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Instructor’s Manual

Relationship Marketing

Fourth edition

John Egan

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ISBN: 978-0-273-73779-7

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Lecturers adopting the main text are permitted to download and photocopy the manual as required.

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ISBN: 978-0-273-73779-7

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Contents

Chapters

Pages

Preface

5

Part I

Relationships

8

1.

100 Years of marketing

10

2.

Relationships in marketing

11

3.

Relationships

15

4.

Relationship economics

18

5.

Strategy continuum

21

6.

Relationship drivers

24

Part II

The core firm and its relationships

27

7.

Customer partnerships

28

8.

Internal partnerships

31

9.

Supplier partnerships

34

10.

External partnerships

37

Part III

Managing and controlling the relationship

40

11.

Relationship management

41

12.

Relationship technology

43

13.

Conceptual developments

45

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Supporting resources

Visit www.pearsoned.co.uk/egan to find valuable online resources

Companion Website for students

An online glossary to explain key terms

Annotated links to relevant sites on the web

For instructors

Complete, downloadable Instructor’s Manual

PowerPoint slides that can be downloaded and used for presentations

For more information please contact your local Pearson Education sales representative or visit www.pearsoned.co.uk/egan

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Preface As amended

As I noted in the first edition, although the main title Relationship Marketing sets out the parameters of this text, it is the subtitle that may prove more enlightening. Exploring relational strategies in marketing continues to acknowledge the role that relationship marketing (RM) plays in modern management and establishes the contexts in which RM is most beneficially exercised. This is not, however, a ‘how-to’ text on relationship marketing, customer relationship management or any of the various relational business subject areas (complete with prescriptive solutions). Rather, this book seeks to generate questions and debate and encourage individual responses to particular marketing situations.

The book is not without bias. It is most definitely written from the viewpoint of marketing as an art rather than a science, and my concerns regarding the mathematical manipulation of sometimes spurious data no doubt resonate in the text. I concur with that body of opinion that views marketing as a ‘messy set of rules, tools and guidelines that produce (results) according to the expertise and sensitivity of the craftsman (or craftswoman), not the empirical accuracy of the rules, tools and guidelines’ (Damarest, 1997, p. 375). This may understandably annoy some of my more mathematically and statistically minded colleagues.

Despite this one fundamental bias, I have attempted to be objective. This does not negate, however, the responsibility of the reader to make up his or her own mind as to whether to accept or refuse any of the positions taken in the text. While reading this book, maintain a healthy scepticism and question conclusions and research findings in whatever way you see fit.

Book structure

The book is divided into three parts. Part I discusses ideas surrounding relational strategies in general and, in particular, relationship marketing. Part II analyses over several chapters the central RM tenet of the ‘core firm and its partnerships’. Part III explores relational strategy management and the management process itself, the place of technology and new conceptual developments including CRM, Social Marketing and Service-dominant Logic.

New to this edition!

As RM is an evolving discipline, this latest edition references the latest developments in the field. In particular it examines three concepts that are associated with RM notably customer relationship management (CRM), social marketing and service-dominant logic. The book also examines in greater depth the influence of technological developments such as social media. There are a number of new case studies referencing and highlighting issues discussed in the text. The Glossary has been updated for this edition.

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Comprehensive web resources

A complete package of supplements is available to assist students and instructors in using this

book. Visit www.booksites.net/Egan to find an Instructor’s manual, PowerPoint slides and links

to other useful sites.

Acknowledgements

The first edition would never have seen the light of day without the help of a number of people whose input I gratefully acknowledge. In particular I would also like to thank the following reviewers for their pre-revision review comments:

Roger Baty, University of Central England

David Gilbert, University of Surrey

Caroline Tynan, Nottingham University Business School

Cleopatra Veloutsou, University of Glasgow

Peter Verhoef, Erasmus University

I am grateful to the publishers, and in particular to David Cox, Andrew Harrison and Chris Shaw, for their support on this latest edition of Relationship marketing.

Last, but very definitely not least, I continue to be grateful to my family for putting up with me locking myself away and to whom this book is dedicated.

I welcome any comments or suggestions regarding this fourth edition. I take this opportunity to thank those readers (students and lecturers in the main) who have made comments and suggestions in the past some of which I have incorporated in this latest edition. As Brown

(2002) notes, the ongoing debate over definitions, domains and the nature of the discipline itself

is a sign of a healthy and imaginative marketing environment. So let’s get healthy!

John Egan

September 2010

eganj@lsbu.ac.uk

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References

Brown, S. (2002) ‘Vote, vote, vote for Philip Kotler’, European Journal of Marketing, 36(3),

313–24.

Damerest, M. (1997) ‘Understanding knowledge management’, Long Range Planning 30(3),

374–84.

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PART I

Relationships

Overview

The first section of this book describes the growth of marketing and goes on to analyse the market phenomenon that has become generally known as ‘relationship marketing’ (RM). One problem that students may encounter when studying this particular marketing concept is the number of different terms associated with ‘relationships’ within marketing. These include the following:

Direct Marketing

Database Marketing

Customer Relationship Management

Data Driven Management

Micro Marketing

One-to-one Marketing

Loyalty (or loyalty-based) Marketing

Segment-of-one Marketing

Wraparound Marketing

Customer Partnering

Symbiotic Marketing

Individual Marketing

Relevance Marketing

Bonding

Frequency Marketing

Integrated Marketing

Dialogue Marketing

Interactive Marketing

This is not to suggest that all of these terms exactly represent all or even a part of what RM is perceived to be all about. Rather they are terms that frequently crop up when discussing elements of RM and of which students should be aware. It does not help clarity that different authors have different definitions for the same term and/or similar definitions for different terms but then marketing is constructed from a messy set of rules!

RM is, therefore, ‘shorthand’ or an ‘umbrella term’ that is used (and sometimes misused) to describe a range of ‘relationship-type’ strategies in product as well as service markets, consumer as well as business-to-business sectors although not necessarily with the same intensity or (importantly) with necessarily the same likelihood of success!

In Chapter 1 the background to 100 years of marketing is discussed. In the following two chapters the theories and developments that have promoted RM are examined, as is the nature of commercial relationships themselves. In Chapter 4 the challenge is to examine (and criticise) the economic arguments underpinning RM. In Chapter 5 a contextual setting for RM is

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developed within the framework of general marketing through the introduction of the marketing continuum concept. Although this latter concept has its detractors, this still serves the purpose of reminding us that this is not one fixed process but a subjective mix of processes and strategies.

