Paper info: Conceptualising Business-to-Business Relationship Value
Conceptualising Business-to-Business Relationship Value
Macquarie Graduate School of Management
University of Otago
Place of Publication
The paper was published at the 21st IMP-conference in Rotterdam, Netherlands in 2005.
“The value of relationships has been enormous because it has made the pain more bearable” claimed the manager of one large company that participated in our research.Building and maintaining relationships in business-to-business (B2B) contexts involves sacrifices by theparties involved, whether in time or money or by precluding the development of relationships with otherparties. Relationships also deliver benefits which may or may not surpass these costs. The net value of a relationship can be thought of as the difference or ratio between these costs and benefits.We have conducted extensive case-based research into B2B relationships and found that relationshipsdeliver value in forms that go beyond simple financial considerations.We find that B2B relationships deliver value in four different forms, each of which can be indicated in anumber of ways: 1) Personal value, indicated in customer retention and referral; 2) Financial value,expressed through increases in efficiency, share of business/wallet, share of market, and received price;3) Knowledge value, expressed through market intelligence, idea generation and innovation; and 4)Strategic value, experienced through gains in long term planning and access to extended networks.Personal value is connected to another relational outcome - non-economic satisfaction. We observed that when personal value is found in a relationship the parties are more willing to stay, as well as more willing to recommend their business partner to others.Relationships may also permit sellers to achieve higher prices or either/both parties to reduce their costs of dealing with the other. We call this type of value ‘Financial Value’ which is linked to economicsatisfaction with the relationship.Relationships allow communication to flow between parties. That is, parties share information, whichmight include market intelligence, feedback on their performance, methods to improve processes or new ways to manage their business. The parties also are more likely to work together in ‘idea generation’ teams. Put another way, the parties learn from one another, which we regard as ‘Knowledge Value.’ We also found that companies that maintain relationships experience longer time horizons for planning, as well as access to extended networks from which they can benefit. This provides the parties with a competitive edge that that we have called ‘Strategic Value’.