Management of Customer Relationships - Case Study Example

THE CONCEPT OF DERIVED DEMAND Name Course Tutor Date Executive Summary Derived demand is applies in economics and entails the demand of one good or service that results from demand for another. This takes place if the first good or service is a part of production of the second good or service. For instance, the demand for cars results in the derived demand for petroleum, since cars use petroleum to move. Another example of derived demand is the demand for coal. To get coal it must be mined, therefore demand for coal increases the demand for mining. Coal is a product of a process that must have mining. The derived demand is a concept that applies to consumers as well as producers. Companies have a derived demand for workers, however, what is on demand are their skills and knowledge that form part of the production chain. This paper analyses the application of the concepts of derived demand in B2B marketing. To get the right concepts in this area, Polycore Composites Pty Ltd is analysed. The company’s current market segmentation opportunities are evaluated and its derived demand is evaluated. Table of Contents Table of Contents 3 Introduction 4 Drivers of demand for Polycore 4 Market segmentation 8 The quality and brand-based segment 8 The service-focused segment 9 The partnership-seeking division 9 Marketing channels 9 Conclusion 10 References 12 Introduction Polycore Composites Pty Limited is a company that manufactures and distributes the biggest variety of honeycomb core worldwide. The company is located along 11 Calendula Court Regency Downs, Brisbane City North in Australia. The company trades on the market as Polycore. It was established in two thousand and five and deals in the businesses that entail exporting, wholesaling and distribution. The company also manufactures and distributes the honeycomb cored panel products that are present in the world market today. Some of the company’s clients range from large marine manufacturing companies to small homebuilders. The company also has a new range of products that include housing and decorative panels that are light and waterproof (Bingham & Knowles 2008). The products are offered in exotic and laminate timber finish. In addition to the new products, other existing products are fireproof honeycomb panels, composite convention honeycomb panels, caravan and RV large fibreglass honeycomb panels. Others include marine status structural honeycombs, fibreglass cheap furniture honeycomb panels and wood-laminated and fibreglass waterproof honeycomb panels. Polycore is also involved in servicing construction industries, marine companies that deal with transport and RV and leisure markets. They supply to these companies the same products outlined above. Drivers of demand for Polycore Eight years since the company was started, Polycore has gradually emerged to cut its own niche in the industry as it has applied divergent marketing strategies that are unique and specific markets. The company products are attract customers because they are marketed in a distinct way. The approach meets the needs of other businesses since the company is involved in a business-to-business type trading. The company however, understands that the consumers who use the products from companies that Polycore serves drive demand. Technically, demand for Polycore products are driven by the consumers that are indirectly served by Polycore (Donaldson and O'Toole 2007). Several factors drive the demand for Polycore products and the marketing department for the company understands them. The company has a strategic decision making unit. The unit is complex as responsible managers and departments are specialised. The junior officers have their work outline cut out. They are in charge of materials and supplies that have low risk and low value. When the company is in the process of acquiring new materials that are very important to the operations of the business then, a big team comprising of representatives from almost all the departments are involved. They also take a long time to make decisions because loses that result from such an exercise can deal the Polycore are big financial blow. This team includes experts some who are outsourced. They come to give specialised opinion and then leave the team once they accomplish their role. The decision-making unit for Polycore can be said to be ephemeral. This dynamism has had positive impact to the demand for Polycore products. When the company was started, its market was amorphous and kept on changing. This meant that their first consumers had different interests and motivations. The team that handled large supplies and products could easily work well because of the different people who had different abilities. The junior that handled low risk and low value deals were in the best place to carry out such responsibilities because they had a one-on-one contact with both the clients and suppliers. At this point, it should be noted that the business levels for Polycore are export, wholesale and distribution. A case in point would be analysing the company’s purchase processes. The company has subdivided these processes into four different categories. They are low risk, low value, high and high value. The junior officers that include supervisors and team leaders carry out the low risk and low value purchases (Bruhn 2003). Most of these processes are under distribution. They are the least and clients and suppliers who have low volumes. Such customers can rarely be differentiated from consumers. Their transactions may not involve more than one employee. The decision is certain to be accurate and the transaction entails low financial risk. The knowledge used in making decisions is also very simple. The other two groups that include low-value, high-risk and low-risk-high value processes often consist of a mixture of technical, purchasing, specialists and purchasers. Through this system, the company cuts the prices in scenario two without compromising on quality. In the first case, Polycore puts the risk in the product and not in the price, as is the case in scene two. Purchasers are the experts in areas where the risk is in the price and not the product and the legal experts would be the specialist