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CHAPTER 1

100 years of marketing

Overview

This chapter looks at the development of marketing from the beginning of the twentieth century. It is included as a means of establishing the context into which relationship marketing emerged in the 1970s and 1980s. The chapter discusses the young discipline’s break from classical economics, which saw value in production but not in distribution. Decade by decade, it traces the development of marketing as an academic and practiced discipline from its strong growth in North America to, ultimately, around the world. The chapter highlights the discipline’s adoption of scientific principles in the 1950s and the subsequent development of the marketing management paradigm built largely on the ubiquitous marketing mix. By the 1970s and 1980s, the economic conditions that had supported this traditional marketing paradigm had fundamentally changed. Competition was greater and growth rates were less than in previous decades. In particular, more attention was being paid to industrial (or business-to-business) and services marketing, which seemed to suggest that a new response by marketers was required.

Chapter contents

Introduction

The early days

Modern marketing

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CHAPTER 2

Relationships in marketing

Overview

This chapter introduces relationship marketing (RM) and suggests why it has grown in importance over the past decade. It reviews the current state of marketing and suggests that RM was seen as a response to traditional marketing’s ‘mid-life crisis’ although to claim ‘new marketing paradigm’ status may be a little premature. The chapter looks at the antecedents to RM and the important part played by services marketing and business-to-business marketing in particular. From here, it traces how RM has developed from the earliest writings to Grönroos’s (1994b, p. 9) generally accepted definition where he describes the objectives of RM as to ‘identify and establish, maintain and enhance and, when necessary, terminate relationships with customers and other stakeholders, at a profit so that the objectives of all parties are met; and this is done by mutual exchange and fulfilment of promises’.

Chapter contents

Introduction

Relationship marketing

Influences on relational strategy development

RM development

Antecedents of RM

The development of RM

Towards a definition of RM

Summary

Discussion questions

Case study: What the Willy Wonka of BSkyB knows about customers

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Discussion questions

1. What were recognised, towards the end of the twentieth century, as the perceived weaknesses of traditional marketing?

Despite the problems that appeared to develop in markets that had transformed from growth to maturity (and to some extent saturation), marketing theory appeared stuck in its ‘futile search for laws, regularities and predictability’ (Brown, 1995), using approaches that were better suited to a ‘bygone age’. The ‘marketing mix’, for example, was proving as restrictive for consumer goods marketing (B2C) as it was for business-to-business (B2B) and services marketing. Its ‘toolbox approach’ (Grönroos, 1994b, p. 5) of science-orientated marketing was criticised as a ‘neglect of process in favour of structure’ (Christopher et al., 1991, p. 8). Other areas of traditional marketing under attack included segmentation and positioning strategies with the realisation that the only category that was really meaningful was that of actual, rather than speculative, behaviour. Market share concepts were ambiguous and subjective (Doyle, 1995, p. 27) and manipulated by marketers to serve their own ends. Perhaps, the biggest weakness of traditional marketing was that it was regarded as manipulative and exploitative of the customer and deserved the description ‘hit-and-run’ marketing (Buttle, 1996, p. vii).

Further information: Box 2.2 TM and RM compared

Chapter 5 Strategy continuum

2. What were the influences that led to the development of relationship marketing?

There are a number of influences that can be seen to have contributed to the development of RM. In general management terms, RM can be seen to have mirrored theoretical developments in organisational structure, distribution management and total quality concepts. More directly, it was the disparities recognised in services marketing research (by, e.g. the Nordic School of Service Management) and business-to-business research (by, e.g. the IMP) that ultimately led to a re-appraisal of the theory, analysis and implementation of marketing. B2B field research suggested that marketing was more than managing exchanges between companies but involved much more complex human interactions. In services marketing, it was the potential differential advantages of building relationships with customers that proved an enduring contribution.

Further information: Pages 18–22 Influences on relational strategy development

Pages 18 and 19 Figures 2.1 and 2.2

Pages 26–28 Antecedents of RM

3. What part did (a) business-to-business and (b) services marketing play in this development?

(a) B2B research into relationships in marketing pre-dated RM research by at least a decade (Mattsson, 1997b, p. 37). Through this work, it had become apparent to many B2B researchers (and in particular those associated with the IMP group) that the traditional marketing approach did not reflect the complexities of industrial marketing. According to Baker (1999, p. 211), these marketers had learnt that if you could not offer a better product at the same price or an equivalent product at a lower price, then the only way to stay in business was to foster relationships and add value through intangible customer service elements. The management of complex human interactions was conceived as ‘network- interaction marketing’ and defined as all activities undertaken by the firm to build, maintain and develop customer relations (Christopher et al., 1991, p. 10).

Further information: Pages 26–27 Industrial marketing research

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(b) Services marketing research was, to a large extent, driven by the growing importance of services in the major economies. It may also be said that this research was largely responsible for the development of the ‘modern’ RM approach. While the ‘marketing mix’ appeared to work reasonably well with consumer goods, the intangible nature of services marketing made it an imperfect fit. As most service providers compete with organisations similar to themselves (i.e. parity offerings), they were seen to rely on the relationship at the service encounter for differentiation. Modern service marketers, therefore, see marketing as an interactive process within a social context where relationship building and management are the vital cornerstones (Grönroos, 1994b, p. 5).

Further information: Pages 27–28 Services marketing

Pages 149–153 Services; Service industries

4. What are the major differences between traditional (TM) and relationship marketing (RM)?

The differences between the two approaches are numerous. While with TM the orientation is to a one-off sale, RM goes beyond the sale to hopefully retain the customer. By implication, this suggests a longer rather than a shorter time scale. In TM, contact is infrequent or broken while RM sees continuous customer contact as important. In TM the focus is on product features, whereas in RM it is on customer value. In TM there is little emphasis on customer service, whereas with RM this is important, again suggesting that RM’s commitment is to meeting customers’ initial expectations rather than making the sale. The importance of quality in RM is reflected in the concern that it is the responsibility of all staff and not just the production team.

Further information: Pages 37 RM definition

Pages 154-161 Customer Service; Building customer relationships

Case study questions

1. Why was James Murdoch prepared to spend time considering various community- based or environmental initiatives?

According to the author, Murdoch sees no substitute to getting really close to his customers and hearing their ideas. Evidently, he wants his customers to know that he cares about the same things they care about, especially concerning the environment and is prepared to spend time and effort as the figurehead for such a strategy.

2. Is this CSR or philanthropy, or are there other motives?

Philanthropy would suggest that Murdoch is doing this on the basis of personal generosity, whereas the article suggests that the strategy is being undertaken for largely commercial reasons. Corporate social responsibility is more credible. This is the recognition that there are commercial benefits for caring about what your customers care about, as what might be termed ‘enlightened self-interest’.

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3.

How might smart businesses tune in to their customers’ legitimate concerns, deepening the relationship they have with them and extending their customers’ appreciation of their business and their brand?

Opening up two-way communication channels with their customers so that not only does the customer understand the business but also develops an affinity to the brand so that the business understands the customers’ needs and concerns.

