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Building Loyalty in Business Markets

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Rebecca Johnson

on 11 April 2013

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Transcript of Building Loyalty in Business Markets

Article by: Das Narayandas Building Loyalty in
Business Markets Business Markets: Business markets differ
from consumer markets A Typology
of Benefits "Here is how our product
or service can help solve
your specific problem." Levels of Loyalty Types of
Customers Benefit Stack & Presentation by: Rebecca Johnson Sellers' Cost of serving customers Low High Most Valuable Customers Partners Commodity Buyers Under performers Wants to grow the relationship Endorses products Resists competitors' blandishments Is willing to pay premiums Seeks to collaborate on new product developments May invest in you The Loyalty Ladder Successively higher levels of loyalty Consumer Market Large number
of buyers with
similar wants. Products can be mass-produced. Transactions
are usually
small in value. Business
Market Fewer
customers. Customers need customized
product or price. Transactions
tend to be
larger. Buyers' positons on loyalty ladder In business markets:
- The customers will use a vendor's product in numerous different applications
- Almost every customer needs a customized product, quantity or price.
- Marketers need to think and sell in terms of the benefits they provide customers or the customer problems they solve. Non-tangible
non-financial benefits Non-tangible
financial benefits Tangible
financial benefits Tangible
non-financial benefits Have value that the sellers
can communicate and
buyers can verify. Example: Volvo has more horsepower and torque.
Fleet owners can calculate the money they will save by using Volvo engines to haul greater loads, faster. Benefits with value that sellers can convey but buyers cannot easily validate. Example: SaleSoft, a sales software seller, told potential customers that it could estimate the additional revenues they would generate by using its software suite. Have value that is difficult for sellers to quantify, even though buyers perceive it. Example: "You can't go wrong for buying IBM" Have value that both sellers and buyers are unable to quantify, especially in monetary terms. Example: Going beyond contracts - delivering supplies on holidays to keep production lines going. These customers want vendors to strip away all the value added services & only sell them the basic offering. They view products as commodities and are likely to switch to other suppliers if they offer lower prices.

Vendors (in most cases) should not bother educating these customers about the value-added services they offer - they should focus on reducing their customer service costs.

If vendors try to develop a relationship with commodity buyers they could push them into another customer category. Industries that operate with high fixed costs will find their biggest customers are in this quadrant. This is because vendors often try to provide free services to big customers to keep them.

Some vendors make the mistake of trying to obtain customers by offering low prices, but plan to raise them in the future. This never works.

Under performers should only be in the customer's portfolios only temporarily. Vendors should try to turn them into another customer category or fire them. These customers are expensive to serve - but the return justifies the effort.

They view suppliers as a value-adding partners and look for a long term commitment.

They want the latest and best products - and will pay premiums for them.

They are drivers of product innovation.

It is hard to manage partners and if not properly managed, the company runs the risk of losing them to the lowest bidder. MVC are as loyal as partners but less expensive to serve. This is because companies have become more efficient in serving them.

These customers are usually willing to vouch for their vendors.

If new rivals appear it might be best for suppliers to switch MVC to Partners by offering them more benefits. Decision-Maker Stack Managers define loyalty as a commitment to continue to buy a product or service, whatever the circumstances. In business markets, the gains from loyalty go well beyond repurchase. Despite executives'
fears about the additional
costs, Narayandas' research shows that companies benefit
by entering into long-term, individual relationships with most customers in business markets. Seller Buyer Manufacturing plants on 4 continents Internet-based order placement, tracking, and billing system. Willingness to handle changes in customer needs with 12 hours' notice. Just in time delivery Customized manufacture and delivery of products to meed plant's daily needs. 24/7 customer response facility with radio links to trucks. Highly competitive prices & quality Warehouse Manager Purchase manager Logistic officer Maintenance manager Factory manager Chief marketing officer CFO Supply chain head COO CEO Least
important Most
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