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B2B Relationships on the Fast Track

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Journal

Authors: Mariachiara Retuccia and Renaud Legoux

Journal: B2B relationships on the fast track: An empirical investigation into the outcomes of solution provision. Vol. 76. Industrial Marketing Management (2019): 203-213

Reviewer

Dr. Brady Brewer, Assistant Professor

Summary

Supplier provided solutions describes the action of a supplier providing services that complement the main product offering. Such service-led growth strategies are frequently referred to as “customer solutions” where companies move from a stand-alone product offering to a much more complex and customized integration of goods and services that address specific customer needs. This process is very customer relationship driven as discovery of customer needs leads to a specific offering. This adds to the value bundle being offered to the customer in hopes of increasing customer retention and sales volume and enhancing cross-selling activities. However, these product offerings, given the time of discovery and development of the value bundle, can be costly to create. The impact of these service offerings are hard to measure, and moreover, may have different impacts for customers in different stages of the relationship life-cycle.

The authors identify several managerial implications from this research. First, suppliers can boost potential growth of new or recent customers at a faster pace by offering service offerings along with a standalone product. The authors find that not only do suppliers grow sales faster, but the length of relationship is also increased. One reason for this is that due to the service offering increasing the value of the standalone product, it increases the switching costs for the customer, thus increasing the customer’s incentive to stay with the supplier. However, the results were mixed for more advanced customer relationships. The research finds that while the service offering was crucial for maintaining customer relationships, these product offerings did not lead to a significant amount of sales growth for those customers, nor did it lead to a significant amount of cross-selling. The implication here is that managers should be aware of the more limited development potential of these established customers.

What this means for Food and Agricultural Business

One of the phrases I hear most when interacting with agribusinesses all throughout the agricultural supply chain is “who is going to be the next Amazon.” As digital platforms, information sharing and data revolutionize industries across the globe, agribusiness leaders know that the agricultural sector is not immune to this transformation. These processes and technologies allow for innovative ideas and shine light on cost cutting measures throughout the supply chain. However, there is another side to this transformation that agribusiness is just as focused on. While these new technologies and data allow for platforms that may reduce customer interaction and cost cutting measures, they also open up new possibilities of service products that complement traditional inputs. For instance, seed suppliers have long offered agronomic services that complement their legacy product lines. These services enhance the value bundle to the customer, strengthening customer relationships and loyalty. However, these services do not come free to the supplier. Some of the costs are built in to the price of the legacy product while other times they may be priced à la carte.

Thus, while online ordering platforms and data continue to reduce customer interactions in certain processes, they open up new pathways to interact with the customer. Certainly, survey and anecdotal evidence show that businesses struggle with fully utilizing the data they are producing. Some suppliers have been keen on pairing their legacy products with service offerings that not only enhance the product they sell, but improve the profitability of their customers’ business as well. While returns to these complementary services are hard to measure for the supplier—especially when pricing is all inclusive of the legacy product—this research shows that customers, particularly ones in the early relationship life-cycle, respond to these offerings. This enhances revenues and increases loyalty of the customer.

As data becomes a bigger topic in the agricultural sector, how agribusinesses respond to these new opportunities may define who the suppliers of tomorrow will be. Farmers, processors and retailers alike know the value of this information but struggle with how to use it and extract value. As previously mentioned, seed retailers have long used this type of customer relationship strategy by offering agronomic services, the question now becomes how this type of strategy is applicable to other products for the farmer, and more broadly, every stop along the supply chain all the way to the consumer.