Professional Selling in Business to Business Marketing
This article will focus on the professional selling practices in business to business marketing. Many organizations have identified that managing relationships is an important technique in business-to-business markets. They utilize different business-to-business relationship marketing programs in an effort to increase their bottom line. As a result, key account management (KAM) has become an important aspect of many organizations' marketing strategies.
Keywords Business to Business Marketing; Contractual Exchanges; Customer Loyalty Programs; Customer Relationship Management; Key Account Management; Marketing Strategy; Relationship Marketing; Relational Exchanges; Transactional Exchanges
Marketing: Professional Selling in Business to Business Marketing
Many organizations have identified that managing relationships is an important technique in business-to-business markets. These organizations have invested much time, money and effort into making these relationships work. They utilize different business-to-business relationship marketing programs in an effort to increase their bottom line. As a result, key account management (KAM) has become an important aspect of many organizations' marketing strategies. Kotler (1994) believes that business-to-business marketing is different from customer markets in a variety of ways such as there are usually (1) fewer and larger buyers in a central geographical territory; (2) a derived and fluctuating demand; (3) participation by many in the buying process; (4) professional buyers and closer relationships, which eliminates the need for a middleman and (5) technological links to complete internal and external transactions.
It is important for organizations to develop positive relationships between business customers and business suppliers, and there are many advantages to this type of relationship. An organization's customer base can provide the best opportunities for growth and long term profit opportunities, especially in light of growing competition and market globalization. Filiatrault and Lapierre (1997) reported that customer retention has more impact on profits than economies of scale, and it costs five to six times more to win a new customer than to keep a current one.
"Relationship marketing is based on the premise that important accounts need focused and continuous attention" (Kotler, 1994). Relationship marketing occurs when organizations realize that they have to continuously work at having a positive, mutually beneficial relationship with their customers. When one thinks of the concept in this context, it supports the marketing belief that marketing is about exchanges (Hunt, 1983). Gundlach and Murphy (1993) identified three types of exchanges that support this concept. The three types of exchanges are transactional, contractual and relational exchanges. Transactional exchanges focus on single short-term situations and each transaction yields a profit. Contractual exchange is intermediate formal agreements, which can include a single contract or a series of contractual exchanges that include open ended contracts. Relational exchanges occur over an extended period of time, are linked together or an ongoing process, and produce long term profits. Webster (1992) has found that many organizations use relationship marketing as a marketing strategy when the transaction depends more on negotiation as opposed to market-based processes. As a result, the market has experienced a shift to a focus on relationship marketing as opposed to transactional marketing.
Relationship marketing has grown over the past ten years (Sheth & Parvatyar, 2000) based on the belief that the efforts will yield substantial profits. However, there is no data to support this belief and research is mixed. There needs to be more studies conducted in order to validate these claims. Two of the main issues that will be need to be reviewed focus on the actual payoff when (1) an organization uses different relationship marketing programs to build different types of relational bonds and norms in order to generate varying levels of return (Berry, 1995) and (2) the types and levels of returns an organization receives from a relationship marketing program based on factors such as participant influence (Reinartz & Kumar, 2000). "Researchers in service and consumer markets have linked relationship marketing activities to intermediate outcomes (i.e. sales growth, higher customer share, lower price sensitivity) that should enhance a firm's profit" (Palmatier, Gopalakrishna, & Houston, 2006). However, the overall findings in both B2B and consumer markets is that relationship marketing efforts have a direct effect on a customer's value to the firm by increasing the length, breadth, and depth of the buying relationship and generating positive word of mouth (Verhoef, 2003).
Several criterions are utilized to describe relationship marketing efforts and they include (1) customer bonds formed, (2) exchange control mechanisms used, (3) benefits offered, (4) functions served, and (5) content area supported. The criterion use different perspectives in order to identify the viable categories for grouping relationship building activities. Most of the categories include financial, social and structural factors and imply that customer-seller relationships are similar within each category, but may vary by level of effectiveness among the categories. Many researchers have used Berry's (1995) model of explaining financial, social, and structural relationship marketing programs. According to his model:
- Financial Relationship Marketing Programs include discounts, free products or other financial benefits that reward customer loyalty. However, organizations must be unique in their offerings so that competitors may not easily duplicate their campaign. Otherwise, there will be no benefit.
- Social Relationship Marketing Programs include meals, special treatment, entertainment, and personalized information. Research has shown that social bonds are not easy to duplicate. Therefore, there is a strong possibility of customer relationships being strong and they will ignore enticing offerings from competitors due to loyalty and satisfaction with a product.
- Structural Relationship Marketing Programs increase productivity and/or efficiency for customers through investments that customers would probably not make themselves (i.e. customized order processing system, tailored packaging). These programs tend to offer unique benefits and require substantial setup efforts. Therefore, the customers may be reluctant to change vendors given the benefits from the relationship.
In addition to relationship marketing, other factors such as the customer, salesperson, and selling firm may influence the exchange performance in B2B customer interactions. Customer commitment to a selling firm is based on the customer's willingness to maintain a relationship with the firm and consider the partnership valuable. The customer's perception and interaction frequency are key factors in determining how long the relationship will last. "A customer's sales growth can lead to increased selling firm sales" (Palmatier, Gopalakrishna, & Houston, 2006, p. 480). It has been found that a salesperson's ability and motivation are important factors to successful sales and profit outcomes. A motivated sales staff has the ability to find and close opportunities for new relationships, which equates to increased profits. If the customer is satisfied with the sales staff's performance, it can lead to a long and prosperous relationship.
Finally, there are opportunities for a selling firm to utilize indirect and direct efforts to develop and secure customer relationships that will yield a significant profit. Palmatier, Gopalakrishna, and Houston (2006) identified different techniques to measure how effective the direct and indirect efforts were in securing successful relationships.
- Direct efforts — The use of customer...
(The entire section is 3531 words.)