where the company puts the risk in the product and not the price. Polycore involves specialists only in the high-value, high-risk transactions. This is when the team involved is made of professionals. The company has segmented its market, which is global based on such factors. There are company experts who handle clients with diverse knowledge on the products. They are assigned to selected clients. These employees have all-round knowledge including technology. During the decision-making process, various factors are combined. They include production, finance, and supply among others. The difference between business-to-business buyers and consumer buyers is that the business-to-business buyers are more rational. This has become one of the drivers of demand for Polycore products and services. Polycore understands that the consumer buyers are more emotional as compared to their Business counterparts. The company uses this idea to price its products (Brennan, Canning and McDowell 2011). The business-to-business buyer is more knowledgeable. He buys with the aim of making profit from what he has purchased. This makes him more accountable in all his dealings. The consumer buyers on the other hand have less knowledge on the items they want to purchase, this makes them vulnerable and easy to manipulate. The business-to-business buyers highly value the return on investment. They come to the market with predetermined minds but are prepared to make comparison with respect to the value derived. Polycore utilises this knowledge to design and produce goods and services that are tailor made. They also price the goods accordingly and make sure that their goods are delivered on time. This has built trust among the clients. The company also ensures that in addition to delivering the goods on time, Polycore reduces the damages and assures the clients that the goods are safe and secure. Polycore deals with these among its clients as the only emotional elements. To take care of these emotional factors, the company has invested many resources to make sure that clients do not risk their reputation because of the company supplying products that are not steadfast (Dwyer and Tanner 2008). The company brand is undisputed despite the fact the company has operated for eight years only. Polycore products are trusted globally respected because of their durability. Various companies have relied upon the maintenance services offered by the company across the world. This was because of the studies commissioned by Polycore to study the market no wonder it has become one of the drivers of its demands. Polycore Composites Pty Limited manufactures and distributes various complex goods in addition to carrying out maintenance services to huge marine transport companies. This is one of the strengths of the company. Trust created in one product can be transferred onto the other (Little and Marandi 2003). The company has used this to its advantage as it is in a position to introduce new products on the existing markets. The company get this to an easy process because of the goodwill that it already enjoys. Experts handle the varieties of the products manufactured by the company and experts handle the logistical engagements. They help in making sure that the products and services are of the highest quality. They add the particular requirements that need to be done by experts. The Polycore products are refined, with the technical aspects fully installed. The business-to-business buyers are always very sensitive on these factors. The specialists combine various items that are generally suitable to a specific market. The company officials responsible for different products and services have knowledge and skills in their respective areas of duty. The company sales team is highly professional and experienced. The success enjoyed by Polycore largely depends on this team of few employees but able team. The other driving factor in the company is its application of the Pareto Principle. Polycore has few selected clients in Russia, North America, Europe and the United States who are always on their sales ledger and are the lifeline of the company (Vitale and Giglierano 2010)Though they are few, the volume of purchases and the Polycore’s rate of stock turnover on the good sold to them help to maintain the company’s accounts. When profits are calculated based on the zones, the few selected markets present the lion’s share among the contributions. These zones have categorised by Polycore as the heavy spenders every sales period on the company’s scale. This is the team that whose products are ranked as high-value, high-risk. They are sensitive customers and as explained earlier the team of experts handles their transactions. The amount products shipped to the heavy spenders hugely differs from the total amounts that are sent to the light buyers. Polycore has a structured up to date system of managing customer relationships that makes it easy to undertake personalised customer service. All people involved in decision-making process use this system to study the behavioural trends of various customers by tracking the history of transactions. The company has developed efficiency by having the accounts management team that is proactive and responsive. This has been taken well by customers and the implication has been that, the company rarely loses customers (Woodside 2010). This has enabled Polycore to concentrate on looking for new markets as it already a strong grip on the existing customers. Polycore Composites Pty Limited has a highly distinguished personalised customer service. The company’s junior employees who handle most of the products under distribution are very thorough. They know the company clients on a one-on-one basis and this makes the customers to feel at ease when dealing with the company. This system has been received well in their markets that include the Asian region, China, Africa and Russia. Market segmentation Polycore Composites Pty Limited is a pure business-to-business company and therefore bases its market segmentation on two aspects. The first is its process of segmentation is based on few behavioural trends and secondly based on the needs. This is because the company does not sell its products to consumers but to other businesses (Bruhn 