Conceptualising business-to-business relationship value

"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 the parties involved, whether in time or money or by precluding the development of relationships with other parties. Relationships also deliver benefits which mayor 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 relationships deliver 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 a number 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 economic satisfaction with the relationship. Relationships allow communication to flow between parties. That is, parties share information, which might 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'.