European Scientific Journal December 2013 /SPECIAL/ edition vol.4 ISSN: 1857 7881 (Print) e - ISSN 1857- 7431

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DIFFERENCES BETWEEN B2B AND B2C CUSTOMER RELATIONSHIP MANAGEMENT. FINDINGS FROM THE

CZECH REPUBLIC1

Karel Kolis, Ing. Katerina Jirinova, Ing. et Ing.

University of Economics in Prague, Czech Republic

Abstract

The purpose of this article is a comparison between Customer relationship management (CRM) in the B2B environment and B2C Environment. Literature shows significant differences; therefore the motivation of the research and hence the article was the verification of theoretical statements. Based on the literature review of CRM, an online questionnaire was sent. This research used 6 questions from the questionnaire. On a large number of respondents the differential analysis was made. Results prove the theoretical expectations: CRM in B2B and B2B environment are partially similar, but the mostly differs.

Keywords: B2B, B2C, CRM, difference Introduction

Customer relationship management (CRM) is well-known term during past decade. Brought by academics and implemented into the business by practitioners, it is nowadays well-used in many companies from different industries.

The purpose of this article is to compare the CRM approach between Business-to-business (B2B) and Business-to-consumer (B2C) relationships. The study was made on small and medium companies in service industry in the Czech Republic.

Literature review

Relationships between the company and customer are usually categorized by types of subjects on the customer side of the relationship2. Therefore the categories could be distinguished into Business-to-business (B2B), Business-to-customer (B2C), or Business-to-government (B2G). (Payne & Frow 2013, s.56) This article will mainly focus on differences between the B2B and B2C environment.

B2B and B2C

B2B is described as the form of relationship with the company on the side of supplier and another business company on the customer side. This business company could be represented by sole trader, company, or institution3. (Kumar & Reinartz 2012, s.261) B2B market includes big number of transactions, and is usually more complex (Davis et al. 2012; Saini et al. 2010; Hutt & Speh 2012, s.38). The complexity leans on number of

1 This paper has been published as a part of the research with financial support of IGA VE 33/2013 2 For the purpose of this study we will omit the cases where the supplier is not a business company, but individual as the consumer. 3 According to some sources the B2B environment includes government institution (Kotler & Armstrong 2009)

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people responsible for the transaction and number of steps in these transactions. (Payne & Frow 2013, s.56) Johnston and Bonoma (1981) define the group of people responsible for the transaction on customer side in B2B market as buying center. The complexity is higher also because of number of people involved seller has to identify and understand their needs and motivation. According to Davis, Golicic and Marquardt (2012, s.200) the number of people in the buying center varies depending on the importance of the transaction, its stage and character. The process is called decision making (Webster & Wind 1972, s.2). The trend in last decades in B2B environment according to Ulaga and Eggert (2006) are closer relationships and also decreasing number of relationships overall. Business-to-consumer (B2C) relationships could be described as a relationship with businesses on the side of supplier and consumers on the other side. The differences to B2B are described in following part. CRM

Building a relationship with customers is an important issue both for B2B and B2C. Mousavy et al. defines CRM as a wealthy popular strategy having hypotheses on the belief that collecting data and expanding the relationship with customers can be the best way to serve customers loyalty and subsequent profits(Mousavy et al. 2012)

Campbell et al. (2009, s.109) see customer relationship consisting from two perspectives: relationship breadth and relationship depths. Breadth represents phases or evolution of the relationship. Organizations develop strategies for moving relationships to a desired phase. By strategies Campbell et al. mean for example loyalty programs, etc. Reichheld presents CRM as a process of developing a relationship with customers which makes them more loyal. He also states that loyal customers are more profitable than non-loyal. (Reichheld 1996)

Customer relationship depth focuses on the factors that strengthen or weaken a relationship within a particular stage e.g. trust, satisfaction, etc (Campbell et al. 2009, s.109).

Javalgi et al. (2006) describe the four main components of service CRM: customer satisfaction, customer loyalty programs, customer retention programs and customer lifetime profitability. According to Reinartz et al. (2004), major CRM activities are customer interaction management (customer identification, acquisition, retention), customer relationship upgrading (cross-selling and up-selling) and customer relationship win-back.

Customer relationship management is often seen as technology-only approach. Many studies confirmed this assumption is based on false expectations and CRM cannot serve without other components (Kale 2004). Woodburn (2002, s.19) confirms this statement by warning that relying on the technology only could inhibit or destroy the relationships with customers. Chen and Popvitch (2003), supported by other authors (Coltman et al. 2011) include technology among the two other main CRM components people and processes. Differences between B2B and B2C environment

According to Kumar and Reinartz (2012, s.261), the transaction volume on B2B market is much greater than on B2C market. Several sources (Saini et al. 2010; Kumar & Reinartz 2012) state there are fewer subjects on B2B market, therefore the value of each transaction and amount in purchase is much bigger. Gummesson (2008, s.174) sees the biggest difference in B2B and B2C in the greater degree of independence between buyers and sellers in the former. Saini et al. (2010, s.366) show the evidence that the CRM technology leads to higher performance in B2B than in B2C relationships.