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CHAPTER 3

Relationships

Overview

This chapter attempts to put relationships into perspective within the RM debate. It looks at the central concepts associated with ‘relationships’ and examines whether customers can have relationships with organisations or whether they always have to be interpersonal. The chapter looks at other types of relationships, including ‘learning relationships’ and ‘higher-level relationships’ associated with organisations such as charities and football clubs. It examines how ‘motivational investment’ can affect the types of relationships that are formed and how ‘supplier-maintained’ or ‘buyer-maintained’ relationships seem to exist in addition to bilateral and discrete exchange relationships. Loyalty and the perceived antecedents to loyalty are discussed and loyalty-type behaviour and loyalty schemes are subjected to scrutiny.

Chapter contents

Introduction

Relationships

Relationship forming

Categorising relationships

Relationship loyalty

Unrealistic relational development

Relationships in context

Summary

Discussion questions

Case study: The art of the soft sell

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Discussion questions

1. In what ways are relationship metaphors used in marketing?

There is justifiable criticism that marketers use the language of human relationships to describe commercial transactions that could never reach that level of interaction. Although there is nothing implicitly wrong in using the term relationship as a metaphor, the danger for marketers comes when they start to believe their own rhetoric. According to O’Malley and Tynan (1999, p. 593), ‘it is important to understand that exchange between consumers and organisations are not inter-personal relationships per se but that the attributes of inter-personal relationships might be usefully employed when describing or attempting to understand that exchange’.

Further information: Pages 48–49 Relationship terminology

Journal article: O’Malley and Tynan (1999)

2. How might relationships develop between organisations and their customers?

The conception that relationships can exist between organisations and their customers is supported by writers such as Blois (1997, p. 53) and O’Malley and Tynan (1999, p. 594). The latter authors justify this assertion by suggesting that when viewed as an association between two or more variables it is clear that such a relationship can exist. On a practical note, it is frequently observed that customer–supplier relationships continue regardless of the loss of the personnel with whom the customer first set up the rapport. Gummeson calls this ‘embedded knowledge’. He explains that if an employee leaves, then the ‘human capital’ is lost but the ‘embedded knowledge’ becomes part of the ‘structural capital’ and is effectively ‘owned’ by the company. Reputation also matters. The historical trustworthiness of parties in previous interactions may even supersede individual relationships. However, recent research by Palmatier et al. (2006) does suggest that the personal relationships are stronger than relationships with organisations (see Chapter 4).

Further information: Pages 50–56 Categorising relationships

Journal article: Palmatier et al. 2006

3. What different levels of relationship can be seen to exist between buyers and suppliers?

Evidence from research suggests that many different levels of relationship exist, from the most fleeting to the highest level. They may be instigated and maintained by either the supplier or the customer or indeed both. At the lowest level are those ‘discrete exchanges’ which are barely relationships at all. Higher-level relationships are more common in B2B environments than B2C because of the nature of the business but can be seen in areas such as the voluntary sector and sporting organisations (e.g. a football club). Another way of illustrating different levels of relationship is with the use of ‘relationship ladders’ or ‘stages’ models. These suggest that as the relationship grows the customer moves to higher levels of commitment. Thus repeat customers become clients and eventually advocates. At the top of the ladder members suggest a level of dedication only surpassed by a full partnership with the company.

Further information: Pages 50–56 Categorising relationships

Page 53 Figure 3.1

Pages 80-83 Relationship stages – Stages models

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Page 59 Figure 3.3

Page126-127 Perceived need for closeness

4. What part do loyalty schemes play in relationship development?

Hart et al. (1999 p. 546) suggest that there is a wide range of motives for setting up a loyalty scheme as listed below:

To build lasting relationships by rewarding customers for their patronage.

To gain higher profits through extended product usage and cross-selling.

To gather customer information.

To decommodify brands (i.e. differentiate them from the crowd).

To defend market position (against a competitor’s loyalty schemes).

To pre-empt competitive activity.

There is, however, considerable doubt about the validity of such programmes, particularly where they are prevalent in a sector (e.g. FMCG retailing and airlines). Once they become the sector norm they become the costs of doing business. Loyalty programmes in reality are not much more than sophisticated sales promotions and appear to have little effect on underlying commitment (Palmer, 1998, p. 117).

Further information: Pages 60-61 Loyalty schemes

Case study questions

1. What does the author mean by ‘customer centric’?

Customer centric implies putting the customer and their needs at the centre of the action without undue pressure. According to the author, a customer centric sales process emphasises a low- pressure environment that lets your sales staff help solve customer dilemmas.

2. Why does Yoforia go out of its way to reward good customer service?

The company recognises that the staff–customer relationship and the importance of the interfaces between them. Their profitability will be largely determined by the outcomes of this interface. Rewarding good customer service helps imbed best practice generating, hopefully, repeat business.

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CHAPTER 4

Relationship economics

Overview

This chapter looks at the economics of relationship marketing. It suggests that RM is not altruistic but based on two profit-driven arguments. These are that customers are less expensive to retain than to recruit and that securing a customer’s loyalty over time produces superior profits. These arguments are tested by comparing the costs of customer acquisition with the costs of customer retention and by examining the benefits of relationship longevity, including stages theories and the concept of lifetime value. The chapter concludes that, although considerable benefits could be achieved under certain industry conditions, this could not be assumed in every case.

Chapter contents

Introduction

Relationship economics

Customer acquisition

Customer retention

Acquisition and retention costs

Economics of retention strategies

Marketing reality

Lifetime value

Switching costs

Relationship longevity

Knowing your customer

The validity of relationship economics

Summary

Discussion questions

Case study: Get fat on chat

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Discussion Questions

1.

What are the different cost drivers associated with (a) customer acquisition and (b) customer retention?

(a)

Cost drivers associated with customer acquisition include (where appropriate) the high cost of personal selling, commission payments, the direct and indirect costs of information gathering and equipment supply and marketing communications costs.

(b)

Cost drivers associated with retention include (where appropriate) advertising and other marketing costs, loyalty scheme and other promotional costs and data maintenance costs.

Further information: Pages 75–78 Acquisition and retention costs

2. What are the potential advantages to be gained from long-term supplier–customer relationships?

Reichheld (1996, p. 39) suggests that the benefits of relationship longevity include revenue growth over time, cost savings (using customer information to reduce costs such as those associated with stockholding), referral income and price premiums. This list should, however, be treated with a degree of scepticism, particularly in mature markets.

Further information: Pages 90–92 Relationship longevity

3. How would you differentiate between the different stages models discussed in this chapter?

Three ‘ladders’ or ‘stages’ models were discussed. The Payne et al. (1995, p. viii) and Kotler (1997, p. 26) models are relatively similar although Kotler differentiates between first-time and repeat customers. Both these models see relationships as intensifying (implicitly over time). Thus customers become clients and then advocates before membership and ultimately partnership with the organisation. These higher levels of relationship are, however, unlikely to exist in sectors such as FMCG retailing. Dwyer et al. (1987) are more descriptive of consumer activity. Thus, following a period of growing awareness and exploration, the relationship expands to a point where either one or both parties make a commitment.

