Session

Strategic Relationships

Session Outline

Emergence Traditional v/s Relationship Trends Strategic Relationships Competitive Advantage

This Session Weekly Activity: Industry Trade Missions Identify the industry you seek a trade mission in:

Tourism Education Industry of interest

Find a trade event calendar website for your selected industry, ie: www.tradeevents.australia.com (Tourism)

Visit the website and determine there are any trade missions going to your country of interest

Comment on the value of such trade missions Word Count: 200 - 300

www.worldbusiness culture.com

www.doingbusiness.org

www.everyculture.com

www.kwintessential.co.uk

Communication Styles

Doing Business

Business Behaviour

Culture

Intercultural Communication

Intercultural Communication

What would be the intercultural communication implications for doing business in South Korea, China and India?

What appropriate intercultural communication styles could you adopt for each country?Word Count: 700 - 1000

Emergence

A new way for marketing management to operate and is based on a managerial perspective that is part of a quest to make marketing effort more effective. (Christopher 1992)

Relationships need to be strategic so that interactive marketing becomes a question of strategy - its origins, development and its continuation is a strategic focus for the firm. (Gronroos 1994)

Relationships are a part of the drive for a more efficient supply chain with the emphasis being on developing closer relationships between channel partners. (Donaldson 2002)

CRM Definitions

"Relationship marketing refers to all marketing activities directed toward establishing, developing, and maintaining successful relational exchanges" (Morgan and Hunt, 1994).

Relationship marketing is how a company finds you; gets to know you; keeps in touch with you; tries to ensure you get what you want from them, not just in the product but in every aspect of their dealings with you; checks that you are getting what they promised you - all subject, of course, to it being mutually worthwhile to both parties (Stone and Woodcock, 1995).

Relationship Value Value added in a relationship or by a relationship is

central when considering strategic relationships. A close relationship with a customer, supplier, and even

competitor can represent an asset. Relationships allow the gains available from joint value

creation to be exploited. Relationship value can be linked into intangible

emotions and preferences developed over time from the actions of a firm, and is measured by loyalty and retention concepts.

Value is also tangible and represented in actions taken in a relationship or as outcomes such as an information technology link, in supplier training, or share-holding in a partner’s organisation.

Topic Example Video

The following video explains how to understand the concept of customer lifetime (or long term) value.

Take note of the key points. http://www.youtube.com/watch?

v=FxpritNCYDA

Relationship Solutions

Implementing relationship-based solutions within an organisation involves:

Re-configuring the organisation in terms of philosophy, organisation and management;

Developing and maintaining partnerships with a range of stakeholders;

Finding ways to secure competitive advantage and deliver superior added value.

Relationships are not only a tactical weapon, but represent a different approach to buyer-seller exchange that is strategic.

Six Dimensions of RM

seeks to create new value for customers and share itrecognises the key role that customers have both as purchasers and in defining the value they wish to achieve.businesses are seen to design and align processes, communication, technology and people customer value.represents continuous cooperative effort between buyers and sellers.recognises the value of customer’s purchasing lifetimes (i.e. lifetime value)seeks to build a chain of relationships within the organisation (to create customer value) and between the organisation and its main stakeholders including suppliers, distribution channels, intermediaries and shareholders.

Trends driving Relationships

Globalisation (markets & organisations)

Falling world growth rates Mergers and acquisitions Strategic supply chain management Organisational complexity Information technology impact Rapid development of electronic

commerce Management implications

Strategic Alliances Strategic Alliances among

independent organisations are common (eg. airlines and telecommunications).

Alliances often evolve as a response to uncertainty and instability in the global business environment.

Sharing resources across organisations rather than through independent expansion is the optimum method for coping within changing environments.

Topic Example Video

The following video explains about the importance of strategic alliances in business.

Take note of the key points. http://www.youtube.com/watch?

v=rACNp6VumDs

Activity: Airline Industry In recent times airline alliance partners have

shifted between alliances. The challenge has been to create alliances

which provide real benefits not only to customers but also to the various alliance partners.

What has been the emerging trend with the alliances and for what possible reasons?

What are the benefits being attained? How has resource sharing improved

efficiencies and strengthened relationships?

Transactions v/s Relationships

Customer relationship types classified by importance as a position along a spectrum between one-off sales and valuable long-term relationships.

