Buyer-Seller Relationship in Business Markets

Buyers and sellers in mature industrial markets can turn single transactions into long-term beneficial relationships by a deeper understanding of the complex connection between the two.

A “must-do” for the sellers, in particular, is to understand patterns of investment and reward, and effectively manage the process that defines the dynamics of buyer-seller evolution.

The buyer is the person or organization that purchases products from suppliers. A buyer could be a manufacturer purchasing raw materials a customer buying a finished product from a retailer. The relationship between the buyer and seller can be either short term (one off or low commitment purchases) or long term, involving regular purchases based on established agreements.

Both short term and long term buyer and seller relationships have advantages and disadvantages. Short term relations can be useful when a degree of flexibility is required. For example, short term agreements give the buyer the option to switch suppliers for their next purchase.

They can also be beneficial in markets where the prices of materials are volatile and long term commitments are not appropriate. The high level of competition to win short term contracts can also provide opportunities for price discounting and special deals to be done.

However, short term arrangements also have their disadvantages. They generally provide little scope for payment and order flexibility. For example, a new supplier on a short term agreement will want a definite order and prompt payment.

There is no trust built up over time between parties, so building Buyer and Seller Relations the opportunity to share market information is also reduced.

There are many advantages that come as a result of building strong buyer and seller relations over a period of time. There is a greater commitment from both groups which means that you will be better able to rely on them when it comes to orders and payments.

There may also be more scope for discounts after the relationship is established and there may be more flexibility in the timing of payments. Trust between the buyer and seller is developed over time and this may allow for the sharing of information, forecasts, knowledge and customers between the buyer and seller.

However, long term buyer and seller relationships generally involve a high level of commitment and work to maintain. Entering into long term contracts may be involved so it is important to have accurate forecasts about the future performance and needs of both businesses.

Supply chain partnerships can be formed between organizations to provide a level of stability and encourage long term commitment from different parties towards achieving results.

Three critical aspects of supply chain partnerships are: recognizing opportunities that would benefit from a partnership, selecting the right partners and meeting your requirements as a partner.

Generally, most organizations will have a balance of both long term and short term relationships with their buyers and sellers. This balance can provide some of the benefits of both, while also reducing the amount of associated risks potential problems.

Buyer and Sales Representative Interaction:

The most important part of buyer-seller relationship is the interaction between a representative of the buying organization (buyer) and a representative of the selling organization (sales representative or sales representative).

There are many other persons from both the organizations involved in the relationship, but the basic building block of the relationship is based on buyer and sales rep’ interactions. When the buyer and the sales representative meet, the nature of their interactions depend upon their roles, behavior and perceptions.

Buyer’s Perception of Sales Representative:

There are two major perceptions held by buyers of sales representatives. One is the stereotypical description of the sales reps, as “talkative”, “easy going”, “manipulative”, “competitive”, “optimistic”, and “excitable”.

An industrial buyer, who does not have previous experience with a particular sales representative, may respond to the sales representative in terms of the stereotype which he has of sales representative in the general.

The second major perception of the buyer depends on the reputation of the company which a sales representative represents.

Generally, the sales representative of a company with better reputation always gets a more favourable initial response from the industrial purchasers. For example – a sales engineer working with a reputed company like Larsen & Toubro (L&T), often got a positive response from the industrial customers.

However, when the same sales engineer changes the job to a less reputed company, as a sales executive, the response was not encouraging, as he had to wait for a long time before he was called in for discussions.

The Role Played by Industrial Buyer:

An analysis of industrial buyer behaviour indicates that personal needs, interaction in the buying centre, an organizational objectives (or needs) determine the response of a buyer to the selling efforts by a sales rep.

For example – an industrial buyer may be motivated by a personal need for salary increment and promotion in his job, and also by a social or organizational need to satisfy the user department. A buying decision may allow the buyer to satisfy both the sets of needs.

The specific personal and social needs will decide:

(i) Whether the buyer meets with a sales rep,

(ii) Which parts of sales rep’s presentation he listens,

(iii) The influence of sales presentation on his decision to buy.