Further information: Pages 80–83 Stages models

4. What effect do switching costs have on a relationship?

Switching costs are effectively barriers to exit from a relationship from the perspective of the customer. They include search costs, learning costs, emotional costs, inertial costs, costs associated with risk, social costs, financial costs and legal barriers/costs. These may be split into those costs, which develop as a consequence of the relationship and those applied by the supplier to ‘lock-in’ the customer. Relationship generated by locking in customers are seen as inferior to those where customers are willing participants and contributors, and may lead (e.g. at the end of a contractual period) to ultimate defection.

Further information: Pages 86–90 Switching costs

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Case study questions

1. Why do customers trust Word of Mouth (WOM)?

The recommendations of friends, relatives, perceived experts and even short-term acquaintances are nearly always going to be more powerful than company-derived messages.

2. Can WOM be managed and what are the dangers associated with this?

Some companies have tried to manipulate WOM. Examples include setting up websites purporting to be run by brand fanatics, starting rumours or gorilla marketing stunts. The dangers are that the customer will perceive that the organisation is behind this and act against them.

3. Does WOM provide proof that brand–customer relationships can exist?

If the definition is that a relationship exists in any interactive situation, then a relationship, albeit weak, may be said to resist. In general, the further away the producer is from his/her customer, the less close the relationship will be (see closeness p.126/127). Service providers are, therefore, more likely to establish relationships than product producers.

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CHAPTER 5

Strategy continuum

Overview

This chapter looks at the arguments for a hypothesised ‘strategy continuum’ with traditional transactional marketing at one end and relationship marketing at the other.

One of the major consequences of viewing marketing in this way is the recognition that while RM may be beneficial in some instances it may not be relevant to all. Indeed, it may suggest that, rather than being regarded as the dominant marketing paradigm, RM is recognised as more of a ‘helpful perspective’ in marketing. The continuum concept further suggests that any company at any point in time may adopt one or more of a ‘hybrid’ range of strategies, although the choice may be dominated by one or other end of the strategy continuum. This idea is developed further by a proposal that the RM end of the continuum may be segmented into database marketing, interactive marketing and network marketing and that they may be seen as approximately equivalent to direct marketing, consumer RM and business-to-business RM. The proposal that ‘drivers’ to particular strategies exist is also introduced and this will be expanded upon in Chapter 6.

Chapter contents

Introduction

RM in context

RM/TM continuum

Marketing implications

Continuum drivers

Summary

Discussion questions

Case study: Understanding and addressing your client’s needs

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Discussion questions

1. Take four companies with which you are familiar. Where would you place them on the hypothetical RM/TM continuum?

See below. (An alternative to the question above would be to select companies with differing perspectives and ask students to place them on the continuum. These may come from the same industry for example, British Airways and Ryanair; IKEA and Habitat, etc.)

2. What factors led to your decision to place them at this point on the continuum?

The choice of where the suggested companies may be placed on the hypothesised continuum is not highly scientific because of the number and variety of the variables involved. One starting point may be based on Grönroos’s (1995, p. 253) series of factors dominating marketing strategy. These are the dominating marketing orientation, the dominating quality function, the customer information system, the interdependency between business functions and the role of the internal market. Alternatively, Brodie et al. (1997, p. 386) suggest that decisions on focus, involved parties, communication patterns, contract types, duration, formality and the balance of power may determine whether a company has a TM or an RM perspective. Another method may be to establish the drivers to particular strategies as discussed in Box 5.1.

Further information: Pages 107–108 Marketing implications

Page 109 Figure 5.3

Pages 108–111 Continuum drivers

Page 109 Box 5.1 Drivers affecting strategic decision-making

3. Suggest, for a company with which you are familiar, a range of marketing strategies that might be termed a ‘portfolio of strategy types’.

The chapter suggests that, rather than one strategy type, companies may adopt a ‘portfolio of strategies’ determined by market circumstances and customer types. For example, customers who bring little profit (or indeed are loss making) may be handled by keeping costs to a minimum and by treating each contact as a discrete transaction. On the other hand, with valuable customers (determined by lifetime value) considerable efforts may be made to maintain and enhance the relationship.

Further information: Pages 110 Hybrid managerial approach

Case study questions

1. Why does the author believe that the process he is describing requires a two-stage process?

The author suggests that if we have the confidence to understand the need this helps us decide how specific we can get in addressing that need.

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2. Are the strategies described designed to establish relationships or are other motives apparent?

Only insofar as they satisfy a particular established objective. Relationships here are treated as a potential variable designed to get a response in terms of a particular metric. Students can decide for themselves whether this is the basis of a long-term relationship or management manipulation.

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CHAPTER 6

Relationship drivers

Overview

In the previous chapters certain drivers to relational strategies were discussed, including high customer acquisition costs (relative to retention costs), high exit barriers, sustainable competitive advantage and buoyant/expanding markets. This chapter examines other drivers that appear to be important, including risk, salience and emotion, trust and commitment, closeness and customer satisfaction. The existence of high risk, high salience and, consequently, high emotion in an exchange transaction appears to suggest that RM strategies may be beneficial as the customer may perceive a close relationship to be necessary in such situations. At the other end of the spectrum low risk, low salience and low emotion suggest that the customer does not perceive the benefits of staying with one or a few suppliers and is, consequently, more opportunistic.

The perceived need for trust and commitment in deep relationships provides another indicator of those situations where relational strategies may be seen as beneficial. At the transactional end of the continuum trust may be a necessary ingredient but the existence of commitment is not usually observed. The concept of closeness is also discussed as when the ‘distance’ between the parties is shorter, deeper relationships may be more likely to develop. Conversely, when the distance is greater, the relationship may be more functional and at ‘arm’s length’. The complexities surrounding the concept of ‘customer satisfaction’ are examined, including the widely accepted satisfaction model (customer satisfaction customer retention profitability), which will be developed further in later chapters.

Chapter contents

Introduction

Risk, salience and emotion

Trust and commitment

Perceived need for closeness

Customer satisfaction

Summary

Discussion questions

Case study: Find a way into the hearts of customers

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Discussion questions

1. Explain the association between risk, salience and emotion.

Risk, salience and emotion are all psychological aspects involved in some way in every exchange or purchase. Although they are wholly subjective, the levels of risk, degree of salience involved and the emotion generated will affect the choice of product or service and supplier involved as well as the ‘level’ of relational involvement the customer will seek or, in some circumstances, allow. Risk, salience and emotion are separately definable concepts but are not mutually exclusive. There is a close association between the level of risk perceived in, the salience associated with, and the emotion generated by, any given exchange situation. Thus, high risk is often associated with high-salience products or services and with a high emotional outcome although any measure is highly subjective and may differ from individual to individual. The proposal is, therefore, that, in situations where there is a high level of personal risk potential and salience, as perceived by the customer, and a resultant high degree of emotion generated, this may promote or ‘drive’ RM strategies.

