Customer Relationship Development Process in Global Marketing - Essay Example

?Global Marketing Executive Summary This study is prepared with the intent to focus on the relationship of Nestle with its s and suppliers while entering the beverage market of Pakistan. The main purpose of the study would be the improvement of relationship of Nestle with its suppliers and customers. The study focuses how customer relationship development process helps in facilitating smooth communication and interaction between the business partners and the customers. The study will also lay emphasis on crisis management and suggestions to improve the supply chain. Service recovery to a service failure would help in restoration of the brand image of a company and also help in development in smooth relationship between the customers and company. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Relationship Development 4 Market Segment & Supplier of Nestle in Pakistan 4 Selection of PBL as Beverage Supplier 5 Methods of Relationship Development 7 Benefits to Nestle from PBL perspective 11 Effects of Supply Chain Crisis 12 Crisis Response Management 13 Rationale for Crisis Management 14 Conclusions & Recommendation 14 References 16 Introduction The main purpose of this study is to assess the relationship of Nestle team with the suppliers and the customers of Pakistan. The study has focussed on the various stages of relationship development between the suppliers, customers and the Nestle, Boost. One of the main objectives of the study would be to focus on the various models that would help in successful establishment of the relationship. However, the researcher of the study could not find the exact statistical data regarding the consumption of beverage in Pakistan. There were no other limitations in conducting the study. The study has laid emphasis on the distribution services of the Pakistan Beverage Ltd of Karachi department. Relationship Development Market Segment & Supplier of Nestle in Pakistan The stiff competition in the marketplace has compelled the companies to improve their existing business activities and resource allocation to maintain their profitability, increase their market share and sustain their annual turnover. Boost is the chosen nutritional drink for entering into the Pakistan. The target market segment for the Boost would be the children aged between 06 to 12 years, teenagers and the young adults. Market segmentation has been done after evaluation of the beverage market in Pakistan. The beverage market in Pakistan is very established and there has been an increase in the beverage consumption in the people of Pakistan. In the year 2011 the people had spent $1.3 billion on carbonated beverages and later in the year 2012 Coca Cola decided to invest $248 million in Pakistan (Tirmiz, 2012). The soft drink industry in Pakistan has been long associated with sports as it has always been promoted by cricket players. The target market segment has been chosen because of their love for sports and Boost being a sports nutritional drink would appeal to this target customers. The Pakistanis are very particular about food hygiene and cleanliness and had decreased their consumption of bottled water which contained high levels of contamination (BusinessWire, 2012). Since, Nestle is an established brand in Pakistan it is important for the company to select an established supplier who can promote the brand benefits and enhance the brand personality further. The successful corporate resource allocation has become essential in restructuring the business process of the company. The successful resource allocation depends upon the suppliers to a large extent. The selection of the suppliers would be to strengthen the relationship with the management, to enhance the market position, broaden the customer base, market targeting etc. Hence the selected supplier for the Nestle, Boost would be Pakistan Beverages Ltd (PBL). PBL had launched a local beverage known as Pakola which still holds a strong market position in the Pakistani beverages market (KCCI, 2013).They acquired Pepsi franchise and have been very successful in promoting the brand and yielding profits out of it (PBL, 2013). Selection of PBL as Beverage Supplier Supplier segmentation has been done after evaluation of various qualities of the suppliers which include cost, quality, delivery service, technology, responsiveness, product development and communications (Svensson, 2004). The supplier segmentation matrices were used to evaluate the supplier activities of PBL. The results derived from the supplier commitment matrices were as follows: Low Commitment High Commitment Low Actual Commitment Maintain Plan for improvement High Actual Commitment Caution Maintain Low Spend High Spend High Design Input Target for redesign for standardized output Savings through Design Low Design Input Caution Maintain From the above matrices we have observed that PBL does not only have the capability of delivering products at time but also will provide strategic inputs fro product design as per the cultural appeal of the Pakistani consumers. PBL has thorough knowledge about the potential market, consumer preferences, distribution process, retail outlet and technical expertise about the