Conceptual Framework of Buyer Seller Interaction:

Both the style and content of buyer-seller communication are determined by a number of personal, organizational and product-related factors. For example – the personal life styles and backgrounds will often determine the style of communication the buyer or the seller chooses to engage in.

Similarly, organizational training and orientation will also mould the buyer or the seller with respect to the style of communication he is expected to engage in. Finally, the content of communication is likely to be determined by product-related variables such as market motivations, buyer and seller plans and technology or competitive structure of industry.

While it is obvious that any incompatibility with respect to what the buyer wants and what the seller offers in a product or service will be detrimental to consummating a sale, it is more interesting and useful to identify dimensions and sources of content incompatibility.

Based on a recent model of individual choice behavior it is proposed that underlying buyer- seller expectations about a product or service, there lies a five dimensional utility space. The five dimensions represent different types of product-related utilities which the buyer desires and the seller offers to each other.

Each type of utility is briefly described below:

1. Functional Utility:

It represents products utility which is strictly limited to its performance and which defines the purpose of its existence and classification as a type of good or service. For example – the functional utility associated with an instant breakfast can be described in terms of taste, convenience, nutrition and calories.

Similarly, the functional utility associated with a passenger car tire can be defined in terms of mileage, blow out protection, traction, handling and ride. The functional utility is often measured in terms of a person’s expectations on a number of product- anchored attributes or evaluative criteria.

It is presumed to be a complex function of positive and negative expectations on multi-attribute profiles. We treat functional utility as one dimension of product utility and ignore for a moment the question of its own dimensionality.

2. Social-Organizational Utility:

Sometimes a product or service acquires social-organizational connotations or imageries independent of its performance or functional utility. This is due to its consistent identification with a selective set of socioeconomic, demographic or organizational types.

Such identification with a selective cross-section of household or organizational buyers tends to impute certain utilities or disutility in the product or service producing imagery or a stereotype. For example, cigarettes are often consumed due to their social imagery even though they may be functionally harmful.

Certain products are, therefore, used for their prestige and not so much their performance. The existence of social-organizational utility in a product or service is also prevalent in organizational buyer behavior especially with respect to those products and services which are directly associated with the organization man.

This is not surprising in view of the fact that there exists an organizational stratification of people working in organizations comparable to social stratification of households based on organization structure, hierarchy and power distribution.

3. Situational Utility:

It represents a product’s utility which is derived from existence of a set of situations or circumstances. The product or service has no intrinsic or independent utility and will not be offered or bought without the presence of circumstances which create its need.

The situational, utility is often strong among those products or services which are consumed on an ad hoc basis rather than on a continuous basis. For example – the utilization of the services of the priest for marriage ceremony or the lawyer for divorce proceedings tends to be non-repetitive by and large.

Similarly, a housewife may buy a product or service as a gift item due to a very specific situation or occasion such as graduation or marriage. Organizations often tend to use the services of professionals on an ad hoc basis because of a specific project.

Many of the capital expenditure items and highly specialized professional skills have greater degree of situational utility in them. It is extremely important to identify situations and activities which add to the utility of the product or service.

4. Emotional Utility:

Sometimes a product or service evokes strong emotive feelings such as respect, anger, fear, love, hate or aesthetics due to its association with some other objects, events, individuals or organizations.

The strong emotive feelings are therefore generalized to the product or service resulting in a different type of utility or disutility. For example – some Jewish buyers tend to refrain from buying German products because of strong emotional feelings they arouse as reminders of the German Nazi movement.

Similarly, many Hindus refrain from eating beef due to strong emotive feelings anchored in religious tenets. While one would expect less prevalence of emotive utility in organizational products or services than in household products or services, this is not borne out by empirical research. Organizations also tend to manifest emotive behavior as is evidenced in international trade and cross-national negotiations.

5. Curiosity Utility:

The fifth type of utility often present in both household and organizational products and services is related to novelty, curiosity and exploratory needs among individuals. Based on the assumption man constantly seeks out new, different things due to either satiation with existing behavior or due to boredom inherent in highly repetitive tasks, certain new products or services acquire additional utilities which are not intrinsic to their performance.

