Discuss the importance of communication in a buyer/seller relationship for complex products (industrial market). 3500 words.
Use this book Managing Business Relationships by David Ford, Lars-Erik Gadde, Hakan Hakansson
Importance of Communication in a Buyer/Seller Relationship for Complex Products
In any business transaction, the relationship between the buyer and the seller is essential because it determines aspects such as pricing and conflict resolution. Effective communication between the two major stakeholders can help to establish long-term advantageous relationships out of simple transactions. Besides, good communication plays a role in building consumer satisfaction and brand loyalty. Furthermore, this communication helps to create sound marketing decisions since it allows industries to determine the best ways to present new products that suit the needs of their consumers to the market.
The pertinence of customer satisfaction has influenced intensive researches on the mechanisms to create stable buyer/seller associations to enhance efficiency. To create an efficient comprehension with buyers, firms should make good purchasing decisions; one such move involves the acquisition of supplier information. In a way, communication is essential in the implementation of sound management policies to enhance the entire development of an organization. This study will highlight the importance of communication in a buyer-seller relationship in industrial markets to justify the efforts toward the optimization of the relationship value.
Buyer-seller communications help to reinforce conventional ideas in business management, marketing, and purchasing. Such ideas encompass the market, marketing, purchasing, and positioning. The idea of the market in management involves a group of similar things. Such as the total volume of sales produced by suppliers and all the clients the purchases similar products. On the other hand, the idea of marketing incorporates the marketing mix concept as well as aspects of general marketing such as after-sales service and advertising (Ford et al., 1998).
Meanwhile, the idea of purchasing entails the mechanisms employed by businesses to ensure that supplies are available at a time, convenient to consumers. This parameter (purchasing) should also seek to cover two problems associated with a business customer. The first issue involves rationalization, which relates to sensitivity towards ineffective use of expensive employees, production-inclined wastage, and overwhelming rate of failure in elements.
The other concern emanates from positive factors such as rapid growth of sales of a company’s products because supplies’ shortage. Conversely, the idea of positioning relates to strategies that a business should embrace to compete effectively in the market. Some variables that could aid to make positioning decisions are inclusive of product demand and innovation potential (Ford et al., 1998). Precisely, positioning requires an intensive market research to ensure that all demands of a given market are met effectively.
Maintaining an effective buyer-seller communication enhances the sustainability of a business. Thus, it fulfills the primary purpose of a business’ existence. It is worth to note that startups tend to fail because they do have exclusive consumer relationship models. The failure to establish a viable relationship with customers reduces the chances of revenue sourcing. Without financial incentives, businesses are rendered obsolete, leading to their closure. Client relationships exhibit certain characteristics, including continual change, consumer involvement, uniqueness, and complexity (Ford et al., 1998).
Concerning continual change, it should be noted that consumer relationships exhibit some instability given that products, attitude, and knowledge are likely to undergo modifications. On customer involvement, clients play a central role in dictating the speed and direction of change in the relationship; while active engagement of clients in a business indicate positive relationships, passivity signifies poor performance of a given business.
Regarding uniqueness, companies or businesses are unlikely to have many customers with similar characteristics; besides, it illogical to generalize that a small sample of clients represents a large number of others. Precisely, each business has a unique selling proposition that makes it totally different from another. Based on complexity, intricate consumer problems determine the primary client relationships of a particular supplier and their offering (Ford et al., 1998). In this context, an offering can exhibit features such as product, service, advice, logistics, as well as price and costs.
Buyer-seller relationships also enhance the knowledge about the significance of suppliers in a business. Some of the positive roles that suppliers play in a company include contributions towards cost reduction and overall development. Examples of costs that suppliers help to reduce relate to production, good handling, storage, capital, administrative and development. Supplier contributions to cost reductions through enhancing sound decision-making on varied aspects such as specification on products to buy (Ford et al., 1998). Relating with buyers allows business organisations to identify needs, which is followed by the identification of relevant suppliers. Buyers can also give salient suggestions about suppliers based on the quality provision.
