Classification of Relationship Marketing Essay Sample
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Introduction of TOPIC
Marketing discipline has attracted considerable attention from academics as a result there are numerous definitions of marketing in the literature. Different authors have different views of marketing. For instance Kotler and Armstrong (2010) define marketing as the social process through which individuals as well as organisations acquire their needs and wants by creating and exchanging values with others while American Marketing Association (2013) defines marketing as the activity, set of institutions, and processes that creates, communicates, delivers and exchanges offers that are valuable for clients, customers, partners and society at large. The chartered institute of marketing (2012) defines marketing as the process responsible for identification, anticipation and satisfaction of customer requirements in a profitable manner.
The definition of marketing by American Marketing Association (1985) stated that marketing is the process of planning and executing the conception, pricing, promotion and distribution of goods, services and ideas in order to create exchange and satisfy organisational as well as individual objectives. However (Hakansson, 1982; Gummesson, 1987, 1994; Gronroos, 1989) believed that this perspective of marketing was not applicable anymore and was relevant only to certain types of companies and markets. These criticisms suggested that in order for marketing to survive as a discipline, a paradigm shift was required in it (Gronroos, 1995) and therefore organisations should be focused on long-term relationship building instead of being short-term transaction-oriented (Kotler, 1992). This report will write comprehensive review of available literature on Relationship Marketing. In order to do so the report will discuss the role and basic tenants within international marketing context.
Relationship marketing is a paradigm shift
According to (Kotler, 1991, Grönroos, C.1994, Gummesson, 1997; Brodie et al., 1997), relationship marketing is a new paradigm in marketing literature that challenges the philosophies of marketing. The new paradigm stresses that marketers should consider present customers as an opportunity for growth (Claycomb & Martin, 2002). Academicians consider it as a paradigm shift in marketing philosophy which stresses the significance of long term relationships and importance of retaining existing customers.
Practitioners believe relationship marketing gives them a competitive advantage (Day, 2000), they consider it a tool that reduces the customer’s churning (Schneider & Bowen, 1999), it is also a tool that enables companies to overcome failures (Crosby & Stephens, 1987), and it also offers an opportunity to market additional products and service to receptive customers (Priluck, 2003). But nowadays relationship marketing takes a holistic view (Kotler & Keller, 2006), and includes customer attraction and customer retention through promise fulfilment and mutual exchange (Gringos, 1990).
The purpose of relationship marketing is to maintain strong relationships and convert indifferent customers into loyal customers (Berry & Parasurarnan, 1991). According to (Zineldin & Philipson, 2007; Das, 2009; Adamson et al., 2003; Gronroos, 1994, 2004; Kotler & Armstrong, 1999; Berry, 1995) relationship marketing is the process of attracting, maintaining and enhancing relationships with stakeholders and customers for a profit so that the parties involved in the transaction achieve their purpose by fulfilling promises and through mutual exchange.
The increasing importance of relationship marketing led to vast amount of research on the subject as a result there are numerous definitions of relationship marketing. Berry (1983) defines relationship marketing as attracting, maintaining and enhancing customer relationships in an organisation. Jackson (1983) offers a more personal definition of relationship marketing by stating that relationship marketing manages strong, lasting relationships with individual accounts. On the other hand Dwyer et al. (1987) has defined relationship marketing from a B2B perspective. Dwyer et al. (1987) proposes that relationship marketing focuses on attracting, maintain and improve relationships within companies.
According to Evans and Laskin (1994), the role of relationship marketing is to enhance the core product of the vendor, i.e., to differentiate the company’s offering in the marketplace. They define relationship marketing as the process that involves inputs, outcomes and ongoing assessment, where input includes understanding customer expectations, empowering employees, building service partnerships and total quality management, outcomes includes customer loyalty, customer satisfaction, quality products and profitability, and ongoing assessment includes customer feedback and integrating relationship marketing into the company’s strategic planning framework.
Relationship marketing Schools
This can be examined from several perspectives, which is highlighted by the three schools of thought (Palmer, Lindgreen, Vanhamme, 2005), they are: Nordic School, Anglo Australian approach and The Industrial Marketing and Purchasing Group.
