Managing Business-to-Business Customer Relationships

Business suppliers and customers are exploring different ways to manage their relationships.57 One key aspect of strong customer relationships between businesses is the concept of vertical coordination.

The Benefits of Vertical Coordination

Much research has advocated greater vertical coordination between buying partners and sellers so they can transcend merely transacting and instead create more value for both parties.58

Building trust is a prerequisite to enjoying healthy long-term relationships. A number of forces influence the development of a relationship between business partners, including availability of alternatives, importance of supply, complexity of supply, and supply market dynamism. Based on these we can classify buyer-supplier relationships into eight categories:59

  • 1. Basic buying and selling—Simple, routine exchanges with moderate levels of cooperation and information exchange.
  • 2. Bare bones—These relationships require more adaptation by the seller and less cooperation and information exchange.
  • 3. Contractual transaction—Defined by contract, these generally have low levels of trust, cooperation, and interaction.
  • 4. Customer supply—In this traditional supply situation, competition rather than cooperation is the dominant form of governance.
  • 5. Cooperative systemsParticipants are united in operational ways, but neither demonstrates structural commitment through legal means or adaptation.
  • 6. CollaborativeMuch trust and commitment through collaboration can lead to true partnership.
  • 7. Mutually adaptive—Buyers and sellers make many relationship-specific adaptations, but without necessarily achieving strong trust or cooperation.
  • 8. Customer is king—In this close, cooperative relationship, the seller adapts to meet the customer’s needs without expecting much adaptation or change in exchange.
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