Relationship marketing importance in B2B versus B2C markets

¶ … B2C and B2B Markets

The objective of this study is to examine that while marketers acknowledge that relationship marketing is important to both B2C and B2B markets, some believe it is more important in a B2B market and why it is that they feel this way and finally if they are correct. The concept of relationship marketing based on delivery of superior value is reported to place emphasis on the customer view as centric to marketing this study examines whether this is correct and if so then why. It is reported in another source that B2B and B2C"… are terms coined and popularized by the worldwide web for commerce and e-Business sales." (APEXTWO: CRM & Marketing Automation Experts, 2012)

While the marketing programs for B2B and B2C are the same the motivation for purchase is differentiated by the needs in terms of the information needed to motivate the purchase decision. (APEXTWO: CRM & Marketing Automation Experts, 2012, paraphrased) B2B is stated to be "…contemporary shorthand for a longtime sales practice called business-to-business while B2C represents business-to-consumer. In essence, B2B deals primarily with other businesses, not the general public…" (APEXTWO: CRM & Marketing Automation Experts, 2012) B2C however, makes provision of products and services "directly to the end user." (APEXTWO: CRM & Marketing Automation Experts, 2012)

The first step in the establishment of marketing strategies for both B2B and B2C are similar in nature in that the target customer must be identified as well as why it is that this specific customer needs to hear the marketing message however it is reported that from this point "the marketing activities diverge." (APEXTWO: CRM & Marketing Automation Experts, 2012)

Argument

It is the position of this study that B2B marketing is of greater import than B2C marketing and that B2B marketing is representative of much longer customer relationships than B2C marketing.

Literature Review

The work of Rauyruen, Miller and Barrett (nd) reports a study with the objective of providing an illustration of "how relationship quality can influence customer loyalty or loyalty in the business-to-business context" and builds on prior research while proposing relationship quality as a higher construct comprising trust, commitment, satisfaction and service quality and state that these specific dimensions of relationship quality "… can reasonably explain the influence of relationship quality on customer loyalty." (Rauyruen, Miller, and Barrett, nd)

Suppliers in the B2B environment need to have an understanding of both the "nature and circumstances of their customers because of the unique characteristics of the customers acting as an organization." (Rauyruen, Miller, and Barrett, nd) There is a generally held belief that customer loyalty results in profitability. (Rauyruen, Miller, and Barrett, nd, paraphrased)

In the endeavor to fulfill the needs of business customers "many supplying and selling firms engage in relationships with the business customers and see the importance of the strategic management of supplier and customer relationships. The quality of business-to-business relationship is viewed by many as being "…as a crucial factor in building success in the market." (Rauyruen, Miller, and Barrett, nd) Customers that are retained in the long-term are those that those who are satisfied. The development of loyalty however and how it can be applied in the business-to-business context is little explored. Three primary stream of research exist and those are reported as the following:

(1) Behavioral loyalty;

(2) Attitudinal loyalty; and (3) Composite loyalty. (Rauyruen, Miller, and Barrett, nd)

It was argued by Tucker (1964) that behavior (in terms of past purchases of the brand/product) "completely accounts for loyalty" and in 1978 Jacoby and Chestnut made the observation that behavioral loyalty studies focused on interpretation of patterns of repeat purchasing in primarily panel data as a manifestation of loyalty." (Rauyruen, Miller, and Barrett, nd) Loyalty is held to be stochastic rather than deterministic. (Rauyruen, Miller, and Barrett, nd)

Day (1968) is reported to have proposed that behavioral and attitudinal components of loyalty could be reconciled and he states "loyalty viewed in terms of purchase decisions may not distinguish between loyalty and spurious loyalty." (Rauyruen, Miller, and Barrett, nd) Baldinger and Robinson (1996) stated the need to "extend typical definitions and measurement approaches of loyalty" suggesting that a study should be undertaken of the "attitudinal components for additional understanding of the stochastic representation of behavioral loyalty." (Rauyruen, Miller, and Barrett, nd)

