BU5845 INDUSTRIAL MARKETING

MAHESH RAMESHAN

The Company Accenture is a global management consulting, technology services and outsourcing company, with more than 223,000 people serving clients in more than 120 countries. Accenture collaborates with clients to help them become high-performance businesses and governments. Using its extensive industry knowledge, service-offering expertise, and technology capabilities, Accenture identifies new business and technology trends and develops solutions to help its clients:

Enter new markets. Increase revenues in existing markets. Improve operational performance. Deliver their products and services more effectively and efficiently. http://www.accenture.com/us-en/company/overview/description/Pages/index.aspx From the company description itself (see the underlined words above) it is obvious that Accenture gives utmost importance to relationships with customers. The purpose of a business is to create and keep a customer (Levitt, 1983). So it can be said that Customer relationships are the most important relationships of any business (imp 76).In contrast to companies selling products to customers Accenture collaborates with its clients to provide solutions to their problems. Accenture operates solely in business markets. The business market for a company generally has fewer but larger buyers than the consumer market. (Kotler and Amstrong 303). It provides services to private and government organisations from all industries. Some of the clients of Accenture are Microsoft, Cisco, US Army, Virgin group etc.

The business buying process is the decision-making process by which business buyers establish the need for purchased products and services, and identify, evaluate and choose among alternative brands and suppliers. Companies that sell to other business organisations must do their best to understand business markets and business buyer behaviour. (Kotler and Amstrong) Business customers are not looking for a product but a solution for their problem, from the supplier (imp3). The solution to the problem is usually a combination of product, service, advice and logistics. (imp 3) The clients of Accentures management consulting division usually approach the company to find a solution to a problem. For example, take the case of Anglo American, one of the worlds largest mining companies. It approached Accenture to find solution to two major problems - to secure enough supply to meet demand during high growth period and to find ways to manage input costs so that the company can stay profitable during recession. Accentures solution to the problem consisted of product, service and advice. Accenture implemented new procurement management systems, provided training for staff, and provided key insights not only on how high-performance businesses structure and run their procurement functions, but also how to optimize a global operating model for scale, value, and 1 5 AUG 2011 STUDENT ID: 51018595

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MAHESH RAMESHAN

flexibility and risk mitigation. http://www.accenture.com/us-en/Pages/success-anglo-americanprocurement-transformation.aspx. The problems usually requires the customer and the supplier working together to arrive at a solution. The above example not only illustrates the difference between the needs of business clients and customers but also the importance of relationships in business markets.

A number of factors affect the business buying process. The business buying is in many ways different from consumer buying. Business purchase generally involves more buyers and a more professional purchasing effort. (kotler 305) There are also a lot of individuals involved in the buying process. It is necessary to identify who makes the decision in order to sell the product. It is a really challenging job for the sales engineers/representatives to identify the right person in a client organisation to sell to. There are basically five roles to be played by different individuals in a buying process. They are users, influencers, buyers, deciders and gatekeepers. There is also a great deal of difference in buying decision making of private and government clients. The government buying process is often complex and include a lot of paperwork, bureaucracy, emphasis on low bid price etc. Accenture has many government clients such as the US Army, other public organisations etc. It should have a dedicated marketing department for government market. Relationship can be used by Accenture as a device to achieve efficiency, innovation or influence others. Among these Accenture almost always have to use relationship as a device to influence the client for the benefit (finance, resource, etc )of the company. When relationships are used as a device to influence customers it is based on relative problems, uncertainty and the ability of company and customer.imp44 45 During a buying process most companies are faced with three uncertainties need, market and transaction uncertainties. Need uncertainty arises when the client has a problem and it cannot state the requirements to Supplier. Market uncertainty arises when the client is unaware about the supply market options available to it. Finally transaction uncertainty is the clients concern whether the supplier can deliver the requirements. Imp 45-46 Accenture can manipulate the customer with a particular uncertainty by using any of the abilities Problem solving ability and transfer ability. Problem solving ability is most effective when the customer is faced with need or market uncertainty. This ability helps Accenture to solve the clients problem and to design a solution. When Accenture uses this ability it can charge more price from the client than when just supplying a product that the client orders. For example we can take the case of the Accenture client 3 Italia. 3 Italia is a leader in Italys telecommunication industry. 3 Italia wanted to reduce the time taken for new product development and also wanted help in managing and operating 2 5 AUG 2011 STUDENT ID: 51018595

