Managing Business-to-Business Relationships
This course is designed to train and enhance the students’ knowledge and skills in business-to-business (B2B) relationship management. This is an important topic for three reasons. First, B2B transactions account for a large part of the economy. By some estimates, between half and two thirds of all transactions in a developed economy take place in B2B relationships and more than half of all employment in most countries is found in B2B markets. According to input-output tables from Statistics Norway, in Norway, B2B-transactions (sales to Norwegian companies and the Norwegian government as well as exports) account for 67% of total use (i.e., sales value). In comparison, household consumption accounts for 18% of total use.
Second, B2B marketing and managing relationships with business customers is different from consumer marketing. For example, individual transactions are usually much larger, more complex, and more strategic, and require more attention and dedicated organizational structures, such as contracts, that create incentives and promote collaboration.
Third, B2B marketing has changed markedly over the last couple of decades. For example, in most OECD countries the share of manufacturing has fallen while services now account for well over sixty percent of total gross value added. Notably, the majority of service value added is B2B. Also, among what we typically consider as “industry value chains” (as introduced by Michael Porter), we see major changes. More than sixty percent of Fortune 100 firms now offer “solutions” rather than pre-developed goods and services.
Understanding B2B marketing and in particular how to manage B2B relationships, is therefore essential for those who want to succeed in marketing and management roles within B2B businesses.
The course takes a model-based approach to teaching the topic of B2B relationship management. A model-based approach means that the students learn to understand and use models of how B2B firms behave and make decisions. The broad structure of the course is based on Brandenburger and Stuart’s (1996) model of value capture in value chains. This model makes a clear distinction between value creation and value capture, and different parts of the course address these different topics. To understand value creation in B2B relationships, we draw on marketing literature around customer solutions and the problem solving approach to strategy. To understand value capture in B2B relationships we draw on various transaction cost theories, such as agency theory, relational contracting theory and transaction cost economics. Finally, we use the insight into how firms create and capture value in B2B relationships as a basis for understanding how B2B firms can develop marketing strategies.
- Introduction to the course and to B2B relationships and B2B marketing
- Efficient value capture in B2B relationships
- Creating value in B2B relationships
- Developing B2B strategies for value creation and value capture
Learning outcome knowledge
Upon completion of this course, students will:
- have a basic understanding of the nature and role of B2B relationships;
- understand how firms can mitigate governance problems through various governance mechanisms, such as incentive contracts, relational contracts, detailed formal contracting, and network governance, to both motivate value creation and ensure efficient value capture;
- understand how value is created in B2B relationships through problem formulation and solution search; and
- know how development of B2B strategies relies on understanding B2B relationships and their attributes, and recognize the distinguishing characteristics of developing B2B strategies, such as product form decisions and value-based pricing.
- Written assignment: 30%
- Class participation: 30%
- Home exam: 40%