beverage market (PBL, 2013). As mentioned before that the concept of nutritional drink has not been widely accepted in Pakistan hence one of the major tasks of PBL would be to highlight the benefits of sports nutritional drink. The action plan would be not only to strengthen the relationship between the suppliers but to extend the relationship beyond cooperation and allow them to provide strategic inputs about the product development. In this case PBL has the technical expertise and the necessary manufacturing layout for the product manufacturing and distribution. Presently, PBL has 4 state of the art bottling lines and 1 canning line. The company has strong association with brands like Pepsi, Miranda, 7up, Mountain Dew and Pepsi. Thus, we can observe that PBL is a trusted and established supplier. Methods of Relationship Development A successful business to business relationship (B2B) between the suppliers and the management leads to superior performance by the company. The prerequisite for the creation of superior customer value is the supplier’s long term survival and success (Liu, Su and Song, 2012). Various theorists have proposed that the focus on buyer supplier relation will require investigation of the relationship value. Relationship value has gained significance and it has been observed that suppliers reflect the relationship value either through their behaviour, quality of service and utility of the product/service. Enhancement of business relationship with PBL would require the implementation of relation development process which would improve the cooperation and quality of relationship between the management of Nestle and PBL. Awareness: In this phase the suppliers and the management recognize each other as viable business partners. The parties cooperate with each other to demonstrate their work capabilities through signalling or promotion. There is no interaction between both the parties (Rogers and Peppers, 2010). Exploration: This phase is also known as testing period where the member engages themselves in trial activities. In this phase active communication takes place where important issues like goal, wants, compatibility etc are discussed. Lack of willingness to demonstrate the commitment can lead to the termination of relationship development process. Demonstration of commitment will help in accomplishment of the goals and objectives jointly (Rogers and Peppers, 2010). Expansion: The positive outcome in the previous phase will determine the success and viability of the relationships between suppliers and the management and help in advancement towards the next phase. In this phase both the parties receive relationship benefits and are high interdependent on risk taking (Rogers and Peppers, 2010). Commitment: In this phase both the parties are comfortable with each other and have already achieved a high level of value. The comfort level of both the parties enables them to make a commitment which is deep and significant (Rogers and Peppers, 2010). Dissolution: This leads to the termination and dissolution of the relationship between the suppliers and management. This occurs when one of the parties believes that the cost of continuation of the benefits would outweigh the benefits (Rogers and Peppers, 2010). One of the major reasons behind the selection of this relationship building model would be to maximize the utility from the business relationship between PBL and the Nestle management. The elements in each stage will enhance the relationship between the management of Nestle and PBL. One of the main objectives of PBL would be to deliver Boost timely to the retail outlets because the nutritional drink which has crossed the expiry date would not be suitable for consumption. Customer relationship management lays emphasis on the detection of customer needs and wants, appropriate reaction to these customers and preservation of customer needs (Urbanskiene, Zostautiene and Chreptaviciene, 2008). CRM will focus on the integration of customer needs, wants and the management process (Urbanskiene, Zostautiene and Chreptaviciene, 2008). A well sought out marketing strategy which focuses on selecting the most useful clients at the initial stages and the utilization of systematized media to create loyalty of consumers towards the brand. The selected model not only is one of the most contemporary approaches for identifying the needs and developing successful relationship with the customers. Although, Nestle is an established brand in the market but the nutritional drink has not been launched before in the Pakistan. The potential consumer market is unknown to the marketing department of the Nestle and requires careful determination of the needs and the knowledge of the consumers regarding nutritional drink. This CRM model will focus on the design and distribution of questionnaire to understand the consumer needs and also enhancement of the customer’s knowledge regarding the nutritional drink. Since, religious sentiments of the consumer need not be disturbed an aggressive promotion would be required which would lay emphasis on the product features and benefits. PBL being an established brand will provide thorough product knowledge to the owners of the retail outlets who can provide demonstration of