CHAPTER 13 BUILDING PARTNERING RELATIONSHIPS Stephen B. Castleberry | John F. Tanner Jr. Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. LEARNING OBJECTIVES • What different types of relationships exist between buyers and sellers? • When is each type of relationship appropriate? • What are the characteristics of successful partnerships? 13-2 LEARNING OBJECTIVES • What are the benefits and risks in partnering relationships? • How do relationships develop over time? • What are the responsibilities of salespeople in partnerships? 13-3 THE VALUE OF CUSTOMERS • Strong relationships with customers are a source of competitive advantage • Customer lifetime value (CLV): Combined total of all future sales • Successfully retaining customers is important to all companies 13-4 RELATIONSHIPS AND SELLING • Relationship marketing - Companies’ attempts to develop stronger relationships with their customers • Accomplished through building loyalty • Behavioral loyalty: Purchase of the same product from the same vendor over time • Attitudinal loyalty: Emotional attachment to a brand, company, or salesperson 13-5 TYPES OF RELATIONSHIPS • Market Exchanges: Transaction between a buyer and a seller in which each party is concerned only about its own benefit • Solo exchanges: Both the buyer and the seller pursue their own self-interests • No future business • Functional relationships: Long-term market exchanges characterized by behavioral loyalty • Customer satisfaction: Buyer’s expectations are met and needs are fulfilled 13-6 EXHIBIT 13.2 - TYPES OF RELATIONSHIPS BETWEEN BUYERS AND SELLERS 13-7 PARTNERSHIPS • Win-win relationship: Both parties are concerned about each other’s welfare • Types • Relational partnerships • Strategic partnerships 13-8 PARTNERSHIPS Relational partnerships • Buyer and seller have a close personal relationship • Marked by open, and honest communication • Partners trust each other and worry about small details • Not necessarily strategic but provides flexibility Strategic partnerships • Long-term business relationships • Partners make significant investments to improve the profitability of both parties • Partners have gone beyond trusting each other • Partnerships get a strategic advantage • Created for uncovering and exploiting joint opportunities 13-9 EXHIBIT 13.3 SELLING IN MARKET EXCHANGES AND LONG-TERM RELATIONSHIPS Source: Adapted from Thomas Ingram, “Relationship Selling: Moving from Rhetoric to Reality, Mid-American Journal of Business 11 (1996), p. 6. 13-10 EXHIBIT 13.3 SELLING IN MARKET EXCHANGES AND LONG-TERM RELATIONSHIPS Source: Adapted from Thomas Ingram, “Relationship Selling: Moving from Rhetoric to Reality, Mid-American Journal of Business 11 (1996), p. 6. 13-11 CHOOSING THE RIGHT RELATIONSHIP • Factors to consider • Type of relationship the customer desires • Size of the account • Access and image in the market • Access to technology 13-12 USING TECHNOLOGY TO INCREASE EFFICIENCY • Technology drives following key areas of salesperson performance • Knowledge management technology: Helps salespeople manage all the information required to be effective • Relational management technology - Builds on customer knowledge management systems to create models that can be used to develop strategy 13-13 PHASES OF RELATIONSHIP DEVELOPMENT Awareness Exploration Expansion Commitment Dissolution 13-14 AWARENESS • Salespeople locate and qualify prospects • Buyers identify various sources of supply • Supplier relationship management (SRM): Use of technology and statistics to identify important suppliers and opportunities for: • Cost reduction • Greater efficiency • Other benefits 13-15 EXPLORATION • Search and trial phase for both buyer and seller • Exploring potential benefits and costs of a partnership • Satisfaction in this phase allows relationship to move forward • Dependability and competence are tested 13-16 EXPANSION • Involves efforts by both parties to investigate the benefits of a long-term relationship • Both parties is to develop the appropriate type of relationship • Both parties probe regarding interest in a partnership • Internal • External 13-17 COMMITMENT • Customer and seller implicitly or explicitly pledge to continue the relationship for a period of time • Most advanced stage of the relationship • Investments are made at this stage • Involves promises by buyer and seller to work over many transactions 13-18 DISSOLUTION • Process of terminating the relationship • Can occur because of: • Poor performance • Clash in culture • Change in needs • Other factors • Loss of investments impacts both organizations 13-19 EXHIBIT 13.4 - FOUNDATIONS OF SUCCESSFUL RELATIONSHIPS 13-20 MUTUAL TRUST • Trust: Belief by one party that the other party will fulfill its obligations in a relationship • Dependability: Perception that the salesperson, and the product and company, will live up to promises made • Can be proved by: • Third-party references, product demonstrations and plant tours • Special presentations, salesperson’s experience and training • Time 13-21 MUTUAL TRUST • Competence: Demonstrated knowledge of: • Customer • Product • Industry • Competition 13-22 MUTUAL TRUST • Customer orientation: Degree to which salesperson puts customer needs first • Stressing benefits and solutions to problems over features • Emphasizing the salesperson’s availability and desire to provide service • Honesty: Truthfulness and sincerity • Likeability: Behaving in a friendly manner and finding a common ground between buyer and seller • Requires increasing personal communication 13-23 OPEN COMMUNICATION • Key building block for building successful relationships • Different for relational and strategic partnership • Relational partnership - Communication goes through the salesperson • Strategic partnership - Direct communication between the buyer and seller • Cultural differences should be considered 13-24 COMMON GOALS • Provide strong incentive to pool strengths and abilities • Help focus on exploiting opportunities • Help sustain the partnership • Effective measuring of goals is critical 13-25 COMMITMENT TO MUTUAL GAIN • Creates a win-win relationship • One does not take advantage of the other • Mutual investment: Tangible investment in the relationship by both parties • Involves spending money to improve the products and services • Must be followed by actions signaling commitment 13-26 ORGANIZATIONAL SUPPORT • Boundary spanning employees: Employees who cross the organizational boundary and interact with customers or vendors • Should be given necessary support • Structure and culture • Training • Rewards 13-27