IBM’s offerings cover a wide spectrum of the technology industry, including hardware, software, and services. The company faces a different set of rivals in each sector but maintains a leadership position in most areas through a combination of investments in R&D, worldwide distribution, and a respected brand.

IBM serves a diverse set of customers in the business market and devotes special attention to the Global 1000—the 1000 largest enterprises in the world. Across these organizations, however, different perspectives and approaches are used in making information technology (IT) purchases. This diversity across customer groups presents a host of challenges for IBM.    

• Customer Group A demands a wide variety of IT products, routine maintenance support, and customized services. These customers value the relationship with IBM and are willing to pay a premium for product and service quality.

• Customer Group B wants high-quality IT products (e.g., storage systems, servers), but, most of all, these customers want a rock-bottom price and choose suppliers on that basis.    

• Customer Group C demands both quality products and extensive service support but wants all of this for a “rock-bottom” price. These customers will freely switch from one supplier to the next. As competition intensifies for IBM and others in the IT sector, more customers are moving into this group each month.

First, describe how IBM might develop a portfolio of relationship strategies to meet the needs of such diverse customer groups. Second, some customers in each group are more costly to serve than others. How should such cost differences be reflected in the particular relationship strategies that IBM follows? Third, what strategies can IBM follow to increase the switching costs of customers in Group B or Group C or increase the profits it derives from these customer groups?

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