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Saini, Grewal and Johnson (2010) add another differences: in B2C relationship customers are less loyal and therefore more likely to switch. Davis et al. explain the bigger loyalty in B2B relationships by need of bigger reliability among trading partners (Davis et al. 2012, s.200). Because pure and discrete transactions are rare in B2B (Day 2000), the importance in B2B is not only about the product or service, but also in the customer relationship (Davis et al. 2012, s.200). The study and methodology

The main aim of the study is to discover differences between B2B and B2C relationships. The research was based on online questionnaire sent to random small and medium companies in the service industry in Czech Republic. Company samples were selected from Albertina database. The questionnaire contained 20 questions, but for purpose of this study, only 6 were used. An e-mail containing link to the questionnaire was sent to 30 674 randomly chosen SMEs. 2 462 replies were collected, and 1 701 were possible to link with additional information from the Albertina database.

From this amount were 1 091 samples from B2B relationship and 610 from B2C. Since the main aim of this study was finding differences between the two types of relationships, all the answers were analyzed for maximal differences between the two groups. The table shows ten most interesting results. Code Question with a specific answer B2B B2C

QA1 The customer satisfaction with your services are inquired by: [Social media and internet monitoring] 10% 27%

QA2 The key customers are determined by: [financial contribution to the company] 55% 29%

QA3 The key customers are determined by: [We do not differentiate customers, everyone is equal] 43% 67%

QA4 How do you select which customers have the right to better customer service? [Those who spend more money] 25% 15%

QA5 How do you select which customers have the right to better customer service? [Those who are prestigious, e.g. for the reference] 22% 11%

QA6 How do you select which customers have the right to better customer service? [We do not differentiate customers, everyone is equal] 43% 56%

QA7 The most common customer faults are in your opinion: [They do last minute orders] 45% 28%

QA8 The most common customer faults are in your opinion: [They ask about information that can be easily found] 12% 24%

QA9 The most common customer faults are in your opinion: [They pay after maturity] 65% 36%

QA10 What kind of the loyalty program does your company have? [None] 54% 47% Tab. 1: Selected questions with selected answers

The differences between B2B and B2C group could be measured separately (as shown

above) or together as two groups. Coordinates of the centers and distance of the centers m(B2B) and n(B2C) were calculated. m(B2B) = [0,0999; 0,5509; 0,4326; 0,2539; 0,2181; 0,429; 0,4464; 0,1247; 0,6508; 0,5371] n(B2C)=[0,2721; 0,2869; 0,6672; 0,1492; 0,1131; 0,5574; 0,2754; 0,2426; 0,3639; 0,4656] In general: m(B2B)=[ m1; m2; m3; m4; m5; m6; m7; m8; m9; m10] n(B2C)=[ n1; n2; n3; n4; n5; n6; n7; n8; n9; n10]

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Afterwards the distances between all items and centers of their clusters using the equation of Euclidean distance were calculated: (2) = (1 1)2 + (1 1)2 + + (10 10)2 (2) = (1 1)2 + (2 2)2 + + (10 10)2 Using the same principle the distances between all items and the centers of the other clusters: ( 2) = (1 1)2 + (2 2)2 + + (10 10)2 ( 2) = (1 1)2 + (2 2)2 + + (10 10)2 For the confirmation of affiliation of the item (company) to its group (B2B or B2C) the test was made: if the distance between this item and the center of its cluster is smaller, then add 1 to the group counter. Therefore: If ( 2) > ( 2) then count +1 to B2B cluster If ( 2) > ( 2) then count +1 to B2C cluster This test showed 705 from 1091 B2B and 421 from 610 B2C are affiliated with their groups4. The conformity is not absolute; therefore the groups are partly overlapped. This result shows the B2B and B2C relationships are not completely different entities but they have something in common. For a better quantification of the overlap was used distance from the clusters centers and standard deviation for both clusters.

(2 2) = ( )2=10=1

= 0,57 2 = 1 ( )=10=1 2 = 1,42 2 = 1 ( )=10=1 2 = 1,40

The results can be visualized (see Fig. 1). The width of B2B rectangle is 2 x 1,42 and the width of B2C rectangle is 2 x 1,40. The distance between clusters centers is 0,57. As mentioned above, the visualization shows B2B and B2C groups partly similar, partly different.

