1. business and industrial

R82 A/S:
how to close the gap in customer satisfaction
VIA University College
3 January 2012
R82 A/S:
how to close the gap in customer satisfaction
The Bachelor Degree in
International Sales & Marketing Management
Authors:
Assignment:
Supervisor:
Characters:
Submitted:
Dmitry Novikov
Bachelor Project
Lise Skriver
97.530
3 January 2012
Dmitry Novikov
Table of Contents
1.
Introduction ....................................................................................................................................1
1.1.
Problem Formulation .............................................................................................................2
1.2.
Delimitation ............................................................................................................................2
1.2.1.
1.3.
Philosophy of Science ............................................................................................................3
1.4.
Methodology ...........................................................................................................................4
1.4.1.
1.5.
2.
Clarification of Concepts................................................................................................3
Report Structure .............................................................................................................5
Reflection................................................................................................................................5
1.5.1.
Quality Assessment including source criticism ............................................................6
1.5.2.
Process Reflection .........................................................................................................6
R82’s customer satisfaction analysis ...........................................................................................8
2.1.
Current situation with R82’s customer satisfaction ............................................................8
2.2.
R82’s total sales activities ....................................................................................................8
2.2.1.
R82’s strategic/consultative selling model ..................................................................9
2.2.2.
Sales specifics ............................................................................................................. 11
2.3.
R82’s ability to satisfy its customers’ needs..................................................................... 15
2.3.1.
The company’s business model ................................................................................. 16
2.3.2.
The company’s value proposition .............................................................................. 20
2.4.
Characteristics of R82’s customer buying behaviour ....................................................... 21
2.5.
Satisfaction targets and their individual impact on R82’s sales volume ........................ 27
2.6.
Why do the targets gap ....................................................................................................... 30
3.
Findings ....................................................................................................................................... 35
4.
Plan of action/recommendation ................................................................................................ 37
5.
Conclusion ................................................................................................................................... 40
Bibliography ............................................................................................................................................. i
Appendix I: Project Description ............................................................................................................ iii
Appendix II: R82 Customer Satisfaction survey 2011 ....................................................................... vii
Appendix III: Interview with General Director of Active Co Ltd. .......................................................... ix
Appendix IV: Interview with R82’s Area Export Manager ................................................................... xii
Appendix V: R82’s terms of sales and delivery ..................................................................................xvi
List of figures and tables
Table 1. Conceptualization scheme of customer satisfaction…………………………………………….………3
Table 2. R82’s macrosegmentation....................................................................................................25
Dmitry Novikov
Table 3. R82’s microsegmentation.....................................................................................................26
Table 4. Customer comments on satisfaction targets………………………………………………………….....29
Figure 1. R82’s sales goals and actions 2011…………………………………………………………………..…..10
Figure 2. R82’s downstream supply chain……………………………………………………..……………...………12
Figure 3. R82’s sales personnel…………………………………………………………………………………………….13
Figure 4. R82’s channels………………………………………………………………………………………………………16
Figure 5. R82’s value network............................................................................................................20
Figure 6. R82’s total product concept................................................................................................22
Figure 7. R82 customer satisfaction survey 2011 results................................................................27
Figure 8. R82’s Balanced Scorecard 2011…………………………………………………………………………….32
Figure 9. Main cause of the gap in customer satisfaction……….……………………………………….…..35
Figure 10. Customers’ cumulative profitability in whale curve…………………………….……….………….38
Dmitry Novikov
Executive Summary
Even if it seems that R82 supports relational approach there is a gap in the customer
satisfaction. Customer organizations constantly demand a high-level performance and increased
support and this fact puts a pressure on R82’s sales staff. R82 delivers a high performance
technical aids and appliances on the global level. The target customer organizations benefit
directly from R82 and how it supports them in the follow-up stge. The company invests into its
R&D and NPD activities greatly.
This study indicates that R82 all in all prefers product innovation and leadership as their key
value proposition instead of complete customer solution. In other words, the research shows that
R82 is more product oriented than customer oriented. The organization and all the sales and
marketing activities are structured around the product, not the market. This is why the gap
appear in the first place.
R82’s salespeople are very dedicated and have both drive and empathy towards their
responsibilities even if R82 lacks to provide sufficient motivation whatsoever. R82 has great
sales force and therefore this fact also needs to be taken into account when improving customer
satisfaction actions come to take place.
Methodologically the research relied on open questionnaire and open interview with R82
customer organizations. For the questionnaire there has been developed a set of satisfaction
targets including common parameters such as delivery time, information level regarding
deliveries etc.
The interviews and the open questionnaire that had been conducted during the course of the
project shed some light on the reasons to why this gap appears. The reasons for the gap in
customer satisfaction seem to be hidden inside R82’s internal processes and supply chain: 1)
missing parts on the shelves at the deliveries which cause the delivery delays, 2) late discovery of
the fact that the parts are missing, 3) inability of R82’s contact persons to act as fast as the
customers want.
Thus, R82 needs to implement at least four things in order to deal with the gap in customer
satisfaction. These are: 1) implement developed incentive plan for the employees and especially
for the sales staff who makes the sales happen; 2) provide a moderate level of sales training so
that salespersons’ abilities and skills are enhanced beyond the current level; 3) apply activity
based costing to all of its customer organization to identify the most unprofitable ones and act
accordingly – try to make them profitable, and 4) implement benchmarking technique, for
example SCOR in order to define best performance practices for its supply chain. By
implementing the combination of the recommendation R82 can achieve an increase in customer
satisfaction and thus can close the gap in it.
Dmitry Novikov
1. Introduction
R82 is a company based in Gedved, Denmark with subsidiaries in England, Holland, Germany
and the USA. R82 produces technical aid and appliances for disabled children, young people and
adults throughout the world (R82 A/S, 2011, p. 3). The company was established in 1982, “R”
stands for rehabilitation and “82” stands for the year it was established in. Currently the
company’s staff consists of 207 employed by the R82 group and 143 employed at the
headquarters in Gedved.
A vast network of distributors and local dealers spread over most of the globe ensures personal
support and secure delivery. R82 has own distribution in 8 countries. R82’s products are divided
into the following categories: seating, standing, walking, transportation, toilet and bath,
accessories and turtle.
Amongst R82’s values are: quality of life, freedom, development, service, safety and the future.
Revenue in 2010 reached 236 million DKK with export ratio of more than 90% (Rahbek, 2011).
R82 outsources most of its production activities to countries like China and Taiwan, though the
assembling of the final products as well as sewing take place in the facilities in the HQ in Gedved.
The national distributor that operates on the Russian market is Active Co Ltd.
The company exports to more than 35 countries and operates only on B2B market meaning it
has little to no dealing with end customer. R82’s downstream supply is divided into three
different categories or “flows”. The first one is shipped to the subsidiaries which possess their
own stocks, the second and the third is shipped to national distributors with only difference being
that second is meant for institutional buyer (B2B) whereas the third one is meant for consumer
sale (B2C).
National distributors’ institutional buyer include hospitals, clinics, rehabilitation centers and alike.
Usually this is where most of the organizational resources are being spent – on fulfilling various
requirements in order to win tenders or reverse auction by which the above organizational buyers
purchase their production. This is where the gap appears.
Furthermore mentioned distributors are mostly small companies with limited resources which
results in lack of optimizing the ordering procedures at R82’s. Everyone has different
expectations regarding delivery time etc. Thus there is a gap in the supply; the longer, more
complex the supply chain is the more important it is to keep track of all of its components.
To sum up: it’s hard for the distributors to deliver a high performance to the institutional buyer
and live up to requirements they may set up; the national distributors have erratic order pattern
even though they’re doing their best at ordering; this casts a shadow on R82’s image in the long
run; it is often R82’s own salespeople’ job to close these gaps which require extra time and
human resources. All in all the supply chain is long and challenging to manage.
On top of that it appears to be that at this point R82 doesn’t have any tool/method for managing
and measuring their customer satisfaction. Even though the company has been successful
through decades, never experienced lack of incoming orders and attained growth there remains
a challenge – gaps in supply chain and lack of a track-keeping or measurement tool for it.
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1.1. Problem Formulation
The purpose with the bachelor project is to analyze R82's customer satisfaction, identify the
cause to why it gaps and then develop a set of recommendations/plan of action that could be
implemented by R82 in near future.
This is how the problem/issue has arisen – the above suggests there may be something that
needs to be improved in R82’s vertical relationships and downstream supply. The above
represents a burning platform for the current project. Therefore, the main question that needs to
be answered in this project report: how to positively influence the situation with B2B buyer’s
satisfaction? In other words – what does R82 need to do to get overall customer satisfaction
level improved and moreover what is the reason behind current situation with it.
Therefore, the following research questions have been formulated: 1) how R82’s total sales
activities are executed; 2) how strong is R82’s ability to satisfy its customers’ needs; 3) what are
the specifics of B2B buying behavior in technical aids and appliances industry; 4) which
satisfaction targets are the most crucial for R82’s performance and what’s their individual impact
on the sales volume; 5) what causes the targets to gap and how is the gap to be closed?
1.2. Delimitation
In regards with problem formulation above the project report does not include the subsidiary
companies. The project focuses on R82’s own resources and its distributors and thus the
subsidiaries are beyond the scope of this report which investigates head company only. Besides,
the subsidiaries’ customer satisfaction differs from that of the head company.
Customer: the end user (B2C) is not touched by this project report and neither any of the
subsidiary companies’ customers, because the report centers around the head company (see
above).
Industry: As it is stated in the introduction R82 manufactures technical aids and appliances and
therefore everything excluded but assistive technology industry.
Geographical: all markets but the Russian market are excluded from the frames of the project,
it’s simply impractical to investigate the topic in question that broadly. However, note that prior to
customers the market is secondary and serves as an example in the project.
Also, the project is not planning to include upstream supply side of the supply chain due to that
the project will study out-of-the company part of R82’s supply. Next, all external causes that may
affect the customer satisfaction on the Russian market are excluded from the actual analysis.
This is the task restriction that was set up by R82’s management who wanted to identify the
internal causes.
Department wise, the company consists of 6 departments. The project concerns only about sales
& marketing department and its correlation with the customers and therefore all the other
departments R82 has are excluded from the project.
Concerning the time frame the project covers most recent events in the company’s life – year
2010-2011. This means that the project does not deal with any kind of data older than 2010.
Eventually the problem should be studied ca. one year forth in time. Also, the plan of
action/recommendations will have to be implemented in the company in a period of 2-3 years
starting from the beginning of 2012.
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Last, but very important – all the research in the project is conducted under an assumption that
the customer satisfaction with R82’s customers needs to be improved. By no means this should
be understood as if R82’s customer satisfaction is low, – in the context of this specific company
the satisfaction has a fluctuating pattern.
1.2.1. Clarification of Concepts
Since the following paper mainly deals with a subjective concept of customer satisfaction the
clarification of concept is required. In order to conduct the investigation R82 has come up with a
particular set of 10 targets to be used in a customer satisfaction survey.
These targets are: 1) delivery time; 2) information level from R82 regarding deliveries; 3)
response time to customer service queries: 4) quality of the answer to queries given by R82; 5)
the way that R82 handles claims; 6) product quality; 7) R82 product range; 8) the packaging of
products; 9) the quality of R82’s catalogues; 10) the quality of R82’s manuals (see table 1).
Thus, under frames of this report customer satisfaction concept is perceived as a combination of
these targets.
Table 1. Conceptualization scheme of customer satisfaction.
Abstract concept
Customer satisfaction
Definition
1) delivery time
2) information level from R82
regarding deliveries
3) response time to customer
service queries
4) the quality of the answer
to queries given by R82
5) the way that R82 handles
claims
6) product quality
7) R82 product range
8) the packaging of products
9) the quality of R82’s
catalogues
10) the quality of R82’s
manuals
Questions1
Source: Own production
1.3. Philosophy of Science
Like the project’s problem formulation suggests the central concept that is researched in the
report is customer satisfaction. Customer satisfaction as such is a vague conception that needs
to be given frames to begin to work with first.
Thus, in ontological terms the reality researched is solely anti-realistic where the project deals
with social constructions like individual opinions and personal perceptions. Then, this reality is
understood by interpreting these opinions and perceptions by the researcher/author influencing
the apprehension of the reality itself – subjective apprehension. As for methodology to research
qualitative techniques are taken. So, in order to apprehend the reality interpretive path has been
chosen and as a result – the interpretivistic paradigm that guides the research.
1
For the questions refer to Appendix III
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Aside of a large portion of individual perceptions and interpretations , there is also a portion of
concrete data included into the report. However the volume of quantitative data used in the
project is far less than volume of qualitative data. That’s why the positivistic paradigm has been
chosen too. Ontological realism is the reality in this case where the hard data is the concrete
reality. Epistemologically the reality is understood objectively and in terms of methodology
quantitative methods are applied – statistical analysis and alike.
1.4. Methodology
In order to conduct the entire project, assess current situation and perform an in-depth analysis
several models and theories have been used. The section below explains the methodology
behind each research question in details.
Research question 1 how R82’s total sales activities are executed purpose is to illustrate the
overall sales function of the company in general terms. This helps in fulfilling the purpose of the
project because it uncovers the way R82 initially deals with their customers and helps to identify
the roots where the value is created.
Also, the question’s aim is to understand how the value proposition is delivered through the sale.
Therefore, in order to answer the research question 1 there are applied the following theories:
strategic/consultative selling model, team building, recruitment, incentives, stress management
and terms and conditions of sales and delivery.
Next, the data used in this question is of qualitative type and represents facts gathered from
R82’s sales & marketing department. As for the method of research this data is collected via
conducting a semi-structured interview with R82’s export manager because interviewing a
salesperson gives the most optimal insight into the sales function and also the dialogue during
the interview is sufficient to get answers to questions that may arise.
Research question 2 how strong is R82’s ability to satisfy its customers’ needs purpose is to
identify its capacity to satisfy. The research question 2 helps in fulfilling the purpose of the report
because it describes what volume of satisfaction R82 can deliver. It especially aims at
discovering and specifying their core competencies. That’s why the company’s selling platform
theories are applied. An assessment of the company’s business model will determine their core
competencies to see if the right value is delivered and the value proposition theory will shed
some light on R82’s value.
In the research there are both qualitative and quantitative types of data involved, including
general information found in Intranet, key numbers and figures about, all the above collected via
desk research and cooperation with the sales & marketing department’s staff. This way the
business model assessment can be made.
Research question 3 what are the specifics of B2B buying behavior in technical aids and
appliances industry aim is to understand the customers’ expectations and how are they perceive
the conception of satisfaction. This question helps in fulfilling the purpose of the project because
it determines the expectations to be matched against the company’s value proposition. In short
its purpose is to dig into what it is the customer demands. Thus, the following theories are used:
an analysis of the institutional buyer, the total product concept, segmentation along with
business-to-business customer buying behavior analysis.
In the research question 3 prevails qualitative type of data – information gained from Active Co
Ltd., more general information from the web and feedback from the other customers. The data is
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collected by first conducting a semi-structured interview with Active Co Ltd’s general director,
desk research and customer satisfaction survey. This specific combination of field and desk
research gives more holistic view over not-so-easy-to-understand Russian market.
Research question 4 which satisfaction targets are the most crucial for R82’s performance and
what’s their individual impact on the sales volume purpose is to find out which satisfaction
targets have the most effect on customers’ satisfaction thus affecting the company’s
performance. The research question 4 helps in fulfilling the purpose of the project because it
reveals which targets are crucial and points out the areas in R82’s internal processes/business
model that need to be improved. Therefore the question will rely on relational theory to see what
criteria are the most crucial for the company’s performance.
