L12, Customer relationships Flashcards
central aspects for the selling firm?
- get to know your customers and yourself
- handling individual customer reltionships
- handling the portfolio od customer relationships
what is meant by differentiating potential business?
- not all demens opportunities are equally attractive — sometimes we need to say no
- the choice of customers defined firm skill set over time
—> whom we can serve affect who we are - firms abilities affect their choice of customers
—> who we are affect whom we can serve
what uncertainties and abilities are there for buyers and sellers?
The seller company:
- problem solving ability
- transfer ability
- capacity
- application
- transaction uncertainties
The buyer company:
- demand ability
- transfer ability
- need
- market
- transaction uncertainties
Describe need uncertainty!
Refers to difficulties customers have I interpreting the exakt nature and importance of goods and serviser that their firms acquire
—> what are my needs?
—> what solution fulfills m need?
—>trust through brand recognition
BUYING STRATEGY:
— Few suppliers and close relationships
What is meant by market uncertainty?
- what are the supplier alternatives?
- rapidly changing supply market
- difficult to make the right buying decision at the right time
BUYING STRATEGY:
— many suppliers and arm’s length relationships
what is meant by transaction uncertainty?
Will I get what I ordered? —> the right product? —> the right time —> at the right location —> for the right price
BUYING STRATEG:
— many supplier and arm’s length relationships or few suppliers and close relationships
Describe supplier abilty
Importance of supplier to understand the uncertainties of their customers
Problem solving ability
—> important for customers with complex problems and high need uncertainty
Transfer ability - (TREND)
—> important for customers with high transaction uncertainty
—< trends to become more important as need uncertainty and market uncertainty decreases
what is a pure transactional exchange?
- orders
2. basic products and highly competitive prices
what is a pure collaborative exchange?
- collaboration and integration between supplier and customer “partnering”
- strong and intensive social, economic, service and technical ties
- Intention of partnering:
—> lower total costs
—> increase value
Describe the working relationship continuum and industry bandwidth
— The relationships can be everything from our transactional exchange to pure collaborative exchange
— Relations can change in both directions
How do you construct relationship-specific market offerings?
Flare out from industry bandwidth
— supplier tries to gain competitive advantage over other suppliers by meeting requirements and preference in both collaborative and transaction
Flare out by unbending
— eliminate certain standard elements from the market offering entirely or transform them into options
Flare out with augmentation
— draw on the practices of more collaborative industries and add new programs and systems that collaborative accounts will value to the standard offering as options
How do you pursue growth in a customer account?
Estimate share of customer’s business
—> understand the total volume of business
—> understand the current share of the customer business
Descibe the all-at-ones approach!
Useful in managing larger customers that can complicate the selling process through a combination of changes in:
—> customer decision-making
—> buying units
—> nature of the products and services offered
—> selling skills required
What is the foot-in-the-door (FITD)?
First get a small yes, and then a bigger yes
limitations:
1. can compel decision-makers to buy products or services they don’t really need
- can damage relationship between the salesperson and prospect
- can limit future business interactions
- FITD products must generate substantial value which customer needs and recognizes
- needs vision of metal relationship
- fit between product functionality and customer requirements must be close
- modular offers
Describe acquisition and retention using the FITD approach
- aquire customer through foot-in-the-door
- Follow-on sales
- Other sales
Describe the HP’s migration strategy
TRIANGLE
BASE 1: Product vendor
— Start where HP has a price/performance advantage as a hardware supplier for existing applications
BASE 2: Value-added supplier
Mitigate up to IT infrastructure and enterprise-wide solutions by demonstrating industry-specific knowledge and delivering strong pre- and post-sales installation resources
TOP: Strategic partners
Develop trusted advisor relationship that allows HP to gain access to the broadest spectrum of IT projects, reduce selling costs and deliver greater value to the customer
How du you pursue continuity?
- promote honest and open communication
- build trust and commitment
- implement coordination mechanisms
- anticipate and resolve conflicts
How du you promote honest and open communication?
- communication:
—> formal and informal sharing of meaningful and timely information between firms - Bridging:
—> establishing multiple levels of communication between firms, across functions, managing levels and business strands
How do you implement coordination mechanism?