the benefits of Boost to the consumers. Figure 1: Customer Relationship Model (Source: Urbanskiene, Zostautiene and Chreptaviciene, 2008). Nestle can also focus on the four implementation relationship model which focuses on four elements like identity differentiate, Interact and Customize. Identity focuses on identification and assessing the target customers (Rogers and Peppers, 2010). Differentiate would focus on categorization of different types of customers like individual customers, business enterprises etc or market segmentation on the basis of age, sex, gender etc would also be suitable (Dibb, 1998). Interaction phase is very crucial and needs to be cautiously planned and can be done either by distribution of questionnaire, conducting of interview etc. This phase is done to understand the customer needs, wants and psychology. Customization would require moulding the company marketing strategy or a process as per the requirement and preference of the customers. The above mentioned models would help in the establishment of a successful relationship with the customers and business partners (Rogers and Peppers, 2010). Benefits to Nestle from PBL perspective With the success of marketing of carbonated drinks PBL has created goodwill for itself in Pakistan. PBL has an efficient distribution network and also the proper technical expertise to monitor the products (PBL, 2013).PBL manufactures and supplies its own plain and flavoured milk brand in Tetra Pak at its own manufacturing plant. One of the major reasons for the selection of the PBL is their thorough knowledge in the delivery of packaged milk products. Since, Boost would be the first powdered milk product that would be distributed by PBL a workshop focusing of the product ingredients, benefits and price will be provided by the Nestle team. Boost would be available in sachet and in 250 gram cartons which does not take excessive factory space and overhead costs. Distribution of sachet and boxes of Boost by PBL will lead to reduction in transportation and inventory costs. This is because sachets and cartons do not require refrigerated trucks for transport to supermarkets or retail outlets. PBL charges high price for delivery of products in Tetra Pak hence Nestle will not plan to sell Boost flavoured milk in Tetra Pak form. The sachet and cartons of Boost would be sealed by PBL itself because of their efficient technical expertise and it would also help in monitoring the product. PBL has an advanced bar coding and scanning machine which is the prerequisite for maintaining accurate data and minimization of the risk (CCFNRC, 2012). Moreover, PBL staff encourages product and process training by the company which can enhance their knowledge which reflects that the suppliers are ready for cooperation. Nestle has been providing payments to its suppliers through fast payment of invoices (Siemens, 2002) PBL accepts payment through invoices because of it helps in facilitating fast credit decisions. Effects of Supply Chain Crisis A potential client has made a bulk order of $500000 of powered boost. The client has several cafe outlets in Pakistan and is very popular among the youth, teenagers, children and adults. The client has ordered powdered chocolate from Nestle as result of the goodwill of the brand. The cafe shop would be a potential client for Nestle because of their regularity of demand of chocolate powder and association with a reputed brand would enable to penetrate into the market easily. The client has made a bulk order from Nestle for the first time and this would be one of the first crucial orders for Nestle. Nestle had conducted a meeting with PBL to discuss the distribution mode, time of delivery and process of the order to the client. However, even after the detailed discussion PBL had failed in delivering the bulk order to the client in time. This was a major service failure from the supplier’s perspective and required immediate service recovery. The situation worsened because the PBL admitted that there would not be able to provide an immediate service recovery due to workers strike at the factory. This would not only interrupt the operations within Pakistan but would also have a negative impact on the image of the brand. The crisis would also include financial loss that would include warehousing and distribution costs. The problem has occurred because Nestle has subscribed the single sourcing supplier model where the company chooses a single supplier on contacting basis and relies heavily on the supplier to carry out all the activities (Ford, Maughan and Stevenson, 2012). Apart from financial and reputational loss Nestle would also lose its opportunity of setting a strong footing in the beverage market of Pakistan. Crisis Response Management Nestle provides a substantial amount of fee to PBL for the convenience of arrangement of all the services. Presently, Nestle would not be paying the fee to PBL for the inconvenience caused to the customer and Nestle. However, since the arrangement of another supplier would involve supplier costs and the goods stored in the factory of PBL would be regarded as defective products as they have higher chances of crossing the expiry date. Firstly, the management of Nestle should be apologetic to the cafe