Professional Documents
Culture Documents
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Relationship Marketing
Centers On: Establishing, Developing, and Maintaining Successful exchanges with customers.
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Transactional Exchange
Centers on timely exchange of basic products for highly competitive market prices. Taxi /bus from the airport Value to customer? Focus of selling shift from attracting customers to keeping customers Dell provides a customized webpage to each of its premier corporate customer Understanding the customers business- the key to success
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Collaborative Exchange
Features close information, social, and operational linkages, as well as mutual commitments. Switching cost Investment Risk of exposure- with a less established supplier or technically complex products
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Types of Relationships
Buyer-seller relationships positioned on a continuum with transactional exchange and collaborative exchange serving as end points. The Relationship Spectrum
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Buyers and sellers craft different types of relationships in response to: a) market conditions and b) characteristics of the purchase situation.
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Strategy Guidelines
1. Determine which type of relationship matches purchasing situation and supply-market conditions for particular customer.
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Why?
Why many a times organizations fail to examine how the cost of specialized products and services vary among individual customers? Profitability is focused at an aggregate level of product and territory To capture customer specific cost- activity based costing is useful. It provides a clear picture of gross margins and cost to serve components. Ex: Kanthal ( a heating wire manufacturer) and the largest supplier to GE( appliance division) found that GE is the most unprofitable customer for them. A normal order processing cost to normal customer was approx. $150 to $600 but it was much more for GE.
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Reason
Frequent order change Expedited ( quick) deliveries Scheduling adjustment
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Low-Cost-to-Serve Customers
Order standard products Order large quantities Predictable order arrivals Standard delivery No changes in delivery requirements Electronic processing (EDI) (i.e., zero defects) Little to no presales support (i.e., standard pricing and ordering) No postsales support
Source: Robert S. Kaplan and V.G. Narayanan, Measuring and Managing Customer Profitability, Journal of Cost Management 15, No. 5 (September/October 2001): p. 8. Developed by Cool Pictures and MultiMedia Presentations
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Customer Profitability
High
Passive Product is Crucial Good Supplier Match Costly to Service, but Pay Top Rupee
Aggressive Leverage Their Buying Power Low Price and Lots of Customized Features
High
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Copyright 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Copyright 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Copyright 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
SOURCE: Adapted from James C. Anderson and James A. Narus, Partnering as a Focused Marketing Strategy, California Management Review 33 (spring 1991) p. 97. Copyright by the Regents of the University of California. Reprinted by permission of the Regents.
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Copyright 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Copyright 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
First, describe how Xerox might develop a portfolio of relationship strategies to meet the needs of such diverse customer groups. Second, some customers in each group are more costly to serve than others. How should such cost differences be reflected in the particular relationship strategies that Xerox follows? Third, what strategies can Xerox follow to increase the switching costs of customers in Group B or Group C?
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Quiz-2
Transactional exchange features very close: a. information linkages. b. social linkages. c. operational linkages. d. all of the above. e. none of the above. On-going transactions in the business market where the customer and the supplier focus only on the timely exchange of standard products at competitive prices could be described as: a. transactional exchange. b. a partnership. c. collaborative exchange. d. a strategic alliance. e. a joint venture.
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Buying firms prefer a transactional relationship when: a. the complexity of the purchase is high. b. there is a competitive supply market featuring many alternatives. c. the supply market is stable. d. all of the above e. (b) and (c) only
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Collaborative relationships: a. are emphasized by buying firms when the purchase is deemed important to the organization. b. are emphasized by buyers when the complexity is high. c. are more likely to involve operational linkages. d. all of the above e. (a) and (b) only
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____ occur in between the two extremes on the relationship continuum, where the focus of the selling firm shifts from attracting customers to keeping customers. a. Transactional exchanges b. Value-added exchanges c. Competitive exchanges d. Collaborative exchanges
Which of the following are goals of customer relationship management (CRM)? a. A continuing dialogue with customers. b. Personalized treatment of the most valuable customers. c. Achieving customer retention. d. All of the above. e. a and c only.
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The problem solving approach followed by an organizational buyer in a new task buying situation is: a. selective. b. extensive. c. cerebral. d. systematic. e. none of the above
When buying influential and decision makers lack welldefined criteria for comparing alternative products and suppliers and they also lack strong predispositions toward a particular solution, they are operating in a stage of ____ problem solving. a. cerebral b. limited c. selective d. Routine e. extensive
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Individuals who control the flow of information into the buying center are performing the role of: a. a user. b. a gatekeeper. c. an implementer. d. a decider. e. a buyer.
When organizational buyers modify a salesperson's message to make it more consistent with their predispositions toward the company, this provides an illustration of: a. selective exposure. b. selective attention. c. selective perception. d. selective retention. e. selective memory.
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In choosing a new piece of manufacturing equipment, the buying organization is uncertain of the model or brand to choose, the suitable level of quality, and the appropriate price to pay. This represents which type of buying situation? a. complex modified rebuy decision b. strategic modified rebuy decision c. judgmental new task decision d. strategic new task decision e. lost-for-good decision
Upon meeting with a General Electric buyer, a salesperson learned that the G.E. purchasing function is unhappy with the supplier's performance and is openly considering new options. This provides an illustration of: a. a new task buying situation. b. a straight rebuy. c. a modified rebuy. d. extended problem solving. e. value analysis.
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3:Buying firms prefer a more collaborative relationship when the supply market is dynamic 4:While loyal customers are likely to be satisfied, all satisfied customers will not remain loyal. 5:The whale curve of cumulative probability demonstrates that the most profitable 20 percent of customers generate between 150 and 300 percent of total profits.
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