- Coordination
Customer and supplier firms synchronize activities, resources and capabilities to accomplish a collective set of tasks - Market-Clearing price
— balances supply and demand for a given offering
— management achieves coordination by allowing price of the market offering to float to the market-clearing level - Power
— The ability of one firm to get its parent to undertake activities that the partner firm would not do on its own
4. Cooperation Promote shared norms on: — how to work together — how to jointly create value — how to share benefits — building mutual trust and commitment
How to treat the portfolio of customers?
- the idea of thinking through the customer base as a whole
- CRM — customer relationship management
- cost to serve each customer
- loyal customers have favorable behavior that impact on profitability
Describe Customer relationship management systems (CRM)!
Bundling of customer strategy and processes for the purpose of improving customer loyalty and corporate profitability
- acquire the right customers
- craft the right value proposition
- institute the best processes
- motivating employees
- learn to retain customers
what can you track in a CRM system?
- cost-to-serve
- transaction prices
- constitution to profitability of each customer firm
what information can you assess in CRM?
- result of relationshipbuilding efforts
- take corrective action
—> redesigning account to different relational categories
—> redesigning relationship-specific offerings
Describe the loyalty ladder
From the bottom and upp:
1. Cynic —> won't buy 2. Skeptic —> willing to be convinced 3. switcher —> will buy if the price is right 4. Buys a bundle of products 5. Invest in the relationship 6. Actively seeks to expand relationship 7. Enthusiastic advocate 8. Willing to pay a premium
Describe the loyalty-customer management effort (cost-to-serve) framework
Cathegorising customers according to position on the loyalty ladder and the customer management effort
SWitcher
—> low on ladder and customer management effors
Most valuable customer (MVC)
—> high on loyalty but low on customer management effort
Undesirable customer
—> low on loyalty ladder but high on customer management effect
Partners
—> high on both loyalty ladder and customer management effort
how can you organize the selling effort?
- undesirable customers
—> created when suppliers mismanage switchers
—> large unprofitable customers
—> relationship suffers from low pieces and scope creep
—> showcase accounts used to attract customers - partners
—> customers are expensive to serve but the returns usually justify the efforts
—> customers want turnkey solutions rather than develop in-house expertise - most valuable customers
—> considered as loyal as partners
—> grateful customers that value their relationship with supplier
—> advocates and reference accounts
name some executing mitigating strategies
- identifying the customer management activities
- quantify the benefits that are associated with each rung of the ladder relative to the adjacent rungs
- calculate the costs incurred in moving a customers from one rung to another
How to manage in a business network context?
- Actors
—> identify key actors
—> assesses the strength of their bonds
—> map their interactions - Activities
—> how activities are clustered?
—> how activities between actors are linked?
—> how they are assembled into process or patterns - resuorces
—> catalog the resources of the network
—> evaluate links among them
—> determine how they can use the constellation of network
what are the three steps in the strategic approach on managing customers
STEP 1:
— Grow each customer relationship over time
—> address several ongoing behavioral issues including communication, trust and commitment, coordination and conflict resolution
STEP 2:
—> Construct and implement relationship appropriate relationship-specific offerings at every stage in each customer relationship
STEP 3:
Use a customer portfolio that:
—> Optimizes customer value in each individual customer relationship and adopts the basic premise that not all customers want the same working relationship — or value it the same
—> enables the managers to recognize the impact of their various decisions on their firms’ capacities and capabilities over time
Describe the process on managing customers
- differentiating different customer types
- Delivering appropriate offerings that fulfill the respective requirements and preferences of the portfolio of customers in a superior way
- getting a fair return in exchange
what does business market managers strive to do?
Cultivate a portfolio of working relationships
how must business market manager deliver value?
In the form of relation-specific offerings
Name some methods for retaining a portfolio of profitable customer-relationship
- FITD
- all-at-once Apaches
- single and multiple sourcing
What is CRM?
a comprehensive set of systems and procedures that firms use to differentially and profitably relate to customer firms
How can suppliers potentially keep customer relationships?
By using business networks