The concept of relationship quality is reported to have arisen from theory and research in the field of relationship marketing in which the ultimate goal is to strengthen already strong relationships and to convert indifferent customers into loyal ones." (Rauyruen, Miller, and Barrett, nd) Previous research on relationship quality has considered and applied testing to the concept of relationship quality in varying research contexts and "the definition and operationalization of relationship quality differs from research project to research project." (Rauyruen, Miller, and Barrett, nd) It is agreed however, "the concept of relationship quality is a higher-order construct consisting of several distinct but related components or dimensions. These components are reported as:

(1) Opportunism;

(2) Customer orientation;

(3) Conflict;

(4) Trust in salesperson;

(5) Trust;

(6) Commitment; and (7) Perceived quality. (Rauyruen, Miller, and Barrett, nd)

There are four different but related dimensions stated to comprise relationship quality in the work of Rauyruen, Miller, and Barrett (nd) and those are stated as:

(1) Trust;

(2) Commitment;

(3) Quality; and (4) Satisfaction. (Kotler, 1994 cited in Rauyruen, Miller and Barrett, nd)

According to Aaker (1991) and Heskett, Sasser and Schlesinger (1997) "satisfaction is a key determinant to every level of brand loyalty. (cited in Rauyruen, Miller, and Barrett, nd) B2B markets are smaller markets that are vertical such as niche size in which there are only thousands of sales prospects whereas the B2C markets are larger and broader markets with tens of thousands up to millions of sales prospects. (Back Office Business Solutions: My Marketing Department, Inc., 2012, paraphrased) The B2B sales are generally accomplished through a purchasing process that is "defined in months" and as well the sale is complex in nature and takes months to reach completion. However B2C sales are short periods lasting from a few minutes to a few days. The B2B sales require consultative selling or selling that has the client's needs as its basis as well as a relationship of trust developing and sometimes "from a two-step level sales organization including the sellers sales force and a distribution sales force." ((Back Office Business Solutions: My Marketing Department, Inc., 2012)

B2C sales however, are generally direct to the consumer or may involve a retailer with the sales approach being one of "a traditional product sells of convincing the consumer they need the product or serving being sold." (Back Office Business Solutions: My Marketing Department, Inc., 2012) B2B sales are reported as "higher ticket" type purchases ranging from a few thousand to tens of millions of dollars however B2C sales may range from one dollar to a few thousand dollars with cars and homes being the exception. ((Back Office Business Solutions: My Marketing Department, Inc., 2012, paraphrased)

The choice to purchase in B2B sales is driven by the need and budgets and tends to be a decision based on a rational base while B2C decisions to purchase are made upon the basis of want more so than need or budgeting concerns and are more emotionally triggered decisions. (paraphrased) Brand identity in B2B markets is created "through personal relationships and consultative selling" while brand identity in B2C markets is crated through use of advertising and social media. (Back Office Business Solutions: My Marketing Department, Inc., 2012, paraphrased) The lifetime value of a B2B customer is reported as much higher due to the higher cost of sales and the likelihood of repeat or add-on sales to the same customer." (Back Office Business Solutions: My Marketing Department, Inc., 2012) The lifetime value of a B2C customer is reported as being "lower than B2B because of the lower cost of an individual sale and repeat sales are generally fewer." (Back Office Business Solutions: My Marketing Department, Inc., 2012)

The bottom line is reported to be that B2B sales prospects are differentiated from B2C in the B2B sales prospects are located in small and vertical markets requiring "consultative selling and taking longer to sell" and as well that B2B sales are "higher ticket sales driven by a rationale sales approach that required developing personal relationships. The payoff for B2B sales prospects is a high lifetime customer value." ((Back Office Business Solutions: My Marketing Department, Inc., 2012)

Hennessey (2012) states that B2B customers "do not want to buy based on what you have to sell no matter what your features, benefits, or because it's on sale now. Fooling them into buying something they don't want or need may result in a onetime sale, but does not create a loyal customer." Hennessey states that loyal and long-term B2B customers make purchases based on "…the power of a relationship you forget or don't forge with them. Things like creditability, trust, integrity, and putting your client first are essential. The best marketing approach for creating lasting B2B customer relationships is customer centric marketing." (Hennessey, 2012) According to Hennessey it is important to learn "how to communicate with your B2B sales prospects in order to build initial rapport that will "set the stage for your ability to meet with your potential customers and solidify your relationship that will culminate in a sale and long-term client relationship." (2012) Sending a B2B marketing message that is "perfectly aligned with your prospects is the first step in achieving your B2B sales prospecting goals." (Hennessey, 2012)