Fig. 1: The distance of the B2B and B2C clusters

Next step was to find out which answers differentiate clusters the most. Therefore the ratio between the answers was developed. 4 Which means with the type of the relationship they claimed in the questionnaire to use the most

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QA1 QA2 QA3 QA4 QA5 QA6 QA7 QA8 QA9 QA10

B2B 0,0999 0,5509

0,4326

0,2539

0,2181 0,429

0,4464

0,1247

0,6508

0,5371

B2C 0,2721 0,2869

0,6672

0,1492

0,1131

0,5574

0,2754

0,2426

0,3639

0,4656

ratio 2,72 0,52 1,54 0,59 0,52 1,3 0,62 1,95 0,56 0,87

inverted ratio 0,37 1,92 0,65 1,7 1,93 0,77 1,62 0,51 1,79 1,15 how many times more important 2,72 1,92 1,54 1,7 1,93 1,3 1,62 1,95 1,79 1,15

rank 1 4 8 6 3 9 7 2 5 10 Tab. 2: Ratio and comparison of the answers

In the Graph 1 the results are visualized. The bigger value the more this answer

contributes to the difference of the clusters. In the graph the answers are sorted from highest contribution to lowest.

Graph 1: Comparison of the answers

Conclusion

From the literature review are visible the similarities differences between B2B and B2C customer relationship management. Although the topic of CRM is popular, not many researchers compared these types of relations.

This research paper showed the evidence of different customer relationship management approach in B2B and B2C relationship types. On the large number of respondents from small and medium companies in Czech Republic was shown the approach is partly similar, but more less different. The topics which differentiate the two groups the most are QA1, QA3 and QA8+9.

The further research should be directed into deeper description of the differences and comparison in different industries and countries. Deeper description could be fulfilled by qualitative research especially interviews. References: Campbell, D., Wells, J. & Valacich, J.S., 2009. Diagnosing and Managing Online Business-to-Consumer (B2C) Relationships: Toward an eCommerce B2C Relationship Stage Theory. AIS Transactions on Human-Computer Interaction, 1(4), s.108132.

0,00 0,50 1,00 1,50 2,00 2,50 3,00

QA10

QA4

QA5

QA7

QA2

QA6

QA8

QA9

QA3

QA1

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Coltman, T., Devinney, T.M. & Midgley, D.F., 2011. Customer relationship management and firm performance. Journal of Information Technology, 26(3), s.205219. Davis, D.F., Golicic, S.L. & Marquardt, A., 2012. Business-to-business Marketing Management: Strategies, Cases, and Solutions, Emerald Group Publishing. Day, G.S., 2000. Managing Market Relationships. Journal of the Academy of Marketing Science, 28(1), s.2430. Gummesson, E., 2008. Quality, service-dominant logic and many-to-many marketing. The TQM Journal, 20(2), s.143153. Hutt, M.D. & Speh, T.W., 2012. Business Marketing Management: B2B, 11th ed.: B2B, Cengage Learning. Chen, I.J. & Popvich, K., 2003. Understanding customer relationship management (CRM): People, process and technology. Business Process Management Journal, 9(5), s.672688. Javalgi, R.G., Martin, C.L. & Young, R.B., 2006. Marketing research, market orientation and customer relationship management: a framework and implications for service providers. The Journal of Services Marketing, 20(1), s.1223. Johnston, W.J. & Bonoma, T.V., 1981. The Buying Center: Structure and Interaction Patterns. Journal of Marketing, 45(3), s.143156. Kale, S.H., 2004. CRM Failure and the Seven Deadly Sins. Marketing Management, 13(5), s.4246. Kotler, P. & Armstrong, G., 2009. Principles of Marketing, Pearson Education. Kumar, V. & Reinartz, W., 2012. Customer Relationship Management: Concept, Strategy, and Tools, Springer. Mousavy, S.K. et al., 2012. Customer Relationship Management (CRM) and Study of Its Effect on Competitive Advantage. Life Science Journal-Acta Zhengzhou University Overseas Edition, 9(4), s.41674173. Payne, A. & Frow, P., 2013. Strategic Customer Management: Integrating Relationship Marketing and CRM, Cambridge University Press. Reichheld, F.F., 1996. The Quest for Loyalty: Creating Value Through Partnerships, Harvard Business Press. Reinartz, W., Krafft, M. & Hoyer, W.D., 2004. The Customer Relationship Management Process: Its Measurement and Impact on Performance. Journal of Marketing Research, 41(3), s.293305. Saini, A., Grewal, R. & Johnson, J.L., 2010. Putting market-facing technology to work: Organizational drivers of CRM performance. Marketing Letters, 21(4), s.365383. Ulaga, W. & Eggert, A., 2006. Relationship value and relationship quality: Broadening the nomological network of business-to-business relationships. European Journal of Marketing, 40(3/4), s.311327. Webster, F.E. & Wind, Y., 1972. Organizational buying behavior, Prentice-Hall. Woodburn, D., 2002. Customer relationship management: Hard lessons learned in B2B pose tough questions for B2C. Interactive Marketing, 4(1), s.1932.