRATEGIC
BUYER’S ADVANTAGE
PARTNERSHIPS •Sell similar A •Reliable products
LOW HIGH amounts over time with low rejection and
TRANSACTIONAL SELLER’S COMMON
RELATIONSHIPS ADVANTAGE
defect rates
•Manage their
selling and GROUND
•Efficient lead times
LOW support expenses

B2BM_02_SG ( S. Goswami) Slide No. 5 B2BM_02_SG ( S. Goswami) Slide No. 6

The Relationship Development Process: Stages

1. Awareness

Supplier Evaluation: Internal Measures
HP Example:
2. Exploration
Courtship 1. Technology
• Attraction
2. Quality
• Communication & Bargaining
& 3. Responsiveness
• Power & Justice
4. Delivery
• Norms
Marriage 5. Cost
• Expectations & Trust
Cessna Example:
3. Expansion & Outsourcing
Cost of defect: not price but cost of rectification when detected
4. Commitment
Customer Evaluation:
5. Dissolution Divorce Sales, profitability, reorder, inventory, service burden,
loyalty, advocacy, etc.

B2BM_02_SG ( S. Goswami) Slide No. 7 B2BM_02_SG ( S. Goswami) Slide No. 8

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External Measures REQUIREMENTS FOR

HIGH PERFORMANCE RELATIONSHIPS
Comparisons:
1. Similar supplies across group companies
BEYOND THE FINANCIAL CONSIDERATIONS:
 INTEGRITY
2. Industry wide comparisons through associations etc.  FAIRNESS
 LOYALTY
3. Supplier domain wise comparisons  FLEXIBILITY
 INPUT INTO YOUR PARTNER’S STRATEGY
4. Global data  PARTNER’S INPUT INTO YOUR STRATEGY
 COMPLIANCE WITH PROCEDURES AND
AGREEMENT
 HONOR COMMITMENTS
 STAND BEHIND YOUR PRODUCTS

B2BM_02_SG ( S. Goswami) Slide No. 9 B2BM_02_SG ( S. Goswami) Slide No. 10

Safeguarding Relationships:
TWO CHOICES FOR STAYING Making B2B Relationships Last
IN A BUSINESS RELATIONSHIP
Make on-site visits to your partner

YOU WANT TO
Trade personnel and offices
 The rewards are financial, strategic or psychological
Manage total dependence with an alternate supplier

Make the pledge of continuous service

YOU HAVE TO
 The cost to exit is too high or there are no

Develop a relational contract
alternatives
Provide ownership by bringing functions or technology
within boundaries of partner’s firm –Vertical
Integration

B2BM_02_SG ( S. Goswami) Slide No. 11 B2BM_02_SG ( S. Goswami) Slide No. 12

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Summary of B2B Relationships:

Seller’s motivation to relate

Social Relationships: High
 Common interests, backgrounds, values, etc.

Safeguarded Relationships: Seller-
Joint
Buyer’s maintained
relationship
 Contracts, dispute settlement modes, penalties Market relation
maintenance

Corporate Relationship: Low High
Buyer’s
motivation
Buyer-maintained
 Ownership, Vertical Integration relation
to relate
Discrete
exchange
No (spot contracts)
exchange Seller’s
market
Low

B2BM_02_SG ( S. Goswami) Slide No. 13 B2BM_02_SG ( S. Goswami) Slide No. 14