Further information: Pages 117–119 Risk, salience and emotion

2. Explain the association between trust and commitment.

Trust and commitment are frequently paired together and appear inseparable in the relationship marketing debate. This may well indicate that, if one or other is missing, the relationship is unlikely to be more than a ‘hands-off’ or transient arrangement. This is because trust and commitment are invariably associated with the prerequisite that the relationship is of significantly high importance to one or both parties to warrant maximum efforts at maintaining it (Morgan and Hunt, 1994, p. 23). What these descriptions of trust and commitment suggest is that, whatever the industry, it is important to build trust and commitment if the establishment of a relationship is the end goal (Pressey and Mathews, 1998). Conversely, it may be hypothesised that if trust and commitment are generally prerequisites to a sale then relationship building is an important step towards achieving this. At the other end of the spectrum, transactional marketing may well require a degree of trust before the sale is finalised (e.g. that food is safe, that a product does what it is supposed to do, etc.) but does not require commitment other than to the sale.

Further information: Pages 119–126 Trust and commitment

3. Why will close relationships be stronger than arm’s length relationships?

Closeness is a construct that is integral to the notion of relationships in that very close and less close relationships exist in virtually all circumstances (Barnes, 1997, p. 229). Closeness can be physical, mental or emotional and can strengthen the feeling of security in a relationship. When the ‘distance’ between the parties is shorter, deeper relationships are likely to develop (Pels, 1999, p. 27). Conversely, when the distance is greater the relationship is functional and at ‘arm’s length’. According to Barnes (1997, p. 237), degrees of closeness in a relationship may be linked, among other things, to the frequency of two-way communication with employees, and to the trust, empathy and mutuality of perceived relationship goals, and is usually associated with core products or services that involve high risk and involvement. Establishing close customer relationships in settings that are not characterised by frequent personal contact or high levels of involvement or emotion may, therefore, be a challenge.

Further information: Page 126–127 Perceived need for closeness

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4. Describe a situation where inertia may determine the duration of a relationship.

Situations where inertia may determine the duration of the relationship are usually those where the customer need do nothing to allow that relationship to continue. A direct debit facility is an example of a situation where the company will continue in a relationship with the customer until such time as it is terminated. If the customer remains in a state of non-dissatisfaction (as opposed to satisfaction) inertia is likely to dominate and the relationship will continue as if on autopilot. Only at such time as some level (or frequency) of dissatisfaction is felt may the desire to switch overcome inertia.

Further information: Pages 134–136 Inertia

Case study questions

1. ‘Designing for trust is about trying to create the best environment for doing business.’ What does the author mean by this statement and how would a company go about doing this?

The thinking behind this is that a trusting customer believes you are doing your best for them and not going through the motions. In this environment, you may avoid constant calls and discounts. Engineering into processes the means by which customers can check the current status of an order/refund/complaint/etc. is one way that this can be done.

2. What is meant by the phrase ‘emotion prints’?

The authors of the paper believe that ‘emotion prints’ are predictable patterns in a relationship into which processes can be engineered.

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PART II

The core firm and its relationships

Overview

While early definitions of RM concentrated on the relationship between the supplier and the customer, later research extended to all the company’s major stakeholders. Thus, marketing is no longer seen as simply an exchange activity but it also entails the creation and maintenance of

dialogue among suppliers, sellers, customers, clients and others such that all parties are satisfied with the purchasing process (Uncles, 1994, p. 335). This second part of the text, therefore, looks

in detail at the firm’s relationships.

Several models are presented, each detailing aspects of the company’s relationships, including the following:

Doyle (1995) The core firm and its relationships

Hunt and Morgan (1994) Four partnerships and ten relationships

Christopher et al. (1991, 1994) Six markets

Gummesson (1996, 1999) 30Rs model.

For the purposes of this text, however, the major relationships are described as follows:

Customer partnerships

Supplier partnerships

Internal partnerships

External partnerships

A separate chapter is dedicated to each of these relationships.

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CHAPTER 7

Customer partnerships

Overview

This chapter looks at the central relationship between a customer and supplier. Although later chapters acknowledge the benefits of the broader view of marketing, there is little doubt that customer partnerships remain a primary concern. The chapter focuses in particular on RM as what you can do for or with your customer, in direct contrast to transactional marketing, where the emphasis is on what you do to your customer.

Services are seen not only as drivers to RM but as central to the philosophy of relational marketing. Customer service is extensively discussed both as a whole and from the perspective of breaking down customer service into episodes and interactions.

Relationship formulation and development are analysed and the concept of customer satisfaction examined and to an extent criticised. Customer service failures and the concepts surrounding dissolution and exit are also examined, as are the concepts of profit chains and ‘return on relationships’.

Chapter contents

Introduction

Customer focus

Services

Service industries

Customer service

Building customer relationships

Profit chains

Summary

Discussion questions

Case study: Where customers go to praise (or bash) you

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Discussion questions

1. How might customers operationalise their ‘obsession with the customer’?

The statement from the Burnley Building Society (p. 148) suggests that, without an obsession with the customer, there will be no business success. Tactics may be suggested (loyalty schemes, newsletters, etc.) but the important point is that a focus on the customer remains central to the business strategy. In this way, every business decision is challenged for its relevance to promoting customer satisfaction and retention rather than short-term cost savings and/or turnover and/or profitability.

2. Why are the boundaries between products and services becoming blurred?

This relates to the observation that many services have a tangible component and products are more than ever recognised as having intangible attributes. It is noted in the text that one of the paradoxes of marketing is that manufacturers very often promote their product on the basis of these intangible attributes (e.g. fun-loving, exciting, etc.), whereas service providers look to create tangible features (e.g. an impressive headquarters) to establish their credibility. It also recognises that, in current competitive market conditions, customer service is likely to be a major or main differentiator whether the exchange involves a product or a service.

Further information: Pages 152-153 Goods versus services

Journal article: Vargo and Lusch 2004

3. Imagine a frequent flyer’s relationship with an airline. What situations have the potential to become critical episodes if service failure occurs?

Numerous situations can annoy passengers, from flight delays to lost luggage. It may not be the problem itself, however, that leads to the critical incident but the company’s response to that problem (Stewart, 1998a). For example, travellers are often heard to complain, not on the basis of delays in themselves, but because of the company’s failure to keep them informed. Minor instances in themselves rarely become immediately critical but they may not be forgotten. Further negative incidents may trigger memories of past problems. It may be the case, therefore, that an accumulation of minor incidents can trigger a critical episode.