2003). Therefore, as much as it operates across the globe, it does not handle the same number of customer that business to consumer companies handle. The company has divided its market into four segments. The other reason is that most of the company clients are rational. The company notes that it does not serve consumers but other business companies. Price segment This is the smallest segment of all the Polycore customers. Most of these clients are found in the regions that the company rates as the emerging markets. They include Africa, Russia, and specific parts of Asian-Pacific. The business is these regions are rather small and volumes of sales are low. However, this does not mean that businesses in these zones are not high-risk, high-value (Fill and Fill 2005). It only means that the markets are still operating in small volumes and they are not highly differentiated. The working margins are low. They are strategic to the company because the company has labelled them the emerging markets. This means that Polycore believes that they will grow gradually to strong business focal points. Other companies would easily rank them as having very low strategic importance. Polycore understands that these zones have to be nurtured to grow. This is clear in the sense that the company has grown to a market leader in the industry eight years after it was established. The quality and brand-based segment These are company markets in Australia, Europe, North, South and the United States. These customers have strong interests in the quality and do not use the price as the driving factor of their demand (Little and Marandi 2003). The customers are large companies and their volumes of sales are huge. Though their number could be small, they value return on investment. They are the customers listed above as the lifeline of the company. The service-focused segment This is the most complicated of all the customers. They have several issues that drive their demand. The customers place emphasis on the quality of products, variety, promptness in deliver and how they treated after purchasing that is the after sale services (Ellis 2011). They are spread across the market but are mainly found in the large markets. The partnership-seeking division The growth of the Polycore has seen the emergence of this new type of market segment. It is surprising that Polycore being a young company would attract clients who are interested in seeking partnerships (Ford, Berthon and Brown 2002). These companies aim at seeking reliability and depend on their trusted suppliers to take up the role. They are large companies that trade in large volumes of goods. Marketing channels Polycore Composites Pty Limited is a business-to-business company that deals in export, wholesale and distribution of goods and services. The business is complex bearing in mind the fact that it operates globally. The company has accelerated innovations in marketing alternatives and it is now faster making it very difficult for competitors. One of the methods the company is using includes the direct mail services (Block and Block 2005). This is because the company considers this more personal appropriate. It is part of the company’s customer service management. Most of the companies they deal with also deal with thousands of clients making emails less suitable. They are also better means of keeping important documents since direct mails can be kept for future reference. The company also takes marketing in a viral manner. Marketers have called the system atomic marketing. They do not only target their customers because they may not be aware of the potential customers (Ford, Berthon and Brown 2002). They package their adverts to address specific behaviours and offers information that is relevant to potential clients. The company’s marketing strategies are very dynamic. They go out to the field and are not static. Applying mobile marketing strategies is crucial because it takes the company down to meet the clients and potential ones. This helps the company to understand the customer preferences and then design the products and services that are tailor made. Polycore has gone back to own marketing teleprospecting. This makes the company’s marketing team to use the fundamental elements of marketing. The use of the social media by the Polycore as a marketing channel undergoes critical evaluation to confirm the return on investment that results from the same. Conclusion Polycore Composites Pty Limited strategically applies the concepts of derived demand to meet its goals. The company trades globally and makes effort to penetrate into emerging markets such as China, Russia and Africa based on the way it packages its products. The company implores excellent customer management systems that personalise the way clients are handled and this is one of the drivers for demand of its products. This strategy has developed trust among the clients and this makes the company’s new products to be easily accepted in the existing markets. This demand for the products and services includes other factors in addition to standardised customer relations. Polycore has established four basic methods of segmenting its market. The company segments its market based on the price, quality, partnership and service. Segmentation is done bearing in mind that their clients are sensitive because they have diverse knowledge. They value return on investment and therefore expect all their transactions to be transparent because they also aim at making profits. Polycore also strategically chooses its marketing channels applying unique and modern methods that make the customers feel attached. Such an excellent phenomenon has attracted industry leaders into admiring its management philosophy. References Bingham, F. & Knowles, P. (2008). Business marketing. New York: McGraw-Hill. Block. M. & Block, T. (2005). Business-to-business marketing. Ohio: Thomson Pub. Brennan, R., Canning, L. & McDowell, R. (2011). Business-to business marketing. London: Sage. Bruhn, M. (2003). Relationship marketing: Management of customer relationships. London: Prentice Hall. 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Organizational culture, business-to-business relationships, and inter- firm networks. Bingley: Emerald. Read More