These products or services are both offered and sought largely due to their novelty and to satisfy a person’s curiosity arousal. They have a very short life cycle and often degenerate as fads or fashions.

Style of Interpersonal Relationships:

The vast literature on group dynamics and interpersonal relationships in small groups provides an excellent source to discuss the concept of style of interaction. It refers to the format, ritual and mannerism involved in buyer-seller interaction.

While we will rely heavily on research in group dynamics, it is important to keep in mind that the dimensionalities of style of interaction discussed here are common to non-personal interactions such as via telecommunication or postal systems. The style of interaction is presumed to be three dimensional.

The specific dimensions are described below:

1. Task-Oriented Style:

This style of interaction is highly goal oriented and purposeful. The individual is most interested in the efficiency with which the task at hand can be performed so as to minimize cost effort and time.

Any activity during the interaction process which is either not task-oriented or inefficient is less tolerated by the individual who prefers the task-oriented style. The buyer or the seller who prefers this style of interaction often tends to be mechanistic in his approach to other people.

2. Interaction-Oriented Style:

The buyer or the seller who prefers this style of interaction believes in personalizing and socializing as an essential part of the interaction process. In fact, preference for this style of interaction is often manifested at the loss or ignoring of the task at hand.

The buyer or the seller motivated by the interaction-oriented style is often compulsive in first establishing a personal relationship with the other person and then only getting involved in the specific content of interaction.

3. Self-Oriented Style:

This style reflects a person’s preoccupation with himself in an interaction situation. He is more concerned about his own welfare and tends to have less empathy for the other person.

He is often unable to take the other person’s perspective and views all aspects of interaction from his own selfish point of view. The concepts of self-preservation, self-survival and self-emulation tend to dominate this style of interaction.

Relationship Marketing:

Relationship marketing is a strategy designed to foster customer loyalty, interaction and long-term engagement. This customer relationship management approach focuses more on customer retention than customer acquisition.

Relationship marketing is designed to develop strong connections with customers by providing them with information directly suited to their needs and interests and by promoting open communication.

This approach often results in increased word-of-mouth activity, repeat business and a willingness on the customer’s part to provide information to the organization.

Relationship marketing contrasts with transactional marketing, an approach that focuses on increasing the number of individual sales. Most organizations combine elements of both relationship and transaction marketing strategies.

Relationship Marketing is emerging as a new phenomenon however; relationship oriented marketing practices date back to the pre-Industrial era. We trace the history of marketing practices and illustrate how the advent of mass production, the emergence of middlemen, and the separation of the producer from the consumer in the Industrial era led to a transactional focus of marketing.

Now, due to technological advances, direct marketing is staging a comeback, leading to a relationship orientation.

With the evolution of Relationship Marketing, the hitherto prominent exchange paradigm of marketing will be insufficient to explain the growing marketing phenomena of collaborative involvement of customers in the production process.

An alternate paradigm of marketing needs to be developed that is more process rather than outcome oriented, and emphasizes value creation rather than value distribution.

Sales Presentation in Business Marketing:

Sales Presentation is the pre-arranged and usually formal meeting held at a customer’s place or a hotel where a product is presented to prospective customers who have come to see the sales pitch. It will often include a demonstration of the product.

Sales Presentation Tips and Techniques:

Presentations have a way of leaving a legacy long after your presentation has ended. Even if the prospect doesn’t buy from you right now, a high quality presentation will definitely be remembered in a positive light.

This might mean referral business later; also the quality of your presentation will impact how your boss and any other colleagues view you and your abilities. This may affect future assignments of your choice and even your promotion prospects.

1. Make the Presentation Relevant to your Prospect:

One of the most common mistakes people make when discussing their product or service is to use a generic presentation. They say the same thing in every presentation and hope that something in their presentation will appeal to the prospective customer.

The discussion of your product or service must be adapted to each person; modify it to include specific points that are unique to that particular customer. If you use PowerPoint, place the company’s logo on your slides and describe how the key slides relate to their situation.

Show exactly how your product or service solves their specific problem. This means that it is critical to ask your prospect probing questions before you start talking about your company.

