Business-to-Business Marketing Management - Case Study Example

Student name Course name Institution Date of submission Student Number Table of Contents Table of Contents 2 Abstract 3 Introduction 4 Theory and marketing concept development 4 The concept of networking in B2B marketing 4 Value creations in B2B marketing 5 Customer relationship management 8 Development of Relationship related theories 9 How marketing managers can leverage the theory and concepts 11 Personal Reflection 13 Conclusion 15 References 16 Abstract Business-to-business (B2B) denotes the business transactions between businesses rather than businesses and consumers. B2B marketing places emphasis on creation of value to the customers and as a consequence, creation of financial value to the company rather than just selling the products. As established, effective business clients often depends on methods that seek to overcome the tendency for opportunism. An underlying implication is to view the customer relationship management as a means to maximising the increased value of customer portfolio. To a considerable degree, the business clients will often expect CRM to improve the role of marketing, and consequently, improve the visibility of marketing within an organisation's top management. Since business clients always look to obtain significant value from the supplier’s marketing processes and activities, the role of marketing managing in creating value is critical. Taking these into perspective, managers will need to deliver value to customers by embedding value in the idea, services, information, goods, or all other types of solutions provided to the customer. Marketing managers should also search for exchange partners their companies can work with to make successful transactions. They should also handle the relative power dependence, since dependence is a direct implication of exchange. They also need to manage customer relationships. Critically, the fundamental role of managing the relationships is to control economic exchange. Introduction Business-to-business (B2B) refers to commercial transactions or exchange among business. Examples include a supplier and a business client, or a manufacturer to a wholesaler (Glynn 2009). A practical example includes the case of Apple and Samsung. The B2B relationship between Apple and Samsung puts the latter in a position of supplying a significant proportion of the raw materials, such as application-specific integrated circuits (ASICs), optical drives, liquid crystal displays (LCDs) to Apple. Apple uses the raw materials to make tablet computers and smartphones for its sale. Currently, Apple is Samsung’s most faithful and largest customer, while Samsung is Apple’s biggest suppliers. This is essentially a part of Samsung and Apple’s business-to-business model (Partner Centre 2012). This paper presents a critical review of the development of marketing theory and concepts within the context of business-to-business marketing. It further explores how marketing managers can leverage the theory and concepts. Lastly, a personal reflection on perspectives regarding marketing and marketing managers within is presented. Theory and marketing concept development The concept of networking in B2B marketing Current studies indicate that the field of B2B marketing is rapidly changing due to advanced technology, greater number of distributions channels and the increased expectation of value creation between the buyer and the seller in B2B marketing (Woodward Fellows 2008; Glynn and Woodside 2012),. According to Glynn and Woodside (2012), B2B marketing is marked by the rapidly changing buyer behaviours and greater prominence of networking and conversations. Regardless of such complexities and constraints, finding, developing and maintaining relationships is at the heart of business marketing. For these reasons, Glynn and Woodside (2012) explain that businesses involved in B2B marketing tend to be centred on two key strategies, creating demand and creating efficient marketing based value addition and networking strategies. To promote demand, Blythe and Zimmerman (2005) suggest that business have to create interrelationships that are of mutual value. In fact, Kleinaltenkamp and Ehret (2006) comments that B2B has achieved largely borrowed concepts from behavioural science and product marketing of business services. Value creations in B2B marketing According to Freytag and Philipsen (2010), one unique feature of developing marketing theory and concept in business-to-business marketing research is that early researchers depended on theory. In which case, the motivation behind business-to-business marketing is that it was based on empirical findings and marketing management challenges, which underscored the value of relationship-based management. Knowledge of these issues enabled some scholars, such as Blythe and Zimmerman (2005) to dispute established transaction-based theories on business-to-business marketing. Current studies are today concentrating on the economic value of business-to-business management. In their review of 'norm based relational behaviours,' Glynn and Woodside (2012) offer an interesting background on how empirical studies have helped develop sound theory. They examined whether MacNeil's theory of relational norms has fundamental structures. Their results show a relatively simple structure inherent in business-to-business relationships that is anchored in value division and value creation (Kleinaltenkam & Ehret 2006). They also attempted to improve theory development by relying on empirical studies, disputing the contradictory statements of market process theory and institutional economics. Their findings show that effective business customers often depend on methods that seek to overcome the tendency for opportunism, as the modern-day institutional economics have revealed. In which case, businesses have to establish symbiotic relationships, where each benefits from their interaction. During the last two decades, forms of economic organisations have changed radically. Of