The data used in this research question is of qualitative and quantitative type – the feedback
from the customers via R82’s customer satisfaction survey and the interview with Active Co Ltd’s
general director which contains a set of 10 targets to measure customer satisfaction. This way
comparing the results from the two methods will broaden the horizon of the answer.
Last, research question 5 what causes the targets to gap and how is the gap to be closed
purpose is to localize the possible causes of the most crucial satisfaction targets, analyze them
and on a base of that develop a set of recommendations/plan of action. This research question
helps in fulfilling the purpose of the project by providing the foundation for the actual set of
recommendations/plan of action.
Thus, this question have balance scorecard and measuring effectiveness of the company’s
supply chain in its analysis. The data consists of qualitative and quantitative types and employs
measurements of R82’s performance metrics in form of the balanced scorecard, the method is
field and desk research. This choice of methodology is preferable because the author ideally
wants to give recommendations based on quantitative data.
1.4.1. Report Structure
The table of contents represents the report structure. In general the questions are organized in
the way presented in the table of contents because the author finds it the most optimal way in
order to progress to the recommendations.
Going from R82’s sales activities to their ability to satisfy the needs, to understanding what the
customers want and then identifying which targets are the important to the what’s inside of the
company that may be the cause for the gaps ensures a rigid structure for the report.
Part 2 includes the analysis itself. Current situation with R82’s customer satisfaction precedes
the analysis of the subject matter and is placed in subsection 2.1. to set the context. Part 2.2
focuses on R82’s total sales activities whereas 2.3. entitled R82’s ability to satisfy its customers’
need. Section 2.4. is entitled characteristics of R82’s customer buying behavior in technical aids
and appliances industry. Section 2.5. examines satisfaction targets and their individual impact
on r82’s sales volume. Last section 2.6. attempts to identify the causes to why there is a gap.
Part 3 contains the findings drawn from the analysis in part 2. On the basis of these findings part
4 suggests a set of action/recommendations whereas part 5 concludes the report.
1.5. Reflection
The author of this paper embarked on a quest to investigate customer satisfaction conception
and find out why it gaps. Customer satisfaction concept was understood with one pre-knowledge
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before entering into the research stage. Accounting for hermeneutical spiral the project report
was shaped by pre-understanding, conducting the research redefined pre-understanding and
made it a new “better” knowledge.
The author already possessed a certain baggage of knowledge before entering this research. The
project has affected the understanding of the satisfaction conception, thus influenced and
redefined pre-understanding which lead to a greater base of knowledge of the satisfaction
phenomena.
1.5.1. Quality Assessment including source criticism
Research question 1 how R82’s total sales activities are executed relied on qualitative data that
was gathered from R82’s sales and marketing department as well as the intranet. Here, an
interview was chosen as the technique to understand how R82’s salespeople behave and the
sales activities structured. Sales activities understanding was based on how individuals at R82
perceive it and thus these are not entirely valid due to degree of subjectivity.
Research question 2 how strong is R82’s ability to satisfy its customers’ needs used qualitative
techniques as well as quantitative, but to a lesser degree. It was entirely desk research.
Therefore, the results of the research question 2 is reliable but not fully valid.
Research question 3 what are the specifics of B2B buying behavior in technical aids and
appliances industry used an interview method. The interviews or the qualitative techniques have
a certain degree of objectivity, but mostly they are subjective as they represent the point of view
of the person interviewed and thus these are not entirely valid.
Research question 4 which satisfaction targets are the most crucial for R82’s performance and
what’s their individual impact on the sales volume relied on quantitative technique of
questionnaire. Therefore it is reliable, but there is always some subjectivity when it comes to
satisfaction.
Research question 5 what causes the targets to gap and how is the gap to be closed used the
results from the questionnaire and R82’s BSC all of these are of quantitative type. The results of
the research are have the most of reliability.
Most of the techniques used point in the same direction and thus the study may be judged
reliable.
1.5.2. Process Reflection
In terms of hermeneutical spiral it has been a rather long and frustrating process to finalize the
initial idea of the project and polish it. In fact the author had been through few subjects before
the final problem area was found. The very first idea of the project’s subject was very different
from the final version, the earliest idea was that R82 needed a strategy map so that it could
assist the management in strategic decision making.
This idea was quickly debunked by the project supervisor due to the fact that it would be
impractical to build up a strategy map without the whole strategy development process complete.
At that point R82 didn’t have their strategy complete. What was mistaken for a strategy was
actually the sales strategy that R82’s sales & marketing department makes every year.
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After the first meeting with the supervisor at VIA a new subject was taken, so the project direction
went completely another route. This time the problem area was found in the balanced scorecard
that would have become a burning platform for the project to come.
Again, the author failed to inform the management of the new subject before the time when the
supervisor visited the company. Then, a very intensive and challenging meeting took place where
there were much arguments about the subject topic. R82’s sales manager and author’s boss
argued that it would be hard to dig into the company’s supply chain and especially difficult to
acquire relevant information from other departments.
Even though the solution wasn’t found that time, next meeting, already without the supervisor,
brought a great results in achieving mutual understanding between the parties. Only then the
subject as it is today was finally chosen, problem area specified – customer satisfaction as the
point of departure. What is most important: both parties were satisfied and agreed on the
subject’s selection.
Even if it was a challenge to get going and finally start the project the author values the
significance of this process for only in dialogue a viable solution can be found. All events above
represent the milestones on the project’s hermeneutical spiral. Only after a new knowledge is
gained the process moves further up the spiral and thus changing the understanding of the
project subject, the company etc.
The combination of research techniques allowed to get broader insight into the problem itself. An
interview with one customer and collective feedback in form of questionnaire is the best possible
technique mix to go when satisfaction is researched. However, the research lacks quantitative
techniques and supporting the project with such techniques only makes it more sturdy in the
eyes of a reader. Actually a comparison of the results of both qualitative and quantitative
techniques of research would be the best way to undergo this project.
If the project is to be remade R82’s supply chain would have been investigated deeper and in
greater details. The problem’s roots that R82 experiences lie within its supply and suppliers.
Without going that deep the roots of the problem can’t be completely eliminated and full
optimization reached. Current project relies on suggesting how to go around and deal with the
problem, not how to remove the cause.
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2. R82’s customer satisfaction analysis
Before entering the analysis itself a quick description of the current situation with R82’s
customer satisfaction is required, because it is the actual context in which the subject of the
project is understood. The description is included in the very first item in the analysis of the
subject matter and located below. Then, the analysis proceeds from research question 1 to
research question 5 according to the report structure.
2.1. Current situation with R82’s customer satisfaction
All in all R82 has more than 30 customers located all over the globe including national
distributors, subsidiaries and local dealers. The situation differs to a degree from land to land,
but in general it is alike. It was especially and strongly specified by the company’s management
that R82 has somewhat special situation with their customer satisfaction. Their position is to
perceive customer satisfaction as a fluctuating value that vary in time due to variety of different
reasons.
Sometimes it goes down and the gaps start to appear, causing the problems in the company and
especially in the sales & marketing department because often it’s the salespeople’s
responsibility to localize and to close these gaps in customer satisfaction as quickly as possible.
R82’s salespeople that take care of specific customers are also their contact persons inside the
company. Anything at all that may have had affected the customers’ satisfaction naturally
reaches the salespeople’s ears.
Recent customer satisfaction survey (see appendix II) that R82 has conducted perhaps is the
best to illustrate the current situation of the customer satisfaction in general. Note that Active Co
was excluded from this survey by default because another method to research was chosen and
their respond is assessed in greater details in the research question 3 analysis.
Now to the survey results: well, first of all the customers show constancy in their answers so that
a clear general picture is easy to define. The customers seem to be satisfied with most of the
parameters leaving out such parameters as delivery time, information level regarding deliveries
and few others where there are certain percentage of dissatisfied respondents. For instance, the
percentage of dissatisfaction in delivery time reaches 23%, and in information level regarding
deliveries – 15%. “Acceptable” percentages aren’t low either, in fact acceptable means that
these customers aren’t fully satisfied, e.g. the way R82 handles claims and product quality. This
is where the gap appears.
The purpose of this section in the report was to define a general picture of the customer
satisfaction, to set the context so to speak. Moreover, the assumption that was set in the
delimitation regarding customer satisfaction had to be verified too. It’s important to provide the
report with a sturdy basis.
So, judging by the responses it can easily be verified that the situation with R82’s customer
satisfaction is inconsistent or fluctuating as such: some of the targets are satisfactory, where the
others have more acceptable in responses and even dissatisfactory, which in fact means there is
a room for improvement.
2.2. R82’s total sales activities
R82’s sales & marketing department is responsible for sales planning and thus has a distinctive
way to plan for its total sales activities. In order to create a context to base the plan of
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action/recommendations upon the company’s sales must be assessed. Attention now turns to
the strategic/consultative selling model.
2.2.1. R82’s strategic/consultative selling model
Develop a personal selling philosophy
R82’s salespeople greatly adapt the partnering marketing concept. Influenced by the partnership
approach individual personal selling philosophy is developed. Currently R82 has 5 salespeople
responsible for different market areas, with 2 of them heavily employing personal selling in their
activities. Usual routine is that these two travel very often in regards with various events,
meetings and visits. They share the same marketing concept and derive from it when dealing
with their own customers face-to-face, though their personal ways still differ.
Business friendship is the relationship between a salesperson and a client that revolves around
business-related issues (Opalinska & Novikov, 2011, pp. 11-12). R82’s area export manager
Anni Kjær Bahlke being one of the biggest users of personal selling at R82’s describes her
personal selling philosophy (see appendix IV) in terms of friendship. She perceives herself as a
less professional and more personal from what is normally expected because she sees most of
her distributors as friends. It's easier to help them in this way and they also feel more
comfortable. For example when a salesperson has to travel and go see the customers it's a lot
easier to do the work with pleasure.
R82’s motto is “nothing compares to a smile” which also indicates that the aim of R82’s
personal sale efforts is in the end to make users feel happy. This value has to go through
national distributors first before it reaches the consumers.
This is why partnering problem-solver approach is adapted atR82’s. Due to the fact that small
businesses lack in resources, R82’s customer organizations demand problem-solving approach
themselves, so it’s actually a requirement in assistive technology industry. Organizations expect
to establish relationships with a long-term partnering opportunities.
Develop a relationship strategy
Win-win philosophy is leading philosophy at R82’s. Professional image of the company is usually
projected at exhibitions where a large number of prospects and competitors are gathered to
meet face-to-face. Largest exhibition that is organized by R82 and their German subsidiary
company is Rehacare. Salespeople use to help their customer organizations on the product
presentations etc.
Regarding maintaining high ethical standards Anni Kjær Bahlke explains when asked about being
truthful with the customers: “…It's very important to be truthful and also to give information when
you get it. If you know something cannot be sent, you'll have to tell them, however painful it is to
do. Because it's one of the things in this company, it is easy to say to me "we cannot", because
they're my colleagues. I'm not personally hurt by it, but the people I have to say it to, they are not
happy.” (see appendix IV). This shows that ethics are given a high priority in R82’s sales team.
According to Opalinska & Novikov (2011, p.11) ethical behavior indeed has significance when
building true relationships.
In relation with Active she states: “With Active and many others they really trust me, which is the
keyword for a lot of businesses. it is that if I say "yes it works, it's not broken" or if I say "yes, we
can deliver" I'm suppose to deliver. Because we talk a lot and we speak a lot together and we see
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each other. In this way we get to know each other and they have a lot of faith in what I say and I
have to live up to this…” (see appendix IV)
She continues: “…I trust them a lot and I think it is vice versa, and I think there is a lot of
commitment both ways. I feel they would do everything they can for us, because it's not one-way
solution, it's their future…From what we see they made first year and this year and hopefully next
year, there will be some money that they can put aside for when they retire.” (see appendix IV).
From the facts above it is clear that R82’s salespeople maintain high ethical standards in their
relationships and it applies to both parties.
Once again R82’s salespeople emphasize the value-added selling. This is the only method they
use when dealing with their customers. R82 sells only to well-established relational businesses in
which they can trust. For example one of R82’s goal for 2011 sales (see fig. 1) states: to develop
main distributor markets through a close cooperation and a follow-up. Also the number of events
is astounding including technical and training seminars, exhibitions etc., the degree of
involvement of customer organization is high in the mentioned events which shows the level of
relationships.
Figure 1. R82’s sales goals and actions 2011
Source: Adapted from Bahlke, 2010
Develop a product strategy
R82’s products are of high complexity with various parts, details and accessories. Also, there are
constant new product development process in the company which brings new products. For
instance the latest addition to the product base is R82’s newest frame – Strong base®. R82’s
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management doesn’t provide any education to the salespeople, instead they educate
themselves.
Regarding the product education Anni Kjær Bahlke notes: “…we do it ourselves. When we have
new product I talk to Bente [R82’s therapist]: "Please show me". Sooner or later I'm going to be
standing showing this at the other end of the world and I can't phone someone and ask "Why
doesn't it turn the right way?". So I always ask Bente to train me. Sometimes I also ask MetteKristine [R82’s product coordinator]…It's important for me too because when I say "Oh it's easy,
I've done it myself" they will trust me more than when I say "I believe it's easy".” R82 also has
elaborate product literature and catalogues that salespeople use to educate themselves.
The above suggests that product knowledge is the most essential topic when it comes to selftraining at R82. R82 delivers value-added solution through partnerships. For instance the
feedback from the customer organizations is taken into account in the NPD (new product
development).
Inviting the customer organizations to participate in the technical seminars at R82’s
headquarters in Gedved allows R82’s technicians to receive valuable feedback on the most
common problems that arise while maintaining (national distributors maintain R82’s products in
their countries themselves).
Develop a customer strategy
A typical buying process of R82’s customers corresponds with the steps in the typical buying
process. However in relational context implementation is the most important. R82 stay with the
company for many years. After the first sale is done the implementation stage begins. Repeat
sales occur when the supplier has demonstrated the ability to add value in various ways after the
sale (Manning, Reece & Ahearne, 2010, p. 167). Judging by the R82’s customers’ life-time value
(see appendix IV) it indicates that almost all R82’s customers remain with them.
Emphasis on the implementation stage is superior, this is so far the image R82 creates. But the
question is whether R82 executes its sales according to relational theory in high relational
context because it wants to create value or it is because those are the setups required by the
industry/competition in order to succeed. In other words – where the drive comes form, is it
internally driven value creation or externally driven value creation? Active general director Anna
Feskova comments on this: “…there are no disappointments with our work with R82. If compared
to the other companies, for example Swedish competitors all I can say they are far behind from
R82's level of doing business. Comparing by the ten parameters above for example R82 would
be the leader amongst them” (see appendix III). This subject is given a broader insight in the
business model section.
R82’s typical buying process is that most of the customers study R82’s materials quite well so
they already know what they want, including product specifications. The salespeople’ job here is
to guide the customers through this process (see appendix IV).
From figure 1 it is also seen that R82 updates its CRM software. As an internal CRM software tool
the company uses Microsoft dynamics CRM that contains the internal customer data.
2.2.2. Sales specifics
At R82 the sales begin with making a budget, as a rule sales & marketing department prepares
the budget for the year to come during the 4th quarter of the current year. Then, this budget with
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estimations based on salespeople’ forecasts gets approved by the company’s management.
Every area/country gets a certain amount in sales to be reached. The salespeople responsibility
is to fulfill the budget by the end of the year.
