Session

Relationships & Strategies

Relationships & Strategies

Strategy Continuum Relationship Planning Relationship Analysis Networks Relationship Drivers

This Session Weekly Activity: IKEA Case Study Click on the link, (http://books.google.com.au/books?

id=YreJ42YFjb0C&pg=PA174&lpg=PA174&dq=case+study+ikea+furniture+retailer+to+the+world&source=bl&ots=ItFx_SKc4k&sig=XNZWBM_v8EoCltODZYFIjK6adOw&hl=en&sa=X&ei=mCgfUbD4Ku_JmAWq8IGICQ&ved=0CFEQ6AEwBg#v=onepage&q=case%20study%20ikea

%20furniture%20retailer%20to%20the%20world&f=false) read the case study and answer the following questions:

What has allowed IKEA to be successful in a competitive environment?

Is IKEA destined to succeed everywhere it cares to establish itself?

Word count: 150 – 200.

RM/TM Continuum

At one extreme is the end-user, packaged consumer-goods market with a marketing mix approach based on discrete, transactional exchange and where customers are more sensitive to price than the development of any longer-term relationship.

At the other end of the continuum are distribution channel, services and business-to-business marketers, who, it is proposed, would benefit from the application of relationship type strategies. The concentration here is on the long term, with the use of an interactive approach based on the development, maintenance and enhancement of ongoing relationships.

TM/RM ContinuumTRANSACTIONAL DRIVERS

RELATIONAL DRIVERS

Company ALargely

transactionalapproach

Develop &maintaindiscrete

exchanges

Company BBalanced

portfolio ofstrategies

CustomerDependent

Company CLargely

relationalapproach

Develop &maintainongoing

relationship

TRANSACTIONAL/RELATIONAL CONTINUUM

RE

QU

IRE

-M

EN

TR

EQ

UIR

E-

ME

NT

STR

ATE

GIE

S STR

ATE

GIE

S

TM RM

TM/RM Continuum

RELA

TIO

NS

HIP

MA

RK

ETIN

GTR

AD

ITIO

NA

L M

AR

KETIN

G

TM/RM Continuum

Importance ofCore Product

Importance ofCustomer Service

Marketing Implications

The dominating marketing orientation The dominating quality function The customer information system Interdependency between business

functions The role of internal marketing

Topic Example Video

In the following video, Robert Kiyosaki briefly discusses what is Network Marketing.

Take note of the key points. http://www.youtube.com/watch?

v=Nf6yOkT6fMI

TM/RM Continuum

RELA

TIO

NS

HIP

MA

RK

ETIN

GTR

AD

ITIO

NA

L M

AR

KETIN

G

TM/RM Continuum

TransactionalStrategies

RelationalStrategies

DangerArea

Relationship Planning

Strategic market relationships must be planned for so that their maximum value can be tapped

The strategic planning process can be applied to relationships using a three-stage framework -analysis, formulation and selection, and implementation

Relationship planning is dynamic and requires top managers to be continuously involved in focusing resources and mobilising people to reach long-term goals.

Planning Process Analysis

Analysis provides the input for strategic choices. Each relational stakeholder is evaluated. Relationships with customers, suppliers, competitors and the interconnectedness of these relationships must be analysed.

Formulation and Selection Formulation and selection of a strategy involves making

choices about which direction a company should take. All the key choices should be integrated and act as a

clear signal of intent by the company. Formulation and selection of a relationship strategy

means making the choices. Implementation

All plans must be implemented.

Strategic Planning Process

Relationship Planning Principles

Interdependence Long-term horizons Analyse interaction Values and images People and process Networks

The Interaction Process The interaction process is how the

parties to the relationship interact. This interaction tends to be of two types:

the shorter-term episodic exchange, for example, one transaction, and

the series of interactions built up into a longer-term pattern of norms and expectations of both parties.

The analysis of episodes and longer-term interaction involves considering certain dimensions.

Relationship Analysis Process

Product and service components exchanged; information exchange patterns; money transfers; communication exchanges (interpersonal bonds

and emotive bonds built through brands); long-term institutionalisation (expectations built

up over time, for example, levels of service expected, or typical responses to problem solving);

Relationship Analysis Process

adaptations made (mutual adaptation in products and processes made by firms typically in industrial markets but also a feature of the attempts at mass customisation in consumer markets);

analysis of repeated interaction value (loyalty and retention effects) and partners as advocates for your business.