particular interest in business-to-business marketing are the propensity of the companies to disintegrate and outsource, and the emergence of networks of independent yet cooperating companies. This, according to Kleinaltenkamp and Ehret (2006), has been specifically so in some industries, such as the automotive, telecommunications and apparel industry. These industries have some common factors in terms of the tendency to reduce the degree of vertical integration of the total value added, growth of the number of suppliers, as well as the original equipment manufacturers (OEMs). Indeed, when the business clients surrender their bargaining power, the long-term relationships they establish with the suppliers replaces the vertical integration of processes that involve particular transactions since the costs are reduced and better networking relationships are established. An example is the case of General Motors (GM) in 1986 when it hired 3000 purchasing personnel and manufactured around 2000 cars for each buyer, while Toyota had 340 buyers and manufactured around 10,590 cars per buyer, despite the fact that GM had a better vertical integration. Toyota had involved more suppliers in its production process. According to Kleinaltenkamp and Ehret (2006), such a tendency has contributed to the increased volume of business-to-business relationships, as well as changed the manner in which business is conducted between businesses. By reducing the level of vertical integration, the suppliers tend to be more favoured due to their core competencies and tendency to use research and development activities. For instance, in the automobile industry, a significant aspect of business-to-business relationships is the partnership between the supply and automobile maker. Automobile manufacturers, such as Fiat, Ford and Mercedes Benz have resisted the temptation to get into vertical integration, and are working with suppliers openly to integrate them in their manufacturing processes. For instance, Fiat partners with its suppliers in 2000 in long-term relationships and included them in the development process, leading to decreased costs and increased quality due to value added services, such as research into the market by the suppliers (Manna 2008). Hence, Freytag and Philipsen (2010) notes that a challenge between the supplier and business client has been establishing trust. Such a challenging transformation of B2B markets has been approached with a growth of interest in developing relationship-centred concepts. The concepts that networks may force business to use relationship-centred marketing concepts that have become prevalently accepted (Ellis 2010). Indeed, a large number of studies in business-to-business marketing have explored relationship marketing and customer relationship management within the context of business networks (Griniute 2012 Freytag and Philipsen 2010). While it is, an acknowledged theory that networking leads to the development of relationships, to date, what this actually means for developing concepts and business practices still remains unclear. An example of this is, when Kleinaltenkamp and Ehret (2006) reviewed studies on the relationship between computer manufacturing companies and disk-drive manufacturing companies and established that while effective management relationships are healthy for business, such relationships are often destabilized by the rival network structures. In such a situation, the business customers may be forced to end their relationships when suppliers create inflexibilities with relationship-specific investments. Indeed, this led some researchers like Brennan et al (2011) to conclude that a difference exists between a company that is customer-oriented and market-oriented. An additional concern is the existing state of empirical researches on the strategic application of customer relationship management. A basic idea of customer equity is its capacity to share financial and marketing elements of a business since it tends to concentrate on marketing programs and customer cash flows. Customer relationship management Some notable progress in respect to the conceptual development and approaches to relationships based concepts, such as relationship marketing and CRM, have been made (Rai 2012). Still, Brennan et al (2011) expressed doubt that these concepts still fail to live up to the required criteria. An underlying implication is to view the customer relationship management as a means to maximising the increased value of customer portfolio. To a considerable degree, the business expects CRM to improve the role of marketing, and consequently, improve the visibility of marketing within an organisation's top management (Kleinaltenkam & Ehret 2006; Rai 2012). In the case of Samsung and Apple, Samsung’s marketing managers will need to engage Apple’s customers through direct marketing, such as emails, to get their attention (Economist 2011). Still, studies have indicated that the concepts of customer equity are confronted with various challenges due to the constrained financial elements of building customer relationships (Freytag & Philipsen 2010). An example include the process of misinterpreting the value of a customer based on the anticipated cash flows of the relationships since the customers is perceived to be the determinant cause of other types of values, such as reputation, as well as the attractiveness of community. In such a situation, some scholars have saw the need to gain better insight into what should actually be perceived as customer-related network effects (Ellis 2010). In fact, businesses that look to relationship-based B2B concepts to help them in decision-making are usually faced with contradictory concepts, theories and advise (Döscher 2014). Brennan et al (2011) explains that this may be because of the idea that relationship marketing did not develop from an area of interest to a discipline. On the contrary, to be regarded as a discipline, a field of study has to shift beyond just description. For instance, it should provide hypothesis, theory, as