Position on spectrum is dependent upon: basis of switching costs volume of business relationship suitability.

Not all customers are worth investing heavily in relationship building.

BilateralBilateral RecurrentRecurrent

DiscreteDiscreteHierarchicalHierarchical

HighHigh LowLowAction ComponentAction Component

HighHigh

LowLow

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Relationship Matrix

Bilateral Relationships

This is where parties co-operate for their mutual benefit and actions are taken on the basis of the consideration of joint goals and outcomes.

The relationship strength is based on its social and economic elements,

belief in (social) and action taken in (economic) a relationship.

Discrete Relationships

Discrete relationships have low relationship strength with minimal levels of belief and action components.

Opportunism dominates because there are few, if any, ties between the partners. Organisations are assumed to make rational economic decisions.

Exchanges offer only a limited need or ability to build relationships.

Building relationships is not central to the exchange and it would not be prudent to invest in the relationship.

Discrete relationships are only 'relationships' to the extent that parties can come together to do business.

Recurrent Relationships

Recurrent relationships are a hybrid form between discrete and bilateral.

Through exchange reciprocity a level of trust is built between the parties but committed actions are low.

Recurrent relationships are special partnerships with well developed social structures.

The focus is more on operational issues than strategic ones.

Both parties share matching sentiments.

Hierarchical Relationships

Dominant or hierarchical relationships are a common form of power and occurs where a dominant partner specifies the nature of the interaction between the partners.

Hierarchical relationships revolve around the decision about who controls the exchange which is reflected in the authority and power-dependency balance in these relationships.

The weaker partner faces a combination of low belief in the desired results but demands a lot in terms of action (ie. specific investments by a supplier on behalf of their customer).

Relationship Contribution

Classification based on three factors: relationship value, net price, and cost to serve.

The relationship value is the value of the relationship to the organisation. (Importance)

Net price refers to the level of utility afforded in the exchange. (Financial value)

Cost to serve is a reflection of the opportunity costs foregone on other exchanges. (Loyalty cost savings)

Topic Example Video

The following video explains what is customer lifetime value.

Take note of the key points. http://www.youtube.com/watch?v=BHDblh9Y1-

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Relationship Ladder

Commitment

Expansion

Exploration

Awareness

Partners

Clients

Customers

Prospects

Members

Advocates

Partners

Clients

Repeat Cust

Prospects

Members

Advocates

1st Time Cust

Suspects

Tra

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Mark

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(Dissolution)

Dwyer et al 1987 Payne et al 1995 Kotler 1997

Value Focus(Part/Mem)

Value Focus(Part/Mem)

Product Focus(Advocate)

Product Focus(Advocate)

Price Focus(Customer)

Price Focus(Customer)

Need Focus(Client)

Need Focus(Client)

HighHigh LowLowDialogueDialogue

HighHigh

LowLow

Dis

cov

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Dis

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Relationship Space Styles

Customer Discovery

Explanation! The degree to which customers are

prepared to share information, knowledge and other resources in order to participate or influence the creation and development of an organisation’s range of product/service offerings.

For consumers, this often relates to the level of involvement required for decision making relative to their formation of attitudes and behaviours.

Customer Discovery

Discovery Profile! Characteristics

Who are they? Preferences

What do they want and expect? Value potential

What is their value worth?

Customer Dialogue

Explanation It is the distinguishing patterns of

interaction and communication as well as the frequency and level to which these occur that differentiates one customer from another.

Customer Dialogue Dialogue Pattern? Relationship

What kind is desirable? Interaction

How can exchange be fostered? Communication

How can control be shared? Reflection: Relationship based

organisations identify ways how their customers can generate value and then structure their CRM strategies accordingly.

Relationship Value Categories

The frequency with which customer dialogue episodes occur is a useful indicator of value potential. There are four basic categories:

Financial Customer

Operational and Process Advocate

Knowledge and Learning Client

Strategic Partner/member

Transactional vs Relationship

TRANSACTIONAL MKTG vs RELATIONSHIP MKTGOrientation to single salesDiscontinuous customer contactFocus on product featuresShort time scaleLittle emphasis on customer serviceLimited commitment to

meeting customer expectationsQuality as the concern of production staff

Orientation to customer retentionContinuous customer

contactFocus on customer valueLong time scaleHigh emphasis on customer serviceHigh commitment to

meeting customer expectationsQuality as the concern of all staff

Approaches Comparison

Traditional Transaction focus Competition Firm-induced Value to firm Buyer passive Firm as control focus Firm as boundary Short-term focus Independent

Strategic relationship Partnership focus Collaboration Co-operation Value in partnership Buyer active participant Firm as part of process Boundary-less Long-term focus Dependent & network led

Customer Profile

Describe the profile of the customer by each market segment.