Interaction Model

Interaction Parties Understanding the interacting parties be they

organisations or individuals is a central dimension of relationship analysis. The analysis of interaction parties consists of the following:

understanding individuals (behaviours, attitudes and opinions of those involved.

history of relationship management; the nature of the resources and competencies

that can be accessed in a relationship for inter-organisational relationships

understanding company size, strategy and structure is crucial.

Relationship Atmosphere

The atmosphere between individuals affects the relationships and is a mediator of it.

Atmosphere is fuelled often by how an organisation operates or actions taken.

The areas to be analysed in relationship atmosphere include:

an analysis of the trust among the partners; an analysis of loyalty towards company and its

offerings; analysing closeness and co-operation; expectations and norms in the relationship; analysing commitment in the relationship an understanding of how power is used and the

interdependence of the parties;

Relationship Environment

Environment is that which effects the relationship The elements which comprises relationship

environmental analysis are: the pace and direction of environmental change affecting

the relationship; the degree of internationalisation of the relationship and

market (the cultural dimensions of relational analysis); position in the channel structure of a relationship; connectedness of the relationship to other relationships

(the network dimension of relational analysis).

Relationship Strength

Relationship strength measures the underlying motivation or assumptions guiding the relationship and the intensity of interaction between the parties.

Assessing a relationship using the relationship strength comprises a social (belief) and economic (action) element.

Assesses the nature of a relationship: economic action and social belief

Relationship Strength

Relationships will have elements of economic action and social belief but the level of each will vary widely.

Strong relationship strength is a strategic resource for a company that may be difficult to copy by other firms as, at this level, unique action and bonds are a feature of the relationship.

5-S Framework

Structure (for relationships, ie. team based). Staff (people dimension - training critical for

managing the social structure). Style (beliefs and actions determine overall

philosophy and direction). Systems (setting up relationship performance

measures). Schemes (relationship implementation support

programs).

Relationship Implementation

The aim of the 5-S framework is to link strategy to the implementation of social and structural ties in the relationship.

Relationship implementation develops the social bonds and structural ties.

Relationship strength happens at an implementation level by bonding people, organisational systems, and processes together.

Topic Example Video

The following video explains the McKinsey 7-S Framework.

Take note of the key points http://www.youtube.com/watch?

v=45hfRfVbkCk

Networks Networks are defined as webs of interconnecting

ties between independent parties. Organisations are tied to each other to create a stability of exchange.

They are embedded in network connections to competitors, customers, suppliers, and into the broader business environment These networks can be resistant to change but can handle change within their structure. feature to sustainability.

Networks Networks are defined by relationships between

the parties in a system. While they are all independent their action is constrained by the network.

Networks are durable and long-term for managing inter-organisational / systems interactions.

Networks temper opportunism and facilitate the smooth economic exchange between organisations.

Network co-operation is a distinct form of economic organisation.

Sharing resources is a key feature to sustainability.

Network Elements

Reciprocity - indefinite patterns of rewarding reactions from others;

Interdependence - long-term interactions leading to stability and a mutual orientation implying a set of interaction rules;

Loose coupling - preserves some autonomy when compared to vertical integration allowing the network to benefit from a broader learning;

Power - facilitates the exploitation of interdependencies, may prevent outsiders from getting into the net, and its use is closely related to the atmosphere in the network, and in particular the trust among the actors.

Network Analysis Micro approach is between organisations and analyses

their ties through an assessment of activities and resources in the network.

Micro analysis focuses organisations and who controls activities and the resources in any particular network. These connections are both of a social and economic variety and will be at different levels of embeddedness or density depending on who is involved.

A macro analysis of networks starts from the economic and social system level and eventually finds its way to an individual firm

Network Analysis Macro analysis begins at an industry or economic level. The influence of how an economy is organised, the

impact of industrial policy, cultural and social organisation patterns are some of the key contextual parameters in which industry and firms operates

The macro approach sees networks as an outcome of various environmental and competitive processes and objectives. How firms operate in different societies is connected with that society, policy and culture.

Topic Example Video

The following video explains the types of Social Networks that organisations can use to keep in touch with customers.

Take note of the key points http://www.youtube.com/watch?

v=t0LhcNLQ_jU

Network Types

Social networks are networks that rely on human interaction as the main mode of formalisation and co-ordination.

Bureaucratic networks are more formalised and vary depending on the power of the parties in the network.

Proprietary networks in which ownership of specific assets are pre-specified include joint ventures and capital ventures.

