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For the discussion, please write critical, The powerpoint and reading document may be helpful mkt_reading.docx ch.13_relationships_powerpoint.ppt homework_question.docx homework_question.docx Unformatted Attachment Preview All right. These are the audio slides here for Chapter 13, which weve moved up to the very beginning of class here. Just to cover a few key objectives, these are going to be underlying a lot of the concepts that we go throughout the remainder of the semester. Well start off by talking about some of the different types of relationships between buyers and sellers-- the appropriateness of each kind of different goals of the buyer and the seller; characteristics of the success for those partnerships; the benefits and risks of engaging in them, because theyre certainly not warranted in every scenario; and then overall, kind of where the sales person comes into play, how they help develop the relationship over time, and what are the sales persons responsibilities within that stage? So as we start off by talking about relationships and selling, a lot of the key conversation early on is about how to get the relationship going, and how to maintain a long-term value of that relationship. And one of the key concepts that comes into play there is understanding the lifetime value of customers. The key to understanding that lifetime value is really kind of at the end of that definition there. It is the combined total of all future sales. And so we had a nice discussion in terms of what that means in terms of future sales, and how we actually know what to predict in terms of how much a group or an individual customer is going to buy from us over and over. And it really comes down to somewhat of the historicals-- the transactions, the number of transactions, the frequency of those transactions, the overall value. But embedded within that is the notion of loyalty. And loyalty is really that predictor of whether or not the customer is going to purchase from us again-- whether or not theyre likely to come back; whether or not theyre likely to buy the same product over and over; whether or not they are likely to withstand certain competitive threats. These are all kind of a function of how loyal the customer is to us individually as a salesperson, our product, or company. Also stemming from that is the different types of loyalty, one being behavior loyalty and one being attitudinal loyalty. So a lot of the conversation was split out around understanding the things that are really characteristics of behavioral loyalty-- just the notion of repeating, purchasing, coming back over and over, kind of out of a habit, or routine, and some degree of satisfaction, versus attitudinal loyalty, which is really that strong emotional attachment. It really capitalizes on that willingness to stick with the customer-- or stick with the product, the solution, the salesperson-- regardless of all these other things that are happening within the environment. So the attitudinal loyalty can arguably be a much stronger form of loyalty. But behavior loyalty-- kind of the counter to that-- is it represents actual purchases. So there are scenarios when we might be very attitudinally loyal, but not actually worth that much value to our organization. We use this database conversation to split it out and say, all right, you know, how can we look at a database such as this and say, which group of consumers is really actually loyal? And then within that, what would we need in order to differentiate between behavioral loyalty and attitudinal loyalty, which is in reality a major challenge, and something thats really hard to achieve here. From there, we went into the different types of relationships. And really theres four main relationships. And theyre split out across two main headers. So the first header is market exchanges. And that represents two different types of relationships-the first being solo exchange, the second being functional relationship. Solo exchange is really kind of at the very end point, where theres no future business. Everybody is self interested in pursuing the best possible deal they can get, because its a one-time transaction and they want to maximize their value that one time. And theres really no shadow of the future hanging over it. Functional relationships still now get into long term exchanges. So pretty quickly were moving from a one-off exchange to a long-term exchange. But what we talked about in this case is, its characterized by that behavioral loyalty. So again, if we flip back a few slides, that behavioral loyalty is really the thing thats a function of habit, or routine, and some degree of satisfaction. And its really not that attitudinal part of it, quite yet. So a lot of this is about driving customer satisfaction if youre the salesperson here. From there we moved into the second header, which is partnerships. And within partnerships, theres two main types of relationships-one being a relational partnership, and one being a strategic partnership. And in this case, really, again, theyre going to be long term. Because were moving off of functional relationships. So were moving even further downstream in terms of the length of the relationships. But now were starting to move beyond just the behavioral loyalty into some of the things that might be more attitudinal. They have close personal relationships, open trust, and communication. Were not really worried about kind of the details and the things that are written within the contract, because a lot of this is things that we work out in inter-personally. The main thing that differentiates these two forms of partnerships are when you start to get into these strategic relationships, we start to talk a lot more about strategic investments, mutual investments, growing the overall size of the pie, as opposed to splitting it in different ways and taking different slices. So were trying to grow the overall value of the relationship. And thats really achieved through the flow of investments into the relationships coming from both parties. So all these things of trust and so forth are that much more important when parties start to put money and nontransferable assets into the relationship to get more out of it. This is a great slide that I encourage you to look over and review as youre going through the slides. It gives you a good kind of