The Nordic School was conceived during early 1980s and it was mainly conceived for services marketing research and it was characterised by a shift in focus from the traditional marketing concepts. These involved Egan (2004): emphasising the importance and relevance of industrial marketing and services marketing more than products marketing; a steady shift from focus on goods and services towards focus on customer value; the integration of marketing and other organisational departments and increased focus on qualitative research. Nordic School of thought considers managing services as the central theme of relationship building and maintenance but it also supports other factors such as establishing strategic alliances, building of networks, developing customer database and managing relationship-oriented communications, and building of networks. According to this school of thought there are three main processes: value process, interaction process and dialogue process.
The work conducted by Christopher, Payne and Ballantyne (2002) is the basis of Anglo-Australian approach. According to this school of thought relationship marketing embodies focuses on relationship approach to marketing instead of transactional approach, considers economic aspect of customer retention and thus ensures proper allocation of resources towards customer attraction and retention, highlights the importance of internal marketing in accomplishing objectives of exte
rnal marketing, explains the inadequacy of traditional marketing mix, extends relationship marketing
The Industrial Marketing and Product Group approach refers to B2B markets, emphasises the need of development of new tools of marketing and management and focuses on the specificity of the sector. In these transactions are not isolated but occur as continual communication between companies. In this school of thought, the interaction between organisations and individual is composed of relationships and multiple relationships between suppliers, buyers and other companies in the network (Palmer, Lindgreen, Vanhamme, 2005, pp. 320). This approach suggests gaining competitive advantage from an appropriate selection process and management of network partners.
Apart from the ideas promoted from these school of thought there are several mid-range perspectives in the relationship marketing literature. According to the middle perspective an organisation should have portfolio of relational as well as transactional strategies which have to be combined into a hybrid model. Companies have different type of customers and they have different profitability for a company therefore they could be different styles of marketing depending on the relationship. Egan (2004) asserts that instead of considering relationship marketing as a new paradigm it should be accepted as a marketing arsenal.
Classification of Relationship Marketing
Traditional studies on relationship marketing focus primarily on dyadic relationships such as supplier-customer relationship (Dwyer, Schurr, & Oh, 1987; Sheth & Sharma, 1997). However Gummesson (1999) argued extension of the domain of relationship marketing to include all marketing activities, such as internal customers, partnerships, networks and others, instead of limiting it to dyadic relationships. Hunt (1997) asserts that companies should focus on building long-term relationships with stakeholders so as to improve their core competitiveness. Morgan and Hunt (1994) classified a focal firm with its relational exchanges via four categories: buyer, supplier, internal and lateral partnerships. Morgan and Hunt (1994) identified ten types of relationships on the other hand Gummesson (1999) identified thirty types of relationships and three kinds of partnerships.
Relationship marketing in an international context
The importance of Relationship marketing in an international context was evident since its conception because of the increasing inter-dependence among markets and the needs of the end consumers [2; 16; 17; 18]. Relationship marketing assumes importance especially when delivery times are long. This statement holds true for products as well as services and highlights the importance of developing relationships with foreign partners in order to acquire strategic information and share resources as well as risks [19; 20]
In a global context, companies used to engage in B2B relationships which revolved around distributors, partners, and sellers. However with technological advancements companies have also started to interact and engage with customers as a result establishing strong relationships with customers has also become vital from a global perspective. There are several factors that influence relationships in an international context. International relationships are influenced by different social and economic context [21; 22; 23; 24; 25] and by the kind of relationship created [26; 27; 28]. Additionally there are several threats in international relationships which are associated with cultural distance and the opportunistic behaviour of partners [29; 19; 30; 28; 31]. Despite of it creating close relationships is extremely important in an international environment especially when there are several competitors in the market.