In order to do so S&M plans various activities to perform during the budget year (see fig. 1).
These activities are for instance aimed at strengthening or developing certain markets and
executing a multitude of events.
According to the strategy hierarchy which is the flow of the strategy from the organizational level
to the unit level (Tanner, Honeycutt & Erffmeyer, 2009, p. 6) corporate strategy leads to
marketing strategy which leads to sales strategy. So these sales activities must ultimately follow
from R82’s mission which is to become the strongest and most preferred brand for children and
teenagers with special needs among parents, users and therapists (R82 International website,
2011b).
In general R82 starts the sales planning process by estimating how much is it possible to sell
next year in each country. Then the national distributors are contacted by the salesperson
responsible for that country to define a target number together and thereafter planning activities
take place.
R82’s out supply chain
The company exports to more than 35 countries and operates only on B2B market. R82’s
downstream supply (see fig. 2) is divided into three different categories or “flows”. The first one is
shipped to the subsidiaries which possess their own stocks, the second and the third is shipped
to national distributors with only difference being that second is meant for institutional buyer
(B2B) whereas the third one is meant for consumer sale (B2C).
Figure 2. R82’s downstream supply chain
Source: Own production
National distributors’ institutional buyer include hospitals, clinics, rehabilitation centers and alike.
Usually this is where most of the organizational resources, both material and human, are being
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spent – on fulfilling various requirements in order to win tenders or reverse auction by which the
above organizational buyers purchase their production.
R82’s sales force
Many of R82’s employees have been with the company for decades. R82 possesses a very
positive and encouraging organizational climate and well-established organizational culture. The
roots of the company lie in its foundation and the values that grew along with the organization
itself. For instance if salespeople are taken into account the annual turnover rate for year 2011
is = 0/5 = 0%. For the year 2010 the annual turnover rate was = 1/4 = 25%.
The size of the sales force is quite limited, Anni Kjær Bahlke was hired in 2007 for a new position
as area export manager and now she controls over 20 national markets. Keeping low turnover
rate ensures increase in the return on relationships (ROR). Relational theory suggests that the
longer the relationship the lower the cost relative to income and the higher the profit is likely to
be (Egan, 2008, p. 77). In Active’s case Anni Kjær Bahlke notes that the sales grew from the year
2008 at 20 thousand DKK; 2009 – 135,000 DKK; 2010 – 840,000 DKK and to 1.6 million DKK
in 2011 reaching 200% of the budget. In this case the relationship surely played off and it was
mutual payoff too.
Returning to the size of the sales force, it is often said that S&M department lacks the human
resources to keep up with the amount of task assigned to the department. Sometimes the
projects are not carried out as planned and left behind.
As it was stated earlier there are 5 currently employed salespeople in R82’s sales & marketing
department, each responsible for different areas/countries. The sales team is organized around
geographical sales structure where a salesperson is connected to customer accounts (see fig. 3).
Tanner, Honeycutt and Erffmeyer state that firms often favor a geographical sales organizations
because it is relatively easy to design, minimizes duplication of effort, and ensures a specific
salesperson is assigned to each customer (2009, p. 140).
Figure 3. R82’s sales personnel
Source: adapted from R82 International website, 2011c
According to Robbins, Judge and Campbell (2010, pp. 537-538) low to moderate levels of stress
stimulate the body and increase its ability to react. But too much stress places unattainable
demands on a person, which results in lower performance. The overall picture of R82’s
salespeople is that they are under “healthy” amount of stress during the work; various events,
deadlines, seminars and order fulfillments keep them stimulated and increase job performance.
Usually the most curtail time for a salesperson at R82 is when they have to prepare the budget
estimation. It takes a lot of strength and sometimes is quite stressful because it puts an extra
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press on them. At those critical point of time the salespeople at R82 are overloaded and stress
level increases and job performance falls. It also affects their personal condition which may
negatively affect their primarily work – making sales. The above refers to periodic stress when
there is increased stress at certain times.
More constant stress appear with those salespeople (3 salespersons) at S&M department who
sit at the phone and responsible for responding to customers mails, the ones who don’t deal with
personal selling. Sometimes they receive tens of customer mails with service queries per day and
this puts a constant increased stress on them. In their case the stress level was characterized as
“constantly-stressed” by the sales staff.
Currently R82’s backup plan consist of notifying the customer organization about failure or lack
of performance (for example inability to deliver in time) as soon as possible so that they know of
the situation and act accordingly. Currently R82’s management does not employ any motivational
programs for their employees whatsoever. One of the minor incentives implemented is Christmas
gifts that R82 employees receive before going to Christmas vacation. Aside of that there are
intangible motivation for the salespeople in form of business friendship and strong business-tobusiness relationships.
R82’s distribution forms
As the primary distribution form R82 utilizes subsidiary companies and sole traders (exclusive
traders) in form of national distributors. R82 has subsidiary companies in England, Holland,
Germany and the USA with their own sales representation in Canada, Luxemburg, Switzerland,
Belgium and Austria whereas national distributors operate on all other markets. The
abovementioned differ by the degree of control that the head company has over them. R82 does
not hold any branch offices in any countries.
The subsidiaries are: R82 UK Ltd. (United Kingdom, Ireland), R82 GMBH (Germany, Switzerland,
Austria), R82 Nederland B.V. (The Nederlands, Belgium), R82 cz, s.r.o. (Czech Republic) and Snug
Seat Inc. (USA, Canada). They all are individual legal entities with their own sets of terms and
conditions of sale and delivery etc. They also have separate liability in regards with rules for
international agreement contracts and international sales of goods and services, if they are
found liable these companies bear legal responsibility, not the head company. R82 has a high
degree of control over them which is seen in the fact that they have shared stocks which require
control.
R82 never sells its products directly. National distributors are the exclusive traders, because only
the trader is entitled to sell the product within the area (Nibe, 2011). Each of them is
independent trader who runs his own business in his own country. The supplier grants the trader
the right to promote and sell the product in a certain geographical area and gives the trader an
exclusive obligation to purchase the product (Nibe, 2011).
For example Active Co Ltd. is given legal right to sell R82’s assistive technology for children on
the Russian market. No other legal entity can sell R82’s products on the Russian market. R82 is
sometimes approached by shady businesses that out of personal gain want to purchase the
product directly from the head company without contacting official R82’s distributors in their own
land. R82 makes it clear that all purchase on those national markets is possible only through
their official national distributors like Active Co. Ltd. (Russia), Fumagalli (Italy), Supace (Spain)
and others.
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R82’s terms and conditions of sales and delivery
R82’s terms and conditions of sales and delivery include common items such as: application and
validity, offers, product information and price, delivery, payment, ownership reservation, delay,
defects and complaints, liability for damages, returns, product liability, force majeure and
applicable law and venue.
In application and validity it is noted that unless otherwise the sale is guided by the terms and if
the buyer accepts the offers these terms automatically applied. “An agreement between Buyer
and Seller has been concluded when Seller has forwarded an order confirmation” (see appendix
V). It means the buyer is bound when R82 sends out the order confirmation. The buyer can
cancel only with the seller’s permission.
“Seller’s information in price lists and catalogues as well as in product descriptions only serves
as instruction and is not legally binding on Seller” (see appendix V). The printing materials are
invitation to treat. Until the offer is accepted by the buyer R82 leaves the right to make
adjustments to its price with regards to exchange rates, customs duties, direct and indirect taxes,
raw material prices, collective wage agreements etc.
Delivery takes place ex works (Incoterms 2000), the buyer pays the delivery costs and carries the
risk from the time it is placed under buyer’s disposal. With regard to delivery time R82 states
“Seller is, moreover, entitled to postpone the approximate time of delivery where delay is
necessitated by circumstances outside of Seller’s control” (see appendix V). R82 protects its long
delivery time by making the delivery paragraph and making necessitated circumstances. This is
where customer satisfaction may be damaged. Any circumstances outside of the company’s
control may be deemed necessitated. Trade barriers are also specified in the delivery time, if any
occur the delivery is postponed.
“If payment has not reached Seller’s account on or before the confirmed delivery date, Seller is
entitled to use the Products for other deliveries as well as to estimate a new time of delivery at
current prices of which Buyer is informed” (see appendix V), this is common routine at R82:
contact persons sometimes have to “hunt” their customers for the payments to be sent to R82’s
bank account due time. R82 is also only liable for delay in case of its own gross negligence or
deliberate behaviour.
“Seller is not liable for additional costs, operating loss, loss of profits, loss of time, loss of
earnings, loss of goodwill, lost business opportunities, loss originating from Buyer’s agreements
with third party, consequential damage and other indirect loss occurring in connection with delay
or defects” (see appendix V). In the above R82 states the liability for damages section in order to
save itself from being liable for those damages.
Force Majeure paragraph mentions all the disasters that may cause the delays or lack of
performance. Last, in the applicable law and venture it is stated: “Any disagreement or dispute
between the parties concerning the construction and scope of these present Sales and Delivery
Terms is to be settled by arbitration subject to Danish law. (Not CISG, however)” (see appendix V).
The reason why R82 doesn’t use CISG is because as Danish company R82 chose to apply DISGA
(Danish International Sales of Goods Act).
2.3. R82’s ability to satisfy its customers’ needs
Hutt & Speh (2010, p. 10) state that marketing can be best understood as a process of defining,
developing, and delivering value. Without any doubts value is a key concept in business-to15
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business interactions that differentiate a company from the competitors. Therefore it is important
to specify and describe what is actually the value proposition that R82 delivers to match it
against the customers’ expectations. The section below is dedicated to this matter.
2.3.1. The company’s business model
Customer interface
R82’s fulfillment and support is quite elaborate. The company uses few different channels to
reach their customers to enhance the value delivered. The company’s whole marketing activities
are divided in four categories aimed at website, printing materials, trade fairs and exhibition and
internal marketing (see fig. 4), the channels suggest that R82’s marketing is structured around
the product.
Figure 4. R82’s channels
Source: Own production
The customers are reached through the internet, where a multitude of downloadable contents
are placed, then the company spends an enormous effort in creating its own printing materials
including catalogues, mounting instructions etc. The third channel are fairs and exhibitions where
R82’s salespeople not only acquire new customers, but also participate in their established
customers’ own exhibits and try to teach them about new products (see appendix IV). All three
mentioned above channels provide service support on different level. Internal marketing refers to
better cooperation with the subsidiaries.
Also the salespeople at S&M are available all the time and can be reached by mail and phone.
Phone calls are the main source of resolving the customers’ questions, so it’s another strong
channel at R82.
Next, the company employs IT systems in order to ensure the support level which it provides with.
As an internal CRM software tool the company uses Microsoft dynamics CRM - a multi-lingual
customer relationship management software package developed by Microsoft that focuses
mainly on sales, marketing, and service (help desk) sectors (Wikipedia 2011).
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The information and insight is taken care of very thoroughly at R82. The company has its own
quality department that captures all the notes, complaints and wishes from the customers and
adjusts the products accordingly, but to a certain extent of course. R82 has decided to use the
information from their customers to enhance the value delivered in form of continuously
increasing the quality of the products. The company spends a considerable amount of its annual
budget on this process too.
Looking into relationship dynamics R82 possesses a well established relational type of
customers. The relationships are very important, many of the customers stayed with R82 since
beginning of their relationships (see appendix IV). The salespeople at S&M describe the
relationships crucial to be successful and most of their activities are aimed at maintaining them,
e.g. seminars, state visits and others. This is how R82’s salespeople strengthen the customers’
sense of affiliation with them. In short, on the RM/TM continuum R82 is highly relational.
Last, the pricing structure of R82 is dependent on several factors. First of all, R82’s products
considered top price amongst technical aids and appliances. Anni Kjær Bahlke, R82’s area
export manager (see appendix IV) explains that the R82 bases its price on the competitors’ prices
of the same type of products.
R82 makes the subsidiaries check the prices of similar products on their home markets, then the
product is set to the price in the range of that comparison but never lower than the cost to
produce. Furthermore R&D and quality departments are costly to sustain and therefore the price
is set considerably high. The price is at that level because the company invests in the production,
development and quality checks to ensure customer is not disappointed.
Core strategy
R82’s business mission is to become the strongest and most preferred brand for children and
teenagers with special needs among parents, users and therapists (R82 International website,
2011b).
R82 has enormous product/market scope. There are over 30 products R82 produces, that
divided into the following categories: seating, standing, walking, transportation, toilet and bath,
accessories and turtle. Simply said the product range is incredible, each of the products comes in
4 different sizes and 3 to 5 different color versions each with relevant accessories. The product
scope actually covers all the age groups and can even be used by the adults.
There is no one single product that the company focuses on, even though there are some “stars”,
R82 supports all their products evenly. Sometimes, having range this big the company runs into
problems when at the time of orders there are none available at their stocks in the warehouse.
R82 introduces new products almost each year, which makes their scope even more dynamic.
With regards to the market scope the company covers almost all the international market. R82
has its own distribution in 8 countries and exports to more than 30 countries throughout the
world. R82 has their subsidiaries in: USA, England, Germany, Holland and Czech Republic. R82
has own sales representation in: Canada, Austria, Switzerland, Luxembourg and Belgium
(Rahbek, 2011). The company segments their customers into parents, users and therapists. R82
actively expands seeking new markets to enter. For example, right now R82 considers the
Chinese market highly potential and desirable to enter.
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Value-added activities that the company performs create the basis for differentiation. R82
processes consist of value-added activities. One of their bases for differentiation is that often
R82’s products offer innovative features that are unique to them alone.
For example R82 has patent rights on Stingray push chair and its ability to rotate with child sitting
in the chair. Also R82 is the winner of the Danish design prize in 2009, design is second aspect
that makes the basis for differentiation, the products look stylish and the colour schemes are
elaborate. In fact the Stingray is impossible to distinguish from that of a normal push chair. Many
of parents purchase the Stingray because of this design so that their children look like all the
others’ when taking a walk. Then, the materials used in the production of High-low® frame are of
high quality and very light (although some parts that R82 outsources to Asia often come with
defects and must therefore be discarded).
R82 also provides superior service to their customers and technical assistance. Often it invites
the specialists from the companies it sells to and educates them about new products through
seminars. R82 product quality is of high standards too and often lasts for longer time then the
others’ in the branch so it later can be reused which means high functionality. Few of R82’s
products are unique due to the technical abilities and features they possess and that’s why R82
had to patent those particular products.
Customer benefits
Customers benefit directly from R82 and how it supports them in the follow-up stge. The benefits
connecting R82’s core strategy and the customer interface tie the two components together. The
customers benefit from the support services R82 provides. All of the needs the customers
express either by communication or claims R82 fulfils. However this is not enough to completely
remove customer dissatisfaction. One of R82’s policies states that their customers should solve
the problems that arise on the national markets themselves, so there is an extent to R82’s
support.
Strategic resources
R82 uses quite a set of skills, systems and technologies to create the value. The value is born
with research and development, where the new concepts are created. Having its own R&D and
the skills of employees who work there make a base for the core competencies. Then the core
competencies are enriched in the production, where the products come to life.
R82 decided not to outsource the finalizing and the assembly of the products to the overseas, so
that the quality is ensured. R82’s facilities include sewing and steelworks and those processes
are controlled too. 143 employees employed at the headquarters in Gedved play another role in
core competencies.
Well-known fact is that the most hard to copy by the competitors is the human resources and the
skills, abilities and knowledge they have. The staff is valued highly and that’s what makes the
core competencies of R82. R82 uses technological processes throughout the whole organization,
but these technologies are used only in relation with the employees. The staff delivers this high
value on to the customers when the salespeople deal with the sales, aftersale, follow-up and
support. Then the feedback from the customers is received by the quality department which
purpose is to enhance the value even more.
