Buyer-Seller Relationship in Business Markets
In this chapter we discussed various aspects of buyer-seller relationships, starting with the uncertainty situations faced by the buyer, that is, need uncertainty. Buyers and sellers in mature industrial markets can turn single transactions into long-term beneficial relationships by a deeper understanding of the complex. Buyer-Supplier Relations In Industrial Markets: When Do Buyers .. doing the job , consistent with the various notions of task variability (Pugh et al. , Van de.
First impressions are the last impressions if they're not good ones, he said. The customer has to be able to evaluate the product. Even if you're sure of the quality, if the customer doesn't understand what you're doing it's not going to work. It must not be too expensive for the customer. I think the most underestimated factor in industrial or business marketing is buyer behavior. The customer calls you and wants to place an order.
If you do it right, you also increase the scope of the relationship. But does it work all the time? The answer is no," he said. Sometimes the all-at-once approach is the only way to jump-start from zero, he observed.
From Transaction To Commitment To explain how he has come to answer question three—how to convert a customer from a transactional to a relationship orientation—Narayandas answered with a case and a research project.
The Wesco case is about a company whose business was very transaction-oriented—dealing in bulbs, wires, and connectors for contractors and industrial customers. Yet it managed to shepherd about a third of its customers into a relationship. As he learned in the Wesco experience, the road is bumpy at first. The distributor tells the customer, "I want to give you lower prices, which will come at the expense of my markets.
What I want you to do is give me higher volumes. The suppliers' costs, meanwhile, just go up. While the customer is getting more value, only one party—the distributor—is actually working at the relationship. Even the slightest effort they put in will lead to much more value for themselves. At some point, the customers begin to give more volumes. For the customers, value increased, thanks to price reduction and the fact that the customers began to see the value of collaboration.
Trust forms between people, between individuals. But commitment forms between firms. So make sure you get through the investment phase at the beginning—investing in skills and systems—and figure out how long to invest and pull out [if necessary].
In Wesco's case, about a third of relationships migrated through; two-thirds fell in the trap. You also need to have an understanding of the pattern of investments, and more important, an understanding of the process of how relationships evolve over time," he said. Kasturi Rangan took an in-depth look over time at three buyer-seller relationships, all in commodity markets.
Buyer-Seller Relationships - Industrial Marketing | Textbooks | Chapters
The three pairs represented different parts of the value chain: There are two major perceptions held by buyers of sales representatives. An industrial buyer, who does not have previous experience with a particular sales representative, may respond to the sales representative in terms of the stereotype which he has of sales representative in the general.
The second major perception of the buyer depends on the reputation of the company which a sales representative represents. Generally, the sales representative of a company with better reputation always gets a more favourable initial response from the industrial purchasers. However, when the same sales engineer changes the job to a less reputed company, as a sales executive, the response was not encouraging, as he had to wait for a long time before he was called in for discussions.
The Role Played by Industrial Buyer: An analysis of industrial buyer behaviour indicates that personal needs, interaction in the buying centre, an organizational objectives or needs determine the response of a buyer to the selling efforts by a sales rep. For example — an industrial buyer may be motivated by a personal need for salary increment and promotion in his job, and also by a social or organizational need to satisfy the user department.
A buying decision may allow the buyer to satisfy both the sets of needs. The specific personal and social needs will decide: Conceptual Framework of Buyer Seller Interaction: Both the style and content of buyer-seller communication are determined by a number of personal, organizational and product-related factors. For example — the personal life styles and backgrounds will often determine the style of communication the buyer or the seller chooses to engage in. Similarly, organizational training and orientation will also mould the buyer or the seller with respect to the style of communication he is expected to engage in.
Finally, the content of communication is likely to be determined by product-related variables such as market motivations, buyer and seller plans and technology or competitive structure of industry.How to Sell a Product
While it is obvious that any incompatibility with respect to what the buyer wants and what the seller offers in a product or service will be detrimental to consummating a sale, it is more interesting and useful to identify dimensions and sources of content incompatibility.
Based on a recent model of individual choice behavior it is proposed that underlying buyer- seller expectations about a product or service, there lies a five dimensional utility space. The five dimensions represent different types of product-related utilities which the buyer desires and the seller offers to each other. Each type of utility is briefly described below: It represents products utility which is strictly limited to its performance and which defines the purpose of its existence and classification as a type of good or service.