progression from what its like to move from the solo exchange of transaction to more of a strategic partnerships-- and the length of the relationship, the benevolence within the other party, the importance of trust, and so forth. The nature of the relationships are a great kind of way to understand these different types of partnerships and relationships, as is understanding when certain types of investments, you know, present certain types of risk, and the trade off between that, based on the potential benefits here. So its a great overview slide, and certainly its representative of the material there. The main takeaway-- or not the main takeaway-- but one of the main takeaways from this was, as we move towards strategic partnerships and those mutual investments, a key function is understanding the solutions there. So we had a reading at the beginning of class that focused on solutions. We then went into a discussion about DuPont and Ford that focused on solutions. And then we want to extend that into our own into our own role plays here. So if were selling a CRM system, how we could understand what the underlying solution-- not the product-- but what the underlying solution actually is, and therefore how we would want to make investments into the partnership. So those are the different types of relationships. Much like interpersonal relationships in our own life and in other aspects of business, they follow kind of a predictable pattern here. And they really go from this awareness stage, where the salespeople are really trying to locate and qualify prospects, identify sources supply, all the way down to the end of relationships. So again, if we connect this to our personal lives, this is how relationships develop, right? At some point, we become aware. Then we start to explore the potential benefits by kind of small purchases, or small, I guess, trials. Once we have some degree of satisfaction, we understand that what theyre going to be able to deliver and live up to their promises, we start to expand upon that and give more-- embed more trust, embed more investments, and start to kind of shut out other options and alternatives here. The deepest stage of that would be commitment, in which we are fully committed to the other partner. Thats when those strategic investments come into play. Thats when the solutions mentality really comes into play. And then some relationships dont last forever. From the salespersons perspective, it would be, all right, when that happens, how do we win them back? How do we go about bringing back those customers that were lost? Each of these, again, has a strategy for the salesperson. Again, during that awareness stage, its really trying to locate and qualify prospects. During that exploration stage, its trying to derive some of that satisfaction that you know youre going to be able to deliver, and therefore get some of that repeat purchases-- a little bit of behavioral loyalty, if you will. That expansion stage-- we can start to expand upon the relationship and engage in cross-selling and up-selling-- things that are going to get more value out of our existing relationships. Build in a little bit more switching cost because of the things that theyd be missing out on if they left. The commitment stage-- were really looking for the pledge to continue this relationship for a long period of time. The investments coming into it-- the enhanced information coming from the salesperson, and therefore the solutions that you might be able to embed within that. In order to make those progressions from one step of the relationship to the next thing and so forth, and get to that deepest stage, theres a lot of things that are really a part of that foundation for successful partnerships and successful relationships. And they build off these building blocks here. So we did talk about kind of when, maybe, some of the loyalty to the salesperson, for example, isnt necessarily the best. Because it can represent some risk to the organization. But for the most part, these are the building blocks of relationships. Relationships themselves are advisable and advantageous to the supplier, and it takes a number of things to develop them. Again, the figure here is fairly representative. They literally are the building blocks for success relationships. Again, you can connect these to your own personal life. What makes a good relationship? Mutual trust, strong communication, commitment to mutual gain, having the same goals in mind, and the right type of structure to make that relationship successful here. One of the key conversations we took from here was about mutual trust, and trust not just being this holistic thing. But its made up of multiple dimensions here-- things like dependability. Am I going to be able to do what I say Im going to do? Competence-- am I knowledgeable? Am I an advisor? Am I somebody you can consult with because I know the product, the company, the industry, and all these things that, you know, I spend all my days thinking about? The customer orientation-- am I benevolent in my thinking about the customer and having them in mind? Am I perceived to be honest and truthful and sincere? And then it also comes down to little things like likability. But trust is this multi-dimensional thing. And its not just something you can hand over with one of those. There cant really be a zero in any of those columns, right? It has to kind of come from all these different dimensions, across dependability, and competence, and customer orientation, and honesty, and likability. And that can happen from the very get go. So we talked a little bit about things that you could do to instill dependability very early on-- things like showing up on time. Things you could do to instill competence from the very first meeting-- be an expert. Be knowledgeable. Be somebody who can teach and train them. Likewise being customer oriented-- asking them questions, actually being honest, and those type of things. So these things happen from the very first interaction on, and its very hard to build them over time. It takes a lot of time and continual iterations. But again, once you have a zero in some of those columns, its pretty easy to kind of swipe this away and deteriorate that trust. Trust is really important. Again, from the left side, we have all those factors driving trust. But once its embedded within the relationship, the perceived risk of