well as develop the methodological rigidity of scientific investigation (Döscher 2014). Development of Relationship related theories An early assumption of the B2B concepts, according to Brennan et al (2011), is the notion that for businesses to sustain themselves, they should concentrate on fulfilling needs rather than selling products. For instance, a company in the mining industry, such as Ausdrill, which manufactures drills holes, engages in the business of providing customers mining services. On the other hand, a shipping company, such as ANL engages in the business of providing transportation to customers. This is a key constituent of B2B marketing, taking into perspective that emphasis is on creation of value to the customers and as result, creation of value to the company rather than selling the products. As a result, products usually lead to a contracted description of the relevant market, which causes marketing short-sightedness. This inspired the introduction of augmented product concept, which stresses that customers use their products in the hope of improving their processes rather than products (Kleinaltenkamp & Ehret 2006). To this extent, interacting in the customer relationship allows a company to discover and describe the aspects of their offering that increase value to the customers. For instance, Samsung is allowed to participate in Apple’s production process in order to learn aspects of value that can increased Apple’s value to customers (Economist 2011). A consequence creation of value was the formulation of Bargozzi's theorem of the exchange relation, which states that market transactions occur immediately the customers and the company seek to gain some value when they engage in exchange. An additional stream of conceptual work centred on the issue of how a win-win situation exchange is discovered, set up and understood. The social exchange theory was interested in the customer relationship's social context. Scholars, such as MacNeil (91978) and Arndt (1979) came up with the concept of customer relationship to cultivate the economic exchanges that provided value for customers in addition to the company. In the ultimate, a stream of relationships marketing theory gained interest in studying relationships as the crucial antecedent of creating value (Kleinaltenkamp and Wengler 2007). As a result, investing in relationships is a critical step towards creation of positive exchange, increasing the value for customers, as well as value of profits to the company. For instance, a decisive element of relationships is that through investment in relationships, business get to improve their positions, as well as create favourable market exchange (Griniute 2012). A critical advantage of the B2B relationship is the existence of trust to create forceful market relationships. In most cases, as Manna (2008) clarifies, the supplier may think that when they network with the manufacturer, they benefit from improved coordination of supply and logistics. For instance, Fiat had disputes with its suppliers for malfunction-related costs. Consequently, Fiat made the suppliers responsible while it only serviced the assembly line. Fiat also focused on hi-tech parts and subsystem components. It built a 700,000-square foot assembly plant in Melfi, Italy intended for suppliers who produced critical components for its suppliers who faced difficulty in transporting hi-tech parts and subsystem components to its plant. Fiat managed to save production cost due to increased coordination (Manna 2008). Contractual perspectives have also drawn attention to the scope of business marketing. Theories that rely on transaction cost economics, property rights theories and principal agent theory centred on the costs linked to administering property rights. In this respect, industrial buyer relationships are viewed as a form of industrial system that enables saving of the transaction cost (Brennan et al 2011). A particular issue the theories attempted to address is that of the specific investment, such as industrial customer company that is susceptible to the risks of suffering from a holdup in the form of raising prices while investing in the purchase process of the supplier. An additional approach is the market process theory, which is anchored in the methodological individualism. The approach specifies that the key source of creating value originate from the customer process (Hintze 2015). Hence, value creation does not emanate from identifying elements of resource use that may go unnoticed. In this regard, customer relationships present business with access to customer processes, which enable them to identify and take advantage of profit opportunities, anchored in improving customer processes. Consequently, capital theory, which is a form of market process theory, underscores the strategic importance of customer relationships. The theory suggests that profit dwells on the forms of capital applications that do not reflect on actual prices in the market. How marketing managers can leverage the theory and concepts Since business clients always look to obtain significant value from the supplier’s marketing processes and activities, the role of marketing managers in creating value is critical. B2B marketing brings in the concept of customer value as a key element, apart from management of customer relationships (Brennan et al 2011). Taking this into perspective, managers will need to deliver value to customers by embedding value in the idea, services, information, goods, or all other types of solutions provided to the customer. It points at the deviation from value-in-exchange towards the concept of value being generated by the customer who uses the supplier’s products. Hence, managers should understand that customers do not get the value until they make use of the product. This also means that managers should understand that value is not created in his company’s activities of designing, making, packaging or transporting the services. Rather, it is in the customer’s practices. For instance, Samsung