Chapter 4

Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
Buyer-Seller
Relationship
Chapter 4
Chapter Questions
1. What are the dimensions of buyer–seller relationship?
2. What are the types of buyer–seller relationships?
3. How to develop effective Relationship Marketing (RM)
strategies?
4. What are the various aspects of RM, CRM, and CLV?
5. What are the methods used for influencing business
customers? What is the importance of customer service?
6. What are the special dealings between a buyer and a
seller in business marketing?
2
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
 Behavior 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
3
Types of Buyer – Seller Relationships
Broadly three types (in a range) of exchanges or
relationships between buying and selling firms:
1. Transactional (short term & distant) relationship
2. Value-added (long-term & continuing)
relationship
3. Partnering / Collaborative (long–term & close)
relationship
4
Transactional Relationship
 One-time transaction & short-term relationship
 Buyers prefer this when:
 Many suppliers are available
 Supply market is stable
 Less complex purchasing decisions
 Sellers prefer this when buyers’ sales and profit potentials
are low
 Buyers’ Focus is on lowest / competitive prices and timely
availability
 Buyers are switchers; no loyalty to any supplier
5
Value-Added Relationship
 Buyers & sellers have a long-term & continuing
relationship
 Medium sales and profit potential of buyers
 Seller focuses 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
6
Collaborative / Partnering Relationship
 Foundation : Commitment and trust of both parties
 Objective: Long-term (& close) 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
7
Developing Effective Relationship
Marketing Strategies
The steps include:

1. Selecting customers
2. Linking CRM system with customer database
3. Developing objectives and strategies
4. Implementing relationship strategies
5. Evaluating relationship objectives and strategies

8
Selecting Customers
 Segment the total market
 Decide target segments with superior value offering
 Select customers with high sales & profit potential
from target segments for collaborative relationship
9
Linking CRM System with Customer
Database
 Build customer database using CRM software
 Customer database includes following customer
information:
 Basic: Name, mail-ID, mobile nos. of buying centre
members
 Company: Customer type, products purchased, sales
potential, Competition, buying factors, etc.
 Psychographic: Values, lifestyle of members
 Transaction history: Purchase transactions
 Satisfaction and Loyalty Compared to competitors 10
Developing Objectives and Strategies
 Relationship Objectives are based on:
 The customer’s purchase orientation
 The customer’s specific needs
 Relationship strategies:
 Transactional
 Value-added
 Collaborative
11
Implementing Relationship Strategies &
Evaluating Objectives and Strategies
 Implementing Relationship Strategies:

 Done through sales and customer support people
 Sales groups serve different customer segments; e.g. key
accounts, transactional accounts, dealers, Government
 Evaluating Objectives and Strategies:
 Both buyer and seller evaluate if stated objectives and
strategies achieved, after 2-3 years
 Relationship continued, upgraded, or downgraded after
evaluation
12
Relationship Marketing (RM)
 RM focuses on collaborative/partnering relationship with key
accounts
 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 situations and not for low sales & profit 13
potential customers
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:
 Sales force automation and management
 Customer service and support
 Integrating marketing functions
14
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; PCt = Profit contribution;

Sxt=Sales to customer ‘x’; PCxt = Cost of products purchased by
customer ‘x’; MCxt = Marketing Cost of customer ‘x’; d= 15
discount (or interest) rate; ∑ = Summation

Benefits and Cost Analysis of CRM
 Benefits
 Unified customer database
 Retaining customers
 Acquiring customers
 Costs
 CRM Software: Develop in-house, buy licensed, or
outsource
 Implementation –People and time
 Integration with existing systems
16
Methods to Influence Business
Customers
 Major Methods:
1. Sales Presentation
2. Negotiation
 Sales Presentation
 Identify and respond to the customer needs
 Have two sided discussion
 Highlight superior value
 Use technology for presentation
17
…conti
 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 18
Special Dealings in Business Marketing
 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
 Keep it minimum
 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 19
Customer Service
The term ‘service’ and ‘services’ are not synonymous
 Services (e.g. courier & legal) are Core services
 Service (or customer service) includes basic & supplementary customer
service that accompanies core product or service
 Basic customer service is provided free of charge to customers
 Supplementary service is an additional service for which a supplier may
charge an extra amount to customers
 High importance given by buyers to quality of core products & services,
basic service & supplementary service
 Examples of basic customer service : information on core
product/service, availability/delivery, complaint handling system, etc.
 Examples of supplementary service : Credit cards, demand drafts/locker
facility (in banks) and maintenance & repairs of equipment 20

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Chapter 4

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Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.

The steps include:

2. Linking CRM system with customer database

3. Developing objectives and strategies

4. Implementing relationship strategies

5. Evaluating relationship objectives and strategies

 Implementing Relationship Strategies:

“Develop customer strategy, business processes,

n = duration; t=time unit; PCt = Profit contribution;

discount (or interest) rate; ∑ = Summation

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