Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e- Business and
Organizational Customers
and Their Buying Behavior
Text © The McGraw−Hill
Companies, 2002198 Chapter 7
The relationship be-
tween Flex-N-Gate and
Toyota illustrates relation-
ship-specific adaptations.
Flex-N-Gate had a con-
tract to supply some of
the rear bumpers Toy-
ota needed for its U.S. facilities. After a while, however, Toyota’s quality control
people were unhappy about the number of minor defects in the bumpers. Further,
Flex-N-Gate’s deliveries were not as dependable as Toyota’s production people
required. Rather than just end the relationship, Toyota and Flex-N-Gate both made
investments to improve it. Toyota sent a team of experts who spent a lot of time
figuring out the reasons for the problems and then showing Flex-N-Gate how to
build better bumpers faster and cheaper. Following the advice of Toyota’s experts,
Shahid Khan (Flex-N-Gate’s owner) reorganized equipment in his factory. He also
had to retrain his employees to do their jobs in new ways. The changes were so
complicated that two of Khan’s six production supervisors quit in frustration. But
the trouble was worth the effort. Productivity went up 60 percent, the number of
defects dropped by 80 percent, and Flex-N-Gate got a larger share of Toyota’s busi-
ness. Toyota got something it wanted, too: a committed supplier that could meet its
standards and a big price reduction on bumpers.^14
A seller may have more incentive to propose new ideas that save the customer
money when the firms have a mutual investment in a long-term relationship. The
customer firm usually rewards the seller with more orders or a larger share of its busi-
ness, and this encourages future suggestions and loyalty by the supplier. In contrast,
buyers who use a competitive bid system exclusively—either by choice or necessity,
as in some government and institutional purchasing—may not be offered much
beyond basic goods and services. They are interested primarily in price.Although a marketing manager may want to work in a cooperative partnership,
that may be impossible with large customers who have the power to dictate how
the relationship will work. For example, Duall/Wind, a plastics producer, was a sup-
plier of small parts for Polaroid instant cameras. But when Duall/Wind wanted to
raise its prices to cover increasing costs, Polaroid balked. Polaroid’s purchasing man-
ager demanded that Duall/Wind show a breakdown of all its costs, from materials
to labor to profit. As Duall/Wind’s president said, “I had a tough time getting
through my head that Polaroid wanted to come right in here and have us divulge
all that.” But Polaroid is a big account—and it got the information it wanted.
Polaroid buyers agreed to a price increase only after they were confident that
Duall/Wind was doing everything possible to control costs.^15Even if a marketing manager develops the best marketing mix possible and cul-
tivates a close relationship with the customer, the customer may not give allof its
business to one supplier. Buyers often look for several dependable sources of supply
to protect themselves from unpredictable events such as strikes, fires, or floods in
one of their suppliers’ plants. A good marketing mix is still likely to win a larger
share of the total business—which can prove to be very important. From a buyer’s
point of view, it may not seem like a big deal to give a particular supplier a 30 per-
cent share of the orders rather than a 20 percent share. But for the seller that’s a
50 percent increase in sales!^16We’ve emphasized that most buyer–seller relationships are based on reducing the
customer’s total procurement costs. However, for completeness we should mention
that some relationships are based on reciprocity. Reciprocitymeans trading sales for
sales—that is, “if you buy from me, I’ll buy from you.” If a company’s customers alsoPowerful customer
may control the
relationship
Buyers may still use
several sources to
spread their risk
Reciprocity may
influence relationship