does not just deliver value to Apple by supplying application-specific integrated circuits (ASICs), optical drives, and liquid crystal displays (LCDs). Instead, it supports Apple’s value creation through value generating processes. To ensure this, it offers Apple resources, such as ideas, service recovery, information, handling complaints and innovative use of software and hardware (Partner Centre 2012). Apart from considering the operational ‘technology’ of a customer, marketing managers should consider their customer’s business strategy to gain an insight into the manner in which their prospective customer intend to handle the supply markets. For instance, for companies using product leadership strategy, such as Apple, it would require Samsung’s marketing manager, who is the supplier of LED and LED glasses, to show that Samsung has outstanding creative and technical skills (Economist 2011). Hence, the marketing manager would have to also manage own internal product development process and invite the participation of Apple to witness his company’s capacity to attain a product leadership strategy. At the same time, marketing managers looking to supply to companies with product leadership will need to have first-hand knowledge of the business the customer deals in, the capacity to offer design and product proficiency, as well as satisfactory responsiveness that can shore up the customer’s search for innovation. Marketing managers should also search for exchange partners, their companies can work with to make successful transactions. This perspective is based on the transaction cost theory. To this end, the role of marketing managers is to allocate exchange costs, since all transactions sustain cost, such as initiating transactions to terminating contracts. Indeed, Brennan et al (2011) comment that companies have the task, as required by the transaction cost theory, to identify an exchange partner in addition to a means of working with the identified partner to ensure a cost-efficient transaction. Marketing managers should also handle the relative power dependence, since dependence is a direct implication of exchange. Additionally, the customer may be comparatively more dependent on the supplier since the customer’s business demands certain resource or since only a few suppliers exist (Brennan et al 2011). At the same time, while a marketing manager may have a strong brand position, he may still have to surrender to the demands of their strategic customers, specifically during recession (Glynn 2009). As a result, they need to create relative degrees of dependence to ensure a level of autonomy of their companies. Next, they need to understand the consequences of their interdependence behaviours, such as the likelihood of exercising power. They also need to take consideration of the implications of actions that may alter their degrees of relative dependence (Lilien & Grewa 2012). Marketing managers also need to manage customer relationships. The concept of relationship marketing is a central element in B2B marketing. This includes managing customer relationships, and ranges from creation of a mutual commitment and gaining an insight into the customer to create a win–win situation as a foundation for marketing (Brennan et al 2011). Practical examples may include use of direct mailing and loyalty programmes to manage relationships. Still, the marketing should be careful to ensure that the cost of retaining a customer is not higher than the benefits expected from the customer by pursuing a profitable strategy (Sheth & Sharma 2006). Critically, the fundamental role of managing the relationships is to control economic exchange. An underlying supposition, according to Grönroos (2006), is that an exchange is fundamentally self-centred. He views exchange as a necessity although should be controlled. To this end, the economic value expected in the relationship can be maximized once the two businesses get to cooperate with each other. Hence, marketing managers must capture the customer’s confidence, by showing integrity, trust, and reliability, as well as by building positive expectations (Lilien & Grewa 2012). This is since commitment of the customer will go hand in hand with trust. In this regard, the social-exchange theory contributes significantly to an understanding of such an exchange relationships, as it shows that apart from the economic factors, trust and commitment also moderates the role of power dependency in relationships. Personal Reflection From studying the Marketing Contexts module, I have learnt several ideas and concepts that have changed my perspective of marketing and marketing managers. Indeed, I have gained significant knowledge on what B2B entails, and practical ideas of the roles of the managers, in implementing the theories and concepts of B2B marketing In fact, my current assumption is that the main distinguishing characteristic of a business-to-business market is that the customer is in reality just another business or organization – rather than an end-consumer. Initially, I had a bleak understanding of B2B marketing, as I tended to confuse it with B2C marketing, since in both situations, similar products are bought, which makes it difficult to distinguish between a consumer market and a business market. It is based on this that I can now confidently speak of B2B marketing as a term denoting marketing of products to business organizations. Following this development, it became apparent that in B2B, the customers have a different reason for buying or not preferring a certain brand. Additionally, the customers in B2B seek long-term relationships since another experiment with a different brand has implications on overall business. What I perceived from this is that brand loyalty is critical. Therefore, I assume that the most important features of business-to-business marketing for any marketing manager includes building relationships, necessitating and sustaining candid technical interactions, and lastly demanding commercial negotiations, as well as giving consideration