Meanwhile, the problem-solving ability of supplier relationships is essential in creating avenues for innovation, which facilitate the process of revenue generation. Biemans (2018) states that complex products, unlike other conventional easy-to-use products require special instructions for use by the clients because of the costly outcomes that can result if they are sold to users without the special instructions. The sophistication that characterize the use of complex products necessitate communication between the seller and the buyer of these products.
Communication gives meaning to the buyer/seller relationship increases the utility derived from the complex products and perfects the execution of the agency role assumed by the seller who is either the manufacturer of the product or an independent business person who represents the manufacturer.
Communication in buyer-seller relationships complete the transaction cycle in the marketplace. Without customers, commercial settings are incomplete, which means that no company can deliver goods or services without engaging salient stakeholders such as intermediate clients, distributors, and final consumers. For instance, in a case involving the development of a car, many entities must be involved because no single company can make a car; this means that the company must liaise with settings dealing with processes such satellite navigation and computer controlled ignition to come up with a whole (Ford et al., 1998).
The fact that technology is developed between companies makes buyer-seller partnership indispensable. Buyers and sellers have an obligation to maintain constant communication with one another to enhance efficiency in business dealings. The dependent nature of the commercial sector implies that no company can incept and implement its personal autonomic mechanism using their resources.
For example, supermarkets and banks need one another to survive effectively. Based on networking principles, all are companies need relationships with other entities such as customers, co-developers, and distributors for their survival and advancement. Concisely, business associations are linked to one another in a network across business landscape (Ford et al., 1998). In addition, it is impossible for one company to regulate all the stakeholders associated with it.
The communication between an industrial seller and buyer will demystify the complexity of the products being sold to the buyer. For example, when the buyer makes a clear description of the product he or she requires for his production process, the seller is in a position to avail products that suit the descriptions of the buyer. For example, an industrial seller who sells printers must establish the specifications of the printers required by the buyer. In this case, the buyer must specify the type of printers they want to buy, the type of material to be printed by the material, the quantity of work they look forward to do with the printer within a specified duration and the environment in which the printer is to be used (Muller, 2017).
After receiving such information, the seller will be in a position to offer the printer with specifications that match the type of printing work of the buyer and which can work efficiently in the buyer’s production environment. The industrial market involves transactions that are meant to facilitate the production of other goods. As such, the buyer/seller relationships in this industry should be based on communication as a way of ensuring that the quality of goods produced using inputs purchased through the relationship are of the right standards (Karjaluoto et al., 2015).
For example, a seller of raw materials used in the production of medicine should make sure that he or she communicates clearly with the buyer (pharmaceutical company) during their transaction to understand the specific needs of the buyer and to sell to the buyer only when the supplies fit the buyer’s input description. Muller (2017) states that the failure to achieve clarity in the communication between the buyer and seller of complex industrial products will lead to costly events like the returning of products to the seller, costly after-sale services, poor quality products at the buyer’s premises, and tarnished reputation on the part of the seller.
Communication between the buyer and seller not only lead to a good relationship between the seller and the buyer but also improves the reputation of the industrial seller who benefits from referrals or recommendations that boost his or her business. Based on Werani (2001), the communication between buyers and sellers can be determined based on varied aspects, including long-term orientation, relationship-specific investments, contractual safeguarding, interaction frequency, and change of contact person.
Long-term orientation is a core indicator of both cooperative and non-cooperative business relationships between buyers and sellers. On the other hand, relationship-specific investments determine the interdependence of key stakeholders helps to incept an effective coordination of all business-based activities. Conversely, contractual safeguarding relates to the legal or binding agreements between buyers and sellers in industrial markets; this aspect could encompass contacts with suppliers regarding the delivery of certain goods within a specified period. Meanwhile, the frequency of interaction has to do with intensified mutual coordination among partner for the sake of efficiency. The change of contact person is necessitated by a reduced proportion of interaction partners to improve business operations.
