HBS Working Knowledge writes about research done by HBS professor Narakesari Narayandas about how “buyers and sellers in mature industrial markets can turn single transactions into long-term beneficial relationships by a deeper understanding of the complex connection between the two.” Three questions addressed are:
1) From the suppliers viewpoint, does it pay off to be in long-term customer relationships?
2) If yes, how do you as the supplier get started?
3) If you the supplier are in an arms-length transactional relationship, how do you move it into a fuller relationship?
A few pointers:
Suppliers increased sales over time. If you get in with fewer customers for a long time, you get a greater share of wallet from the fewer customers (as opposed to more mass market customers), he said. Manufacturing costs went down. Even in long-term relationships, opportunism is always shown. Customers still are opportunistic, customers still look out for themselves.
To explain how he came to answer question twoabout starting a customer relationship from scratchNarayandas first told his audience about the classic vendor-customer standoff. The vendor wants money first; the customer sits back with arms folded and replies, Prove to me that you can do what you say….Rather than going after the entire volume, break up the needs into different parts, and try to initiate a relationship using one component, selling only this one component, he advised.