customer management strategy in business markets

8/10/2019 Customer Management Strategy in Business Markets

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Customer ManagementStrategy in Business Marke

Presented by:

Rahul Medhi - 131245Rushabh Gosar - 131248Saurabh Sane - 131249Shreyans Jain - 131250

Shreyans Nahata - 131251


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Customer Management Strategy inBusiness Markets

1. Differentiate

Between and

Select

Opportunitiesto Serve

2. Understand the

Impact of

Selection

Decisions on theFirm

3. Build and

Manage the

Buyer Benefit

Stack and SetPrice

4. Locate Or

Stream o

Customer

the Loyal

Ladder anManage

Relations

Impact of Orders

and Transactional

Customers on Firms

Resources and

Capacity

Impact of OrderStreams and

Customers

Relationships on

Firms Skills and

Capabilities


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The Divergent Effects of Orders aCustomers

In most business markets there is a disconnect betwCustomer Choice and Order Selection

If not managed properly, it can create problems betwMarketing and Manufacturing department


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Typology of Buyer Benefits

Economic,

TangibleBenefits

Economic,

IntangibleBenefits

Non-economic,Tangible

Benefits

Non-

economicBenefits

Economic Benefits

Non-economic

Benefits

Vendors Ability to Communicate the

Benefit to the Customer

Hi Lo

Hi

Lo


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Economic, Tangible Benefits

Both buyer and seller can easily measure and financially quathese benefits

The ease of communicating and buyers willingness to accepthese benefits attractive.

These benefits are easy to offer and equally easy for compet

also offer These benefits are differentiators only when the product or

truly unique.


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Non-economic, Tangible Benefits

These are benefits that are readily perceived by buyers, but have difficulty in quantifying them

For example, market reputation, brand name etc.

Buyers reward the vendor for these benefits by

Specifying there product in RFQs

Pay a price premium


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Economic, Intangible Benefits

These benefits are quantifiable by vendors but difficult for tto verify.

Vendors use three approaches to prove their claim

Benchmark Studies

Pilot Test

Money-back guarantees

These benefits are key to achieving differentiation from com


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Non-economic, Intangible Benefit

These benefits are difficult for both seller and buyers alike tand quantify

Buyers need to experience such benefits to appreciate them

Eg. Claims like trust us

These benefits help in establishing


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Buyer Benefit Stack

It helps vendors mobilize and communicate buyer benefstacking the benefit elements one in top of the other

This facilitates the vendors understanding of the level animportance of buyer benefits being offered.

To successfully communicate buyer benefits the vendor

identify the motivation and power bases of all the DMUmembers


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Buyer Benefit Stacka)

X Y Z

b)

X Y Z

c)X Y Z

1 2 3 41

2

1

2

1

2

1

2

3

4

1

2

3

4

1

2

3

4


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Using the buyer benefit stack to SPrice

Money left on

the table

Vendors Profit

Costs incurred by the

vendor

Price


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Customer Loyalty Loyalty has been defined as a buyers commitment to

consistently rebuy or re-patronize a preferred product orservice despite situational influences and competitivemarketing efforts.

Favorable behaviors that is shown by loyal customers

Greater Propensity to repurchase

Word of Mouth effect Resistance to customers blandishments

Pay a price premium

Collaborate with vendor to improve performance and develop newproducts.

Invest in relationship


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The Loyalty LadderLoyalty behaviors are inter-dependent and customers display different behaviors in

order defined by their underlying loyalty level.

Willing to pay Premium

Enthusiastic Advocate

Actively seeks to expand relationship

Invests in relationship

Buys a bundle of products

Switcherwill buy if the price is right

Skeptic- willing to be convinced

Cynic- wont buy


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Managing Customer Relationships Usthe Loyalty Ladder

MVC Partner

Switcher Underperforming Customer

Relationship

Position on the

Loyalty Ladder

Cost of Customer Management Effort

Low High

Sellers need to figure out whether it makes sense for them to invest, maintain or

Divest in customer relationships and order streams.


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Switchers

Customers who only wants basic unbundled product offering (no VAS)from the vendor.

This reduces vendors Customer Management Effort Cost so suchcustomers expects lower prices.

These customers view the product as commodity and so are likely toswitch vendors if they are not able to get lower price.

Primary focus in these relationships is in the management of costs. So company can have a long term contract in return for lower prices or

alternatively, migrating these customers to new products andtechnologies by de-commoditizing the relationship


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Underperforming CustomerRelationships When vendors mis-manage switchers, they become underperforming

customers.

Vendors due to some factors accept extremely low margins from largecustomers.

ExampleLarge Volume customers, Showcase Accounts

These customers can be migrated to Switchers identifying vendors servicesand efforts which customer does not require.

These can also be migrated to partner quadrant by first communicating thetrue benefit stack to them. The best time for this is when vendor is able tooffer other sources of value addition as well.

A vendor can even fire a customer- If vendor is providing unique value andnot getting paid for it, and customer is unlikely to get this value free fromanyone else and is likely to come back after having realized this.


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Partners

Expensive to serve , but returns are also high

Customers expects long term commitment

Demands latest and best products ,and are ready to pay a premium

Customers in this quadrant can quickly move to underperfquadrant, hence vendors should be proactive in terms of rcommoditization cycles.


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Most Valuable Customers (MVC)

More inexpensive to serve than partners

Vendor is more efficientreduces CME without reducing tbenefits

Grateful customersValue relationship with the vendor anto pay a price premium

Advocates and reference accounts to the vendors.


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Moving customers in the loyalty &CME Framework Identify the customer management activities required to s

relationship at each rung

Quantify the buyer benefits at each rung relative to adjace

Calculate the cost of moving the customer from one rung t

Analysis of customers current position by identifying the p

competitive effort , ineffective account management by vepersonnel, or individualistic customer factors

Using the loyalty ladder and buyer benefit stack , vendor ccustomer migration along the ladder.


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CaseletWESCO Turning switchers to MVC

Industrial customers followed a transactional approach tosuppliers and distributors-bid for the lowest price - switche

WESCOs National Accounts Program-

Objective: migrate switchers to collaborators with a long term relaorientation.

Th WESCO S (C d )


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The WESCO Story (Contd)

Wesco offered lowest prices initially to sign up to the NA p

Cost to serve was higher initially and prices offered was lo

Key NA customers: Low Cost & Low Price


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CMR- Migrating from profits to losseRelationship Termination

CMR Enterprises- Cabinet and Furniture manufacturer

Served both commercial and residential customers

Commercial business is based on past performance gettingto bid for customers next projects


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Example: Blackstone Homes

Blackstone: Regional residentialcontractor

Offered CMR to become the exclusivecabinet supplier

Point A: Both firms felt Blackstonewould become the partner customerfor CMR (Point B)

Due to customization and on-timedelivery regardless of changes, CMRincurred cost (absorbed it).

Example: Blackstone Homes


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Example: Blackstone Homes(Contd) CMR asked for a cover of its

additional cost which

Blackstone didnt appreciatedand agreed to a nominalincrease

Relationship is not profitableand eventually it was

terminated. Later, Blackstone tried alternate

suppliers unsuccessfully andcame back to CMR.


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Conclusions Survival of every business depends on customer satisfactio

to the competition.

Revenues received must exceed Customer Management ef Monitoring customer health is a pre-requisite for managin

customers for profits.


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Thank You

customer management strategy in business markets

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