2. Create a Connection between Your Product/Service and the Prospect:

In a presentation to a prospective client, try to prepare a sample of the product they would eventually use. After a preliminary discussion, hand your prospect the item they will be using – instead of telling them about the item, place it in their hands to see exactly what the finished product looks like and so they are able to examine it in detail.

They are then able to ask questions to see how their organisation would use it in their environment. Also, remember to discuss the benefits of your products, not the features. Tell your customer what they will get by using your product versus your competitors.

3. Get to the Point:

Today’s business people are far too busy to listen to long-winded discussions. Know what your key points are and learn how to make them quickly. Don’t bore your customers with irrelevant details. Make sure you know what key points you want to discuss and practice verbalizing them before you meet with your prospect.

4. Be Animated:

The majority of sales presentations are boring and unimaginative. If you really want to stand out from the crowd make sure you demonstrate enthusiasm and energy. Use your voice more effectively and vary your intonation.

A common mistake made when people talk about a product with which they are very familiar is to speak in a monotone voice. This causes the other person to quickly lose interest in your presentation. Record your presentation. This will allow you to hear exactly what you sound like as you discuss your product.

5. Use a Physical Demonstration:

A great technique is to use the whiteboard or flipchart in the prospect’s boardroom during the presentation. Instead of-telling the client what you can do, stand up and deliver a short presentation using the whiteboard or flipchart in the prospect’s boardroom.

This unusual approach never fails to create impact with the customer but ensure that your writing is clear and legible and that you draw pictures and illustrations that can impress the client with their level of proficiency.

6. Develop a Framework:

Just as writers develop an outline for an article, or story book, it is critical for you to develop a framework. This framework relates to the sections that you will be presenting to your prospect. The following framework works well if you have about 45 minutes to present.

You can reduce or increase the amount of time around each section, but spend most of the total time talking and asking questions about them and getting them to tell you what is important to their organization.

Negotiation:

Negotiation is a strategic discussion that resolves an issue in a way that both parties find acceptable. In a negotiation, each party tries to persuade the other to agree with his or her point of view.

In advance of the negotiation, participants learn as much as possible about the other party’s position and what the strengths and weaknesses of that position are and are prepared to defend their positions and counter the arguments the other party will likely make to defend their position.

Many offers that people assume to be firm and final are actually flexible. For example, negotiation can be used to reduce debts, to lower the sale price of a house, to get a better deal on a car or to improve the conditions of a contract.

Negotiation is an important skill when accepting a new job. Often, the employer’s first compensation offer is not a company’s best offer and the employee can negotiate for higher pay, more vacation time, better retirement benefits and so on. Negotiating a job offer is particularly important because all future increases in compensation will be based on the initial offer.

Sales Negotiation:

Sales negotiation is a process that involves the deliberation of all details necessary to successfully complete a sale. As part of this type of negotiation, a salesperson engages directly with a customer, assessing the needs of the client, pointing to the advantages the customer stands to gain, and helping the customer see how purchase of the goods or services offered would be a wise decision.

The ultimate goal of any sales negotiation is to earn the business of the customer, satisfying the expectations of the customer to the point that he or she will be willing to consider making future purchases of the goods or services offered, and complete the sale with terms and conditions that are considered beneficial to all parties involved.

It is important to note that a sales negotiation can be a very formal process that is carefully crafted, or it can occur in a situation that takes place unexpectedly. Some negotiations are very informal, whiles others are highly structured.

In many cases, the negotiation phase of the sales process will rely on the use of a few carefully employed strategies, although the exact expression of those strategies are often adapted to fit the circumstances surrounding the negotiation.

For example – a sales negotiation may follow after a formal presentation to the potential customer. The presentation may include any number of visual aids, including video streamed over an Internet connection.

Once the salesperson has a sense that the customer has received enough knowledge to see the value and at least some applications for the product, the negotiation can begin. This will often involve exploring more possible applications, identifying the costs associated with the use of the product, taking care to call attention to savings of time and money that the customer can reasonably anticipate by using the product.

From there, the negotiation moves on to settling on the pricing for the product, and the mutual agreement on the terms of the contract that will govern the newly established relationship between the buyer and the supplier.