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MAHESH RAMESHAN

delivery over time. So they wanted Accenture to define a new business model and service delivery center to serve its customers. http://www.accenture.com/us-en/Pages/success-3italia-wireless-delivery-centre-summary.aspx. Here the client has not ordered a product or a certain predefined service but a solution to their problem. So it is all up to Accentures problem solving ability to arrive at a solution. Transaction uncertainty forces the client to interact strongly with suppliers to check everything is going as planned. The client can instead depend on a reputed supplier like Accenture whose previous achievements are known to all. Transfer ability requires the company to provide solutions to customers problem quickly, easily, consistently and at the promised cost.imp 47). But there is a catch, since the different abilities of the supplier require different organizational flexibility and investment. Accenture has different divisions of the organization dealing with different types of clients. So the company can adapt to the requirements and can exploit the uncertainties of the clients. For example the clients of the BPO business generally have transaction uncertainty while he clients of consultancy division usually have need and/or market uncertainty. The abilities of the supplier and the uncertainties of the customer and the ways in which these are utilized affect the type of relationship between them. Another side of this aspect is that the supplier (Accenture) also has its own uncertainties and the customers can influence it with their capabilities. Relationships are the most important assets of Accenture and for that matter any company. Relationships take time to develop in to a stable state and depend on a variety of factors. Ford et als model is very useful in understanding the stages in the development of a relationship.

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BU5845 INDUSTRIAL MARKETING

MAHESH RAMESHAN

The relationship develops through the interaction between the customer and supplier, cocoordinating activities of the two and adaptation. The initial interaction between the customer and supplier is a necessary condition for relationship development. If these interactions become successful and lead to business then these two parties have to coordinate their activities. It is this coordination that decides the nature of the relationship to a great extent. Imp 71. As the business progresses both parties may have to make some adaptations in operations, facilities etc. Whatever the pattern of development of a relationship, we can examine it using the three critical processes that underlie the formation of all relationships (H_akansson and Snehota 1995): actor bonds, activity links and resource ties. We can study the relationship between clients and Accenture in the Business Process Outsourcing (BPO) department. The interaction between the clients purchasing unit staff and Accentures marketers will create actor bonds between them. Once it develops into business then they will coordinate their activities which will lead to the formation of activity links. For example the activities of the BPO need to link with the activities of the client organization. Consider a client outsourcing procurement to Accenture. Accenture should coordinate its working in relation to the client so that deliveries reach the client in time thus forming activity links. The business may require both parties to invest together in some resources, in the above case it can be software for electronic procurement management, thus forming resource ties.

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MAHESH RAMESHAN

The involvement of two companies in the relationship depends on the strength of actor bonds, activity links and resource ties. Imp 72 The level of involvement in turn determines the effect of relationship on the supplier and the client. All relationships involve a lot of variables and are difficult to manage and will have problems. This facet points out the importance of managing problems in relationships. In order to manage relationships effectively the company also needs to understand the economic value of relationships and should be able to assess its relationships with clients. Imp 73

Finding the value of a customer relationship is a very difficult task as it involves measuring both tangible and intangible costs and benefits. To manage the relationships purposefully Accenture not only should consider the value of the relationship to the company but also to the client. Not all high involvement relationships have high value. So it is not correct to assume that it is always good to have high involvement relationship with all clients. This is because high involvement relationships have some important disadvantages along with advantages. Some of the pros and cons of high involvement relationships are given below: Benefits It can create facilitate effective communication and flow of information. It can increase predictability, reduce problems of misunderstanding and enable both companies to cope with their uncertainties. It can enhance the efficiency of the two companies_ combined operations and activities and facilitate a division of labour between them based on their respective abilities and resource investment. Drawbacks A high-involvement relationship involves considerable investment by the supplier and customer and is likely to take a considerable time to achieve. It involves a significant element of risk that the potential of the relationship will not be achieved. A high-involvement relationship constrains the actions of the two companies within that relationship. It reduces the companies_ abilities to change between relationships. So strategy of Accenture should be to form high-involvement relationships (strategic alliances) with only highly beneficial clients. Assessing Customer According to Ford et al 2003, managing a relationship with a single client has two aspects: To assess the relationship on a regular basis. 5 5 AUG 2011 STUDENT ID: 51018595