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The more tangible assets which R82 uses in value enhancement are for instance as mentioned
before the patents, the distributors. The manufacturing facilities in Gedved is another strategic
asset as well as the warehouse where the products are stored. In fact the whole production site
in Gedved that takes 26.000 m2 with buildings at 8.900 m2 is the biggest strategic asset that the
company owns. It’s the heart where the products are manufactured.
Another R82’s strategic assets are the stocks available in Europe and the US: R82 produces the
products in their facilities in Gedved and sends the finalized products to the stocks of the
subsidiary companies and therefore have access to stocks and shelves in Europe and the USA.
All of the above leads to R82’s core process: delivering quality controlled technical aids and
appliances made in Denmark. Another core process that takes place at R82 is NPD (new product
development). The third core process is sharing of knowledge.
Configuration
At R82 the configuration is that when new product development takes place all of the company’s
subsidiary companies’ specialists and stakeholders participate in it. The keyword for the NPD
process is cooperation and finding a solution through dialogue. Getting everyone’s approval and
acknowledgement regarding the core strategy for the next period when the new products are
introduced.
The value network
Such a configuration requires a developed value network. The company has 123 active suppliers,
35 of them fall under 10 thousand DKK. R82 outsources some of its production activities
overseas. Outside of Denmark R82’s suppliers are located in countries as Lithuania, Malaysia,
China, Germany, Czech Republic and Taiwan. The rest are Danish companies. Non-Danish
suppliers make up 40% of R82’s supply.
These companies supply parts, metal, accessories, components and even complete products
(e.g. Swan®, Manatee®). In order to control the supply R82 developed quality check procedure
making the supplier undergo quality inspection and test the products. First-delivery always goes
through quality check to create a standard quality for a new supplier. In case of supplier defect
R82 issues reclamation to get the supplier to solve the defects.
R82 developed an elaborate horizontal relationship with partners (see fig. 5). First of all the
subsidiary companies are the most important partners for R82. No strategic decisions are made
without cooperation with these. New product development projects are shared between the head
company and the subsidiaries. Next type of the partners are the sales representatives that cover
Canada, Austria, Switzerland, Luxembourg and Belgium, while the rest of the international
market is taken care of by the national distributors e.g. Active Co Ltd.
Once again, the strength of relationships in the case of R82 is very stable and high. The fact is
that each participant in R82’s vast value network is dependent on overall success of the
distribution, production and the image that R82 creates. R82 was established in 1982 and
started to export its production in 1986 (Rahbek, 2011). It took over 20 years of dedication to
establish its network and enrich it with value enhancement.
Also such coverage ensures quality respond from the markets, and all of the participants share
the information and insight that is gained from the customers which is advantageous when
strategically planning ahead. For instance organizing various events in cooperation with their own
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customer organizations is a fine example of partnerships e.g. latest Rehacare exhibition in
Dusseldorf which was established by R82 and their German subsidiary company – R82 GMBH,
where the newest product was introduced and both companies came to meet new prospects.
Figure 5. R82’s value network
Source: Adapted from Rahbek, 2011
R82’s assets and competencies are enhanced even more by joining the coalitions. Currently R82
is a member of the Danish rehabilitation group – the trade association of manufacturers and
suppliers of disabled related products and services (Dansk Rehab Gruppe, 2011). Besides of
R82 the Danish rehab group includes such companies as Guldmann and Pressalit Care.
Company boundaries
R82 possesses an increased company boundaries. By developing its partnering ability it
increased the company boundaries and reached global level. These company boundaries already
create value that is further developed by R82’s own strategic resources. R82 structures its
strategic resources around their value network. For example, the head company manufactures
the products in their facilities in Gedved and sends a part of the finalized products to the stocks
of the subsidiary companies. So, R82 can easily have access to temporary stocks in large part of
Europe and the USA.
2.3.2. The company’s value proposition
A business model should reveal the way in which a firm is deliberately emphasizing a different
set of activities in order to deliver a unique mix of customer value (Hutt & Speh, 2010, p. 165).
From the business model analysis above the general picture of R82’s value proposition can now
be deducted.
Points of parity. R82’s products provide the following points of parity: packaging of the products
and quality of the products. The next best alternative to R82’s products is a German company
Otto Bock. The top quality of R82’s products is distinctive enough to get credits, but comparing to
Otto Bock’s products is essentially the same. Therefore the customer organizations may not see
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the difference between the two. The packaging is another common point of parity found within
the branch.
Points of difference. R82’s points of difference are the delivery time, quality of the printing
materials and shared information level. Delivery time is the one that is inferior to the next best
alternative. Many of the customer organizations show that they are concerned most with this
value element because their own customers (e.g. consumers) often perceive R82’s 4-5 weeks
delivery too long. The reason for 4-5 weeks delivery period is first of all because it’s simply one of
the contract statements, secondly and most importantly it requires a great deal of time to get the
products assembled and tested before they are ready to be shipped off. R82’s Anni Kjær Bahlke
further explains that there is no way delivery time can be cut without decrease in product quality
which can lead to product failure rate when used (see appendix IV).
Printing materials (catalogues, mounting instructions, manuals etc.) is the superior point of
difference provided by R82. The customer organizations perceive the above as a distinguishing
value element of R82. Shared information level is another superior value element, the customers
benefit from openness of R82, they get informed about changes, events or situations at the
headquarters in Gedved.
R82’s customer value proposition can thus be defined as: R82 delivers a high performance
technical aids and appliances on the global level. The company invests into its R&D and NPD
activities greatly which allows them to become the product leader in the branch, thus R82’s key
value proposition is product innovation and leadership.
All of the needs the customers express either by communication or claims R82 fulfils. This results
in more friendly customer interface with positive relationship dynamics and openness in
information and insight. In return the customers benefit from the technical support in that R82
stands for – the aftersale support services, technical knowledge that is shared and strong
business relationship. These are the values of superior performance that R82 communicates to
their customer organizations.
As it was stated before most of the organizations R82 sells to are small businesses that often
strife to compete on the national markets. Those value propositions R82 supplies its customers
with provide them with security, ensuring and stability feelings.
2.4. Characteristics of R82’s customer buying behaviour
R82’s business customer in assistive technology industry are mainly small organizations
consisting of 4-9 employees at most.
R82’s total product concept
Majority of R82’s customer organizations including Active set their expectations high. In
accordance to the total product concept beside just generic product like push chair or seat they
perceive the expected product as: 1) delivered as quickly as possible/no delays; 2) with no
missing parts and 3) it has to be packed according to their own country’s rules of import of goods
so it won’t get problems at the customs.
For instance Active Co Ltd. has emphasized the latter due to that they would often have to pay a
penalty charge for not having the item list on the packages. Active’s general director consider the
above very important, beside of paying a fee it would also increase the delivery time, which is
crucial.
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Continuing, it is clear that these organizations may often overlook the value-added product that
R82 offers. Manning, Reece and Ahearne (2010, p. 150) state that the value-added product
exists when salespeople offer customers more than they expect. Anni Kjær Bahlke further
explains that closely working with the customer organizations including establishing exhibitions,
seminars and medical forums where R82’s personnel helps their customer organizations to
attract new customers for them is one of the value-added products.
Another value-added aspect of R82’s total product is that that the sales staff monitor and followup the deliveries (see appendix IV). Where these small businesses have a hardest time to control
the delivery, a salesperson from R82 comes in. In simple this is one place where the sales staff
closes the holes in their customers’ processes. This is without a doubt a value-added product
that is easily left unnoticed.
Active in cooperation with R82 aims at establishing the base of therapists that would recommend
and acknowledge R82’s assistive technology on the Russian market. This fact is actually
connected to the total product concept, this aim of the two companies is none other than
potential product because the potential product refers to what may remain to be done, that is,
what is possible (Manning, Reece & Ahearne, 2010, p. 150).
Figure 6. R82’s total product concept
Product: Push chair, seating
system, active wheelchair
etc.
Expected product: no
delays, no missing parts,
correct package, high level of
info, technical support etc.
Value-added product:
exhibitions, seminars,
medical forums, delivery
control
Potential product:
establishing the base of
specialists that would
recommend the products on
the national markets
Source: Own production
Thus, figure 6 illustrates R82’s total product concept. Often customer organizations push the
expected product and demand from R82 higher degree of fulfillment and support. However, a
product in a business-to-business environment is always more than it seems. In the case of R82
the value beyond the generic and the expected product is considerable. Even so the fact remains
that R82 sometimes lacks to deliver the expected product to full satisfactory of their customers.
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Dmitry Novikov
Active Co Ltd.
Active Co Ltd. was established in April 2009 and soon after signed the first exclusive contract
with R82. The company employs only qualified doctors (pediatricians), graduates to work with
assistive technology for children.
Main areas: sales of R82’s products, work with the social schools and other institutions
(inspection, appointment, selection, adaptation, work with parents), training of doctors and
specialists (working with R82 products, the basics of appointment, selection and adaptation of
the assistive technology (by our experts specialists), working with rehabilitation centers, parents,
foundations. Today Active has many distributors in Russia (Active Co Ltd., 2009). As of now the
company has 5 employees. The head office is in St. Petersburg while there is also an office in
Moscow.
Education, qualified information, service and technical support to the best specialists of the
leading educational institutions of the world - the basis of the project. This is a project to
introduce the achievements of other countries in the social sphere in Russia's social model
(Active Co Ltd., 2009). Note that Active Co also works with other suppliers of assistive technology,
namely Panthera and Visiontech, however R82 being the main supplier of assistive technology.
R82’s products make up to 60% of Active’s sales.
Specifics of the Russian market
Active gets its revenue from Russian private sector – families with disabled children. It seems
that dealing with institutional buyer is hard at this point of time for the company because there
are immense legal aspects to this issue in Russia, many of laws just hinder small and medium
businesses from dealing with the public sector (see appendix III). Often the institutional buyer’s
purchases are pre-set and corrupted, especially in healthcare branch.
Normally R82 brand is chosen on the other national markets because of the quality and features
for the rehabilitation. These features usually have to be assessed by a medical specialist so the
products can become acknowledged in the healthcare branch – to get a “green light” from the
therapists, so to speak.
The main problem on the market is that there is a lack of good medical specialists who can
assess and suggest R82's technical aid and appliances to the institutions and rehabilitation
centers. The very procedure of business-to-business interactions in the industry is undeveloped.
If a tender purchase in other countries depends on participants' skills, abilities, products' quality
etc. on the Russian market the participants don't care about that. Often the tenders are
predefined – who is going to win, because everything's prepaid (see appendix III).
Another aspect to this is that the federal law that governs tender purchases’ criteria is not based
on the requirements but on the price. In short: the one with the lowest price wins. According to
Anna Feskova (see appendix III) there would be no advantages no matter how good they [R82]
are at whatever they are doing for a company on the Russian market, the price decides
everything. Due to the above R82 with all of its prizes, achievements and finest design can't beat
the bureaucratic system that has been on the market for very long.
Beyond the price the priority requirement on the Russian market that is also emphasized by
Active is the delivery time. This expectation is influenced by Active’s own customers, who are as
mentioned above the families with disabled children. Quite often Active’s customers perceive the
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Dmitry Novikov
delivery time as long. Russia is a huge country and the distances put on even more time for the
products to be delivered. Often they don't want to wait that long and sometimes this fact affects
the choice of products (see appendix III). This is one of the reasons Active states that delivery
time parameter is the least satisfactory.
Moreover Russian laws regarding the goods imported say it must be entire product that has to be
exported (see appendix III) and therefore Active can't receive the products by separate parts,
even if some of them are ready to be shipped off before the others. For example often R82’s
seating systems have to be mounted on a frame (e.g. High-low frame or Strong base) in order for
them to function. As result the delivery time remains 4-4,5 weeks. Almost every national export
rules set different requirements when dealing with shipment of assistive technology for children
making this a legal specific to this matter.
Even though Hutt and Speh state that when the value offerings of the business marketer are
perceived as unique, other criteria (than price) dominate (2010, p. 47), due to the specifics of
the Russian market another overall important requirement is the price. To win the institutional
buyer at present time on the Russian market the price is the decision-making factor.
In the interview with Active’s general director Anna Feskova she notes that the price is left out
from the survey (see appendix III). Further she explains that R82's portfolio is top price and it's an
issue on the Russian market even though the customers are starting to get use to this price
range (see appendix III), however this is more related to the consumer market.
As for Active itself as a customer organization Anna most emphasizes the level of information
and services that R82 provide to maintain the products. Active in cooperation with R82 aims at
establishing the base of specialists that would recommend the products on the Russian market
even if there is a lack of them now (see appendix III). Once again, this fact is actually connected
to the total product concept, this aim of the two companies being the potential product.
Customers’ buying process
Life-time value of R82’s customers is high. Many of their customers have been with the company
almost since the beginning. A customer lifetime of 20 years is a norm at R82. Active Co Ltd. was
one of the latest acquired customers and started to work with R82 in early 2009.
Anni Kjær Bahlke (see appendix IV) states that them who do good job with R82 stay with R82. In
her career she fired only one troublesome customer who seemed to lack in sales. Their typical
buying process is in fact a straight rebuy, where buyers have substantial experience in dealing
with the need and require little or no new information (Hutt & Speh, 2010, p. 165). But, keep in
mind that in this case straight rebuy approach is in relational context.
R82’s area export manager describes her customers’ buying process: “…most of them have
studied our material quite well so they already know what they want. Our products it's not a
luxury…It's something special their customers want for their children and they can see all
benefits and good effects of a seating system. The main behavior I meet is that the customers
already know what they want or need and then you’ll have to guide them about accessories and
things like that. Take for example an issue about the Stingray: lot of people really want to buy the
Stingray for their children, although their children are big. All because the neighbor will not notice
that you have a handicapped child if you have a Stingray. But then we'll have to tell them: “But he
would seat far better in a Panther or an x:Panda”, depending on decease he has. But mostly
people know what they want and have studied things very well.” (see appendix IV)
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Dmitry Novikov
So, according to the model of the organizational buying process customer organizations have a
similar pattern of how they buy. Normally these businesses are presented evoked set of
alternatives at exhibitions and fairs. It’s easier to evaluate the candidates during the exhibitions
where many of them participate and show off new products. There, through individual
communication the businesses form individual and organizational preferences and make
organizational choice based on mutual agreement. In some cases R82 can hold back those
businesses that seem suspicious to become their customers.
Segmentation
On the basis of the above it is now possible to describe how R82 segments its customers. Table
2 illustrates R82’s macrosegmentation whereas table 3 illustrates the microsegmentation. The
bases of segmentation visualize R82’s common buyer organization.
Table 2. R82’s macrosegmentation.
Variables
Illustrative breakdowns
Characteristics of buying organizations
Size
Small and medium businesses with typical
number of employees between 4-9.
Geographical location
National markets: South America (Argentina,
Brazil); Middle East (Saudi Arabia, Kuwait,
Israel); Asia Pacific (Japan, Australia, New
Zealand, Korea, Singapore); West Europe
(France); East Europe (Russia, Poland); Africa
(South Africa); Scandinavia (Denmark, Sweden,
Norway, Iceland, Finland); South Europe (Spain,
Italy, Greece, Portugal)
Usage rate
Non-users (national distributors)
Structure of procurement
Centralized, partnering direction
Product/Service application
End market served
Users, therapists, parents, advisors, funding,
dealers
Value in use
High
Characteristics of purchasing situation
Type of buying situation
Straight rebuy in relational context
Stage in purchasing decision process
Early stage
Source: adapted from Hutt & Speh, 2010, p. 128; own production
Microlevel bases in personal characteristics in R82’s microsegmentation (see table 3) are based
on Active Co’s general director Anna Feskova taken as an example.
