Customer Relationship Management in the Business-to-Business Market in Brazil - Assignment Example

 Customer relationship management in the business-to-business market Customer relationship management in the business-to-business market Businesses operating in the business-to-business market are oftentimes more concerned with tangibles of the relationship, including compliance to specifications, supply dependability, and issues of pricing and finance. These dynamics make up the foundation of quality in the B2B environment and, if included in marketing strategy, underpin the establishment of trust between two business partners. Business-to-business marketing is fundamentally different than B2C marketing, whereby social and psychological elements are often incorporated into marketing strategy in order to gain long-run brand loyalty and satisfy the complex characteristics of consumer needs. Research has identified that development of trust in B2B marketing is imperative, especially when there are cultural or geographical disparity between both partners (Moment 2001; Burkert 1994). Trust is the most critical value-added constituent in this business relationship. Companies that engage in B2B marketing, especially when working with international partners, must focus on establishing conviction and reliance in order to progress forward and experience the long-run synergies provided by successful partnership development. This report focuses on business-to-business marketing in Brazil, a country in which there are established hierarchies of business relationship development that actually do take into consideration the dynamics of interpersonal relationship development in order to build the necessary trust between partners. The report also focuses on the tangibles of customer relationship with Pfizer, an international pharmaceutical company operating in B2B environments. Pfizer believes that value-added activities are critical to establishing an appropriate customer relationship management system to ensure long-run sustainability of the marketing relationship. The majority of these activities include reliance on technology to support interactivity between trading partners. Vendors that have been pre-approved are granted access to Pfizer’s technology systems, allowing them to track their own invoice movements and also submit orders through Pfizer’s e-business website (Pfizer 2013). This not only adds convenience, but sets the foundation for the vital trust required. According to Starnes, Truhon and McCarthy (2010) trust is only established over time and building this relationship is a cyclical process of reciprocal acts. Pfizer takes a proactive stance by providing the foundation of trust, allowing vendors and other supply/ordering partners to gain access to important information technologies. Because Pfizer operates in an international environment in which geographical distance is a factor in determining the depth and quality of communications, being the first to extend trust in this fashion to a variety of important vendors starts the cycle of reciprocal trust-building that can only be developable over time. What this creates, as aligned with appropriate models of customer relationship management, is a technical dependency that is established through reliance in partner products and customer support tools. Geographical distances forbid routine interactivity with a variety of international customers and vendors, therefore Pfizer must establish a methodology by which to satisfy customers using virtual self-service technology tools. Most organisations forbid access to internal technological systems, however without these self-service access tools, Pfizer would be unable to establish regular communications with customers and vendors without devoting intensive labour toward international travel. Establishing a pre-approval process by which customers and vendors are allowed password-generated access to Pfizer’s systems illustrates to trading partners which customers are considered the most valuable, giving the impression of trust and conviction that helps to build sustainability in the B2B relationship. Slovic (1997) is adamant that trust is much easier to destroy than to create. The establishment of inter-organisational trust, the bi-directional relationship between two or more organisations in the B2B environment, is highly fragile and can falter from such issues as lack of security in technology transactions or lack of availability of appropriate technical support when coerced to utilise a partner’s technological systems. It is so much more than just the sales relationship that matters when attempting to instil trust between trading partners, it is about ensuring that data security is managed appropriately and that there are tangible systems developed to ensure consistency, reliability, and even benevolence associated with technologically-based transactions. Pfizer excels in extending faith and confidence in its trading partners and also securing the integrity of virtual communications and transactions which only serves to further supplement the quality and longevity of the B2B relationship. Pfizer maintains many advantages when it comes to establishing integrity of the B2B relationship. Because Pfizer operates in an oligopoly, a market structure characterised by only a handful of large suppliers of product (Boyes and Melvin 2005), buyers maintain very high switching costs in the event that there is a breakdown of trust or perceived relationship integrity. When a business like Pfizer maintains this type of advantage, it is in a position to leverage its supplier power and simply threaten to locate new customer agreements in the event that a buyer attempts to begin dictating terms, such as pricing or distribution strategy. Pfizer does not have to establish virtual access to its customers and vendors as there is little opportunity for defection to other pharmaceutical companies and, therefore, there is virtually no risk to Pfizer by removing this technological convenience and keeping systems all internalised. If the customer is dissatisfied with Pfizer’s total B2B performance, Pfizer will lose practically no capital in locating an alternative customer segment to offset any losses from the disgruntled customer. This is why Pfizer is both an interesting case study for examination of its B2B practices as, despite having such high supplier power in its international markets, Pfizer continues to elicit trust in it business model toward many different trading partners even when costs of supporting multiple, virtual transactions are significant and certainly not a requirement in order for Pfizer to continue to experience high profitability and market success. Pfizer is not the only international company that has developed trust in business transactions. MasterCard, a multi-national company offering a variety of credit and financial services to broad business markets, found considerable success operating internationally by incorporating cultural