to value adding tasks, such as after-sale services. It is also clear to me that any individual transactions between the businesses are large and extensive and require commitment. At the same time, while getting a contract is difficult, once a relationship is created successfully, a repeat business is ensured when the business’s performance is satisfactory. Therefore, a marketing manager must establish and build a good relationship with the customer. Preferably, the good relationship should be established at all levels of the client, including the management, the leaders, as well as workers since lack of satisfaction at any of these levels can endanger the relationship. In my view, the manager will need to make periodic efforts to interact with the various levels as a significant part of marketing. To this end, I believe that marketing should take a direct form, such as face-to-face marketing. Rather than use of advertising. In fact, the marketing managers should only use advertising as reminder of a network they maintain with business clients. At the same time, I learn that the technical interactions that the marketing managers should make need to fundamentally open and truthful ensure trustworthiness. The reasons for this, in my view, are that the business client may identify flaws or shortcomings in the product. They may not tolerate the awkward features of the products. Having learnt the concepts of building market relationships, I opine that in such a situation, the manager has to discuss the complexities of the product rather than overstate them. The manager should also facilitate an open communication channel to ensure that all business clients’ concerns are addressed in time. At any rate, the relationship has to be two-way. Conclusion B2B marketing places emphasis on creation of value to the customers and a s a consequence, creation of financial value to the company rather than just selling the products. As established, effective business clients often depends on methods that seek to overcome the tendency for opportunism. In which case, businesses have to establish symbiotic relationships, where each benefits from their interaction. Additionally, for businesses to sustain themselves, they should concentrate on fulfilling customers’ needs rather than selling products. An underlying implication is to view the customer relationship management as a means to maximising the increased value of customer portfolio. To a considerable degree, the business clients will often expect CRM to improve the role of marketing, and consequently, improve the visibility of marketing within an organisation's top management. Since business clients always look to obtain significant value from the supplier’s marketing processes and activities, the role of marketing managing in creating value is critical. Taking these into perspective, managers will need to deliver value to customers by embedding value in the idea, services, information, goods, or all other types of solutions provided to the customer. Marketing managers should also search for exchange partners their companies can work with to make successful transactions. They should also handle the relative power dependence, since dependence is a direct implication of exchange. They also need to manage customer relationships. Critically, the fundamental role of managing the relationships is to control economic exchange References Blythe, J & Zimmerman, A 2005, "Business to Business Marketing Management: A Global Perspective," Cengage Learning EMEA, New York Brennan, R, Canning, L & McDowell, R 2011, "Fundamentals of Business-to-Business Marketing," SAGE: New York Döscher, K 2014, "Recovery Management in Business-to-Business Markets: Conceptual Dimensions, Relational Consequences and Financial Contributions," Springer Science & Business Media: New York Economist, The 2011, “Apple and Samsung's symbiotic relationship Slicing an Apple,” viewed 7 April 2015, Ellis, N 2010, "Business to Business Marketing: Relationships, Networks and Strategies," Oxford University Press, London Freytag, P & Philipsen, K 2010, "Challenges in Relationship Marketing," Academica, New York Glynn, M 2009, "Business-to-business Brand Management: Theory, Research and Executive Case Study Exercises," Emerald Group Publishing: New York Glynn, M & Woodside, A 2012, “Business-to-business Marketing Management: Strategies, Cases and Solutions,” Emerald Group Publishing, New York Griniute, I 2012, "Measurement of Marketing Communications Performance: Implications and Theory Building for B2B Organizations," Aarhus University Grönroos, C 2006, "On defining marketing: finding a new roadmap for marketing," Marketing Theory vol 6, pp.395-417 Hintze, S 2015, "Value Chain Marketing: A Marketing Strategy to Overcome Immediate Customer Innovation Resistance," Springer, New York Kleinaltenkamp, M & Ehret, M 2006, "Relationship Theory and Business Markets," Emerald Group Publishing, New York Kleinaltenkamp, M and Ehret, M 2006, "The value added by specific investments: a framework for managing relationships in the context of value networks," Journal of Business and Industrial Marketing, vol 21 no 2, pp.65-71 Kleinaltenkamp, M & Wengler, S 2007, "Key Account Management in Business-to-Business Markets: An Assessment of Its Economic Value," Springer Science & Business Media, New York Lilien, G & Grewal, R 2012, "Handbook on Business to Business Marketing," Edward Elgar Publishing, New York Manna, D 2008, "Just-In-Time: Case Studies Of Supplier Relationships Across Industries," The Journal of Applied Business Research vol 24 no 1, pp.75-83 Partner Centre 2012, Apple (AAPL), viewed 7 April 2015, Rai, A 2012, "Customer Relationship Management: Concepts and Cases," PHI Learning Pvt: Delhi Sheth, J & Sharma, A "The Surplases and shortages in Business-to-Business Marketing Theory and Research," Journal of Business & Industrial Marketing vol 21 no 7, pp.422–427 Woodward Fellows 2008, "Establishing Effective Governance and Collaboration in Asian Operations," Value Networks Series vol 1, pp.1-14 Read More