“Transactional Vs. Relationship Selling”

1. Introduction:

The account relationship strategy a company chooses to follow represents the type of relationship, it is going to develop towards its customers. Within the account relationship strategy, there are three different kinds in which the relationship of you and your customer can be differentiated: The transactional relationship, consultative relationship and enterprise relationship.

In my following term paper I would like to show you what the key elements of every relationship is and for further explanation examples will document every relationship. At the end a real life example will show an industry which is right now making a shift from transactional relationship selling to a consultative approach.

2. Main Body

2.1. Transactional relationship

2.1.1. Definition and explanation

The transactional approach is mostly common where customers can quite easily switch their businesses from one supplier to another, just depending on who offers the lowest price for them.

The effort done by the company to customize a product for a single customer isn’t that big. As well as customer service. It is limited to a certain extend. So a transactional relationship is one in which the relationship is generally based on the need for a product which is highly competitive priced and is of acceptable quality. As already indicated before, the main difference between transactional relationship and the other two types of relationships is that it is very often based on a personal relationship between individual buyers and sellers. The personal contact is here just between the salesman and the customer.

Trust is here a key element of the relationship, because you know your contact person, your personal salesperson now for years. He won’t normally trick you. But the problem is, if another competitor is able to offer the same or a similar product for a cheaper price and its quality is as well on high level, you easily lose your customers. There isn’t a strong connection between the two parties, they are making business together but if somebody else is able to offer you the same product for a more competitive price, the risk that this customer changes the supplier or producer is quite high. This personal relationship or contact to your salesperson has not only positive effects, the problem is that if this salesperson suddenly isn’t anymore your, for years accustomed, sales representative you easily loose the trust in the company. The relationship before was just one between the salesperson and the customer, which company was behind the salesperson is very often secondary.

But this close personal contact of the salesperson isn’t always the case. The good thing of transactional selling is that less investment has to be done for the customer and especially the customer service is reduced which results in a lower price for the purchaser.

A study which has been done recently shows that 68 percent of all firms focus on transactional relationship with at least some of their customers. But which types of companies are most likely connected with transactional selling?

These are mostly companies which sell directly to the end-customer, so consumer goods firms and large organizations. These companies offer their customers readymade products, which focus on the mass market. Individual adaptations for a single customer aren’t normally possible. But as said before, if your product isn’t personally customized, the investment of the company is less which leads to a lower purchase price.

2.1.2. Real life example of a transactional relationship

Good examples for a transactional relationship to their customers are the discounter supermarkets in Germany. If you take the example Aldi, here the philosophy published on their website already shows what their strategy towards their customers is: “Konzentration auf das Wesentliche” which means “concentration on the essential”. This statement which further explained tells you that they only have a small assortment of goods, very strict quality management and a simple and cheap product presentation. Customer service isn’t mentioned with a single word at the mission statement or the philosophy. But where they focus on is cost leadership, that’s how they differentiate themselves from their competitors. To achieve this goal of being a cost leader, a strict policy towards the number of employees is of essential importance. So service personnel at Aldi markets isn’t there to advise customers, because they think their product portfolio is more or less self-explanatory. Their function is more to backfill stock at the market. They can give advise where certain products can be found but real customer consulting does not take place. The relationship Aldi tries to build to its customers is not through outstanding service performance, price and quality are the aspects which count for Aldi and most of their customers. As already mentioned in the explanation of a transactional relationship, Aldi is just operating at the B2C market, where a transactional relationship to your customers is wide spread.

2.2. Consultative relationship

2.2.1. Definition and explanation

The main difference here to a transactional relationship is the effort which is done by supplier. If the demand of the customer is there, here a more detailed plan or more personalized concept can be evaluated. This offer can create additional value and provides further benefits, next to the product itself. The disadvantage of this type of relationship is the additional effort which has to be done by the salesperson or the whole sales team which results in a higher purchase price normally. The success of this whole concept bases on how close the salesperson gets to its customer. How many relevant detailed information he gets from his customer and how he analyzes and figures out personally customized solutions. Generally there are 3 ways how value can be created here for the customer. First finding out and then explaining the customer’s problems. Showing him opportunities and solutions to solve these problems in a new and different way. Second working out better solutions for your customers than he would have found out by himself and the third way to generate additional value to the customer is acting as the “customer’s advocate” within the suppliers organization, where you ensure that resources