The company’s
performance has declined significantly since 1970 where it produced
100,000drums per week to its current level of about 10,000drums per week. This
decline has been attributed to increased competition, changing customer needs,
closure of important business segment, and relaxation of United Nations
standards for the transportation of hazardous goods.
The aim of this
report is to identify the main issue that the organisation needs to deal with
and recommend an appropriate strategy for doing so.
There has been
an increase in the level of competition in the packaging industry. This has
been supported by a number of factors which include an increase in the number
of competitors and relaxation of packaging rules hence qualifying a wider range
of packaging materials to be used on hazardous materials. The result has been
decline in the market share and demand for the company with its current
production being 10,000drums per week as compared to 100,000drums per week in
1970.
Decline in
market share is a big problem for the business because it limits its potential.
It could also lead to the organisation being less competitive and at the risk
of either closure or hostile takeover. For as long as there are more
competitive players in the market, Fibrestar’s chances of survival are low.
This is why there is need for a more creative approach to marketing.
The proposed
strategy for reversing the decline at the company is the use of relationship
marketing. Its definition and application in various contexts are explained in
the literature review section below.
Relationship
marketing is related to the trust-commitment theory. This theory states that as
the level of trust increase among parties, their level of commitment to each
other increases (Raggio et al. 2014).
In an organisation, this means that where the clients get to trust it, their
level of commitment and loyalty is enhanced. In other words, the
trust-commitment theory focuses on the fact that relationship marketing can be
an important tool for enhanced customer retention and loyalty. The model also
contains levels where the client is transformed from an occasional buyer, to an
advocate, a consultant, and to a partner (Raggio et al. 2014). At the partner level, the organisation gets to be
consulted even before the client decides on which products or services they are
likely to need. The consultation is of course an indication that the client has
confidence in the organisation and expects to purchase from it unless it
advises on them procuring the goods or services from a different organisation.
Relationship
marketing is an approach to marketing that emphasises the creation of
attachment or bond between the client and the organisation (Preechanont and Lu,
2013). Managers seek to strengthen these bonds because they tend to be unique
and difficult to replicate. Bonds create a form of social capital that makes
the parties to each want to remain within that relationship. The presumption is
that once a strong relationship has been created, a lot of time and emotions
will have been invested in it and the client would be reluctant to take a
similar amount of time forging new relations with other organisations
(Wongsansukcharoen et al. 2015). In
other words, relationships are a form of investment that stands to be lost if a
client switches brands. It is a switching cost which clients consider before
making a decision. This means that where the relationship is very strong, the
switching costs are very high; and this puts the customer at a situation where
they’d have to have a very compelling reason to switch organisations.
Relationships
between parties also tend to be unique where no two relationships can be said
to be identical (Kaufmann et al. 2015).
This rarity or uniqueness can be very helpful in customer retention. Even if a
rival organisation was to focus on relationship building, they would still have
a hard time replicating the kind of relationship already in existence. This
means that with effective relationship marketing, an organisation can ward off
increased competitors and solidify its hold on the market (Streukens et al. 2011). In a business to business
setting, the interaction is between organisations and not individuals. This
means that the relationship marketing approach needs to be more comprehensive
to capture the dynamic decision making nature in the organisation. The marketer
must not only understand the power structures but also understand that the
preferences of the organisation are influenced by factors other than the
personal considerations of the decision makers.
Sarmento et al. (2015) recommends the use of
trade fairs in creating opportunities for interaction between organisations. In
such an environment, the client organisation will have availed some of their
influential decision makers to be available to establish any relationships they
need to establish with prospective clients. For the relationship marketer, this
becomes a unique opportunity to create familiarity and acquaintance with many
decision makers at a time. This earns the organisation a little mileage when
the time for organisational purchase decision making process comes. Besides, it
is important for interactions to be meaningful and lengthy enough to promote understanding
of the ideas being shared. Trade fairs are just but an example of opportunities
for enhanced interactivity. Others could include organisational functions,
formal lunches and dinners, and even direct meetings with individuals within
the organisation. When forging B2B relationships, Sarmento et al. (2015) recommends that as many decision makers as possible
be involved. This would lower the risk of the one decision maker in favour of
the organisation being overruled in the decision making process.
