buyer-supplier relationships in international markets in the USA, Mexico and .. market, and its potential as a burgeoning market for consumer and industrial. Buyer-Supplier Relations In Industrial Markets: When Do Buyers Enter the Trap of Making Idiosyncratic Investments? February M. (Ben) Bensaou. INSEAD. buyer–seller relationship research is investigation of relationship quality from both marketing over the decades, particularly in relation to industrial marketing .
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.
Building a Better Buyer-Seller Relationship - HBS Working Knowledge - Harvard Business School
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.
Buyer-Seller Relationships - Industrial Marketing | Textbooks | Chapters
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.
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The three pairs represented different parts of the value chain: What we found is that there are many commonalities," he said. Together they developed a process model of relationship development, described in their working paper, "Building and Sustaining Buyer-Seller Relationships in Mature Industrial Markets".
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Previous work by other scholars had focused on two paths: None of this work could explain how relationships that began as unbalanced, with one player holding most of the cards—as is typical in industrial markets—could evolve from adversarial to collaborative.
In their paper, they developed nine propositions and identified five processes. They found that the contract stage in industrial markets leads to a performance evaluation stage. It is relatively easy for the seller to identify a prospective customer and build a face-to-face relationship. Highly professional and trained people in buying processes are involved. In many cases, two or three decision makers must approve a purchase plan.
Often the buying or selling process is complex, and includes many stages for example, request for proposal, request for tender, selection process, awarding of tender, contract negotiations, and signing of final contract. Selling activities involve long processes of prospecting, qualifying, wooing, making representations, preparing tenders, developing strategies, and contract negotiations.
Blurring between B2B and B2C[ edit ] Industrial marketing can cross the border into consumer marketing. For example, an electronic component seller may distribute its products through industrial marketing channels see Channel marketingbut also support consumer sales. Many products are equally desired by business and consumers—such as audio products, furniture, paint, hardware, etc.
Nonetheless, manufactures and service providers frequently maintain separate industrial and consumer marketing operations to reflect the different needs of the two channels. Call for bids Industrial marketing often involves competitive tendering. This is a process where a purchasing organization undertakes to procure goods and services from suitable suppliers.
Due to the high value of some purchases for example buying a new computer system, manufacturing machinery, or outsourcing a maintenance contract and the complexity of such purchases, the purchasing organization will seek to obtain a number of bids from competing suppliers and choose the best offering.
An entire profession strategic procurement that includes tertiary training and qualifications has been built around the process of making important purchases. The key requirement in any competitive tender is to ensure that: The business case for the purchase has been completed and approved. The purchasing organization's objectives for the purchase are clearly defined. The procurement process is agreed upon and it conforms with fiscal guidelines and organizational policies. The selection criteria have been established.
A budget has been estimated and the financial resources are available. A buying team or committee has been assembled. A specification has been written. A preliminary scan of the market place has determined that enough potential suppliers are available to make the process viable this can sometimes be achieved using an expression of interest process. It has been clearly established that a competitive tendering process is the best method for meeting the objectives of this purchasing project.
If for example it was known that there was only one organisation capable of supplying; best to get on with talking to them and negotiating a contract. Because of the significant value of many purchases, issues of probity arise.
Organisations seek to ensure that awarding a contract is based on "best fit" to the agreed criteria, and not bribery, corruption, or incompetence. Bidding process[ edit ] Suppliers who are seeking to win a competitive tender go through a bidding process. At its most primitive, this would consist of evaluating the specification issued by the purchasing organizationdesigning a suitable proposal, and working out a price.Introduction to Sales - Changes in the Buyer Seller Relationship
This is a "primitive" approach because There is an old saying in industrial marketing; "if the first time you have heard about a tender is when you are invited to submit, then you have already lost it. This section needs expansion. You can help by adding to it. May Industrial buying journey[ edit ] Before industrial buyers engage in the bidding process, they go through a long and distinct buying journey. A study conducted by Thomasnet.
Establish the business need for acquiring a specific product or service. Define the requirements the product or service must meet.
Determine what products or services to consider. Determine if a new product or service is necessary to address the business need.
Determine if buying a new product or service is financially justifiable and affordable. Define the criteria to use to evaluate the products or services under consideration.