outlet owner which would help in brand restoration of the company. Brand restoration is essential to sustain the image of the company and help in enhancement of the brand personality. Secondly, Nestle should collaborate with Gourmet Pakistan Food (GPF); GPF is also an established supplier in Pakistan which would help in managing the crisis for the current situation. Nestle always arranges for excessive products which are kept for stock purposes. A meeting would be arranged by Nestle with the supplier head of GPF and details like stock delivery timing, route, destination etc would be discussed. The key responsibilities would be discussed and would be delegated accordingly. After delivery of the food product to the required client Nestle should ensure that the product has been delivered timely. Nestle should also offer discounts to the cafe outlet owner so that the relationship between the two does not get damaged. PBL would be also obliged to provide the finance for the loss incurred by Nestle. Money received from PBL would be paid to the GPF for delivering the products on time. The cafe parlour owner is not only a potential client for Nestle but a relevant source of penetration into the market. The cafe parlour has significant number of outlets in Karachi and if relationship between both the parties is not damaged then Nestle would be solely responsible for distribution of chocolate powder in all the cafe outlets. Rationale for Crisis Management One of the major reasons behind the selection of GPF to distribute the powdered chocolate to the potential client during the crisis is because they are also one of the established beverage suppliers in the market. GPF has the required technical and managerial expertise to handle the crisis maturely (Gourmet, 2013). GPF manufactures and distributes powdered milk to various retail outlets and supermarkets of Karachi (Gourmet, 2013). GPF also has a strong distribution network and has also distributed food products to the cafe outlet earlier. A contract/ agreement between the GPF and the management of Nestle which would lay emphasis on the compensation required for the damage caused or non delivery of products. Conclusions & Recommendation Although Nestle is an established brand it still faces challenges in entering into a new market. One of the major challenges faced by the Nestle in entering the Pakistan market would be cultural identity, market potential of beverages, relationship development with suppliers and customers. This would require proper scrutiny of the market and implementation of successful B2B and CRM models to enhance the supplier and consumer relationship. However, we have observed that implementation and execution of a specific model would not improve the business process or improve the B2B relationship but a careful evaluation of all the supply chain models would facilitate smooth relationship between the business partners and customers. It is observed that PBL is an established supplier in Pakistan who is aware of the potential market and the requirements of the retail outlets and supermarkets. Hence, Nestle should adopt the multi sourcing model which requires the company to develop relationship with multiple suppliers on a contracting basis (Ford, Maughan and Stevenson, 2012). This contract would allow the company to market the test projects. Since there is stiff competition among the suppliers there is a sense of efficiency among the suppliers (Ford, Maughan and Stevenson, 2012).Nestle needs to identify the other established and reputed beverage suppliers of Pakistan (BASF, 2013). For example Gourmet Pakistan Foods (GPF) is a leading manufacturer and supplier of beverages and dairy products. Nestle should focus on developing relation with the GPF to set a strong footing in the beverages market. We have observed that GPF had helped Nestle in managing the crisis by delivering the bulk order of powdered chocolate to the cafe outlet. However, Nestle should develop contingency plans which would help Nestle during emergency crisis. It would focus on analyzing the stock requirement of the company through Economic Order Quantity model and keeping a substantial amount of stock in advance for emergency purposes (VanVactor, 2011). However, Nestle should not be abiding by a singular approach and follow multiple approaches which can act as a remedy. Thus we can observe that Pakistan is a potential market for Boost and would yield huge amount of profit if marketed properly. The successful cooperation between the suppliers and Nestle would decide the success and profitability of the Boost. References BASF, 2013. Beverages. [online] Available at: < http://www.newtrition.basf.com/web/global/newtrition/en_GB/market_segments/index > [Accessed 25 May 2013]. BusinessWire, 2012. Bottled Water Consumption. [online] Available at: [Accessed 25 May 2013]. CCFNRC, 2012. Managing crisis: Risk management and crisis response planning [pdf] Available at: < http://archive.acf.hhs.gov/programs/ocs/ccf/ccf_resources/managing_crisis.pdf > [Accessed 25 May 2013]. Dibb, S., 1998. Market segmentation: Strategies for success. Marketing Intelligence & Planning, 16(7), p.245-256. Ford, C., Maughan, A. and Stevenson, S., 2012. 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