In an
organisational context, a relationship is said to be strongest when it has
almost become part of the organisational culture to procure goods from a
specific organisation (Raggio et al. 2014).
This is often evident when the supplier is consulted in the course of designing
products to provide insight on appropriate supplies to be used. Indeed, every
organisation seeking to establish a strong B2B relationship aims to reach the
partnership level of a relationship where the client organisation seeks for advice
on various issues before finalising on production plans. Such relationships are
not only based on trust but also on the confidence that the supplier will do
everything possible to ensure that the unique needs of the organisation.
Strong
relationships tend to be related to the creation of some identity revolving
around the business. Relationship management should as effective as to ensure
that all involved in marketing the organisation bear this identity (Luo and
Kumar, 2013). It is very important to ensure that the clients do not feel like
they are dealing with different people whenever they interact with the
organisation. In fact, many organisations will try and ensure that there is one
person assigned to each client. The person responsible is expected to develop
inroads into the organisation through a network of interpersonal relationships
with the members of the organisation. As the strength of these bonds increase,
the organisation is able to retain such customers. This approach tends to come
with the risk of the key staff leaving with key clients depending on the
strength of relationships between them. However, Kaufmann et al. (2015) notes that this is often not a major problem as the
client organisations get to be attached to the organisation/brand more than
they get attached to the individual they have been dealing with.
Relationship
marketing in itself cannot yield positive results for the organisation: it must
be accompanied by concerted efforts in innovation and actual production (Chang et al. 2012). The goal of relationship
building is to gain an understanding of the unique needs of the client
organisation. These needs tend to be more complex than in the case of
individuals because they often tend to be ideas among individuals that grow
over time before being adopted by the organisation. The supplier would in this
case need to understand the decision making dynamics of the organisation and
beware of possible changes in the needs of the organisation even before such
needs are brought forward (Chang et al.
2012). Once they are made aware of such needs, the supplier can begin to
brainstorm on creative ideas that can be developed to meet these changing
needs. The ability of the supplier to anticipate the needs of the organisation
and presents timely solutions tends to be an important driver of confidence and
trust in the relationship. In fact, it is the most important factor that
clients consider besides timely production and cost.
Relationship
marketing needs to be managed in a manner that brings out mutuality: meaning
that both sides need to appreciate the need to be in that relationship (Albadvi
and Hosseini, 2011). This means that the marketer must understand what the
needs of the client are and come up with a pragmatic and creative way of meeting
these needs. Relationships start with rational assessment of the offer being
made before initial transactions are used to develop stronger bonds between the
trading parties.
In a
hypothetical situation, supposing there had been a strong relationship between
Fibrestar and its clients in the pharmaceutical clients, it probably would not
have needed to close the division. The company would have been informed of
changing needs and would have been given a chance to factor in these changes in
its product design hence retain these customers. The same hypothesis can apply
to the level of increased competition. Increase in the level of competition is
only high because the organisation is unable to inspire high levels of customer
loyalty.
It is, however,
important to appreciate that relationship marketing can only be sustainable if
it is accompanied by strategic and operational agility. The organisation should
be able to accommodate as many of the changing needs of the clients as possible
in a given span of time. Loyal customers do not switch brands without first
giving their preferred brands a chance to improve where necessary. The bottom
line is improvement in line with customer expectations.
The company’s
challenge could be stemming from its lack of understanding of the market. For
instance, the organisation needs to understand that increased sensitivity to
price does not mean that the clients prefer cotton to fibre. If the question had
been explored more intensively, it would have been established that all that
was needed was for the company to lower its prices slightly and the client
organisations would still prefer fibre.
This view is
informed by the fact that there is increased sensitivity to questions of
environmental sustainability. Even though the UN has reviewed its standards on
packaging of hazardous materials, the organisations still have a responsibility
to the consumer and to the environment. They would not overlook this responsibility
unless the cost of compliance was too high. Ways through which costs can be
lowered would therefore be highly appropriate. For instance, a strong
relationship marketing approach would inform the company about recycling
opportunities that can be created together with the clients to bring the prices
down.