The industrial market is characterized by mass production of goods and services. Therefore, any miscommunication between the seller and the buyer can be costly to the buyer in the form of poor quality products that may not be sold in the market. The main aim of the seller is to make profit from his or her sales and the aim of the buyer in the industrial market is to purchase those goods that will ensure that his product ion process is optimal. The seller looks forward to having return sales from particular buyers because the repeat sales keep him in business.
Similarly, the buyer seeks to produce goods that will address the demands of consumers without any shortcoming concerning quality (Karjaluoto et al., 2015). Therefore, as the industrial buyer and industrial seller engage in business, it is important that the needs of the buyer and the supplies presented to the market by the seller be understood well.
Claycomb and Frankwick (2004) state that the communication between buyers and sellers is critical in facilitating conflict resolution and buyer search. On conflict resolution, an organization that values communication will critically review client feedbacks to identify varied weaknesses in the delivery of services; this move would enable it to fix key issues to win the trust of its consumers. On the other hand, buyer search is influence by organizational features such as buyer experience, duration of relationship, and the size of company. In industrial contexts, the buyer/seller communication develops with time in relation to episodes of interaction that encompass acts and counteracts.
Most organizations tend to rely on adaptable changes that satisfy consumer needs. One way to analyze adaption s in the industrial sector is the social exchange theory. This model perceives relations exchange as dynamic processes that are bound to experience continuous changes over time. In this context, relations exchange implies that buyer/seller communications are counterpart-specific, given that they are likely to involve symbiotic associations (Cristina, 2014). Buyer-seller relationships are also reliant on task factors. Such aspects incorporate interaction objects, including exchange of parts, materials, and components. The exchanges involving salient products results to certain investments; this could force both buyers and sellers to incur high switching costs.
Buyer-seller communication helps in effective marketing since it enables an organization to establish effective management processes with different audiences. The engagement of varied audiences allows industries to develop and present customized messages for different stakeholder groups. In the era where communication revolution has become a crucial entity of the society, entities utilize new media and information technology. The main aspect of technology that most organizations utilize to communicate with the masses is the Internet.
Presently, every organization has an interactive website, which offers a unique opportunity for buyers or client to interact with varied facets of the company; some functionalities that the Internet makes possible are inclusive of the access of personalized compartment of marketing tools, non-personal tools compartment, and industrial cyberspace (Elsäßer & Wirtz, 2017). Despite the improvement, there is a need for more research on industrial marketing. Bachkirov et al (2016), cultural factors could also shape buyer-seller communication in the industrial goods sector.
In the Arabian Gulf, for instance, there are components of national culture that influence negotiators to act in a given way. This aspect is largely influenced by globalization, which plays a crucial role in improving the growth of international trade. The gross domestic product (GDP) is influenced UK trading activities, considering that the UK perceived the Arabian Gulf as a viable trading setting. Buyers in this region are usually encouraged to buy if the they are praised for their attainments; thus the activity (praising) creates an inspirational feeling that motivates them to purchase.
Communication in a buyer-seller relationship is efficient for strategic management. It allows an organization to identify and prioritize internal and external shareholders that influence overall organizational performance. What is more, communication oversees the identification and prioritization of critical variables of an organization that could interest every stakeholder (Elsäßer & Wirtz, 2017). Besides, communication ensures that strategic communication connects every crucial aspect of an organization to stakeholders in the best way possible.
Through Business relationships, companies can determine the cost and benefits that each company needs to incur and when they should be incurred. The price of an item is negotiated among the companies involved in the transaction so as to minimize under pricing or overpricing of items. This situation creates a common picture where everyone knows what is expected of them (Ford et al., 1998). Precisely, this kind of networking based on mutual understanding leads to strong relationships among the parties involved.