What do they buy? Where do they buy it? Why do they buy it?

When do they buy it? Where and how are the products

sold in each market segment?

Customer Profile

Who is the buyer and who is the end user in each market segment?

Who buys what in what market segments?

Will they change their buying habits?

Remember, buyer behaviour is affected by economic, social and political influences.

Activity: Customer Value Profile

Using the four basic value categories as your starting point,

Financial Operational and Process Knowledge and Learning Strategic, identify the benefits and costs to an

organisation for each value category.

Relationship Mode Characteristics

Developing new opportunities via partnerships and strategic alliances;

Out-sourcing of non-core activities; Using product development teams to turn ideas

winning products and services; Open relationships with their employees; Using IT to serve customers better and gain

competitive advantage; Employing customer satisfaction measurement

linked to the company's compensation and reward structure;

A focus on being market-driven and customer-led.

Relationship Approach Criteria

(a) its belief in not only satisfying or even delighting customers but involving customers as the number one priority;

(b) by investing resources to research markets and customers on a one-to-one basis;

(c) by taking a planned and joint approach towards delivering customer satisfaction.

Core Firm & Its Relationships

Classic/Special Relationships

Customer Markets

Buyer Partnerships

Customer P

CORE FIRM

External P

Lateral Partnerships

Referral/Influence Mkt

Meta Relationships

Cla

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Relational Exchange Categories

Supplier partnerships Goods suppliers Services suppliers.

Lateral partnerships Competitors Non-profit

organisations Government.

Buyer partnerships Ultimate customers Intermediate

customers. Internal

partnerships Functional departments Employees Business units.

Relationship Strategy Questions

Decisions concerning collaboration or competition as a strategy - whether or not to pursue relationships as a strategy. Overall vision and direction for relationships set by top management;

Choices about which relationships to develop - deciding which relationships to develop or new ones to nurture;

Choices about levels of relationship benefits to provide - allocation of resources to relationships. Levels of product/service to each relationship, investment and adaptation patterns;

Choices about how benefits are delivered - organisation structures to relate to each of a firm's relationships.

Selection and Positioning

Strategy is about choice. Choice is a complex problem and is closely related to position.

Positioning in relation to other competitors is important. Relationship networks are as beneficial as they are fluid over time. Therefore, position within the network of relationships is crucial.

Competitive Advantages

Relationship-specific assets - investment and adaptation unique to the relationship;

Knowledge routines - joint learning as a focus for higher order value, for example, ideas from another firm may define a new product;

Combining complementary resources and capability - often lead to the joint creation of new products, services and technology.

Lower transaction costs than competitors - trust creates a atmosphere where costly safeguards and checks are not needed.

Relationship Advantage Criteria

Difficult to identify what generates the advantage (its causes are ambiguous);

Causes can be identified but there is not enough time to copy (time to market can be significant in many sectors, for example, electronics);

Interconnectedness between the parties to the relationship may have created a unique asset;

Partner scarcity - just as relationships with advantage potential are scarce the corollary that partners of this type are also scarce holds;

The relationship is unique in total that is difficult to divide into component parts and is governed by rules and regulations unique to the parties.

Next Session Weekly Activity: IKEA Case Study Click on the link, (http://books.google.com.au/books?

id=YreJ42YFjb0C&pg=PA174&lpg=PA174&dq=case+study+ikea+furniture+retailer+to+the+world&source=bl&ots=ItFx_SKc4k&sig=XNZWBM_v8EoCltODZYFIjK6adOw&hl=en&sa=X&ei=mCgfUbD4Ku_JmAWq8IGICQ&ved=0CFEQ6AEwBg#v=onepage&q=case%20study%20ikea

%20furniture%20retailer%20to%20the%20world&f=false) read the case study and answer the following questions:

What has allowed IKEA to be successful in a competitive environment?

Is IKEA destined to succeed everywhere it cares to establish itself?

Word count: 150 – 200.