Most sales training programs will spend a significant amount of time helping new salespeople hone their ability to engage in effective sales negotiation. While the training varies from one program to another, most will include tips on how to efficiently evaluate the potential customer, identify his or her most pressing needs and use the data in a manner that convinces the customer to make a commitment and purchase the product or service offered.

While some forms of sales negotiation focus a great deal on price, other factors such as quality, customer support, and timely delivery of the goods or services are also often employed as part of the tools in the negotiation process.

How to Negotiate a Sale?

1. Before the negotiation begins, prepare yourself; aim to appear keen to do the deal but not desperate.

2. Clarify your objectives (e.g. price, volume or a quick sale) and how important the deal is to you.

3. Find out what the customer wants. What features or extras do they value and what are their priorities – price, service or delivery?

4. Research the customer’s position: how urgently they need your product, what they can afford and what alternatives the competition is offering.

5. Assess the value of your offering to the customer: what benefits it offers what problems it solves for them, what alternatives it replaces.

6. Identify the strengths and weaknesses in your proposal and plan your strategy; aim to reach a deal which will suit the customer as well.

7. Decide what could be negotiable; try to identify concessions which would cost you little but which the customer would value.

8. Consider the potential impact on other deals and other customers of any concessions you make.

9. Clarify your terms and conditions from the start of the negotiation.

10. Pitch your opening price high; explain how the value in what you are offering justifies the price.

11. Agree what the negotiating points are.

12. Concentrate on asking questions and listening; fend off questions aimed at discovering your own negotiating position.

13. Test the strength of any concessions the customer asks for; ask whether they are deal- breakers, or what alternatives there are.

14. Look for reciprocation on any concessions you make: for example – an increased order size in exchange for a discount.

15. Summarize each point as it is agreed; shake hands on the deal when all the points have been covered and follow up with a written agreement.

Reciprocity:

Reciprocity in social psychology refers to responding to a positive action with another positive action, rewarding kind actions. As a social construct, reciprocity means that in response to friendly actions, people are frequently much nicer and much more cooperative than predicted by the self-interest model; conversely, in response to hostile actions they are frequently much nastier and even brutal.

Reciprocity is developed and woven into good enough relationships, sometimes without participants knowing that is what they are doing. With awareness, it can become a robust, healthy feature of the relationship.

Reciprocity requires people to be invested in their relationship. If a relationship is important enough to them, partners will be emotionally invested in it enough to work at building and maintaining it. Commitment is sustained through the improvement of reward-cost balance in relationships.

The most useful investments are those that tap into what the partner has contributed emotionally. Passion is a vital condition in healthy relationships. Reciprocated love is related to feeling fulfilled.

Reciprocated love and emotional contribution are behavioral investments that sustain a committed relationship.

Business to business sales offer you an opportunity to develop reciprocal relationships that can have far reaching benefits for your own company as well as your customers. Developing constructive partnerships with other businesses can help you manage your company more efficiently and provide ways to reduce your overhead.

Cultivating these relationships to a point where cooperative advertising can be done is one way to approach selecting businesses for a reciprocal relationship. If your company and one of your suppliers have complementary products and/or services, your advertising efforts will have more impact. What your customer sees is enhanced value and a more credible business presence.

While there are benefits to developing these types of relationships, it is important to make sure that the other business has a code of ethics that is compatible with your own. Discussing customer service in depth with any vendor that you are considering is first on the list- if you cater to your customers and the other business never returns a phone call, there are bound to be problems.

If you want to establish a relationship with a large corporation, again the keyword is benefit. You need to be prepared to show how your service or product will find a specific need that will enhance the profitability of the corporation.

It is not sufficient simply to say that your product or service is the best. The larger the company, the more competition you will face which makes research all the more important.

When you want to broaden your scope of community to encompass a relationship with a vendor, look for compatibility of purpose in order to make the most of the relationship. Small business owners that are working with limited marketing budgets can benefit greatly by the word of mouth advertising that is created in the process of collaborations with suppliers.

Endorsements of products and services are one of the strongest sales tools available; people are more receptive to recommendations that are made by a person that they have a relationship with than expensive promotions.