The buyer-seller communication also helps in the transmission of knowledge and information across the network. It acts as a vehicle through which new ideas and alternative working ways may be transferred. Businesses, for example, share ideas especially on matters of technological developments. A close link exists between the value of technology of a business and the developing technologies of its suppliers and customers. Each side of the technology is regarded as an important asset where businesses can share important information on how to improve their businesses (Ford et al., 1998).
Companies can also modify their technologies in order to solve particular problems in the business, including how to reduce or eliminate inefficient logistics. The combination and recombination of technology enhances the economic capacity of a company as well as providing means through which the new technologies can be commercialized to facilitate development. Most managers use technological resources to meet the requirements of their final customers (Ford et al., 1998). For this reason, they cannot make their own individual decisions but rely on a series on networks with their customers, suppliers, development partners as well as competitors.
A business relationship based on communication between buyers and sellers also promotes network development. Through interaction with customers and suppliers, the company can gain access to other parts of the network. Operating in a business relationship tends to be cheap (Ford et al., 1998). This aspect is because the expenses involved in sourcing for external information is minimized by utilizing the experiences and information from people within the relationship; this situation further reduces development costs. Integrated information sharing systems also reduces administrative costs.
Business relationship between suppliers and business owners often help in offsetting the costs involved in business operation (Ford et al., 1998). For example, where a supplier is allocated a shelf within a supermarket, he or she will be required to pay the owner of the supermarket for that space. To effect change in a network, a company must have a well organized structure and efficient resources needed to carry out the change. Changing counterparts is also time consuming and involves considerable parts.
The knowledge and information invested in the previous relationship may also be distorted in the event of changing partnership. Such costs make it difficult for a company to seek new relationships (Ford et al., 1998). Having a stable relationship with a regular and reliable supplier is cheaper than having to set deals with new suppliers who might come with different prices for their offerings.
An inter-business relationship involving buyers and sellers creates familiarity among the involved groups. As a result of working together, one becomes familiar with other ways of working, which further builds trust. People can share ideas and solve their problems in an easier and quicker manner. In most cases, customers do not have close contact with the product manufacturers; instead, they deal directly with intermediaries.
Customers, thus, have fewer suppliers to manage and tend to gain financially from the intermediaries who are usually very competent, especially in dealing with the manufacturers (Ford et al., 1998). In addition, the goods offered by the intermediaries are often tailored to the customer’s requirements.
Communications helps to identify business intermediaries, which are a crucial link between manufacturers, suppliers and customers. They improve efficiency in logistics and sales activities through the transportation of goods to their respective clients. Manufacturers are normally faced with the challenge of finding appropriate distributive channel who can deliver the goods to intended end users. Use of intermediaries as purchasing agents for the customers makes work easier in distributing the company’s outputs (Ford et al., 1998).
Furthermore, interconnections help individual companies satisfy their ambitions of gaining control of the surrounding network so as to maintain their positions and remain relevant. Each company therefore strives to manage its relationship with its counterparts and influence them in the direction they wish. It is critical to note that no company has sufficient supply of all the resources necessary to enhance its existence or sustenance.
In this regard, each has to depend on the skills, technologies and resources of the customers, suppliers and the distributors. Business relationships enable companies to have access to knowledge of its counterparts in order to gain competitive advantage over them (rival entities) (Ford et al., 1998). Companies that operate in isolation are unable to exploit their resources and skills necessary to solve their problems and sell their offerings. Thus, business relationships are the basis of a company’s growth and development.
This study provides a detailed discussion on the importance of communication in a buyer-seller relationship. Through communication, buyers and sellers learn many things from another. Apart from information about suppliers, the communication between the two factions is critical in network development and solving organisation problems.
Precisely, communication between buyers and sellers is the key to business sustainability considering that it keeps forges a cordial relationship that constitute business environment. For instance, it eases logistics and sales that guarantee profitability in a business. In this respect, every business has an obligation to strive towards the establishment of an effective communication with its consumers to improve overall efficiency.
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