dimensions into its B2B strategies. Now, it should be recognised that most models of B2B best practice tend to negate sociological and psychological factors from strategy due to the high dependency in B2B on more technical and price-related factors. Mastercard took a unique approach to customer relationship management, establishing its Supplier Diversity Program in Brazil, a program that applauds small businesses owned by women, veterans and minority groups to have an equal opportunity to participate in Mastercard’s procurement processes. Even though these small businesses represent only a small fraction of total buyers for Mastercard, therefore not representing highly profitable markets, the business labelled each small business owner as a Tier 2 prime supplier (Mastercard 2013). This is where the psycho-social connections between trading partners comes into play. Even though a rational mind would recognise that Mastercard’s incredible cash position and supplier power are intense and, like Pfizer, it poses little financial risk to the business model in the event of supplier or customer defection. In Brazil, as one relevant example, Mastercard stopped telling customers about its priceless values and, instead, began asking customers what they individually considered priceless (Galloni 2009). Brazil is a highly collectivist country, a social condition in which group membership and adherence to group-oriented principles is a primary social condition. Before a business deal closes in Brazil, there is an expectation from trading partners that a social rapport be established before any element of trust is allowed to be introduced by Brazilian business partners (Wuhan 1999). The depth of communications between trading partners is considered to be context-rich in Brazil, where trading partners will often speak profusely and expect business dealings to occur within a group dynamic before loyalty is even considered (Hofstede 2012). This social condition makes it difficult to conduct business with more professionalism in the event that relationship dynamics were to be removed from the B2B strategy. Further complicating the business-to-business environment in Brazil is the level of power distance that is considered acceptable between trading partners with different market power levels. It was previously established that Mastercard maintains considerable leverage in its sales markets and can, therefore, be less responsive to trading partner inquiries disputing the integrity or competence of Mastercard. In Brazil, inequality is often tolerated when it is understood that one entity maintains much more authority or power than the trading partner (Leng and Botelho 2010; Kelly 2009). At the same time, scoring high on the power distance template generally makes Brazilian citizens have a higher need for power and status. This is where Mastercard excels, by understanding the social condition and the need to proverbially save face when in a position with much less market authority and power. Mastercard works to establish relationships according to the social order in the country, but also develops appropriate programs, such as the aforementioned diversity program, that gives buyers the perception of authority even when, in reality, very little exists. This should be considered a best practice model for operating in international collectivist nations where foregoing manipulation of market power becomes a model of customer relationship management utilising psychological and sociological prowess. Even though customers in Brazil would be considered lost-for-good customers due to the high switching costs that are associated with defecting from Mastercard, Mastercard does not impose penalties by simply threatening to locate new customer bases or locate other supplier networks. Copacino (1996) iterates that early involvement with suppliers throughout the product development process to take full advantage of their expertise and competence is a method of achieving B2B competitive advantage. Mastercard’s product quality and integrity, through years of brand-building and experience in many business and consumer markets, tends to speak for itself and therefore the company does not have to consider the many tangibles of product as a means of fostering trust. Trust, when working with international trading partners such as companies in Brazil, occurs by appealing to the sociological factors that drive the social condition and ensuring compliance to their many rules even if they conflict in the Western model of business that tends to forego intensive relationship development. This is why Mastercard and its presence in Brazil is an interesting topic of study when considering the impact and structure of the B2B relationship. Even though Mastercard could easily forego these labour-intensive value-added activities such as the diversity program for small business buyers and suppliers, it chooses to adapt a strong focus on customer relationship management as a key competitive tool. However, it should also be recognised that there are many different threats of substitutes for Mastercard, such as financial services provided by its main competitor Visa. Thus, it would not make rational sense for Mastercard to completely negate cultural needs of its many suppliers and buyers as business customers could easily defect to localised financial service companies or international businesses that would be more willing to establish preliminary relationships before discussing the tangibles of business partner strategies. Both Pfizer and Mastercard, operating in international markets, represent unique approaches to the business-to-business marketing strategy with each taking different approaches that include tangibles of product and service as well as intangibles of relationship development and customer management. Building loyal customers is a strategic advantage for today’s businesses that sell or supply to other organisations (Gounaris and Vlasis 2004). Under most B2B models, the variety of promotions and integrated communications utilised for business trading partners is radically different from the consumerist perspective that often seeks psychographically-oriented strategies to achieve brand connections. Pfizer and Mastercard are two examples of where proactive strategies to retain loyal customers and where negating considerable market power in exchange for quality and depth of relationship have brought both international companies considerable market success in Brazil and other international markets. This seems to be the nature of customer relationship management for business-to-business dealings: Work diligently to establish appropriate trust (such as Pfizer’s clever utilisation of technology support tools as a marketing success dynamic) and cater to cultural characteristics in international markets vital to establishing longevity in trading partnerships. References Boyes, W. and Melvin, M. (2005). Economics, 5th ed. 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