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MAHESH RAMESHAN

To use this assessment for carrying out the major activities involved in relationship management: communication; defining and redefining the offering; fulfilling the offering and monitoring performance.

To manage a relationship Accenture needs to evaluate a lot of issues related to it such as the history and current stage of relationship, potential and investment, atmosphere of the relationship, network and current operations.imp 76. The list of questions to be asked in each section is given in the table below: Once the assessment is over the result can be utilized to control the major activitiescommunication, defining and redefining the offering, fulfilling the offering and monitoring performance- in the relationship management to get the desired end result. The communication element is very important for Accenture as its management consultancy wing deals with providing advice to clients on various management issues. There will be a lot of interpersonal communication in a relationship. Each of these communications plays different roles at different times such as information exchange role, negotiation and adaptation role, crisis insurance role, social role and ego-enhancement role. Good communication decreases the distance between the companies. At the same time Accenture encourages good communication it should also be careful not to transfer key strategic information (such as confidential financial data) to clients. Managing the development of the offering to clients is particularly difficult and complex in the case of Accentures consultancy division as in most of the cases offering delivered to client does not consist of a tangible product but include less tangible service such as advice, suggestions etc. The value is delivered to the client when the service finally solves the clients problem. Because of the nature of the service provided by Accenture (especially the consultancy wing) it is essential to have good actor bonds, resource ties and activity links to fulfill the offering. The relative importance to the customer of the offering and its fulfilment can vary imp 81. For example, if a client outsources its telephone customer service to Accentures BPO wing then the client will expect company to deliver required standards from day one of its operation and consistently thereafter. But in the case of development of a new supply chain management system for a client, the offering can be modified and corrected taking time as the client values this differently from the above case. Monitoring performance Monitoring performance of relationships is a very difficult and this in turn creates problem for marketers to negotiate and determine price. Relationships can give value to both the supplier and the client. So Accenture should consider the financial performance of the relationship for both the company and the client and communicate it to the client. Marketers relationship 6 5 AUG 2011 STUDENT ID: 51018595

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MAHESH RAMESHAN

management and pricing policy must reflect the fact that the costs of keeping a customer are far less than gaining a new one. Imp 82 Accenture has to manage relationships with a number of customers from different industries. Since even managing a single relationship properly can be difficult as mentioned above, managing a portfolio of relationships is highly complex. Accenture has to develop clear criteria for allocating its resources, assessing the relationships and prioritizing them to suit the interests of the company. One possible method of analyzing customer relationship using relationship cost, net price achieved and relationship value is given below:

In short the main task for relationship marketers is to turn a prospective customer into an advocate. Conclusion

Pheng, L, S., 1999. The extension of construction partnering for relationship marketing. Marketing Intelligence & Planning. Vol. 17 Iss: 3. pp.155 162

Kotler, P. and Keller, K., 2008. Marketing Management. 13th Edition. New York: Prentice Hall. Ford, D et al. 2003. Managing Business Relations. 2nd Edition. England: Wiley. Christopher, M. et al, 1991. Relationship MarketingBringing Quality, Customer Service and Marketing Together. Oxford: Butterworth-Heinemann http://www.accenture.com/usen/company/overview/description/Pages/index.aspx http://www.accenture.com/us-en/Pages/success-accenture-hp-drive-businessresults.aspx http://www.accenture.com/us-en/Pages/success-3-italia-wireless-delivery-centresummary.aspx http://www.accenture.com/us-en/Pages/success-anglo-american-procurementtransformation.aspx 7 STUDENT ID: 51018595

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MAHESH RAMESHAN

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