For example — the functional utility associated with an instant breakfast can be described in terms of taste, convenience, nutrition and calories. Similarly, the functional utility associated with a passenger car tire can be defined in terms of mileage, blow out protection, traction, handling and ride. It is presumed to be a complex function of positive and negative expectations on multi-attribute profiles.
We treat functional utility as one dimension of product utility and ignore for a moment the question of its own dimensionality.
- Building a Better Buyer-Seller Relationship
- Buyer-Seller Relationship in Business Markets
- Industrial Marketing
Sometimes a product or service acquires social-organizational connotations or imageries independent of its performance or functional utility. This is due to its consistent identification with a selective set of socioeconomic, demographic or organizational types.
Such identification with a selective cross-section of household or organizational buyers tends to impute certain utilities or disutility in the product or service producing imagery or a stereotype. For example, cigarettes are often consumed due to their social imagery even though they may be functionally harmful. Certain products are, therefore, used for their prestige and not so much their performance. The existence of social-organizational utility in a product or service is also prevalent in organizational buyer behavior especially with respect to those products and services which are directly associated with the organization man.
This is not surprising in view of the fact that there exists an organizational stratification of people working in organizations comparable to social stratification of households based on organization structure, hierarchy and power distribution. The product or service has no intrinsic or independent utility and will not be offered or bought without the presence of circumstances which create its need.
The situational, utility is often strong among those products or services which are consumed on an ad hoc basis rather than on a continuous basis. For example — the utilization of the services of the priest for marriage ceremony or the lawyer for divorce proceedings tends to be non-repetitive by and large.
Similarly, a housewife may buy a product or service as a gift item due to a very specific situation or occasion such as graduation or marriage. Organizations often tend to use the services of professionals on an ad hoc basis because of a specific project. Many of the capital expenditure items and highly specialized professional skills have greater degree of situational utility in them.
It is extremely important to identify situations and activities which add to the utility of the product or service. Sometimes a product or service evokes strong emotive feelings such as respect, anger, fear, love, hate or aesthetics due to its association with some other objects, events, individuals or organizations.
The strong emotive feelings are therefore generalized to the product or service resulting in a different type of utility or disutility. For example — some Jewish buyers tend to refrain from buying German products because of strong emotional feelings they arouse as reminders of the German Nazi movement. Similarly, many Hindus refrain from eating beef due to strong emotive feelings anchored in religious tenets. While one would expect less prevalence of emotive utility in organizational products or services than in household products or services, this is not borne out by empirical research.
Organizations also tend to manifest emotive behavior as is evidenced in international trade and cross-national negotiations. The fifth type of utility often present in both household and organizational products and services is related to novelty, curiosity and exploratory needs among individuals.
Based on the assumption man constantly seeks out new, different things due to either satiation with existing behavior or due to boredom inherent in highly repetitive tasks, certain new products or services acquire additional utilities which are not intrinsic to their performance. They have a very short life cycle and often degenerate as fads or fashions. Style of Interpersonal Relationships: The vast literature on group dynamics and interpersonal relationships in small groups provides an excellent source to discuss the concept of style of interaction.
It refers to the format, ritual and mannerism involved in buyer-seller interaction. While we will rely heavily on research in group dynamics, it is important to keep in mind that the dimensionalities of style of interaction discussed here are common to non-personal interactions such as via telecommunication or postal systems.
The style of interaction is presumed to be three dimensional. The specific dimensions are described below: This style of interaction is highly goal oriented and purposeful. The individual is most interested in the efficiency with which the task at hand can be performed so as to minimize cost effort and time. Any activity during the interaction process which is either not task-oriented or inefficient is less tolerated by the individual who prefers the task-oriented style.
The buyer or the seller who prefers this style of interaction often tends to be mechanistic in his approach to other people. The buyer or the seller who prefers this style of interaction believes in personalizing and socializing as an essential part of the interaction process. In fact, preference for this style of interaction is often manifested at the loss or ignoring of the task at hand. The buyer or the seller motivated by the interaction-oriented style is often compulsive in first establishing a personal relationship with the other person and then only getting involved in the specific content of interaction.
He is more concerned about his own welfare and tends to have less empathy for the other person. The concepts of self-preservation, self-survival and self-emulation tend to dominate this style of interaction. Relationship marketing is a strategy designed to foster customer loyalty, interaction and long-term engagement. This customer relationship management approach focuses more on customer retention than customer acquisition. Relationship marketing is designed to develop strong connections with customers by providing them with information directly suited to their needs and interests and by promoting open communication.