According to Leopard (2006) in the work entitled "B2B vs. B2C Marketing -- Do the Differences Matter?" The differences in B2B and B2C marketing are such that "run deep. And they're important. Take the decision-making process for example. Sure, mot families consult on houses and cars, but no one ever gets fired for making an impulse buy while in the line at the grocery store. In fact, creating the interest that drives an impulse sale is one of the core tenants of B2C marketing." (Leopard, 2006) This is, however to the case in B2B and most specifically decisions involving "some sort of technology." (Leopard, 2006)

The example stated is that of "an enterprise software package or perhaps a customer relationship management system." (Leopard, 2006) Leopard states that the information technology director who drive the decision-making process will spend "months getting input and buy-in from the sales, marketing and finance departments" since most B2B choices are multifaceted in nature and are expensive and as such have resulted in those making bad decisions being fired. There is great pressure for tangible results to be delivered through marketing efforts and this requires a marketing strategy meaning that in B2B marketing that the reality must be acknowledged that CEOs "are done throwing money into the marketing black hole where there is no measurable return. Even the most brand-savvy CEOs are demanding that marketing add value in the places where they're being measured by investors, quarterly revenue, and the overall health of the sales pipeline." (Leopard, 2006)

Stated as two proven methods that B2B marketers make a huge difference are those of:

(1) delivering good leads; and (2) creating a rational argument. (Leopard, 2006)

Leopard reports that B2B marketers need to "focus on providing sales with the facts" as follows:

(1) Clear, concise information about the features and benefits of the offering and how it addresses the prospect's pains.

(2) An honest, factual assessment of the competitive landscape, and therefore the prospect's alternatives, preferably provided by a credible third party.

(3) Tools (or at least an approach) that can help speed the process of creating the business case or ROI calculation.

(4) Customer references, both written materials and customers willing to engage in a conversation with a prospect. (Leopard, 2006)

Two tangible measures of value exists within these two including: (1) pipeline to velocity or increasing the speed at which the company moves a prospect from curiosity to close; and (2) face time or increasing the speed at which the company moves a prospect from curiosity to close." (Leopard, 2006)

It is reported that there has been great expansion in the B2C category, which is stated to largely equate to "electronic retailing and its main objective is to aggressively convince prospective buyers to shop." (Leopard, 2006) Reported as well is that B2C companies "employ different marketing campaigns for publicizing their goods and services. This would include coupons, vouchers, email blasts, banner ads, limited edition offers, and the likes to entice their target market to buy. These campaigns are much shorter in duration thus the urgent need to secure the customer's interest very quickly. The path to purchase must be short and simple -- just a few clicks from email receipt to order confirmation. Any more than a couple of clicks and the customer is likely to abandon the shopping cart. The call to action must be obvious and the offer enticing. As such, email campaigns often highlight special deals and discount that can be used both online and in store." (APEXTWO: CRM & Marketing Automation Experts, 2012) As well they can be "informative especially if the aim is to build the brand and enhance customer (e.g. Anderson and Sullivan, 1990; Bearden and Teel 1983; Bitner, 1990; Bloemer, de Ruyter and Peeters 1998; Bloemer and Kasper 1995; Boulding et al. 1993; Burton, Sheather and Roberts 2003; Dube and Maute 1998; Ennew and Binks 1999; Oliver 1997; de Ruyter and Bloemer 1999; LaBarbera and Mazursky 1983;Patterson 1995; Selnes 1993; Yu and Dean 2001 cited in Rauyruen, Miller and Barrett, nd ). Loyalty is an important aspect in B2C marketing. This proved very true for companies like Amazon, Best Buy, and Staples. They combine good customer service and education on their product and services thus their customers keep coming back." (APEXTWO: CRM & Marketing Automation Experts, 2012)