Further information: Page 158 Customer service failure

4. What, according to your judgement, are the most important factors in the ‘profit chain’ illustrated in Figure 7.7?

There is, needless to say, no definitive answer to this question. Each of these factors contributes to the success or otherwise of a relationship to a greater or lesser degree, depending upon the particular situation. What is more important to recognise is that any one failure can lead to failure over all.

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Case study questions

1. Why do customers use these review sites?

Those looking to buy a product or service are looking for reassurance or recommendation. Those posting reviews are taking advantage of an outlet to describe their experiences. Regrettably it is more likely that comments will be complaining rather than praising.

2. How should companies react to complaining behaviour?

If the information is incorrect or the customer misinformed then there is an opportunity to advise them. However, in most cases, a complaint will be justified and you need to be clear how you are going to resolve it. As is noted in Chapter 7, research suggests that it may not be the original problem that causes a critical episode but the company’s response to it.

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CHAPTER 8

Internal partnerships

Overview

This chapter looks at internal partnerships, including those concepts associated with internal marketing. Research in this area suggests that the quality of relationships that a company has with its customers is largely determined by how they are made to feel by employees at the ‘front line’ (the employeecustomer interface). It is a recognition of the importance of employee involvement in the relationship that this chapter discusses the importance of human resource management in the development of the internal market and the broader need to remove the functional barriers from the organisational environment. This discussion is not restricted to the marketing department employees; indeed, the importance of ‘part-time marketers’ is acknowledged and the considerable advantages of teamwork promoted. The perceived need to retain customers is reflected in this chapter by the benefits associated with employee retention and loyalty. The effect of climate and culture on this loyalty is also discussed. Empowerment is seen as one of the most recognisable features of internal marketing, although the benefits have to be measured against the costs of such a strategy. The chapter notes that the development of internal partnerships is not as straightforward as is sometimes suggested. It concludes, therefore, by discussing the problems associated with implementing internal partnership strategies.

Chapter contents

Introduction

Customeremployee interface

Theory development

The internal market

The functional interface

Climate and culture

Employee retention and loyalty

Empowerment

Operationalising empowerment

Internal marketing implementation

Conclusion

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Summary

Discussion questions

Case study: Resetting the sun

Discussion questions

1. What are the basic concepts that underlie internal marketing strategies?

Several (at times overlapping) ideas are associated with internal marketing. The concept of employees as (internal) suppliers and customers has been put forward by many writers (e.g. Gummesson, 1991, p. 69; Christopher et al., 1991, p. 69), as have techniques associated with ‘selling the message’ (Palmer, 1998, p. 201) or orchestrating the mission (Christopher et al., 1991) to internal audiences. The breaking down of functional barriers within the organisation (e.g. Doyle, 1995, p. 29) is seen as important, as are activities that improve internal communication and customer consciousness among employees (Hogg et al., 1998, p. 80). The retention of employees is also a feature (Grönroos, 1990, p. 88), as is the development of a marketing orientation (e.g. Gummesson 1991, p. 69). The idea which perhaps best sums up internal marketing is that, through meeting the needs of employees, companies can meet the needs of their customers (Shershic, 1990, p. 45).

Further information: Pages 170–172 Theory development

2. Suggest ways in which functional barriers (e.g. between marketing and human resource management) could be broken down.

Among the biggest problems in organisations are the barriers that are built up between departments such that they become ‘functional silos’ acting independently of the company as a whole. Marketing departments are not exempt and indeed may be part of the problem. The most common approach to this is through enhanced interorganisational communications (newsletters, updates, etc.) but this may not be enough. Christopher et al. (1991, p. 17) suggest that all employees, whether or not they are marketers and whether or not they are involved directly with customers, should be employed, trained and rewarded on the basis of a customer focus. In this way, the company pulls together (so-called goal congruence). Another approach to the functionality problem is through the development of cross-functional teams. No one solution is right for every case, and each company will need to find an organisational form that is effective and complements its climate and culture.

Further information: Page 173 The functional interface

3. What are the principal advantages and disadvantages of empowerment?

Empowerment has, according to Bowen and Lawler (1992, pp. 3234), a number of perceived benefits and costs. On the positive side, quicker on-line response to customers’ needs during service delivery and to dissatisfied customers during service recovery is seen as among the most important. Empowerment also generally leads to employees feeling better about their jobs and themselves and, consequently, interacting with customers with more warmth and enthusiasm. Empowered employees also appear to be a great source of service ideas and are great positive advocates (through ‘word-of-mouth’) of the company. Empowerment should not be considered without understanding the potential downsides. Most commonly, problems involve managers who wish to retain authority or employees who have no wish to have such a responsibility. It is also clear that some customers may prefer to be served by non-empowered employees, for example, in self-service situations. Other costs associated with empowerment

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include higher investment in selection and training and, ultimately, higher labour costs. It may also lead to slower and/or more inconsistent service delivery as individual treatment slows down the operation. There can also be a poor reaction of customers who see employees negotiating ‘special deals’ or terms with other customers. It may also be the case that an empowered employee may make too many bad and costly decisions.

Further information: Pages 178–180 Empowerment

4. What type of organisational climate and culture might best suit the implementation of relationship marketing?

For the climate and culture to suit RM, then it must accommodate the development of internal partnerships through internal marketing. As the climate and culture are dependent on how employees view the organisation, then how the employee perceives his or her role in the organisation and the wider environment must be deemed essential. As the suppliercustomer interface (‘the moment of truth’) is so important, the empowering of employees to make decisions during service delivery and service recovery is crucial. An overt, company-wide, marketing orientation is also critical if the hard work of one group of employees is not going to be undone by others.

Further information: Pages 176–177 Climate and culture

Case study questions

1. Why was this rebranding necessary?

It had a highly convoluted name which was unpronounceable in many of their sales territories and a high number of sub-brands. There is the evident danger that because the brand has been around some time and although unpronounceable may be fondly regarded by customers and staff alike. Hence the need to consult staff.

2. What were the positive aspects for employees?

The staff were consulted during the rebrand and details of the finer points explained at the launch. Although they have little research to go on (at the time the article was written) anecdotal evidence suggested that it was well received by staff.

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CHAPTER 9

Supplier partnerships

Overview

This chapter looks at a company’s relationships backward on the supply chain. In this regard, it distinguishes these vertical supplier–customer relationships (partnerships) from horizontal (collaborative) relationships (which are covered in Chapter 10). The chapter discusses the types of vertical relationships associated with supplier–customer partnerships (or partnering) and establishes that the generic objective of these relationships is to improve the efficiency and effectiveness within the ‘value adding’ system. The importance of understanding organisational cultures is examined and the requirement for cultural change proposed. The reasons behind the development of partnering are discussed and the perceived benefits and costs of partnering analysed.

