International and Business to business marketing - Partner Relationship Management

“Our buying teams, where appropriate, manage their selection of tenderers via tenderer selection lists (TSLs). These individual lists may be established for single or ongoing use and are comprised of those suppliers who are best able to meet the needs of a particular commodity area.”

TSL's are specifically designed to enable BT to decide the degree to which a supplier will be able to meet the criteria which have been set for the supply of the (range of) goods, services or works defined.

On November 14, 2001, British Telecom announced a strategic partnership with Siebel Systems, Siebel call centre application software will play a pivotal role in the launch of contact central, a new generation of internet contact centre technology.

BT is one of the world’s leading providers of telecommunications services.  Its retail division is the largest communication service provider in the United Kingdom, providing telecommunications services to more than 21 million businesses and residential customers. To support this strategy, BT implemented Siebel eCommunications and leveraged it to build eContact, a fully Web-enabled, 24x7 contact centre solution.  The Siebel System-based solution enables BT Retail agents to utilise proven business processes across all operations to ensure improved efficiency.  For example, when a customer call eContact centre, either spontaneously or in response to an advertising campaign, the system automatically routes the customer to an advisor specifically trained to respond to the customer’s inquiry.  The Siebel solution then ensures that agents use best practices by guiding them through each interaction with a caller – from handling billing inquiries, to account modifications, to placing new orders.  In addition, during periods of low in-bound activity, the Siebel System enables the agents to seamlessly switch to outbound telemarketing roles and follow proven best practices in targeting new customers.

Tom Siebel, Chairman and CEO of Siebel Systems said “We have worked together with BT for a number of years in developing their internal Customer Relationship Management (CRM) deployment, which addresses BT’s 21 million UK customers.  Our new strategic partnership is a natural extension of our relationship.  Jointly we will now offer unrivalled CRM services that span infrastructure, software, application and integration.”   

To address the needs of the business customers, i.e. BT, Siebel Systems must understand the purchasing goals of BT, and how the purchasing function contributes to the objectives of the organisation.  The purchasing decision maker must juggle a number of different objectives; this is illustrated in the diagram below:

Siebel eCommunications implemented the strategic techniques that would achieve BT’s overall objectives by understanding the procurement processes of BT in achieving success in the competitive communications marketplace by reducing costs, providing better service to its customers and developing new products and services.  To accomplish this BT Group will harness the supply industry and provide bespoke procurement services that generate competitive advantage for their customers. This will be achieved by seeking suppliers who demonstrate interest, commitment and proven results to help make BT's business and their own succeed.

Siebel Systems were able to meet BT’s goals by:

• Increased its revenue per customer by 20%;
• Improved its customer satisfaction by 8%;
• Increased its employee’s satisfaction by 34%;
• Identified 5,000 new accounts within a 12-week period  

Organisational buying decisions are not discrete but result from a variety of stages which interact, and upon which the final decision depends.  The composition of the buying centre varies according to the nature of the product purchased.

Pierre Danon, chief executive of BT Retail said: “We are delighted to link up with Siebel Systems, whose expertise will play a key role in helping us provide end-to-end communications solutions tailored to our customers’ needs and generate new revenue streams.  We have already announced the extension of our brand into entertainment and information and communications technology (IC) solutions for small and medium sized business.”

The structure of the buying centre can also be examined in the light of the different roles of the individuals who constitute it.  Webster and Wind (1972) suggest the major roles found in the buying centres to be:

• Users.
• Influencers.
• Deciders.
• Gatekeepers.

However, Hill (1972), rather than analyse the structure of the buying centre through the roles of the participants, he suggested an analysis on the basis of function units:

• Control unit: responsible for policy making which influences buying.
• Information unit: responsible for providing information relating to the purchase.
• Buying unit; anybody within the organisation who will use the product or the service.
• Decision-making unit: those people within the buying centre who between them will arrive at a decision.

While there are a host of variables that can determine the composition of the buying centre, they can be broadly categorised into market, company and product factors.

Products and services are often technologically complex and this, combined with bulk purchasing, leads to many industrial purchases being of high value.  Also, industrial markets are characterised by derived demand and marketing thus requires careful evaluation of the secondary markets, which influence demand for the primary product.  Furthermore, many industrial products are highly concentrated and there tends to be greater differences between buyers.  Therefore, we can conclude that each individual market will have its own characteristics, thus in this case, Siebel Systems will organise their buying centre to meet the particular conditions that are demanded by BT. The organisation of the buying centre to meet these market characteristics will vary depending upon the size of the company and the service being purchased.  Weighand (1966) defines a product as ‘variety of promises to perform’. Performance will be judged according to the expectations that the individual has according to the expectations that the individual has of the product, the product variable embraces a number of characteristics, including product essentiality, technical complexity, value of the purchase, consequence of failure, novelty of the purchase and frequency of the purchase.  Where a product is central to an organisation’s operations it is likely that the purchase will be decided jointly by all the parties concerned.  Bauer coined the term ‘perceived risk’ and Cyert and March (1963) applied the concept of risk avoidance as one of their basic concepts explaining the behaviour of the firm.  They suggest that, in order to avoid uncertainty and failure, organisations avoid the necessity of having to anticipate events in the future by emphasising short-term feedback; and impose standard operating procedures to ease the burden of decision making.  However, BT’s previous experience and knowledge and expertise in CRM will lead to a reduction in risk perception.  Thus according to Robinson et al (1967), BT’s buying classes which are depended on previous experience as ‘modified rebuy’, this suggests that the company already has prior experience of the product but the particular purchase situation demands some degree of novelty.  Many writers and researchers have attempted to categorise the stages of the buying process, despite the fundamental criticism of the various buying stages models, there is no doubt that buying is a dynamic and sequential process which the industrial marketer must make every effort to understand.  Perhaps the most useful classification of the organisational buying process is that suggested by Luffman (1974) who proposes five basic steps: stimulus; specifications; search; evaluation and selection.  This is similar to BT's buying processes as illustrated above.    According to Webster and Wind (1972), they compromised 4 main categories of models, task related, and non-task related, complex and multi-dimensional. BT’s model of buying behaviour can be depicted as task related, this is explained through the desire for rational and optimum outcome as a fundamental determinant of behaviour.  These models focus on concepts such as lowest purchase price; lowest total cost; constrained choice; rational economics; and material management.  Sheth (1973) proposed a complex model specifically for industrial behaviour, which integrates a large number of variables into one comprehensive model.  