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Dmitry Novikov
Table 3. R82’s microsegmentation
Variables
Key criteria
Illustrative breakdowns
The level of information and services that
supplier (R82) provides to maintain the
products in the aftersale, relationship buyers
Purchasing strategies
Single source (partnering)
Structure of decision-making unit
Sales managers (S&M businesses don’t have
purchasing departments and therefore sales
staff decides)
Importance of purchase
High importance
Organizational innovativeness
Innovator
Personal characteristics
Demographics
Decision style
Mixed mode, organizational influence on the
decision-making
Risk
Risk taker
Confidence
High, both trust and commitment involved
Job responsibility
Purchasing, marketing manager
Source: adapted from Hutt & Speh, 2010, p. 131; own production
Then, in order to forecast the demand of the segments R82 uses sales force composite approach
where the salespeople estimate the future sales volume. The routine is that the salesperson
responsible for a certain area makes estimates for the sales for the next year for each of the
national markets.
Many of R82’s customer organizations including Active also supply other manufacturers’
assistive technology that is in a lower price range and this is a common characteristic in the
industry. Customer organizations report that this does not result in a drop in sales due to that
cheaper substitute products compete on different level and present no direct competition to
R82’s technology.
The picture here is that those markets where consumers can’t spend lots of money on assistive
technology need a cheaper solutions and therefore national distributors also supply those
cheaper solutions. This poses no direct threat to R82’s sales because consumers who’s got an
opportunity to purchase high quality technology do so, and if they don’t have money for some
reason they choose a cheaper product without even considering buying R82’s.
One of R82’s policies is that R82 tries to prevent its customers from selling competing products
such as for example Otto Bock’s push chair “clone” of R82’s Stingray – Kimba. This is however
stated only on paper, but in reality some customer organizations consider selling directly
competing products too.
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Dmitry Novikov
2.5. Satisfaction targets and their individual impact on R82’s sales volume
Figure 7. R82 customer satisfaction survey 2011 results
R82 Customer satisfaction survey 2011 results
10
9
8
7
6
5
4
3
2
1
0%
10%
20%
30%
40%
not satisfied
50%
60%
acceptable
70%
80%
90%
100%
satisfied
The satisfaction targets in the figure 7 are as follows: 1) Delivery time; 2) Information level
regarding delivery; 3) Response time to customer service queries; 4) quality of the answers to
queries; 5) the way R82 handles claims; 6) Product quality; 7) R82 product range; 8) Packaging
of products; 9) Quality of the catalogues; 10) Quality of the manuals.
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Dmitry Novikov
delivery time
information level regarding delivery
response time to customer service
queries
quality of the answers to queries
the way R82 handles claims
product quality
R82 product range
packaging of products
quality of the catalogues
quality of the manuals
Source: Own production
satisfied
46%
69%
69%
acceptable
31%
15%
23%
not satisfied
23%
15%
8%
85%
62%
69%
92%
100%
100%
77%
8%
39%
31%
8%
0%
0%
15%
8%
0%
0%
0%
0%
0%
8%
Above figure 7 illustrates the results of the customer satisfaction survey that R82 carried out
during October 2011 (see appendix II). For this purpose the SurveyMonkey website was used.
R82’s S&M department created and sent out this survey to their customers organizations – 50
people all in all. Unfortunately, the respond rate was low resulting in only 13 responses which
actually is the sample size of this project. Even though the sample size is that small the
customers show constancy in their answers so that a clear general picture was easily defined
and the priority targets are easily found.
The customers seem to be satisfied with most of the parameters leaving out such parameters as
delivery time, information level regarding deliveries, response time to customer service queries
and few others where there are certain percentage of dissatisfied responds. For instance, the
percentage of dissatisfaction in delivery time reaches 23%, and in information level regarding
deliveries – 15%.
According to the poll results aside of the delivery time the parameters that cause the
dissatisfaction belong to R82’s human resources, including information level regarding
deliveries, response time to customer service queries and quality of the answers to queries.
The questionnaire also contained an open field with comments after each question where
customers could leave their complaints and/or comments. Table 4 below illustrates the
comments left by the customers. What is most important is that these comments allow to see
some of the customers’ individual opinions. Also, comparing the results of the interview with
Active’s general director to the comments makes more holistic understanding of how the
customer organizations and the individuals in them perceive most important.
In general both the interview method and the questionnaire’s results indicate that the customers
aren’t fully satisfied with R82’s delivery time which poses the biggest threat to these small and
medium enterprises. Human resources targets on the other hand project a different image,
because Active’s general director Anna Feskova states: “All that has anything to do with the field
of communication of our company with R82's specialists is very satisfactory to us. R82 has put a
lot of effort in building this communication base with Active.” (see appendix III).The others
however give both positive and negative feedback based on various occasions and events that
occurred while dealing with R82’s sales staff.
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Table 4. Customer comments on satisfaction targets
Target
Delivery time
Comment
1) deliveries are often delayed
2) deliveries are expected to take no longer
than three weeks
Information level regarding delivery
Response time to customer service queries
3) generated delivery dates in Navision are not
realistic
1) not everybody are informed properly about
delivery delays.
2) people wants to be informed in advance
about expected delivery delays. Otherwise they
can not inform the customers before it is too
late.
1) Peder is our main contact person regarding
orders and questions - he is doing excellent
job. Bente is also very helpful when I need
some help from here.
2) We have 2 days to our customers, as a
minimum R82 should have the same otherwise
we will not be able to fulfill our demands.
quality of the answers to queries
the way R82 handles claims
3) Should reply in 3-4 days even for some
technical or customization inquiries.
1) Production stops at 14.00 o'clock, Therefore
urgent questions can only be answered the
next day. Now and then this causes a conflict.
1) What is max time for handling of claims, i
would like to know that so we are able to
inform our customers.
2) It would be much appreciated if R82 could
inform us of product faults before we discover
them ourselves!
Product quality
3) Rather than returning items as repaired we
need the information in the claim as to how
they were repaired and what was wrong with
them.
1) Stingray need improvements on the
sturdyness. People like the look and the design
but the feelling is that with the time is weak.
2) It could be easier to order side support.
R82 product range
3) We have some "bendy metal" problems
which need to be sorted. The headrest bars in
particular are not tightening well and will bend
easily.
1) You could make a child wheelchair LIGHT,
completely foldable, multiadjustable in all
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Dmitry Novikov
ways.
2) I would like you to have lighter wheelchairs
in the range of cross frame and fast frame.
Packaging of products
Quality of the catalogues
Quality of the manuals
3) A new lighter Panther would be great for our
market, as there is a lot of competition for
Paediatric manual wheelchairs, the Panther is
a little outdated and heavy.
1) Yes we are satisfied, although when
shipping parts, we would appreciate they be
put in the existing product boxes rather than a
separate box (or 3) for parts, as we pay a lot of
money for freight to Australia!
2) Packaging high-low indoor could be
improved.
1) It is always getting better and better.
2) If you can stock more that would be great,
as we often have lengthy wait times for these
to come over.
1) Quality has decreased with pages separating
from the instruction manual.
2) R82 have started a big improvement so we
are sure it will move to satisfied.
3) The manuals I know are currently being rewritten.
Source: adapted from Jensen, 2011, own production
Speculating from the results above the effect of the targets that belong to R82’s human
resources may be minimal on R82’s sales volume. It sure results in individual dissatisfaction of
both national distributors and their own customers, but it doesn’t make R82 sell less, because
according to Anni Kjær Bahlke (see appendix IV) R82’s customers’ life time is long and they tend
to stay with R82 even if from time to time there may appear a slight dissatisfaction. Egan (2008,
p. 57) also suggests that satisfaction does not always result in retention (loyalty) and it is equally
apparent that dissatisfaction does not necessarily result in defection.
R82 employs both acquisition and retention strategies. The lifetime value concept suggests that
a company should avoid taking a short-term view of the profit (or indeed loss) of any individual
but rather should consider the income from that company’s lifetime association with the
customer (Egan, 2008, p. 77). Judging by R82’s sales retention strategy works in their favor.
On the other hand delivery time, or in fact the delays in delivery may cause the decrease in R82’s
sales volume simply reducing the amount of units sold periodically. Therefore if R82 wants to
both increase the customer satisfaction and the sales volume it is the delays in delivery that
must be tackled first.
2.6. Why do the targets gap
It is most important to understand the reasons why the customer organizations find the targets
least satisfactory, therefore four most gapped targets were chosen: 1) Delivery time; 2)
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Information level regarding delivery; 3) Response time to customer service queries and 4) quality
of the answers to queries.
Delivery time
Even if Anni Kjær Bahlke suggest that she follows up and regularly informs her customers about
delivery delays (see appendix IV) the customers still seem to be dissatisfied with current
information level regarding delays: not everybody are informed properly about delivery delays
(Jensen, 2011). It depends on the contact person at R82 and their approach to the issue of
speed of informing about the delays. On the other hand it also depends how busy the individual
contact person at R82 is. It may simply take time to get to each and every of their customers
after the delay is discovered. For instance, as a salesperson Anni Kjær Bahlke follows the rule of
immediate contact of the customer if something important happens which affects the delivery
itself, she is always available on the phone too.
Most crucial is the lead time – the customer organizations can’t or don’t want to cope up with
R82’s 4-5 weeks of delivery time, even if it’s the company’s policy that the delivery takes the time
period of 4-5 weeks and is stated in the contract. Delay on the other hand is a serious issue. Anni
Kjær Bahlke herself notes that: “…the only problem could be the delivery time. Because now and
then we have had few deliveries that have been delayed and haven't been able to live up to their
deadline.” (see appendix IV).
A common scenario for the delay in R82 is when the orders are prepared to be shipped off and
often it is revealed that there are needed parts not available on the shelves just before the
curriers’ vehicles arrive to collect the packages. A salesperson discovers that some parts are
needed immediately because the shipping department is about to send the packages away in 34 hours. Then, this salesperson learns that there are none available in the stock. Often, these
missing parts are taken from the subsidiaries’ own stocks if they are available there. Even if one
part is missing the product can’t be used and this renders the product incomplete – the
customer organizations can’t sell it. Standard procedure at R82 if something can’t be shipped at
a certain point –it is pushed to the next time the freight cargo arrives.
Depending on the location of the national distributor the shipping has to wait for the next time
the currier arrives and this takes time, because R82 can’t ship the products every day. There are
specific dates for picking the packages for every country. For example, if the package is
incomplete and there are missing parts the date of shipping has to be pushed forth in time and
this may take up to one week or even more. This is how the gap in time of delivery appears.
Information level regarding delivery
Many of the customer organizations have also noted that information level regarding delivery is
unsatisfactory. It all again comes down to the delivery delays. The customers want to be informed
on the issue of delays almost immediately. Again, at R82 the fact of delays often revealed just
before the shipping take place. The contact persons cannot foresee these delays in advance,
especially when they have to keep up with a dozen or so of customer queries.
The reason seems to be hidden within the same problem as the target above – missing parts on
the shelves. Assuming if there were less last-minute issuers with the missing parts the
satisfaction of the customers would rise, or in case of delays it is needed to make a method of
quick response on the common issue of discovered delays.
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Dmitry Novikov
Response time to customer service queries
Response time to customer service queries is where the feedback gets inconsistent which once
again confirms that mostly the human resources: targets depend on individuals that work as
contact persons at R82’s sales and marketing department. The comments here give credit to the
contact persons and at the same time there remain dissatisfied customers that complain about
3-4 days of waiting which they perceive as very long.
Figure 8. R82’s Balanced Scorecard 2011
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Dmitry Novikov
Source: adapted from Kildegaard, 2011
This may be due to that R82’s sales and marketing department have to serve somewhat 40
customers, each with their own demands, while R82’s sales staff consists of only 5 contact
persons (two of them involved in personal selling). It is simply hard for the salespersons to
provide high quality answers to all of the customers fast and to keep the quality and the speed
high.
Quality of the answers to queries
This target may depend on a variety of different reasons as well as the reasons above. Quality is
subjective to each individual customer and it is . Theoretically, if the targets above are improved
the quality of the answers to queries will rise too.
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Dmitry Novikov
Now, why are there shortage of parts on the shelves? According to the balanced scorecard theory
the customer results depend on the internal processes. R82’s balanced scorecard (see fig. 8)
indicates that their own internal processes suffer. Missing purchased products in total for
example stay red for the whole time. Assuming that if there weren’t any missing purchased
products the missing parts on shelves would not occur so often.
Also, the quality department at R82 doesn’t allow defected parts to be shipped and they have to
be discarded which also adds to the shortage. Those are the two internal reasons why delivery
delays occur and this is how the gap in the customer satisfaction appears.
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3. Findings
R82 as a company has more responsibilities to the R82 group then to their customers. Not
everyone in the company follows the relational approach. The relationships hang on few
immensely dedicated salespersons which take care of customer relationships. They are pressed
and stressed and often it is them who has to solve problems that appear, for instance the
delivery delays which is the main source of dissatisfied customers. Much more personal effort is
required to be a salesperson at R82. There is also a lack of motivating the sale staff.
In this case the stress level was characterized as “constantly-stressed” by the sales staff. (This is
the main reason why response time to customer service queries suffers.) It feels that many of the
support is not internally driven, but is a external requirement that has to be fulfilled in order to
score highest turnover. Here, the individual goals and the corporate goals differ.
Its ability to come up with new products and successfully launch them onto the market is very
profound. Also, in comparison with competing companies in the branch their respond time is
lower, (vs. 1 week respond time). There is resistance to change amongst R82’s top management.
It’s not something negative but a common trait with all companies.
The approach to problem-solving amongst R82’s employees differs from individual to individual.
While salespersons’ personal approach is aimed at maintaining the relationships and to the
extent of business friendship, R82 has certain corporate policies which prevent their customer
organizations from being fully satisfied. At R82 some individual employees have more passion
and enthusiasm towards their customers and their expectations. In the end it appear to be that
R82 all in all has product innovation and leadership as their key value proposition instead of
complete customer solution.
In regards with the question asked in the section 2.2 – where the drive comes form, is it
internally driven value creation or externally driven value creation the answer now can be
defined. Mainly the large portion of value is a external requirement set up by the national trade
rules, laws and customer organizations themselves thus value must be created and delivered.
But, R82 possess incredibly skillful employee base who, on the other hand, as individuals create
another portion of value only out of their own personal ego drive and empathy. This value cannot
be matched by any competitor.
Figure 9. Main cause of the gap in customer satisfaction.
Missing
purchased
products
Shortage of
parts on
shelves
Delivery
delays
Gap in
customer
satisfaction
Source: Own production
Also, based on the analysis it appears to be that R82 tries to save on some of the activities that
the company could perform to enhance their own output, both is sales and employee
satisfaction. According to return on relationship model building good internal quality operations
leads to happy and contended employees producing quality products, which in turn results in
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customer satisfaction, retention and profitability (Egan, 2008, p. 166). Not everyone in the sales
staff is satisfied with the present conditions all the time.