Relationship marketing contrasts with transactional marketing, an approach that focuses on increasing the number of individual sales. Most organizations combine elements of both relationship and transaction marketing strategies. Relationship Marketing is emerging as a new phenomenon however; relationship oriented marketing practices date back to the pre-Industrial era.
We trace the history of marketing practices and illustrate how the advent of mass production, the emergence of middlemen, and the separation of the producer from the consumer in the Industrial era led to a transactional focus of marketing. Now, due to technological advances, direct marketing is staging a comeback, leading to a relationship orientation. With the evolution of Relationship Marketing, the hitherto prominent exchange paradigm of marketing will be insufficient to explain the growing marketing phenomena of collaborative involvement of customers in the production process.
An alternate paradigm of marketing needs to be developed that is more process rather than outcome oriented, and emphasizes value creation rather than value distribution. Sales Presentation in Business Marketing: It will often include a demonstration of the product.
Sales Presentation Tips and Techniques: Presentations have a way of leaving a legacy long after your presentation has ended. This might mean referral business later; also the quality of your presentation will impact how your boss and any other colleagues view you and your abilities.
This may affect future assignments of your choice and even your promotion prospects. Make the Presentation Relevant to your Prospect: One of the most common mistakes people make when discussing their product or service is to use a generic presentation. They say the same thing in every presentation and hope that something in their presentation will appeal to the prospective customer. The discussion of your product or service must be adapted to each person; modify it to include specific points that are unique to that particular customer.
Show exactly how your product or service solves their specific problem. This means that it is critical to ask your prospect probing questions before you start talking about your company. In a presentation to a prospective client, try to prepare a sample of the product they would eventually use. After a preliminary discussion, hand your prospect the item they will be using — instead of telling them about the item, place it in their hands to see exactly what the finished product looks like and so they are able to examine it in detail.
They are then able to ask questions to see how their organisation would use it in their environment. Also, remember to discuss the benefits of your products, not the features. Tell your customer what they will get by using your product versus your competitors. Get to the Point: Know what your key points are and learn how to make them quickly.
Make sure you know what key points you want to discuss and practice verbalizing them before you meet with your prospect.
The majority of sales presentations are boring and unimaginative. If you really want to stand out from the crowd make sure you demonstrate enthusiasm and energy. Use your voice more effectively and vary your intonation. A common mistake made when people talk about a product with which they are very familiar is to speak in a monotone voice. This causes the other person to quickly lose interest in your presentation.
This will allow you to hear exactly what you sound like as you discuss your product.
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Use a Physical Demonstration: This unusual approach never fails to create impact with the customer but ensure that your writing is clear and legible and that you draw pictures and illustrations that can impress the client with their level of proficiency. Just as writers develop an outline for an article, or story book, it is critical for you to develop a framework. This framework relates to the sections that you will be presenting to your prospect. The following framework works well if you have about 45 minutes to present.
You can reduce or increase the amount of time around each section, but spend most of the total time talking and asking questions about them and getting them to tell you what is important to their organization.
Negotiation is a strategic discussion that resolves an issue in a way that both parties find acceptable. In a negotiation, each party tries to persuade the other to agree with his or her point of view. Many offers that people assume to be firm and final are actually flexible.
For example, negotiation can be used to reduce debts, to lower the sale price of a house, to get a better deal on a car or to improve the conditions of a contract. Negotiation is an important skill when accepting a new job.
Negotiating a job offer is particularly important because all future increases in compensation will be based on the initial offer. Sales negotiation is a process that involves the deliberation of all details necessary to successfully complete a sale.
As part of this type of negotiation, a salesperson engages directly with a customer, assessing the needs of the client, pointing to the advantages the customer stands to gain, and helping the customer see how purchase of the goods or services offered would be a wise decision.
The ultimate goal of any sales negotiation is to earn the business of the customer, satisfying the expectations of the customer to the point that he or she will be willing to consider making future purchases of the goods or services offered, and complete the sale with terms and conditions that are considered beneficial to all parties involved.
It is important to note that a sales negotiation can be a very formal process that is carefully crafted, or it can occur in a situation that takes place unexpectedly. Some negotiations are very informal, whiles others are highly structured. In many cases, the negotiation phase of the sales process will rely on the use of a few carefully employed strategies, although the exact expression of those strategies are often adapted to fit the circumstances surrounding the negotiation.
For example — a sales negotiation may follow after a formal presentation to the potential customer. The presentation may include any number of visual aids, including video streamed over an Internet connection.