working with that supplier goes way down, as well as the decision-making uncertainty. So theyre able to make those decisions with a lot more certainty and speed. The opportunism of the customer, as well as the concern that the suppliers going to act in kind of not the best interest of the buyer goes way down. And the things that are improved include the customers willingness to share information, which is really important as youre trying to get towards that solution perspective. And the overall performance of the seller and the supplier in that case. The second building block was open communication. In this case, it has a lot to do with listening skills, questioning techniques, and then active listening, showing that youre listening and responding appropriately. Common goals are important to make sure youre both working towards the same objectives, as well as the commitment to that objective. So its not just investments in the relationship, but the mutual investments coming from both parties, so that power and dependence isnt skewed in some way. And finally, the organizational support. Again, organizations can say, we emphasize relationships, relationships, relationships. But if they arent giving you the right type of structure, for example-- if theyre not giving you a salary base that says, yes you earn commission based on sales. But we also gave you this base to emphasize relationships and to do other tasks aside from just sell and just close deals. If they arent training you on how to do this, if the reward structure-- again, kind of similar to that structure-- isnt set up properly, then you could argue that the organization is kind of all talk without a lot of support for these actual goals. Again, the key things we talked about in this chapter-- the different types of relationships. We went from solo exchange all the way to strategic partnerships; when each type of relationship might be more or less appropriate based on those investments and the risks versus the benefits coming out of it; characteristics of successful partnerships; those building blocks; the benefits and risks to the organization and to the salesperson; how they develop over time from that awareness stage all the way to the potential of dissolved relationships; and their responsibilities to salespeople across each one of those stages. Whats their goal at the awareness stage? Whats their goal at the exploration, the expansion stage, at the committee stage, and so forth. So what should the salesperson be doing as the buyer is following this process? Overall, those are some of the key concepts that come out of chapter 13. And the material really should be fundamental, again, as we move forward to future chapters in the textbook, here. 1 MKT 405: COURSE OVERVIEW 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? • What are the benefits and risks in partnering relationships? • How do relationships develop over time? • What are the responsibilities of salespeople in partnerships? THE VALUE OF CUSTOMERS • What is customer lifetime value (CLV)? • Customer lifetime value (CLV): Combined total of all future sales • Why is CLV important? • Strong relationships with customers are a source of competitive advantage • How do you measure CLV? • Reflects customer satisfaction, retention and/or loyalty CUSTOMER DATABASE Customer Group 1 Customer Group 2 Customer Group 3 Customer Group 4 Lifetime Sales $25,000 $50,000 $100,000 $100,000 Avg. Purchase Value $25,000 $25,000 $33,333 $33,333 Total Number of Transactions 1 2 3 3 Number of Transactions / Year 1 1 1 1 Product Categories Purchased 1 2 3 3 One & Done Cross-Buyers Behaviorally Loyal Attitudinally Loyal Output RELATIONSHIPS AND SELLING • As companies’ attempts to develop stronger relationships with their customers, loyalty is the linkage to CLV: • Behavioral loyalty: Purchase of the same product from the same vendor over time • Attitudinal loyalty: Emotional attachment to a brand, company, or salesperson • Which is more important to you as a salesperson? 1. MARKET EXCHANGES 1a. Solo exchanges • Both the buyer and the seller pursue their own self-interests • No future business 1b. Functional Relationships • Long-term market exchanges characterized by behavioral loyalty • Customer satisfaction: Buyer’s expectations are met and needs are fulfilled 2. PARTNERSHIPS 2a. Relational partnerships • Buyer and seller have a close personal relationship • Marked by open, and honest communication • Partners trust each other and don’t worry about small details • Not necessarily strategic but provides flexibility 2b. 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 EXHIBIT 13.2 - TYPES OF RELATIONSHIPS BETWEEN BUYERS AND SELLERS PRODUCTS → SOLUTIONS Company - Product Customer Product Focus Solution Focus Cola Drink / Syrup Movie Theater Taste, Brand Preference, Consumption Rates Driving Patrons to the Theater DuPont Paint Paint (for cars) Ford – Automobile Manufacturer Raw Materials, Manufacturing Process NetSuite CRM System CRM systems are technology that allow customers to organize customer information, identify sales opportunities, forecast sales and inventory levels, maintain oversight of employee behaviors, etc. Customer Profile Features, Reputation, Technology, Company History Cola Company Product Description Painted Cars ? PHASES OF RELATIONSHIP DEVELOPMENT Awareness Exploration Expansion Commitment Dissolution PHASES OF RELATIONSHIP DEVELOPMENT EXHIBIT 13.4 - FOUNDATIONS OF SUCCESSFUL RELATIONSHIPS 1. MUTUAL TRUST • Trust: Belief by one party that the other party will fulfill its obligations in a relationship • (a) Dependability: Perception that the salesperson, and the product and company, will live up to promises made • (b) Competence: Demonstrated knowledge of customer, product, industry, competition, etc. • (c) Customer orientation: Degree to which salesperson puts customer needs first • (d) Honesty: Truthfulness and sincerity • (e) Likeability: Behaving in a friendly manner and finding a common ground between buyer and seller TRUST IN BUYER-SELLER RELATIONSHIPS Dependability Competence CO Honesty Likeability Trust + • • • Perceived Risk DM Uncertainty Opportunism Concern • • • Share Info Cooperation Channel Performance 2. 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 • Listening OPEN COMMUNICATION OPEN COMMUNICATION “Low” Negative “High” Negative 3. COMMON GOALS • Provide ... Purchase answer to see full attachment