Thus, based on the analysis in the item 2.6 it is possible to draw three main problems that cause
the gap in customer satisfaction: 1) missing parts on the shelves at the deliveries which cause
the delivery delays (see fig. 9), 2) late discovery of the fact that the parts are missing, 3) inability
of R82’s contact persons to act as fast as the customers want. In fact the first reason causes the
second to happen. It is the delays that put a pressure on the sale staff making information level
regarding deliveries a dissatisfactory.
Based on business-to-business customer buying behavior analysis it is clear that R82’s
customers appear to be high-cost to serve meaning that all of them order small order quantities,
have unpredictable order arrivals, large amount of presale and postsale support, pay slowly
(Kaplan & Atkinson, 1998, p. 159) and so on.
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4. Plan of action/recommendation
Problems exist when customers perceive they exist (Manning, Reece & Ahearne, 2010, p. 339). It
all is based on customer organizations’ perception even if some parameters aren’t real. If R82 is
so committed to their goal of becoming number one in the branch they have to pay attention to
the current respond from their customers. Another important note is that customer complaints
provide unique opportunities for companies to prove their commitment to service (Manning,
Reece & Ahearne, 2010, p. 340). The course of the project now proceeds to the plan of
action/recommendation R82 should implement in accordance with the project’s findings.
According to the project’s delimitation to the downstream supply only the plan of
action/recommendation is therefore built accordingly: recommendation suggests how to deal
with the problem rather than suggests how to eliminate the source which lies within upstream
supply.
Every plan of action or recommendation includes some sort of change. R82’s case is no
exemption, the change is needed in order to deal with the source of customer dissatisfaction. As
it was noted in the findings the personnel is very important in the case of R82. Therefore the
change process goes through a series of phases that, in total, usually require a considerable
length of time (Kotter, 2007, p. 97).
In order to get the most successful outcome out of the recommendations R82 has to follow
Kotter’s eight step change model so that the change outcome is maximized. This includes
creating sense of urgency, empowering others, establishing short-term goals etc. Because a
vision of the change process can reduce the error rate. And fewer errors can spell the difference
between success and failure (Kotter, 2007, p. 103). This is a pre-condition for the plan of action
that this report contains.
As it is stated by Robbins, Judge and Campbell (2010, p. 518) planned change seeks to improve
the ability of the organization to adapt to changes in its environment. Second, it seeks to change
employee behavior. R82 has a long history of success and, perhaps, the company would not
encourage the change so easily. It’s always easier to let the things stay the way they are.
Therefore the change must be encouraged by empowering the sales force. Because resistance to
change hinders adaptation and progress (Robbins, Judge and Campbell, 2010, p. 519).
Thus, R82 change’s main goal is to become more market oriented and less product oriented and
review their value proposition resulting in achieving aligning the organization to the market.
Change agent position must be created within the company in order to conduct the change.
Sales force
In regards to the sales force that R82 has the following would be appropriate scenario in the light
of findings. According to ROR model it is the employee who’s have to be satisfied fist in order to
create the customer satisfaction. Therefore R82 has to implement the incentive plan to motivate
their employees, namely the salespeople – those who make sales, thus make money for the
company. It is important to realize that not only will it improve salespersons’ performance and
satisfaction, but also will result in increase in sales volume.
Developing a total reward program for the sales force including both financial and nonfinancial
rewards is preferable. If R82 wants to keep it inexpensive than choosing either work-life or
compensation is in order. Health-and-wellness programs are fine, for example fitness for the
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employees. Bonuses for the sales staff and commission is another fitting incentive. This will
create a motivation for the salespersons and improve their personal drive.
Next R82 has to establish training programs in order to train the sales force to improve their
performance. This typically results in higher sales for the company and higher incomes for the
sales reps, who experience greater job satisfaction…(Tanner, Honeycutt & Erffmeyer, 2009, p.
190). This will cause R82 salespeople’ satisfaction to rise which will result in increase in
customer satisfaction level. The training should be done according to the sales training cycle.
Instead of self-educating salespersons R82 must establish training programs on the following
topics: product knowledge is at most important, and at least sales skills. R82 may also deliver
training to their personal salespeople and the contact persons.
Thirdly, R82’s customers are highly demanding and erratic in ordering procedures. In order to
bring them into order the company must apply activity based costing technique to all of its 36
customer organizations. This will enable R82 to identify the most and the least profitable
customers. According to the cumulative profitability whale curve (see fig. 10) and Pareto principal
the most profitable 20% of customers generate between 150% and 300% of total profits, the
middle 70% of customers break even and the least profitable 10% of customers lose 50% - 200%
of total profits, leaving the company with its 100% of total profits (Pedersen, 2010).
Once ABC costing is applied and the least profitable customers are identified R82 has to try to
turn unprofitable customers into profitable and if this fails – fire them, but only as the last resort.
First priority is to save the relationships.
Figure 10. Customers’ cumulative profitability in whale curve.
Source: Adapted from Pedersen, 2010
High cost to serve and low net margin generators are characterized by aggressive behavior:
leveraging their buying power, low price and lots of customized service and features (Kaplan &
Atkinson, 1998, p. 159) and thus troublesome. By doing this R82 can make all the customers
worth spending efforts on, because it would be impractical for R82 to engage in a change
themselves and leaving the customers out. The customers have to change too in order to
experience the increase in R82’s performance.
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Missing parts on shelves
Delivery delays have to be either forecasted or eliminated in order to improve the customer
satisfaction and close the gap. Due to the project’s delimitation the plan focuses on better
managing and forecasting the delays. R82 can employ a form for qualitative benchmarking in
order to identify best performance practices to deal with the delays, for example SCOR. SCOR is
preferable because it identifies specific best practices to improve supply chains (Anon, 2010, p.
3). There are surely best practices that deal with similar problems in the supply chain. When the
best practices are discovered R82 can then use these practices to deal with common problems
in the supply chain which shall reduce the delays and increase customer satisfaction.
As the long-term plan of action R82 needs to reach a higher degree of alignment of the
organization with the market to remove the roots of the gap in customer satisfaction. Right now
R82 has lateral supply chain where all the links are separately independent. The downside of
such supply chain is that it is far from simple to reach the synchronization of joint material flows
(Jonsson, 2008, p. 383). In market-responsive supply chains like R82’s should be it is more
important to have flexible suppliers that can adapt to changing volumes and variants with short
leadtimes (Jonsson, 2008, p. 385).
Therefore R82 needs careful supply chain management program to support the transformation
to market driven organization and alignment with the market. One fitting technique in supply
chain management is quick response (QR), which is a concept for collaboration and exchange of
information between manufacturers, wholesalers and retailers in supply chains…it strives to coordinate and synchronize the common flow of materials to achieve the most efficient utilization of
resources possible (Jonsson, 2008, p. 377).
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5. Conclusion
In order to close the gap in customer satisfaction a company can either go around the problem
and try to deal with it or go to its roots and try to eliminate the source. Due to the fact that this
study is delimited to downstream supply, the first stand was chosen.
The interviews and the open questionnaire that had been conducted during the course of the
project shed some light on the reasons to why this gap appears. The reasons for the gap in
customer satisfaction seem to be hidden inside R82’s internal processes and supply chain: 1)
missing parts on the shelves at the deliveries which cause the delivery delays, 2) late discovery of
the fact that the parts are missing, 3) inability of R82’s contact persons to act as fast as the
customers want.
Of course, the above are not the real causes of the gap in customer satisfaction, but the causes
that lie on the surface. First of all the study shows that R82, as product oriented organization,
structures its sales and marketing around the products, not the market. This sounds more
realistic and this is why there is a tendency towards a gap between customers and R82 itself.
If R82 desires to get rid of the gap in its entirety the company has to become more marketoriented, restructure its supply chain to market-responsive and implement the quick response
concept so that R82’s flows of materials and information is tied in with customers’ needs and
behavior.
As for the current recommendations, R82 needs to implement at least four things in order to deal
with the gap in customer satisfaction. These are: 1) implement developed incentive plan for the
employees and especially for the sales staff who makes the sales happen; 2) provide a moderate
level of sales training so that salespersons’ abilities and skills are enhanced beyond the current
level; 3) apply activity based costing to all of its customer organization to identify the most
unprofitable ones and act accordingly – try to make them profitable, and 4) implement
benchmarking technique, for example SCOR in order to define best performance practices for its
supply chain.
By implementing the combination of the recommendation R82 can achieve an increase in
customer satisfaction and thus can close the gap in it.
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Bibliography
Active Co Ltd, 2009. History. [Online] (Updated 24 Jul 2011)
Available at: http://www.rvozm.ru/node/20
[Accessed 5 October 2011].
Anon, 2010. Summary group A. November 2010 Horsens: VIA University College.
Dansk Rehab Gruppe, 2011. Danish Rehabilitation Group. [Online]
Available at: http://www.rehabgroup.dk/?lang=uk
[Accessed 23 November 2011].
Egan, J., 2008. Relationship marketing: exploring relational strategies in marketing. 3rd ed.
Gosport: Pearson Education.
Hutt, M. D. & Speh T. W., 2010. Business marketing management. 10th ed. Mason: SouthWestern, CENGAGE Learning.
Jensen, H., 2011. R82 Customer Satisfaction survey 2011. [PowerPoint] November 2011.
Gedved: R82 A/S.
Jonsson, P., 2008. Logistics and supply chain management. Maidenhead: McGraw-Hill.
Kaplan, R. S. & Atkinson, A. A., 1998. Advanced management accounting. 3rd ed. Upper Saddle
River (NJ): Prentice Hall
Kildegaard, E., 2011. R82 scorecard. R82 A/S.
Available at:
http://r82intranet/dk/Lists/Nyheder%20DK/DispForm.aspx?ID=430&Source=http%3A%2F%2Fr
82intranet%2FDK%2FSider%2Fdefault%2Easpx
[Accessed 12 December 2011].
Kotter, J. P., 2007. Leading Change: Why Transformation Efforts Fail. Harvard Business Review,
[Online]. R0701J, pp. 96-103.
Available at: https://studienet.viauc.dk/sites/ishs-hold/archive/ISHS21S11/ManagementOrganisationLogistics/Articles/Development%20of%20the%20Sales%20Platfo
rm/Leading%20Change%20by%20John%20P%20Kotter.pdf
[Accessed 12 December 2011].
Manning, G.L. Reece B. L. & Ahearne, M., 2010. Selling today: creating customer value. 11th ed.
Upper Saddle River (NJ): Pearson Education International.
Nibe, A.M., 2011. Distribution forms rev. [PowerPoint] February 2011 Horsens: VIA University
College.
Opalinska, A. & Novikov, D., 2011. Relationship selling: what role does a salesperson play in
relationship selling. BA. Horsens: VIA University College.
Pedersen, C., 2010. abc. [PowerPoint] September 2010 Horsens: VIA University College.
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R82 A/S, 2011. Catalogue 01.2011 UK. [Online] Horsens: Grafisk Forum A/S. Available at:
http://www.e-pages.dk/r82/45/
[Accessed 14 September 2011].
R82 International website, 2011a. Profile. [Online]
Available at: http://www.r82.com/en-IE/About-R82/Profile.aspx
[Accessed 11 September 2011].
R82 International website, 2011b. R82 vision and mission. [Online]
Available at: http://www.r82.com/en-IE/About-R82/Vision-and-mission.aspx
[Accessed 14 November 2011].
R82 International website, 2011c. Contact Sales & Marketing. [Online]
Available at: http://www.r82.com/en-IE/Contact/Int.-Sales-and-Marketing.aspx
[Accessed 29 November 2011].
Rahbek, M., 2011. PowerPoint presentation GB. [PowerPoint] August 2011. Gedved: R82 A/S.
Robbins, S. P. Judge, T. A. & Campbell, T., 2010. Organizational behavior. Upper Saddle River
(NJ): Financial Times Press.
Tanner, J.F. Honeycutt, E.D. & Erffmeyer, R.C., 2009. Sales management: shaping future sales
leaders. Upper Saddle River (NJ): Pearson Education International.
Wikipedia, 2011. Microsoft Dynamics CRM. [Online] (Updated 17 Oct 2011)
Available at: http://en.wikipedia.org/wiki/Microsoft_Dynamics_CRM
[Accessed 15 November 2011].
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Appendix I: Project Description
Bachelor Project Description
R82 A/S:
how to improve customer satisfaction in business-to-business sector
1. Background description/Problem area
R82 is a company based in Gedved, Denmark with subsidiaries in England, Holland, Germany
and the USA. R82 produces technical aid and appliances for disabled children, young people and
adults throughout the world (R82 A/S, 2011, p. 3). The company was established in 1982, “R”
stands for rehabilitation and “82” stands for the year it was established in. A vast network of
distributors and local dealers spread over most of the globe ensures personal support and
secure delivery. Amongst R82’s values are: quality of life, freedom, development, service, safety
and the future. Revenue in 2010 reached 236 million DKK with export ratio of more than 90%.
R82’s outsources most of its production activities to countries as China and Taiwan, though the
assembling of the final products take place in the facilities in Gedved. The national distributor
that operates on the Russian market is Active Co Ltd.
The company supplies to ca. 36 countries and operates only on B2B market meaning it has little
to no dealing with end customer. R82’s downstream supply is divided into three different
categories or “flows”. The first one is shipped to the subsidiaries which possess their own stocks,
the second and the third is shipped to national distributors with only difference being that second
is meant for institutional buyer (B2B) whereas the third one is meant for consumer sale (B2C).
National distributors’ institutional buyer include hospitals, clinics, rehabilitation centers and alike.
Usually this is where most of the organizational resources are being spent – on fulfilling various
requirements in order to win tender or reverse auction by which the above organizational buyers
purchase their production.
Furthermore mentioned distributors are mostly small companies with limited resources which
results in lack of optimizing the ordering procedures at R82’s. Everyone has different
expectations regarding delivery time etc. Thus there is a gap in the supply; the longer, more
complex the supply chain is the more important it is to keep track of all of its components.
To sum up: it’s hard for the distributors to deliver a high performance to the institutional buyer
and live up to requirements they may set up; the national distributors have erratic order pattern
even though they’re doing their best at ordering; this casts a shadow on R82’s image in the long
run; it is often R82’s own salespeople’ job to close these gaps which require extra time and
human resources. All in all the supply chain is long and challenging to manage. On top of that it
appears to be that at this point R82 doesn’t have any tool/method for managing and measuring
their customer satisfaction level. Even though the company has been successful through
decades, never experienced lack of incoming orders and attained growth there remains a
challenge – gaps in supply chain and lack of a track-keeping or measurement tool for it.
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2. Purpose
The purpose with this bachelor project is to analyze customer satisfaction on the Russian market,
identify the cause to why it gaps and then develop a set of recommendations/plan of action that
could be implemented by R82 in near future.
3. Problem formulation
This is how the problem/issue has arisen – the above suggests there may be something that
needs to be improved in R82’s vertical relationships and downstream supply. The above
represents a burning platform for the current project. Hypothesis is that a company theoretically
can have influence or some kind of effect on their customer satisfaction level in B2B
environment, more likely indirectly. Therefore, the main question that needs to be answered in
this project report: how to positively influence the situation with B2B buyer’s satisfaction? In
other words – what does R82 need to do to get overall customer satisfaction level improved and
moreover what is the reason behind current situation with it.
Therefore, the following research questions have been formulated: 1) how R82’s total sales
activities are executed; 2) how strong is R82’s ability to satisfy its customers’ needs; 3) what are
the specifics of B2B buying behavior in technical aids and appliances industry; 4) which
satisfaction targets are the most crucial for R82’s performance and what’s their individual impact
on the sales volume; 5) what causes the targets to gap and how is the gap to be closed?