This is the
essence of the trust-commitment concept where the clients are expected to
prefer to suggest improvements to the products and its features instead of just
switching to purchase from the next organisation. Going into the future, this
approach is expected to help the organisation to retain its current customers.
Highly effective and satisfactory initiatives by the organisation will also be
expected to lead to the current clients giving them access to their own
networks. Business organisations have in recent years grown the tendency to
operate within networks and this means that once trust has been established
with an organisation, it becomes easier to market to organisations within its
network.
Drawing from
insights in the past literature, the relationship marketing strategy should be
able to help the organisation to recover its market share and even grow much
faster than it has done in the recent past. However, structural weaknesses in
the organisation such as the duplication of marketing manager roles would need
to be addressed comprehensively to ensure that each officer is fully utilised
for the greater good of the organisation.
Based on the
analysis in the sections above and past literature, the strategy recommended is
the adoption of relationship marketing. This should be done by primarily focus
on building strong interpersonal bonds between Fibrestar staff and the staff of
the target organisations. A research phase is recommended for each of the
organisations with a view to understanding the power structures, decision
making processes, and the needs of the organisation. After this knowledge has
been gained, the organisation should seek to create opportunities for interaction
with the employees or managers of the targeted organisations. These meetings
can either be formal or informal but they ought to be organised in a manner
that encourages interactivity hence creating chances for bonding and
establishment of trust.
Where a
relationship has been created and the organisation contracted, the focus should
shift to consolidation or strengthening of the relationship. More members of
the client organisations that had not yet been involved can be reached out to.
The aim of this would be to ensure that the relationship between the two
organisations is strengthened and not just dependent on the few persons
responsible for the first purchase. The intensified interactions would also
help the organisation to understand any changing needs of the client even
before such needs are formally recognised. This would give it a head-start and
enable it to offer timely solutions for the challenges and preferences in
question.
The relationship
marketing should be adopted as one of the main strategies within the
organisation. Other strategies that must be implemented together with it should
include innovation management and operational agility to ensure that needs
identified is quickly accommodated in terms of the actual product and the
production processes.
The strategies
proposed in this section have been informed by the information covered in the
literature review section. The potential of trust and commitment to facilitate
client retention is the main reason why relationship marketing has been
proposed as a solution. The literature review has also shown that with
effective relationship marketing, the organisation gets to learn from its
clients about what needs to be done; including insights on what its competitors
might be doing. This helps in keeping the organisation innovative hence very
competitive in the market.
Albadvi, A. and Hosseini, M. (2011)
Mapping B2B value exchange in marketing relationships: a systematic approach, Journal of Business & Industrial
Marketing, 26(7), 503-513
Chang, S. et al. (2012) Building customer commitment in business-to-business
markets, Industrial Marketing Management,
41(6), 940-951
Kaufmann, H. et al. (2015) B2B and internal relationships and curative
international marketing: A polish case study, Industrial marketing management, 51, 69-81
Luo, A. and Kumar, V. (2013)
Recovering Hidden Buyer-Seller Relationship States to Measure the Return on
Marketing Investment in Business-to-Business Markets, Journal Of Marketing Research, 50(1), 143-160
Preechanont, P. and Lu, T. (2013) A
COMPARATIVE STUDY OF SMALL BUSINESS OWNER-MANAGERS' IDENTITY CONSTRUCTION IN
B2B RELATIONSHIP MARKETING AND BUSINESS NETWORKING DISCOURSE IN THE UK AND CHINA,
Journal of Enterprising Culture,
21(04), 495-532
Raggio, R.D. et al. (2014) Gratitude in relationship marketing; Theoretical
development and directions for future research, European Journal of Marketing, 48(1/2), 2-24
Sarmento, M. et al. (2015) Applying a relationship marketing perspective to B2B
trade fairs: The role of socialization episodes, Industrial Marketing Management, 44, 131-141
Streukens, S. et al. (2011) Return on marketing investments in B2B customer
relationships: A decision-making and optimization approach, Industrial Marketing Management, 40(1),
149-161
Wongsansukcharoen, J. et al. (2015) Social CRM, RMO and
business strategies affecting banking performance effectiveness in B2B context,
The Journal of Business & Industrial
Marketing, 30(6), 742-760
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