Sustaining Customer Relationship

1. © Anik Saha
B2B Marketing Session 10
Sustaining Customer Relationship
9th November, 2016
Author: Anik Saha

2. © Anik Saha2
Sustaining customer Relationship
Supplier & Customer having Detailed Understanding of
Requirements & Changing Preferences, Communicate to
each other and Respond to Changes
Fulfil Mutually
agreed upon
requirements
Pursuing continuity
and Growth
Ongoing customer
relationship Mgmt

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Thinking Strategically About Relationship
Consider Industry Bandwidths
Partnering as a Focused Marketing Strategy
• Customer selection, order selection
• Good orders from bad customers
• Bad orders from good customers

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Delivering Superior Value with Relationship-specific Offerings
Construct Relationship specific market offerings
• Market research by supplier to understand industry bandwidth
http://www.slideshare.net/dvrs/chapter10-9201001

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Price Relationship specific market
offerings
Organize to Deliver Relationship-specific Offerings
Sell Relationship specific offerings
Delivering Superior Value with Relationship-specific Offerings
Solve common Relationship-offering
implementation Problems
• Sum of price increments for set of unbundled services >
price premium granted for collaborative offering
• While unbundling, lower price less than current solution
• Collaboration helps optimize requirements to reduce price
• Org. structure to develop different level of
relationships
• Sales, presales, inside sales, app
engineers, quality engrs, service personnel
• Transactional, consultative, enterprise selling
• Strategic selling
• Identify, recruit, plan, leverage partners and its
resources together for a common customer
• Opportunistic customers waiting for programs
to reduce price; doesn’t recognize value
• Suppliers needs to be assertive
• Customer asks for unbundled services at
lower price at higher service levels
• Negotiate only if strategic customer and
ensure long term commitment

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Pursuing Continuity & Growth: Working Together
Promote Honest/ Open Communication
Building Trust and Commitment
Coordination Mechanisms
• Communication: sharing critical information in time
• Bridging: inter firm engagements at every level of
mgmt
• Reduces chances of Single point contact failures,
dependency problems
• Commitment to solve
• Trustworthy, dependable supplier
• Guarantee through a binding contract/ T&Cs
• Service recovery systems
• Coordination between supplier & customer to
accomplish set of tasks
• Market clearing price : coordination through
transactional deals
• Usage of extra power to direct weaker firm
• Cooperation, reciprocation, shared norms in
collaborative deals

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Pursuing Continuity & Growth: Working Together
Anticipate and Resolve Conflicts
• Conflicts on frequency, intensity, duration of
disagreements
• Convert pathological problem to functional conflict:
change processes, policies to add value/ reduce cost
• Leverage mediation/ arbitration as process
Customer Retention Planning
• Tracking customer retention
• Assessing cause of customer defections
• Analyzing complaint and service data
• Establishing procedures for responding to defections
• Anticipating reformulation of market offering

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Pursuing Continuity & Growth: Selectively Growing Relationship
Estimate & Target wallet share
• Market research, primary/ secondary information
from customer to know wallet share
• Target profitable growth prospects to add value/
reduce cost
Pursue single sourcing or multiple
single sourcing
• Customer avoids single sourcing to avoid
complacency and single point failure
• Multiple single sourcing for different plants/
locations; ensures backup supplier
Focused Share Building
Expand scope of working relationship
Broaden working relationship Adopt new profit models
• Focus on building 100% wallet share on target
profitable offerings
• Avoid selling large revenue with low profit
• Add capability or value to provide better solution
to customers
• Example: ‘fresh partner’ program of KLM
• Relationship migration strategy from product
vendor to a strategic partner
• Risk sharing , gain sharing approach in
collaborative relationship
• Warranty/ guarantee vs. Profit
sharing/ revenue sharing plan

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Ongoing Customer Relationship Management
CRM Bundles Customer strategy/ Processes to Improve
Customer Loyalty and Corporate Profitability
Acquiring Right
Customers
Crafting Right Value
Proposition
Learning to Retain
Customers
• Monitoring, Evaluating,
Reassigning Accounts
• Emerging CRM
Applications
• Sustaining Customers
through connected
Relationships

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Ongoing Customer Relationship Management: Acquiring Right Customers
Estimate Customer Equity
Implement Activity Based Costing
• Customer Equity = Lifetime value of all the firm’s customers
• NPV of all revenue (future & past) – cost of acquisition
& maintenance of a customer
• Helps optimize marketing and other costs
• CRM helps capturing relevant cost and worth
• ABC matches expenses to activities. Following cost drivers
• Transaction specific: processing & fulfilling orders
• Customer specific: cost of ‘customization’ of offering
• Customer segment: applies to accounts in segments; trade shows, collaterals, advertising
etc.
• Support cost: customer sustaining costs applicable to any segment – senior resource
cost, corporate branding etc.
• Cost-to-serve: presales + distribution + post sales
• ABC helps to develop specific customer margin analysis
• Contribution margin: Net sales – direct labor, materials & Energy costs
• Controllable margin: Contribution margin – transaction and customer specific costs
• Segment margin: Controllable margin – segment support cost & assigned corp. overhead
• Net Profit before tax : segment margin – otherwise assigned corporate overhead

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Ongoing Customer Relationship Management: Acquiring Right Customers
Monitor Transaction Prices
Evaluate Relationship Outcomes &
Reassign Accounts
• Business mgrs focus on transaction prices
• Pocket price waterfall: all terms, discounts, rebates,
incentives, bonuses for a transaction
• Pocket price band: distribution of all prices supplier realized
• Helps understanding which customer receives max
discounts, willingness to pay, how effectively sales using
Avg. Transaction price
Cost-to-serve
High
High
Low
Low
Profitable Reformulate offering
and price
Cultivate
collaborative relation
Reformulate offering
and price
• Strengthen relationship with top 20% generating profit
• Reduce cost-to-serve on next 70% and increase price
• Do not serve bottom 10% generating loss
• Include qualitative assessments on customers

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Ongoing Customer Relationship Management: Crafting Value Proposition
Allocate Resource
Synchronizing Marketing Efforts
Updating Customer Value
• CRM helps with customer requirements, customer value,
cost-to-serve, contribution, transaction price etc for analysis
• For low value transaction type business focus resources on
gaining new customers as retention scope low
• For businesses with limited potential accounts and high
customer acq. Cost, deploy resources on retention accts
• Synchronize operation, marketing, sales or any other
customer facing activities
• Constantly track customer’s changing needs, pain points
• Continuous development of value and new features/benefits
• Proactively seeking feedback on areas of improvement

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Ongoing Customer Relationship Management: Learning to Retain Customers
Managing within a Business Network Context
Adding Value through Business Networks
Sustaining Relationships

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Acknowledgement
Buisness Market Management by James C. Anderson &
James A. Narus, Published by Pearson Education
© Anik Saha