The b-to-b tango: Suppliers and customers need to stay in sync

The business-to-business relationship can be a bewildering one often filled with mixed signals and missed opportunities. In her research, Ruth Bolton, a professor of marketing at the W. P. Carey School of Business, has found that nurturing a trusting relationship with a client, along with having good communication between the supplier and customer and within the supplier firm, can turn a potential money-losing event into an opportunity to increase revenue.

Bolton first approached the impact of the personal touch in the client-supplier relationship when she surveyed 387 business customers of a large telecommunications company. Her findings showed that clients tended to place more weight on the personal relationship they had with a supplier than on the hard economic aspects of a deal.

A company's goal, then, is to "strike the right balance" between things like price and contract terms with employee-delivered services (EDS) such as customer support and strong social bonds.

"The key finding was that the value provided by employees, such has having a dedicated account representative handling your business, really has a lot more value than firms might have realized, and customers are willing to make tradeoffs," Bolton said.

Bolton found that suppliers with strong EDS created clients that renewed contracts, upgraded services and made good recommendations. Perhaps more importantly, good employee-delivered services helped smooth the path for possible relationship-ending incidents such as price increases or slow repair times.

However, when it comes to building a good, EDS-driven relationship with a client, Bolton found that it was important for a supplier to avoid a "one size fits all" policy. Owners and employees turn companies into living, breathing entities with their own peculiar likes, dislikes and quirks.

A supplier would do well to pattern their EDS to the particular character of each client company. That means getting to know the customer by getting them to actively participate in the service relationship and encouraging them to communicate their needs. This will go a long way toward eliminating unwanted on-site visits that consume the supplier's time and money and risk alienating the client.

"The business is about keeping things going and serving their customers," Bolton said.

"That last thing they want is you showing up — a supplier taking up their time. The only time when a visit is actually valued is when you do have some sort of ongoing relationship with a representative who can actually come and help you with something."

Many times, suppliers miss opportunities to get clients actively involved simply by not returning phone calls. Bolton said clients often initiate requests through calls, but many suppliers don't pay attention or track them.

"They tend to think, 'Ok, now we're going to go visit the company and dazzle you,'" she said. "But what the customer remembers is that last week they made a call to someone in the organization and the call never got returned."

Through further study, Bolton also has discovered that building a strong personal and financial relationship with a client can have not-so-obvious benefits as well. Mainly, a supplier can transform a mistake or a crisis with a product or service into an opportunity to get a client to actually upgrade service. In her latest study, Bolton looked at data from a supplier of system support services with 120 very large business customers in Germany and the United Kingdom who hold over 2,000 contracts.

In a new article Bolton writes that "customer dissatisfaction can be an opportunity for account management teams to 'migrate' contracts to higher service levels." However, that requires three factors to be in place: first, the supplier must have a good product and service track record with the company; second, the supplier has nurtured a solid personal and financial relationship with the client; and third, and perhaps hardest of all, there must be good communication within the supplier firm.

Bolton said that consistency is paramount to companies. They want their services and products to remain on a positive and even keel. For suppliers, that means striving to avoid extreme outcomes - good and bad - when dealing with a client. In her study, Bolton found that a company with a number of extreme outcomes on a supply contract was 85 percent more likely to renew the agreement. That compared to 95 percent for just one extreme outcome on a supply contract.

Obviously, too many extreme bad outcomes will cause a client to not renew its relationship with a supplier. However, Bolton also found that too many extreme good outcomes could hurt as well. While under-promising and over-delivering is an old business axiom, Bolton found that clients easily adapt to too much of a good thing, thus negating its impact.

"The problem is, if nothing ever goes wrong, then the customer never figures out what a wonderful job you're doing because you never have a chance to show them," Bolton said.

Where there is a good relationship with the supplier, customers are willing to forgive the occasional misstep, if it is just that, occasional. Bolton found that if a supplier has multiple contracts with a client and there is a problem with just one, clients are more likely to believe it is some unusual circumstance and will think, "Thank goodness we have Joe the supplier here that we're paying big bucks to who is going to solve it for us."

If consistency is generally maintained and a good EDS-enhanced supplier-client relationship exists, Bolton writes that suppliers can seize on a problem to actually convince a client to upgrade a service. To do that, however, a supplier's internal communications must be functioning optimally. The right hand knowing what the left hand is doing is critical, though difficult to achieve when the sales and service departments are speaking virtually different languages.

An account management team visits the key decision maker in the customer organization, while the technical people hit the front lines to actually deliver the service.

"Making those teams work together is kind of tricky. At times there happens to be a bit of an adversarial relationship there," Bolton said. "The sales people see the service people as letting them down, and the service people see the sales people as over-promising."

But if both teams can work together to improve internal communications, the result will be better communication with the client, increasing the chances of building a long-term and profitable relationship.