Relationship asessment

”The purpose of a business is to create and keep a customer” (Levitt, 1983)

Rosneft 2011

Lars Huemer, BI

Relationships in business markets…

• A jungle

• Survival of the fittest• Independence • Competition• ’Zero sum game’• Winning-losing • Tight boundaries

• or a rainforest

• Co-existence/co-evolution • Interdependence • Collaboration• + sum games• Open/multiple boundaries

Cf Håkansson et al 2009

”Having business relationships is not a matter of choice for companies. The important choices are about which relationships to develop and how to

develop them” (Blois, 1998)

Characteristics of relsationships• Continual change

– A relationship is never stable– People have different perspectives and aims– Interplay between Activity links, Resource ties and Actor bonds– New problems always arise

• Customer involvement– Customers are always involved in conjunction with or independently

of the supplier– Customers are never passive– Both parties have ideas about how the relationship should be

managed– Both parties will try to do it (often separately)!

• Uniqueness– Never two identical relationships– Customers have different problems and want to be

treated differently• Complexity

– Complex patterns of interaction on both customer and supplier side

– Combination of elements such as products, service, advice, logistics, etc.

– Parties ”co-evolve” over time – Must continously assess and re-assess the relationship

Managing continuing relationships

• Managers must ensure that offerings remain effective over time

• Requires changing and reallocating resources• Needs to assess current portfolio of

relationships • Needs to assess the competitors:

– Products– Categories

• Cannot adress this alone!

Developing relationships

• A relationship always acts a a bridge to other relationships

• Developing relatioships means building such bridges

• Adaptations are necessary for a relationship to mature

• Adaptations are never symmetrical:– Inside the relationship– Between the dyad and connected relationships

High-involvement relationships

• Pros:– Facilitate communication, increase predictability, reduce

problems and misunderstandings• Cons:

– Only handle a limited number of high-involvement relationships at one time

– Risk that potential will not be achieved– Constrains the actions of the two companies– Reduces abilities to change or switch to other more

promising relationships

Assessing single relationships

1. Assess the relationship2. Set the agenda3. Organise the relationship

1. Asess the relationship

• Never a snapshot in time• More to do with the processes and dynamics

of the relationship• Means looking backward and forward

Typical questions

• History and current stage– What is the history?– What is the current development stage?– Why do we have this relationship?– What problems do it adresses?– What is the volume of business and the nature of

offerings?– What is the level of involvement?– What is the ARA?– Financial performance? Value to both parties?

• Potential of the relationship– What do we see as a potential?– What is requested to fulfill its potential?– What involvement does each company want to

have?– What are the threats to the relationship?

• Atmosphere of the relationship– How commited is each company to the current

relationship?– What is the disctance between the parties?– How dependent are the parties on eachother?– What conflict and cooperation exists between the

parties?

• Network– What is the network position of the relationship from the

perspective of both parties?– What is the role of the relationship in the portfolios of the

supplier and customer?• Current operations

– How does the current management of the relationship by the parties fit with their overall strategies?

– Is the current pattern of interaction between supplier and customer appropriate?

2. Set the agenda

• Any unresolved issues that needs to be monitored?

• What is the interplay between this relationship and others?

• How does this relationship contributes to the overall preformance of the company?

3. Organise the relationship

• Interpersonal interaction– Information exchange role– Negotiation and adaptation role– Crisis insurance role– Social role– Ego-enhancement role

• Fulfilment– The value to a customer is how the initial offering

or promise is fulfilled– This is an interactive process– Fulfilment requires allocating responsibilities,

defining priorities and resources, monitoring and feedback

• Defining and redifining the offering

Managing a portfolio of relationships

• Need decide which relationships we should prioritise?

• Problematic because relationships are interconnected

• Some criteria:– Expected volume of business– Expected profitability– Potential development effects on wider network

One example

• 3 criteria:– Relationship costs– Net price achieved– Relationship value

• Volume• Profitability• Technological development• Network access

8 Categories

1. Todays profits2. The ”cash cows”3. Yesterdays profits4. The ”old men”5. Tomorrows profits6. New technical and commercial requirements7. Minor relationships