Chapter contents

Introduction

Supplier partnerships

Business-to-business relationship research

Business relationships

Partnering

Culture gap

Partnership costs and benefits

Power

The downside of B2B partnerships

Summary

Discussion questions

Case study: How to…choose the perfect partner

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Discussion questions

1. Distinguish between vertical and horizontal relationships.

Vertical relationships are those that integrate all or part of the supply chain through component suppliers, manufacturers and intermediaries. Horizontal relationships are represented by organisations that are at the same point in the channel of distribution (including competitors) who seek to cooperate and collaborate for mutual benefit.

Further information: Pages 189–190 Introduction

2. What part does the balance of power between the parties play in a relationship?

The balance of power affects how partners act in a relationship. This is usually determined by the relative importance of the relationship to the individual parties. Imbalances of power create the potential for one party to pursue short-term advantage, whereas balanced or symmetrical dependence represents a mutual safeguard and collective incentive to maintain a relationship (Palmer, 1996, pp. 20–21). Such is the destructive nature of imbalances of power that those relationships that are based upon agreements which, as far as possible, design out power/ dependence issues are most likely to succeed.

Further information: Pages 197–198 Power

3. Why are closer ties likely to develop in business-to-business rather than business-to- consumer relationships?

It has long been recognised that personal relationships develop between individuals in different organisations. B2B relationships (and the networks of relationships that develop from these) can be very strong and enduring in certain circumstances. Close B2C relationships, on the other hand, are less likely as there are only a minority of cases where the level of risk is such that it requires trustful and committed relationships.

Further information: Chapter 3

Pages 192–193 Business relationships

Pages 209–211 Networks

4. Why might partnering relationships lead to ‘the reduction (or dulling) of market incentivisation’as suggested on p.197?

It is a generally held view that vigorous competition in a marketplace stimulates players to shave margins, cut costs and develop new features, products or services in the hunt for competitive, advantage. If partnerships within all or part of an industry lead to less competition, the suggestion is that the incentives for cutting costs and new developments are reduced. Indeed, this is the basic premise that guides anti-competitive legislation in many countries. An alternative view is that such industry partnerships reduce operating costs. This is the argument used by airline alliances (e.g. Oneworld, Star Alliance, SkyTeam) when they ask for anti-trust protection in the USA.

Further information: Pages 196–197 Partnership costs and benefits

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Case study questions

1. What are the benefits to commercial organisations of the partnering described in this article?

The article concludes that it can offer significant benefits to the brand and the bottom line. Reinforcement of the brand image of caring obviously works for relevant brands. Increased sales to customers who want to contribute to good causes are also a benefit.

2. What are the potential dangers for both the commercial and charitable organisation?

Difficult to see (barring a scandal of some sort) what the downsides of these projects are for the commercial organisation. From the charities’ perspective an association with, for example, a discredited organisation, might be harmful.

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CHAPTER 10

External partnerships

Overview

In the previous chapter, a distinction was made between horizontal and vertical relationships. This chapter concentrates on those horizontal relationships with organisations that collaborate at the same point in the distribution chain (but not necessarily from the same point in that chain). The chapter differentiates between networking, which it describes as ‘relationships between individuals (as opposed to organisations)’, and collaborations, which are usually more formal (but not necessarily contractual) relationships between companies. Collaboration is further sub- divided into industry collaboration (e.g. the ‘Oneworld’, ‘Star’ and ‘SkyTeam’ alliances in the airline industry) and external collaborations, where companies with different strengths (and perhaps different industry knowledge) cooperate, often to take advantage of a new segment or to promote segment differentiation. The chapter looks at the stages through which such relationships develop and the importance of developing trust and commitment over time. Other relationships, for example, with governmental and non-governmental organisations and agencies, are also discussed.

Chapter contents

Introduction

Horizontal partnerships

Relationship research

Networks and collaboration

Networks

Collaboration types

Developing collaborative relationships

Downsides

Other relationships

Conclusion

Summary

Discussion questions

Case study: Mumsnet’s the word

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Discussion questions

1. Distinguish between network and collaborative strategies 1 .

Networks are seen as relationships between individuals (as opposed to organisations) who use their personal contacts in a systematic way sometimes but more often ad hoc way. Although not strictly controlled by the company, such networks are often encouraged and facilitated by organisations. Collaborative strategies are between organisations and are often more formal. They may or may not be contractual but are likely to include agreements of some sort. Collaborative agreements are more controllable, with the objectives and subsequent strategies specifically spelt out by the collaborators.

Further information: Pages 208–211 Networks and collaboration

Collaboration types Pages 211–214

2. Where would you draw the line between collaboration and collusion?

There is a very fine line between collaboration and collusion (Sheth and Sisodia, 1999, p. 81) and different societies are prone to draw the line according to established national practice. Although the rules are established, interpretation of the rules is such that countries will tend to adapt them to their own self-interest. The ‘general rule’ as set by such bodies as the European Union is that any collaboration that restricts competition and, ultimately, is detrimental to the customer is ‘anti-competitive’.

Further information: 216–217 Downsides

3.

Suggest examples of (a) industry collaboration and (b) external collaboration.

(c)

Industry collaborations are of two main types. The first is where an entire industry works together to achieve a joint objective (e.g. increase the overall turnover in the industry). This is often organised through trade societies or appears through industry consensus (e.g. the Meat Marketing Board). The second type (referred to in the text as ‘alliances’) is where a group of competitors collaborate to achieve cost and efficiency objectives (e.g. Oneworld).

(d)

External collaboration involves arrangements between organisations from different market sectors, each of which brings different skills, competencies and assets to a relationship. They may be formed to create competitive advantage in an existing market or to take advantage of a newly emergent sector. Examples include the collaboration between Boots and Hollinger Telegraph to set up handbag.com.

Further information: 211–214 Collaboration types

4. Why might organisations wish to maintain relationships with consumer or other pressure groups?

Consumer and other pressure groups are of growing importance to commercial operations. Although some of these organisations are small in size, compared to some of the corporations with which they come into conflict, they can have a devastating effect on an organisation’s public relations (e.g. McDonald’s and Shell). Although complete agreement may not always be possible, the maintenance of dialogue can prove profitable.

Further information: Page 218–219 Pressure groups

1 It should be noted that other authors use different definitions for both of the above terms and that the following relates to the definitions used in this text.

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Case study questions

1. What external relationships have Mumsnet developed?

Mumsnet has a number of commercial arrangements, for example with Ford, but it is highly selective and driven by the views of its ‘membership’.

2. Why is the portal so successful and what might it need to do to maintain this success in the future?

It evidently satisfies a need for a targeted group of primarily well-educated mums. One of the possible dangers is that it loses track of this audiences’ needs or, in an attempt to grow its membership, moves too far away from core product. Commercial relationships may work against them unless carefully managed.