Thus relationships in the business market are often close and enduring, rather than constituting the end result, a sale signals the beginning of a relationship.  This approach has been characterised by: Longer-term and closer relationships with fewer suppliers.  The dramatic rise in competition on a worldwide basis requires a global perspective of markets.  To secure a competitive advantage in this challenging environment, business market customers are developing closer, more collaborative ties with fewer suppliers than they have used in the past, and are demanding quality and speed from their suppliers to an unprecedented degree.  BT for example offers a mission statement on its relationship with its suppliers:

“We will value the diversity of our suppliers. We will work with them in innovative ways that create added value for our customers and trading partners.

Specific Commitments:

• Have a fair procurement process, administering tendering and contracting procedures in good faith.
• Pay promptly and as agreed.
• Not make the award of a contract conditional on a supplier being a customer of BT.
• Promote our principles and values when working with others.”

“Relationships evolve over time and can be considered to traverse a series of stages characterised by increasing mutual adaptation, reduced distance and increasing commitment.”

The advantages of long-term buyer-supplier relationship consist of: enhanced economic efficiency, mutual investment, information sharing and privileged access to a key player.  However, the drawbacks are that the suppliers may be locked into a mediocre player, dulled market incentives and mutual vulnerability.

Nonetheless, theorists have developed relationship models to explain these important customers and suppliers’ relationship, as the relationships consists of learned rules and norms of behaviour i.e. the atmosphere within which the episodes take place. With extensive contact patterns between many individuals from each company and significant mutual adaptation by both parties.  For example, Ford’ stages model (1980) describes the phases that the relationship may be developed:

PRE-RELATIONSHIP

↓

EARLY DEVELOPMENT

↓

LONG TERM

↓

FINAL STAGE

This process can be understood in terms of increasing experience of both partners, reduction of uncertainty and distance in the relationship, growth of actual and perceived commitment, formal and informal adaptations and also investments and savings.   Therefore, relationship development can be a process of bonding, which leads to mutual commitment to the relationship.  Thus bonds may be structural or social in nature; social bonding is the degree of mutual personal friendships that tend to hold a relationship together.  Relationships are not dichotomous variable, power of the buyer or seller is closely tied to the independence of the partner relationship, however, they do exist in a wide variety of forms and all inter-company relationships simultaneously exhibit conflict and co-operation, with guile and self-seeking.

Siebel Systems operates understands the capabilities of R&D, customer service and capitalises on their strength in developing marketing strategies that are responsive to BT’s needs.  The marketing managers also assume an approach that can be used to classify decision-making roles and to highlight the multifunctional nature of business marketing decisions.  

Marketing is best viewed as the functional area that manages critical connections between the organisation and customers.  Siebel System operates in a high-technology industry and must be alert to the rigors that may signal a strategic inflection point-a fundamental change in the basis of competition in the industry.  To successfully cope with such change, top management must assess the firm’s strategic goals and competencies in light of the new competitive reality.  Companies that prosper in high technology markets demonstrate an ability to transform themselves by adjusting strategy goals, building new competencies, and adapting strategies to the new industry conditions.  Discontinuous innovation involves the creation of new forms of customer value within existing or new markets.  Business marketing management must be coordinated and synchronised with corresponding efforts in other functional areas.  Strategic plans emerge out of a bargaining process among functional areas.  Managing conflict, promoting cooperation, and developing coordinated strategies are all fundamental to the business market’s role in the firm.  A continuous process, marketing planning involves several stages: Situational analysis; evaluation of problems, and opportunities; formulation of marketing strategy; development of an integrated marketing plan, and measurement and evaluation of results.

Understanding the dynamics of organisational buying behaviour is essential to all major strategic and tactical planning in industrial marketing: the identification of profitable segments and motivating those individuals with product and service offerings appropriate to their need.  Thus every action of the industrial marketer is based on the probable response of organisational buyer in relation to price, product, distribution, advertising and promotion.  Industrial marketing is characterised by complex interaction processes both within the marketing and purchasing companies.  High technological and financial dependencies are common in industrial markets.  These dependencies lead to extensive involvement and interchange over a long time periods.  Thus purchasing is a multiphase and a multi-objective process.

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