Business-to-Business marketing as a key factor for increasing service revenue in China By Joni Yau Nov 29,2008

Introduction Until the late 90s, only few Swiss machine and equipment manufacturing were active in China but Schindler, Sulzer, Buhler and Saurer present in the Chinese market since 1980s. In 2004, 41% of Swiss Co. have already entered the Chinese market Most Swiss Co. have found it extremely difficult to transfer their traditional business model to China

Introduction In Europe and America, most Swiss machine and equipment manufacturer generate a major share of their total revenue through services Service related performance outcomes can include the quality of customer relationship (non-financial outcome) and direct service profitability (financial outcome)

Introduction To generate a major share of the total revenue through services cannot be achieved without a clear Service marketing and Management Survey in Jan 2005, indicated that Swiss Co achieved on average 21.2% of their total revenue through service in Europe but in China on average they only earn 10.3% of their revenue through service

Business to Business Marketing Strategies To expand of service revenue by transform from products oriented to services oriented Transition line Product Product-Related Solution Manufacturer Services Provider

Business to Business Marketing Characteristics Product Manufacturer Customer service is used as one of the main differentiating factors in product communication, use customer service to sell more products Manufacturer offer the customer service for “free” often charge a price premium for the product

Business to Business Marketing Characteristics Product-related services “intangible product” that a supplier markets to its customer Product related services are priced individually

Business to Business Marketing Characteristics When communicating product-related service, 2 relevant pts to note: 1. it is important to empower service managers and technicians so that they can offer product-related service proactively 2. an empowerment of this kind is only possible if the employees have the right mindset

Business to Business Marketing Characteristics Solution Provider Change B to B marketing from a transaction-oriented marketing to a more relationship-base marketing To build long term relationship with customers Relationship Marketing, 3 relevant pts to note:

Business to Business Marketing Characteristics 1. a solution provider offers a complete package consisting of product, product-related services and customer support services 2. Uses a bundled pricing approach for the whole package 3. To make the bundle price attractive, the price is based on specific contractual arrangements

Chinese Culture affect B to B Marketing Power distance Long-term orientation Uncertainty avoidance Collectivism Vs Individualism

Chinese Culture affect B to B Marketing Chinese like to use the following ways to build up relationship with customers: - Guanxi - Renqing - Mianzi

Chinese Culture affect B to B Marketing Swiss Co found that moving successfully along the transition line in China requires an influential person in the service organization as part of the guanxi network. The guanxi network has helped the co. to build a reputation and personal relationship with its customers

Chinese Culture affect B to B Marketing To build and sustain a position within a guanxi network requires some knowledge of renging which is about the exchange of favors Mianzi which is about preserving individual dignity or enhancing someone’s social status

Chinese Culture affect B to B Marketing The concept of guanxi, renqing and mianzi are closely linked with the “free-of-charge” approach for product-related services Guanzi networks are built among individuals are not among organizations, the establishment of personal relationships and the company’s image of providing solutions is even more time-consuming

To reduce the resistance of Chinese Culture solution Establishing a long-term relationship by using "free-of charge“ approach for product-related services reduced the risk perceived by customers when they consider the purchase of equipment availability Service managers deliberately use "free" product-related services for establishing a guanxi network and "giving face" to their customers Limited by clearly defined rules for charging for product-related services. To overcome resistance to these reules, companies offer the sercice managers the freedom to be personally available to their customers 24-7.

To reduce the resistance of Chinese Culture The preference for personal relationships limits the implementation of contractual arrangements for pring equipment availability The co. reduced the degree of contractual arrangements in favor of personal relationships. Only a few basic arrangements are resolved by personal relationship The high power distance in China limits the empowerment of managers and service technicians to offer product-related services proactively The empowerment was a major part of the service managers and technicians' basic and follow-up training. Some companies trained their Chinese service staff in Switzerland. That helped service them to gain a better understanding of what empowerment means in the context of Western culture. This help them to recognize different customer situations better and to define how to communicate product-related services more easily

To reduce the resistance of Chinese Culture Because encouraging service managers and service technicians to gain a better understanding of the value of product-related services can damage the face of both employees and customers, they are highly reluctant to change their mindset Instead of damage the face of service managers and technicians by encouraging them through internal marketing, such as give them internal award of understanding the value of product-related services

To reduce the resistance of Chinese Culture Service managers support customers to improve all processes associated with a company's product. In this case, they "give face" to their customers by praising customer's reputations. The renqing philosophy of "giving face" to customers' projects a specific image as a solution provider and builds a reputation for improving customers' equipment availability Companies do not "give face" to their customers by improving all processes associated with their products. This was implemented by specific control mechanisms. E.g. the provision of customer support services requires the approval of the head of the local service organization

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