4. Delimitation
In regards with purpose above the project report will not include the subsidiary companies. The
project focuses on R82’s own resources and its distributors and thus the subsidiaries are beyond
the scope of this report which investigates head company only.
Customer: the end user (B2C) will not be touched by this project report and neither any of the
subsidiary companies’ customers, because the report centers around the head company (see
above).
Industry: everything excluded but technical aids and appliances industry.
Geographical: all markets but the Russian market will be excluded from the frames of the project,
it’s simply impractical to investigate the topic in question that broadly. More likely there will be
taken and the distributor that operates on that market. Also, the project is not planning to include
upstream supply side of the supply chain due to that the project will study out-of-the company
part of R82’s supply.
Concerning the time frame the project plans to cover most recent events in the company’s life
meaning year 2010-2011. Eventually the problem should be studied ca. one year forth in time.
5. Choice of models and method
In order to examine R82’s current situation and perform an in-depth analysis there will be used
models and theories.
Models and theories: thus, in order to answer to research question 1 there will be applied the
Company’s selling platform theories. First of all an analysis of the institutional buyer and their
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strategic situation will take place. Then, an assessment of the company’s business model will
determine their core competencies to see if the right value is delivered. Geographical positioning
theory will aid in determining how the value is being created whereas rules for international
agreement contracts and international sales of goods and services will shed some light on the
way R82 deal with their customers legally.
In regards with the research question 2 there will be used segmentation along with business-tobusiness customer buying behavior analysis. Research question 3 will rely on analysis of R82’s
business model to see what criteria are the most crucial for the company’s performance. As for
research question 4 the personal development, team building, recruitment, incentives, stress
management, terms of sales and delivery and management of partnerships will be used. Last,
research question 5 will have balance scorecard and measuring effectiveness of the company’s
supply chain in its analysis.
Only after having answered all the research questions a set of recommendations can then be
suggested. Simply put the project will have to investigate cause-and-effect relationship with
analysis of the cause followed by making a plan of action/recommendations.
Data: Data collected will consist of both qualitative and quantitative type combined which will
ensure the most optimal outcome for a project report of this scope. Therefore the project will
have both types involved in the analysis and evaluation.
Methods: Recently R82 has specified a set of 10 targets to be used in their future customer
satisfaction survey. These targets will be used to measure the gap in customer satisfaction in the
course of this report. Data used will be collected both internally and externally. Internally – mainly
the most needed will be collected from R82’s own sales and marketing department, all of the
above field research. Externally – there will be questionnaires sent out to the customers – field
research as well. Desk research will include gathering info and documentation which is available
on R82’s intranet; the distributors will also be researched on the net. There will also be made a
pair of interviews with the company’s employees.
6. Time schedule
The Gantt chart below illustrates the main activities performed during business placement and
the BA project.
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7. Sources, references and literature
The list below presents the preliminary sources and literature to be used in the project report.
Active Co Ltd, 2009. Равные возможности. [Online] (Updated 24 Jul 2011)
Available at: http://www.rvozm.ru/
[Accessed 5 October 2011].
Donaldson, B. & O'Tool, T., 2007. Strategic market relationships: from strategy to
implementation. 2nd ed. Glasgow: Bell & Bain.
Egan, J., 2008. Relationship marketing: exploring relational strategies in marketing. 3rd ed.
Gosport: Pearson Education.
Harvard Business for Educators, 2007. Customer lifetime value calculator. [Online]
Available at: http://hbsp.harvard.edu/multimedia/flashtools/cltv/index.html
[Accessed 5 October 2011]
R82 A/S, 2011. Catalogue 01.2011 UK. [Online] Horsens: Grafisk Forum A/S. Available at:
http://www.e-pages.dk/r82/45/
[Accessed 14 September 2011].
R82 International website, 2011. Profile. [Online]
Available at: http://www.r82.com/en-IE/About-R82.aspx
[Accessed 11 September 2011].
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Appendix II: R82 Customer Satisfaction survey 2011
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Appendix III: Interview with General Director of Active Co Ltd.
Me: Can you in general terms describe the current situation of the customer satisfaction on the
Russian market?
Anna: Due to the fact that the production of R82 is quite new to the Russian market it would be
hard to assess the situation right now. Speaking general, I believe those consumers who bought
R82's products are quite satisfied because they start to use referrals and to recommend the
products to the others. R82's products stand very distinctively from the competitors' products
and probably they are the best available on the Russian market now.
Me: Where in your case does most of the revenue come from – public or private sector?
Anna: It comes from the private sector because the public doesn't deal with us yet. It doesn't buy
from us at the moment. There are immense legal aspects to this issue in Russia, many of laws
just hinder us dealing with the public sector.
The main problem here is that there is a lack of good medical specialists who can assess and
suggest R82's technical aid and appliances to the institutions. The very procedure of business-tobusiness interactions in the industry is undeveloped. Another this is that the federal law that
governs tender purchases criteria are based not on the requirements but on the price. In short:
the one with the lowest price wins the tender.
Me: Please, comment on the 10 targets, the first one being the delivery time.
Anna: We are not completely satisfied with this parameter because we would like to have it
happen a bit faster. It all comes to the people who buy from us, often they don't want to wait that
long and sometimes this fact affects the choice of products. Yesterday on the meeting there were
much talk about the logistics and R82 suggested to keep a stock in Russia. I think it's risky due
to the crisis and no one wants to risk.
Moreover again for example Russian laws regarding the goods imported say it must be entire
product that has to be exported and therefore we can't receive the products by separate parts,
even if some of them are ready to be shipped off before the others. As result the delivery time
remains 4-4,5 weeks. A single product includes many parts and accessories, and thus increasing
the costs of keeping stock. It's easier for the manufacturer to keep them in stock, I would
recommend R82 to establish something like that at their own site. On the contract basis it would
be better for us and R82 to handle more effectively this way.
Me: information level from R82 regarding deliveries
Anna: Very satisfied, very good established channels. On the scale of ten I would give all 10.
Everyone is easy to contact ant any time and therefore in principal nothing to complain about
here.
Me: our response time to customer service queries
Anna: We are satisfied with this parameter, nothing really to comment on here either.
Me: the quality of the answer to queries given by R82
Anna: All that has anything to do with the field of communication of our company with R82's
specialists is very satisfactory to us. R82 has put a lot of effort in building this communication
base with Active.
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Me: the way that we handle claims
Anna: Also satisfied, because the company always repairs the defected products, if there are any.
All that we asked of R82 they fulfilled it very professionally and in time.
Me: our product quality
Anna: Comparing to other products of the same category it's the best out there that's available
today in the world I would say. In regards to the particular issues there are of course some, but in
general in terms of functionality, materials used and design R82's products are of high quality.
They react to all the customer notices and wishes and very flexible.
Me: R82 product range
Anna: Enough at the moment to cover the consumer market as well as medical institutions and
specialists. So it's multifunctional in some sense. Not speaking about the age coverage, it's very
broad.
Me: the packaging of products
Anna: Satisfied, nothing to explain or comment on here.
Me: the quality of our catalogues
Anna: Highly satisfied, customers like R82's catalogues, the catalogues differentiate from those
of similar companies. The catalogue is not merely a list over items but a whole book that can be
read. Aside from containing the information about the products the catalogue has detailed
therapeutical information regarding how to walk, how to stand etc.
Me: the quality of our manuals
Anna: Perhaps it's the consumers who should give the answer to this question. From the point of
view of the end user I can give you an example. We once supplied a rabbit size 4 product to Perm
to a single mother. She managed to assemble the product by herself. As for the guide itself: for
example take IKEA, it its manuals IKEA uses pictures to show how to assemble. I think there
must be both pictures and text in them - a combination, just like in R82’s manuals.
Me: What are the predetermined expectations around the 10 targets on the Russian market? Is
there something else that you would describe important?
Anna: Well, all in all the price would be the one that is left out of the survey. Still, R82's portfolio
is top price and it's an issue on the Russian market even though the customers started to get use
to this price range. As for our company we most emphasize the level of information and services
that R82 provide to maintain the products. Active in cooperation with R82 aims at establishing
the base of specialists that would recommend the products on the Russian market even if there
is a lack of them now. We have to teach them.
Me: In your opinion how well does R82 perform in fulfilling the customers’ expectations?
All that is required R82 gladly fulfills. In few words: there are no disappointments with our work
with R82's If compared to the other companies, for example Swedish competitors all I can say
they are far behind from R82's level of doing business. Comparing by the ten parameters above
for example R82 would be the leader amongst them.
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Me: Which requirements do the institutions set up e.g. contracts, tender purchase etc. Does R82
have any advantages in fulfilling these requirement over competitors?
Anna: The priority requirement is the delivery time. Once again, due to the specifics of the
Russian market the overall important requirement is the price. As I tried to say earlier, there
would be no advantages no matter how good they are at whatever they are doing for a company
on the Russian market, the price decided everything. It's very poor in my opinion because R82
with all of its prizes, achievements and design can't beat the bureaucratic system that has been
on the market very long. No one would acknowledge R82.
Why is that R82 is chosen widely, it's because of the quality and features for the rehabilitation.
These features must be assessed by a medical specialist so the products can become
acknowledged in the healthcare sector. And there are no such people in Russia. If a tender
purchase in other countries depends on participants' skills, abilities, products' quality etc. on the
Russian market they don't care about that. Often the tenders are predefined - who is going to
wind because everything's prepaid. It's bad there is no place for a healthy competition in tenders
in Russia. There is a qword corruption that describes it all in this question.
Me: Are there any external sources that affect customer satisfaction on the Russian market?
Comment on government, bureaucracy and funding system
Anna: It's the same as the one above, I have already given answer to this in the previous
question.
Me: Give a general picture of your customers : who are they, how do they buy, what quantities do
they purchase, do they repeat purchase or one-time buy.
Anna: Our most common customers are families with disables children, a private sector. If they
buy from us they most likely stay with us and make other purchases. If they come for a certain
product Active would diagnose the children and suggests what they need. Therefore people come
back. Latest addition to the customer base are the charity organizations that buy in bigger
quantities.
Me: What happens when the children grow up? What happens with the old technical aids and
appliances?
Anna: The thing is that we've been on the market for three years and there are few who bought
from us who had this experience. The law provides the disabled children with the technical aids
and appliances stated the time period for how long can it be used. After the time of exploitation
has ended no one cares about what happens with the old appliances. There are no regulations
regarding that whatsoever. It can easily be discarded or sold away. Appliances of low quality get
broken very fast, as for R82's products they can be used long time even after. There were few
cases with this issue and the people like to keep the old ones for themselves for further use,
maybe not that much as the new ones of course. We plan to maybe take the old ones back in
exchange for considerable discounts for the new ones and use the old to lease. Not everyone can
afford the products yet so it could be a good idea. It also depends where the compensation is
from. For instance in Moscow people get fully compensated.
10th November 2011, R82 A/S Gedved
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Appendix IV: Interview with R82’s Area Export Manager
Me: Can you describe the current situation of the customer satisfaction on the Russian market?
How does the picture look like?
Anni: From what I know, mainly they are quite satisfied, the only problem could be the delivery
time. Because now and then we have had few deliveries that have been delayed and haven't
been able to live up to their deadline. And it was a few orders for tenders, so they had a penalty
on it. But in general I believe they are quite satisfied.
Me: How does S&M department plan for the general sales activities?
Anni: It begins with making the budgets, the budget for 2012 for example when we start to see
how much do you want to sell in Russia in 2012 we also look at how can we do this. And in the
word how we have activities, we have exhibitions or new product coming out, seminars, product
training, things like that. So, we start seeing how much do you think you can sell, we always talk
to the distributor in each country, then together we find a number, then we start planning
activities. For the next year 2012, I promised Bente – our therapist, that she will go once or twice
to Russia to St. Petersburg and Moscow to do a seminar for product training with customers
chosen by Active.
Me: How do you sustain growth? Is it new customers, increase in sales volume or something
else?
Anni: In general it's a bit of everything. I find or have found quite a few new customers which of
course has given growth in sales, but also working with the customers. We do have or already
had when started we have had quite a lot of growth. Like for instance Italy Fumagali we have
more than doubled the sales over the last four to five years. And this is I think many things could
be the reason for this. Number one: they get more attention now when I'm here to look after them
and to help them, number two: we have developed new products, developing new products also
gives us an increased turnover. Because for instance before x:Panda there was nothing like this
so now we're selling 250-300 x:Pandas in Italy per year. So this has given us a lot of growth.
Then, we have the Stingray which will also give us growth. And now I believe with Mustang we can
also have a lot of growth, but also that you do the activities with the customers that you say: "can
we go visit your customers in Rome" or do seminars together or go to exhibitions. There are many
ways of increasing sales. But new products, extra attention and new market areas.
Me: Do relationships play a great role in your dealing with the customers? Describe your
relationship with Active Co.
Anni: yes, in mine it does. With Active and many others they really trust me, which is the keyword
for a lot of businesses. it is that if I say "yes it works, it's not broken" or if I say "yes, we can
deliver" I'm suppose to deliver. Because we talk a lot and we speak a lot together and we see
each other. In this way we get to know each other and they have a lot of faith in what I say and I
have to live up to this.
Me: How long and what does it take to establish a business relationship? What does it require
from you personally?
Anni: At the beginning it's a tough job because you have to get to know them, to get to know their
way of thinking and then you get started the ordering process and you have to learn them how to
order. For instance the Israelis they can still write "I want the stingray red and with the canopy
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and a table". What size, what color etc. We need to know, and we need to learn them to take the
pricelist and go number by number by number. It can be a hard work to learn them this and also
in the beginning they order something they don't really want. And we have to say "Are you really
sure you want the handbrakes on the Stingray?" and or "Are you sure you want big wheels in
front?". You have to be paying much more attention to their orders also if they order wrong side
supports for an order a wrong head support. If they forget to order a small thing like between the
Multi frame and the x:Panda there is an adapter. If you do not order this you have the two pieces
that cannot be put together apart from the largest sizes. On the size 1 and 2 you need it. So you
have to paying real attention to their orders.
Me: What is your customer’s average life time? Can you give some examples?
Anni: Quite a lot of them have been with us for many many years. Like you know the Finnish
people that were on the visit few weeks ago, they started with us in 84 or 83 and we started in
82. So I think most of them who do good job with us stay with us. I have fired only one, that was a
Portuguese company, they sold next to nothing. Then we found Special Care who's been with us
ever since.
Me: How do you meet/acquire new customers?
Anni: Exhibitions, mainly exhibitions or they find us on the e-mail when they google assistive
technology for children. But mostly I meet them on exhibitions. They come to see our products
and ask if there is a distributor in their country and then we take it from there.
Me: Which obstacle, if any are there when a new customer is acquired?
Anni: I don't meet many, but it can be difficult if they are used to work with other companies that
work in a different way, ordering way. Because the obstacle I meet is to teach them how to order
correctly so it's as easy as possible for the sales office.
Me: How will you describe the situation with orders coming in R82?
Anni: Right now we're in a very good flow of orders. We've had very good 2011, also 2010 was
acceptable, but in 2009 we could feel the international crisis. The last two years and especially
this year has been very good.
Me: What your price is based upon? How do you calculate the price for the products?
Anni: We look at the cost price, and I know every time we have a new product we ask the dotter
companies what is the price target number, what should price be for this. And then everybody
looks in their country, who do we compete with. And we try not to have the price too high, but of
course we have to compare it with the cost price. We have to have a minimum turnover because
it something many of our customers cannot understand - our prices. But if you take them around
the factory and explain how much hard work we put in R&D, in keeping all the factory running
they can understand that we can't make just 10% on each product and that's enough. Because
we have to pay wages and rent and many things. And also R&D, we spent a lot of money on
research and development which we are supposed to because we want to be the first with many
things, we don't want to be the one to copy the rest.