Relationship Contribution Classification

Classification based on three factors: relationship value, net price, and cost to serve.

The relationship value is the value of the relationship to the organisation. (Importance)

Net price refers to the level of utility afforded in the exchange. (Financial value)

Cost to serve is a reflection of the opportunity costs foregone on other exchanges. (Loyalty cost savings)

Driversto Strategic Decision Making

Drivers promoting RMHigh Acquisition costsHigh Exit BarriersSustainable Comp. AdvantageBuoyant/Expanding MarketHigh Risk/SalienceHigh EmotionRequire Trust & CommitmentPerceived Need for ClosenessSatisfaction Benefits Retention

Drivers against using RMAcq/Retention Diff SmallLow Exit BarriersUnsubstainable Comp.AdvSaturated MarketsLow Risk/SalienceLow EmotionTrust Only RequiredNo Reason for ClosenessRepeat Behaviour

Strategy Favourable

Risk, Salience and Emotion

Risk, salience and emotion are all psychological aspects that vary some way in every exchange.

The levels of risk, degree of salience involved and the emotion generated will affect the choice of product or service and supplier involved, as well as the 'level' of relational involvement the customer will seek or allow.

Risk may be defined as 'the perceived probability of loss interpreted by the decision maker' and presumes an element of consumer vulnerability in the exchange.

Risk, Salience and Emotion

Salience may be regarded as the level of importance or prominence associated with the exchange.

Emotion is the complex series of human responses (sometimes negatively described as 'agitation of the mind' or 'cognitive dissonance') generated as a result of the exchange.

There is a close association between the level of risk perceived in, the salience associated with, and the emotion generated by, any given exchange situation.

Trust

Reduces harmful conflict. Decreases transactional costs Promotes adaptive organisational forms

(e.g. network relationships). Facilitates the rapid formation of ad hoc

work groups. Promotes an effective response to a

crisis.

Trusting Situations

Probity - honesty and integrity Equity - fairness, values &

sincerity Reliability - dependability,

quality & consistency Satisfaction - positive

associations

Commitment Relationship commitment is central to

relationship marketing. Commitment implies that both parties

will be loyal, reliable and show stability in the relationship with one another.

It is a desire to maintain a relationship, often indicated by an ongoing investment into activities which are expected to maintain that relationship.

Commitment is connected with the concept of trust.

Trust and Commitment

It is important to build trust and commitment if the establishment of a relationship is the end goal.

Areas that need to be considered prior to developing trust and commitment include:

Relationship termination costs Relationship benefits Shared values Communication Opportunistic behaviour.

Customer Satisfaction

Satisfaction is a psychological process of evaluating perceived performance outcomes based on predetermined expectations.

Customers are satisfied when their 'expectations of values' are positively realised.

The greater the (negative) gap between the level of expectation, and the matching of such expectations, the greater the level of dissatisfaction experienced by the customer.

ServiceExpectation vs Realisation

NEGATIVE POSITIVE

Expectationof Service

Realisation Realisation

Dissatisfaction Satisfaction

Topic Example Video

The following video discusses customer satisfaction drivers.

Take note of the key points http://www.youtube.com/watch?

v=LhiLAWh6aWw

Satisfaction Drivers

What drives customer satisfaction?

Drivers (factors) exist on five levels and generally involve progressively more personal contact with the service supplier:

Core product or service Support services and systems Technical performance Elements of customer interaction Affective dimension of services (ie.

the little extras).

Customer Satisfaction Process

At the heart of any successful strategy to 'manage' customer satisfaction is the ability to 'listen to the customer'.

The five categories of approach to this process include:

Customer satisfaction indices Feedback Market research Front-line personnel Strategic activities.

Return on Relationships

CustomerSatisfaction

CustomerRetention

CompanyProfitability

SimpleReturn-on-Relationship

(ROR) Model

Topic Example Video

The following video discusses Collaborative Marketing as a relationship strategy.

Take note of the key points http://www.youtube.com/watch?

v=y_XtDtceGDY

Next Session Weekly Activity: Socialnomics Consider this: Social media has transformed the way we live and do

business. Check out this video by Erik Qualman, the author of

Socialnomics: http://www.youtube.com/watch?v=2G7lNi8sDcU Social media is not a fad. Check out: http://www.youtube.com/watch?v=8JaBAgu6xTA Discuss how social media will be used to further promote

products and services in the future. Word Count: 200 - 300