Elements of successful RM in an international context
The available research on relationship marketing clearly shows that the essence of relationship marketing lies in strong relationships. And in order to have strong relationships it is necessary to have certain elements. Considerable amount of research has been conducted regarding the components of successful relationships (Gupta, 1983; JuÈttner and Wehrli, 1994; Dion et al., 1995; Dawar et al., 1996; Holm et al., 1996; Conway, 1996; Selnes, 1998; Ali and Birley, 1998; Lin and Germain, 1998). Wilson (1995) listed 13 relationship variables and argued that based on the situational factors it is possible to add to delete the variables to understand the relationship situation. However the variables which are considered more important in the context of international relationship are:
3. Customer orientation/ empathy
4. Experience/ Satisfaction
The level of commitment a partner has towards a relationship is of core importance in developing relationships. Wilson (1995) considers commitment “as the most common variable used in the buyer-seller relationship studies”. Berry and Parasuraman (1991) consider relationship commitment as the vital ingredient of a successful marketing relationship, so do Morgan and Hunt (1994). Rusbult (1983) identified level of commitment as the strongest predictor of voluntary decisions to remain in a relationship. Hocutt (1998) define commitment as the intent of continuing a course of activity and action (Hocutt, 1998). Commitment is stronger if the available alternatives are of poor quality, satisfaction levels are high or investment size is huge (Rusbult, 1983). Wilson (1995) believes that commitment is also influenced by social bonding.
Ford (1984) states that several components of relations between suppliers and customers cannot be based on legal criteria therefore relationships should be based on mutual trust. Mietilla and Moller (1990) consider trust as the precondition for higher commitment. According to Wilson (1995) trust is the fundamental building block because it is included in several relationship models. Therefore in order to have successful relationships it is important to have trust. Morgan and Hunt (1994) believe that commitment and trust are vital components in a relationship because they motivate marketers to work towards preserving relationship investment through cooperation with partners.
Customer orientation / empathy
Palmer and Bejou (1994) consider empathy as the essential factor in developing relationships. Convay (1999) asserts that during the initial stages of relationship development, the responsibility lies with the seller to empathise with buyer. However, he further states, that with the passage of time mutual empathy becomes important. Friedman et al., 1988) found that liking of one party by the other is vital for developing business and interpersonal relationships. Graham (1989) therefore suggests that interpersonal attraction is helpful in influencing negotiation outcomes as well as success of future transactions.
This component is another aspect of successful relationships. Buchanan and Gillies (1990) suggest that experience can have an important influence on customer satisfaction, and the higher the customer satisfaction, the more strong is the relationship. Hocutt (1998) associates satisfaction with trust and commitment. Therefore satisfaction is a vital component of relationships, in its own right as well as because it influences other relationship variables.
Schramm (1954) defines communication as the process of establishing a similarity of thought between the receiver and the sender. Communication is therefore essential in developing business relationships. From the business perspective, communications is associated with receiving as it is with giving (Cherry, 1952, p. 640; Osgood and Sebeok, 1965, pp. 1-7; de Lozier, 1976, pp. 2-6; and Crystal, 1978, pp. 14-18). Anderson and Weitz (1989), Frazier and Rody (1991), and Metcalfe et al. (1992) describes communication as an important component of Relationship Marketing. According to Selnes (1998), communication is not only a vital element in itself, but it also influences the level of trust between the seller and buyer.
This report has offered a comprehensive review of the relationship marketing literature. The report found that the discipline of marketing has undergone a tremendous change in past three decades with the conception of the relationship marketing. And this altogether has led to changes in the definition of marketing where earlier the focus was on profitability and now the focus is on exchange. The report identified that the concept of relationship marketing is considered a paradigm shift in marketing by some authors (Kotler, 1991, Grönroos, C.1994, Gummesson, 1997; Brodie et al., 1997) however some believe it is a marketing arsenal (Egan 2004). The literature available on relationship marketing has shown that authors have identified different types of relationships and relationship marketing is not only concerned with business to business or business to customer relationship.
Further the report has identified the importance of relationship marketing in international context. From a B2B perspective good relationship help companies in acquiring strategic information and resources from partners, while from a customer perspective it enables companies to retain customers. In order to maintain good relationships it is important for companies to work on certain relationship dimensions. Companies can maintain good relationships with their international customers by focusing on commitment, trust, customer orientation, experience and communication.