Me: Do you have your personal selling philosophy? Describe in short terms please.
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Anni: Yes, I think I am less professional and more personal from what is normally expected
because I see most of my distributors as friends. Because I think it's easier to help them in this
way and I also feel that they feel more comfortable. When you have to travel and go see them it's
a lot easier to do your work with pleasure, because I like to do my work with pleasure and not
something that you have to do between 8 and 4. So if you feel "I'm going to visit my friends in
New Zealand and see how they are doing and how I can help them". It's a far more positive way of
seeing it then "Oh shit, 35 hours on the plane, I don't want to". It's a lot easier, and also it's my
philosophy "I like to do thing I like to do". Also because I cannot do it from 8 to 4. Sometimes they
need me at night, sometimes the nee me in the morning. it's the really important small questions
they need me for that can be solved in 5 minutes, but if I shut my phone down when I go home I
lose a lot of opportunities.
Me: Tell about trade fairs? How often, what, when, what image do you project there? What do you
make the potential customers see and think about R82?
Anni: The only exhibition I really know we're going to is the Rehacare because it's organized by
ourselves or by our German dotter company. For the rest I know my French people go to
Autonomic in Paris every two years and I know that we have fair in bologna in Italy every two
years and we have the exhibition in Valencia in Spain every two years. R82's philosophy is that
each distributor makes their own exhibition, they pay for it. I go there and visit and help them but
they pay for it themselves. They have also their own brand where we help in to try to get right
products there on time so they can be on the exhibition. And you know our mission: to be the
preferred brand among children, parents and therapists so it's what we aim at.
Me: Do you educate yourself in product knowledge? What does R82 do to educate the
salespeople?
Anni: Not much, we do it ourselves. When we have new product I talk to Bente: "Please show me".
Sooner or later I'm going to be standing showing this at the other end of the world and I can't
phone someone and ask "Why doesn't it turn the right way?". So I always ask Bent to train me.
Sometimes I also ask Mette-Kristine (product coordinator). Just now we've tried to change a small
receiver on the canopy because I'm going to Italy and they are going to ask me so I can say "I
know how to do it, I.ve dome it myself". It's important for me too because when I say "Oh it's easy,
I've done it myself" they will trust me more than when I say "I believe it's easy".
Me: What is your main source of prospects? If it is trade shows. Do you have a prospect
database?
Anni: I don't have my customer database, but I have them. It's important for them to be exhibiting
when we have new products because they need all their customers and we're there to help them
to shoe the new things, also help them to organize seminars at times where there are no
exhibitions. For instance Supace in Spain, there are 4 different areas, they are themselves in
Catalonia, but what happens in Madrid?
Me: Can you describe a typical buying process and buying behavior of your customers?
Anni: First of all most of them have studied our material quite well so they already know what
they want. Our products it's not a luxury thing you can say "I want these boots". It's something
special their customers want for their children and they can see all benefits and good effects of a
seating system. The main behavior I meet is that they already know what they want or need and
then you'll have to guide them about accessories and things like that. Take for example an issue
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about the Stingray: lot of people really want to buy the Stingray for their children, although their
children are big. All because the neighbor will not notice that you have a handicapped child if you
have a Stingray. But then we'll have to tell them: "But he would set far better in a Panther or an
x:Panda", depending on decease he has. But mostly people know what they want and have
studied things very well.
Me: Please tell what service do you provide with you customers after the sale is closed? How do
you follow-up?
Anni: I try to follow-up so that the customers get deliveries on time. One of my customers had a
small payment issues so that I had to chase them for the money before they can have the
products. The service I do extra is that I have to tell them "next week you have this that shall be
ready to go, please take care of that the money is in our account so it would not get delayed". it's
a logic thing that should not be necessary, but it is for quite a few countries. It's a question of
words, they can look in the order confirmation and see the price. Some banks required an invoice
or performance invoice. So they could ring Charlotte and ask for the invoice, but they don't think
like that.
Me: How do you handle claims/complaints? What is the standard procedure for that?
Anni: The standard procedure for that is try to explain to the customers that they must have a
short description of the problem, the serial number and the item number, perhaps a photo.
Without the serial number, the item number and knowing what is the problem we can do nothing.
Also, in this way, we can put it into our database, it they send this information to our sales office,
they can put it into database. If the customers don't do that, we will never know half of the
problems they had and then we cannot correct them. So, it's very important that they report to us
the problems they find.
Me: In Active Co. case, how strong are trust and commitment if there are any at all?
Anni: It's a lot. I trust them a lot and I think it is vice versa, and I think there is a lot of
commitment both ways. I feel they would do everything they can for us, because it's not one-way
solution, it's their future. Anna once told me a year or two ago, she said "You're are my pension",
meaning that she makes money now for the time when she retires. From what we see they made
first year and this year and hopefully next year, there will be some money that they can put aside
for when they retire.
Me: How essential is truth in your relations? Give examples please.
Anni: It is very important, of course I don't lie, but then if I do not say the correct what I do – I do
not say anything. It's very important to be truthful and also to give information when you get it. If
you know something cannot be sent, you'll have to tell them, however painful it is to do. Because
it's one of the things in this company, it is easy to say to me "we cannot", because they're my
colleagues. I'm not personally hurt by it, but the people I have to say it to, they are not happy.
14th November 2011, R82 A/S Gedved
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Appendix V: R82’s terms of sales and delivery
1. Application and validity
1.1.
Any delivery of technical facilities and appliances (referred to as the Products) for
disabled persons will take place in pursuance of the present Sales and Delivery
Terms, unless these have been deviated from by explicit written agreement between
R82 A/S (referred to as Seller) and Buyer.
1.2.
Buyer’s indication of special terms in the order documents, on the order or similar is
not considered deviation from the present terms, unless Seller has accepted these
terms in writing.
1.3.
Buyer’s acceptance of Seller’s offer entails acceptance of Seller’s ordinary sales and
delivery terms.
2. Offers
2.1.
An agreement between Buyer and Seller has been concluded when Seller has
forwarded an order confirmation. Any objections on the part of Buyer to the contents
of the order confirmation must be prepared in writing and must reach Seller latest the
day after as when Buyer receives the order confirmation.
2.2.
Cancellation or alteration of an order can only take place with Seller’s written
permission.
3. Product information and price
3.1.
Seller’s information in price lists and catalogues as well as in product descriptions
only serves as instruction and is not legally binding on Seller.
3.2.
Technical specifications and other data in price lists, catalogues, product descriptions
and offers are approximate, unless Seller has expressly guaranteed otherwise.
3.3.
Unless otherwise agreed, all orders will be registered at prices applicable in DKK at
the time of receipt of order; however, as regards price and delivery subject to
reservation for strike, lock-out and other circumstances outside of Seller’s control.
Prices are listed ex works, exclusive of VAT and similar public taxes and duties.
3.4.
Offers are made in accordance with the current price on the date of the offer. Until
the offer is accepted the Seller reserve the right to make changes in the price as a
result of documented increased costs on the part of Seller, for example due to
changes in exchange rates, customs duties, direct and indirect taxes, raw material
prices, collective wage agreements, other production costs and other circumstances
outside of Seller’s control.
4. Delivery
4.1.
Delivery takes place ex works (cf. Incoterms 2000) with reservation for any time
delays. Delivery thus takes place from Seller’s address notwithstanding if one of
Seller’s own employees or a third party delivers the sold products to Buyer in
accordance with separate agreement. Buyer hence pays all transport costs, and
Buyer carries the risk of the Products from the time when Seller has placed the
Products at Buyer’s disposal on Seller’s place of business. Insurance of the delivery is
to be taken out by Buyer on Buyer’s own account.
4.2.
Any other delivery type will only apply provided that this expressly appears from the
order confirmation.
4.3.
The time of delivery fixed by Seller is indicative and not binding, unless otherwise
explicitly stated. It is emphasised that delay subsequent to the time of delivery but
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prior to the Product’s arrival at Buyer’s address is irrelevant to Seller, and any claim
arising from such period is to be filed against the carrier.
4.4.
Seller is, moreover, entitled to postpone the approximate time of delivery where delay
is necessitated by circumstances outside of Seller’s control.
4.5.
If delay is due to Seller being in a situation as described in clause 1.2 or 4.4, the time
of delivery will be postponed for as long as such trade barrier subsists; both parties
are, however, entitled to cancel the agreement free from liability, when the trade
barrier has subsisted for more than three (3) months. This provision applies
notwithstanding if the event occurs prior or subsequent to expiry of the agreed time
of delivery.
4.6.
Disputes concerning already delivered and received Products do not entitle Buyer to
refuse receipt of later deliveries.
5. Payment
5.1.
The terms of payment are payment in advance, unless otherwise agreed in writing.
5.2.
Buyer must pay the price stated on the order confirmation, and payment is regarded
timely if Seller receives the total invoice amount on or before the due date.
5.3.
If payment or part hereof is settled too late, cf. above, default interest of 2 % per
month accrues as of the due date and until payment takes place.
6. Ownership reservation
6.1.
Delivered Products remain Seller’s property until full and final settlement hereof
(ownership reservation).
6.2.
If payment has not reached Seller’s account on or before the confirmed delivery date,
Seller is entitled to use the Products for other deliveries as well as to estimate a new
time of delivery at current prices of which Buyer is informed. This date applies instead
of the previous delivery date confirmed by order confirmation. Buyer is not entitled to
compensation in connection with the payment in advance.
7. Delay
7.1.
Buyer cannot claim compensation in the event of delay, unless such delay is caused
by Seller’s gross negligence or deliberate behaviour.
8. Defects and complaints
8.1.
Immediately after receipt of the Products and prior to employment hereof, Buyer must
carry out control applicable in accordance with current trade practice, also insofar as
concerns any damage during carriage. Buyer must ensure that the Products live up to
the contractual requirements and that they are suitable for Buyer’s contemplated
use.
8.2.
Buyer shall immediately and within eight (8) days after Buyer has learned or should
have learned of a defect notify Seller of the defect in a manner designated by Seller
on the homepage (Log on “My Pages” and find the PDF formular “Customer Claim
Report”). If notice of defect is not given prior to this time limit, Buyer’s entitlement to
rely on said defect will lapse.
8.3.
Deficiencies in a product resulting from natural wear and tear, damage, faulty
operation, insufficient maintenance, accident or other conditions, for which Buyer
carries the risk or is responsible, do not constitute a defect.
8.4.
Seller provides a twenty four (24) months’ right to file a complaint concerning
delivered Products from invoice date provided that correct use of the Products has
been observed.
8.5.
Seller is entitled without undue delay to repair or replace parts that have become
useless due to defects in material or design, provided that the defect is an original
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defect or is a defect arisen within a guarantee period, if such exists. Seller is free to
choose between repair and replacement of defective parts. If replacement or repair
will result in disproportionate expenses, Seller is, however, instead of replacement or
repair entitled to grant a proportional reduction of the purchase price equivalent to
the reduction in value.
8.6.
Where Seller offers to remedy the defect or replacement, Buyer is not entitled to
cancel the sale or claim compensation in consequence of the defect or any
consequential costs hereof.
8.7.
An offer to remedy the defect lapses if the Product has been subject to misuse.
8.8.
Alteration of or interference with the sold Product without Seller’s written consent will
exempt Seller from any and all liability.
8.9.
Defective Products must to the extent possible be returned to Seller safely wrapped
and in original, undamaged packing. If the original packing has been damaged, it
rests on Buyer to secure a safe wrapping and packing. Buyer forfeits his notice of
defects, where the Product is damaged as a result of inadequate wrapping or
packing.
9. Liability for damages
9.1.
Seller is not liable for additional costs, operating loss, loss of profits, loss of time, loss
of earnings, loss of goodwill, lost business opportunities, loss originating from Buyer’s
agreements with third party, consequential damage and other indirect loss occurring
in connection with delay or defects.
9.2.
Buyer cannot claim compensation for loss which could be avoided by carrying out
covering purchase(s).
10. Returns
10.1. Prior to return of the Product, Buyer must contact Seller in order for Seller to forward
a returned products report and to advise of a return order number to be stated by
Buyer when returning the Product. Seller is entitled to reject the returned products if
the return order number is not indicated by return of the Product and the returned
products report.
10.2. Buyer pays for all costs for transport and shipment in relation to return of the Product
to Seller. In case of return of the Product to the Buyer costs related to transport and
dispatch are also paid for by the Buyer.
10.3. Only subject to prior agreement fully saleable Main Products and Accessories may be
returned deducting 25 % of the net sales price exclusive of carriage invoiced to the
customer. Special orders/Products cannot be returned. The Products cannot have
visible damages or defects when returned and have to be fast mowing items for R82,
i.e. the product is among the 90% most sold products. Reasoning for return of
Products must follow including a list of number of articles, reference numbers and
product descriptions. The Products must be returned safely wrapped and packed;
cannot have exceeded one (1) year from production date and must carry original
serial number
10.4. If a product does not comply with the above and/or it concerns spare parts and
modules, which are still deemed to be saleable, the Products may be accepted for
return subject to a separately agreed price deduction. Such instances cannot,
however, be subject to crediting in excess of 50 %.
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11. Product liability
11.1. Subject to mandatory provisions in the Danish Products Liability Act, Seller is only
liable for product liability damage to the extent that it is verifiable that such damage
can be ascribed to Seller’s or Seller’s employees’ negligent or even deliberate act.
11.2. Seller is not liable in damages for indirect loss, including (but not limited to) operating
loss, loss of profit, loss of production or other indirect loss of any nature.
11.3. Subject to mandatory provisions in the Danish Products Liability Act, Buyer shall
indemnify Seller for any amount, including damages, expenses, interest etc., which
Seller could become liable to pay to third party.
11.4. Seller is not liable for any damage which is due to Buyer’s failure to comply with the
prescriptions in Seller’s user manuals or which is due to overload of the Products.
11.5. If a third party claims compensation for product damage, Seller must be notified
hereof immediately.
12. Force majeure
12.1. Neither party is entitled to compensation nor to cancel a purchase agreement in the
event of lack of performance where this is due to force majeure.
12.2. Force majeure occurs where a party or a party’s subsupplier is prevented from
performing such purchase agreement and agreements linked hereto due to war, civil
war, riots, public restrictions, import or export bans, natural disasters, including but
not limited to earth quakes, flood, extensive flooding, tornados, volcano eruptions
and widespread industrial conflict, fire or the like (the list is not exhaustive), which
neither ought nor could have been foreseen by the parties at the time of conclusion
of a purchase agreement.
12.3. Force majeure can only be claimed if the relevant party has notified the other party in
writing no later than five (5) working days after commencement of force majeure.
12.4. The party not affected by the force majeure situation is entitled to cancel the
agreement where the agreed delivery time is exceeded by thirty (30) days or more as
a result of force majeure. In the event of such cancellation, both parties return as
soon as possible all items received from the other party, and no further claims
between the parties subsequently subsist.
13. Applicable law and venue
13.1. Any disagreement or dispute between the parties concerning the construction and
scope of these present Sales and Delivery Terms is to be settled by arbitration
subject to Danish law. (Not CISG, however).
13.2. The parties are mutually obliged to allow legal proceedings initiated against them by
the court or the arbitration court trying claims for damages concerning product
liability filed by a third party against either party.
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