CHAPTER 2 The Character of Business Marketing

Why Do We Need Relationships?  Consider the story “I Pencil: My Family Tree”  The pencil asserts, “not a single person... knows how to make me”  First cedar is cut from forests by loggers using saws and trucks. Then it is cut into slats and transported to the pencil manufacturer. Here the lead center is added, having been mined in Ceylon. The eraser is made by reacting Indonesian rape seed oil with sulfur chloride. Chapter 2 - The Character of Business Marketing

What Determines A Successful Relationship?  What is the seller’s motivation to relate  What is the buyer’s motivations to relate If they aren’t equally motivated it won’t be an equal relationship Chapter 2 - The Character of Business Marketing

BUYER’S MOTIVATION TO RELATE Types of Relationships SELLER’S MOTIVATION TO RELATE HIGH BUYER’S ADVANTAGE STRATEGIC PARTNERSHIPS LOWHIGH TRANSACTIONAL RELATIONSHIPS SELLER’S ADVANTAGE LOW Chapter 2 - The Character of Business Marketing

Seller’s motivation to relate High Low Buyer’s motivation to relate High Low Seller’s market Seller- maintained relation Joint relationship maintenance Buyer-maintained relation Buyer’s Market Discrete exchange (spot contracts) No exchange Relationship Motivation Map Chapter 2 - The Character of Business Marketing

High Performance Relationships BUILD ON COMMON GROUND BUYERS Want: Reliable delivery without interruptions Reliable products with low rejection and defect rates Efficient lead times SELLERS Want to: Sell Large Volumes Sell similar amounts over time Manage their selling and support expenses Chapter 2 - The Character of Business Marketing

Key Elements For Strategic Partnerships  Integrity  Fairness  Loyalty  Flexibility  Input into your partner’s strategy  Partner’s input into your strategy  Compliance with procedures and agreement  Honor commitments  Stand behind your products Chapter 2 - The Character of Business Marketing

Why We Stay in a Business Relationship  WE WANT TO  The rewards are financial, strategic or psychological  WE HAVE TO  The cost to exit is too high or there are no alternatives This impacts are motivation and willingness to cooperate Chapter 2 - The Character of Business Marketing

Developing Relationships  Awareness – collecting information  Exploration – parties testing (sales may occur)  Attraction – getting to know each other  Communication and Negotiation  Power and Dependence  Develop Norms (standards of behavior)  Expectations and Trust  Expansion – increase the scope of business  Commitment – desire to maintain  Dissolution Chapter 2 - The Character of Business Marketing

Making B2B Relationships Last  Make on-site visits to your partner  Trade personnel and offices  Manage total dependence with an alternate supplier  Make the pledge of continuous service  Develop a relational contract  Provide ownership by bringing functions or technology within boundaries of partner’s firm (vertical integration) Chapter 2 - The Character of Business Marketing