Start building your reciprocal business relationships with small projects that are easy to manage without a huge time investment. Make sure that you involve all the individuals that will be affected by the project or be called into participation to make the project a success.

As you work through the process of the project work, take time to discuss and evaluate the impact it is creating for both your business and that of your vendor so that it can be refined and developed into a long term, mutually beneficial method of operation.

Customer Service:

Customer service is the service provided to customers before, during and after purchasing and using goods and services. Good customer service provides an experience that meets customer expectations. It produces satisfied customers.

Bad customer service can generate complaints. It can result in lost sales, because consumers might take their business to a competitor.

Good customer service involves developing bonds with customers, hopefully leading to long term relationships. It creates advantages for both customers and the business alike. Customers benefit because the business is providing a service that meets their needs.

The business benefits because satisfied customers are likely to be repeat customers. They will stay with the business. However, good customer service is not easily achieved. It takes time to establish. It requires investment to deliver consistent standards.

Characteristics of Good Customer Services:

The important characteristics of good customer services are as follows:

1. Listening Skills:

A customer service representative must be able to listen to the needs of the customer. They take notes and summarize the customer’s words back to them to ensure understanding. Instead of planning their answer or retort as the customer is speaking, they listen with the goal of comprehension.

2. Asking Skills:

Those in customer service know that asking the right questions can yield the answers that are necessary to solve the problem or address the issue. Quality questions help to uncover the actual needs, goals, objectives and concerns of the customers so the representative can work to meet those needs and alleviate the concerns.

3. Responsible:

To work in customer service, responsibility is a must. This responsibility is two-sided, as it covers the agents’ responsibility in attendance, service, loyalty and attitude. It also covers the ability of the agent to take responsibility for mistakes and results-to know that their own actions determine the results in customer situations.

4. Responsive:

Each need, question or concern is addressed in quality customer service. Bypassing a question because the answer is not known can leave a customer feeling ignored. Many service related inquiries are multi-faceted so it is important to fully respond to one inquiry before moving to another.

5. Knowledgeable:

Customer service agents should be completely knowledgeable in the department/product/service for which they are responsible. Along with this knowledge comes confidence, which leads to customer satisfaction.

If a situation arises where an agent does not know an answer, he must be willing to admit not knowing and find the answer or pass the client to a representative that can answer the question.

6. Complete:

A customer service representative should work through a situation to its completion. Instead of being quick to hand off the problem or hesitant in working through a customer’s needs, the agent should be thorough and work through each situation step-by-step until it is resolved.

7. Timely:

Customer service is at its best when it is prompt. Allowing a customer to sit on hold or wait in the store for an available representative is unacceptable. The timely response to a request, question, concern or problem is the first step to a solution. This may not always be speedy, but it should be efficient and thorough.

8. Accurate:

Any information relayed from a customer service representative to a customer must be 100 percent accurate. Whether it is instructions on assembly or performance or information on warranties, everything must be factual. Along with accuracy in fact, the representative should be precise in the actions performed on the customer’s behalf.

Managing Buyer Seller Relationship:

Buyer-seller relationships, starting with the uncertainty situations faced by the buyer, that is, need uncertainty, market uncertainty, and transactional uncertainty.

The buyer-seller relationship evolves across five stages- pre-relationship stage, exploratory stage, development stage, stable stage and final stage. This evolution depends on variables like experience, uncertainty, distance and commitment.

Depending on the extent of their interdependence, the relationships are categorized into transactional relationships, collaborative relationships, alliances and reciprocal relationships.

Industrial marketers have to manage relationships with suppliers, customers and distributors. This requires analyzing supplier relationships and dimensions, acquiring the right customers, creating value, understanding the importance of power etc.

Sales representatives play a vital role in managing the relationships with customers by performing multiple functions – information exchange, negotiation and adaptation, crisis insurance, social relationship and ego-enhancement.

Uncertainty and lack of trust, power difference, deviations from agreements, institutionalized patterns of operation and distance between buyers and sellers lead to conflicts. These conflicts can be resolved through persuasion, compromise, negotiate and bargaining.