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PART III

Managing and controlling the relationship

Overview

In this third and final part, important aspects of the management and control of relationships are discussed. It should be noted, however, that this is not a prescriptive approach; rather, an attempt to illustrate the various routes taken and the opportunities available dependent on a company’s individual requirements.

Chapter 11 discusses the concepts surrounding the planning and control of RM and the potential management of relationships. The text deliberately avoids the promotion of a prescriptive ‘checklist’ of solutions, although some models are generally accepted as valuable from a planning perspective. Instead, it recommends the need to ‘design-in’ relational strategies, initially within the current planning process. The chapter also confronts head-on the criticism of RM, in part as a warning against ‘prescriptive complacency’ and in part to rebalance (if this is needed) any over-enthusiastic claims made on its behalf.

Chapter 12 looks at the enormous impact that new technologies are having on marketing and the management of relationships. As Brad DeLong, an economist at the University of California at Berkeley, has stated: ‘IT and the Internet amplify brain power in the same way that the technologies of the industrial revolution amplified muscle power’ (quoted in Woodall, 2000). Even he would be surprised by the developments in the last 10 years and their effect on commercial life.

Chapter 13 looks at the direction RM research is heading and what forms and influences it is taking. It discusses customer relationship management (CRM) and perceived associations and conflicts with RM. In this edition two other developments, social marketing and service- dominant logic, are discussed as they are both seen as having RM at their core.

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CHAPTER 11

Relationship management

Overview

This chapter looks at the management of relationship marketing. It does not promote revolution; rather, it suggests introducing relational strategies into existing marketing plans. The chapter looks at some of the problems associated with relational management, notably with regard to protection of personal data. It also questions the efficiency of many companies, which appear not to use the data they hold. The chapter reviews some of the criticisms of relationship marketing which, although frequently over-emphasised, are not wholly without foundation.

Chapter contents

Introduction

Relationship management

The marketing plan

Managing relationships

Criticisms of RM

Summary

Discussion questions

Case study: A decisive edge

Discussion questions

1. What factors distinguish a marketing plan that incorporates relational strategies from a more traditional plan?

As part of the situational analysis, it may be beneficial to conceptualise the company in relation to the RM/TM continuum. Customer analysis should also distinguish between those customer exchanges that are relational and those that are discrete. Relational marketing plans may incorporate ‘bottom-up’ as well as ‘top-down’ objectives derived from database information and, perhaps, other relational partnerships (e.g. alliances). From a retention and development perspective, database strategies may be developed and segmented by the type of customer relationship. Tactics may involve the use of DbM, DM and CRM and associated technologies. Action plans may be disseminated to relational partners rather than kept within the company.

Further information: Pages 230–234 The marketing plan

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2. Why might the management of customer information become even more important in the future?

It is likely that customers will become less tolerant over the handling of data in the future. The three major concerns with the management of customer information would appear to be with the handling and use of personal data itself, with the unwanted attention the supply of information may attract and with organisations that do not use the information they do hold wisely. In the first instance, not only are there moral reasons for taking care of personal data but this may (now or in the future) also be backed by the force of law. Unwanted attention is relative. Direct mail is only ‘junk mail’ if it is of no interest to the prospect. Better profiling and targeting should reduce this. Perhaps the most annoying from the perspective of the customer is where information is known but ignored (e.g. offering cable telephone services in areas where the cable is not laid).

Further information: Pages 234–238 Managing relationships

3. What, in your judgement, are the most sustainable and least sustainable criticisms of RM?

Perhaps the most sustainable criticism of RM is in situations where claims are made that are selective and largely unjustified. RM (or any other management concept) is not a cure-all but a strategy that will benefit some (if not many) companies. The least sustainable (from this writer’s perspective) is that because it is flawed it has nothing to contribute to marketing and should be dumped in favour of the next concept to come along (CRM?). No concept is perfect and part of the marketer’s art is in the selective nature of its application.

Further information: Pages 238–242 Criticism of RM

Case study questions

1. What makes a good decision-maker?

Probably the short answer is flexibility; adapting your decision-making style to suit the particular circumstances. The article also suggests that knowing how to use the organisational structure is helpful, but that it is an awareness of decision-making styles and avoidance of common errors in thinking can ‘turn a bright individual into a reliable decision-maker’.

2. What part does intuition play in decision-making?

Intuition is an extremely important tool of the decision-maker. Decisions based on rationality and supported by evidence can be misleading especially if the problem is incorrectly framed. The Coca-Cola example and the 1960s ‘Bay of Pigs’ fiascos are notable examples of this. Intuition, tempered by experience, provides a backcloth against which the potential outcome of a decision can be considered.

3. Explain the ‘availability trap’ and ‘anchoring’.

The availability trap suggests that the more salient, memorable or recent information is, the more we rely on it to make our decision. Anchoring explains our susceptibility to making decisions based on how the problem has been framed.

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CHAPTER 12

Relationship technology

Overview

This chapter reviews the developments in both information technology (IT) and manufacturing technology and their effect on relationship marketing strategies. It reviews those concepts surrounding mass customisation, noting that there appears to be a gap between the vision and the reality. In technology-driven markets (e.g. electronics), ‘time to market’ is becoming a priority affecting the ability to undertake market research. The potential benefits of IT in establishing and maintaining relationships is noted although the benefits associated with loyalty programmes are, at best, overstated. The concepts of database marketing, direct marketing and customer relationship management are discussed in respect to relationship marketing, and observations on their strategic significance are noted. Technological development, and the Internet in particular, has undoubtedly had an effect on the marketplace and these changes are also analysed.

Chapter contents

Introduction

Manufacuring/Service delivery technology

Information technology

Technology and marketplace relationships

Summary

Discussion questions

Case study: Social networks; cash cow or corporate headache?

Discussion questions

1.

Why is marketing research expenditure perceived to be difficult to justify?

In

certain industries (but not all), it is becoming difficult to justify expenditure on marketing

research. The major characteristic of such industries is rapid technological development (e.g. computing, photographic, etc.). In these ‘technology-driven industries’, the time it takes to bring

a new product is becoming shorter as ‘windows of opportunity’ contract. Under these

pressurised conditions, market research can ‘take more time than the marketer has got’ (Gordon, 1998, p. 6). Using the marketplace itself to test products has the advantage of producing results based on actual (as opposed to forecast) sales while at the same time generating revenue.

Further information: Page 238 Time to market

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2. What do you understand by the term ‘one-to-one marketing’?

One-to-one marketing implies the development of long-term relationships with individual customers (as opposed to groups of customers). The purpose of such singular attention is in order to better understand that customer’s needs and better deliver the service that meets that individual’s requirements (Chaffey et al., 2000, p. 290). For one-to-one marketing to become a reality there is a need to develop knowledge-based systems that will effectively learn more about individual customers and action tactics accordingly.

Further information: Page 256 One-to-one marketing

3. Distinguish between the terms ‘relationship marketing’, ‘direct marketing’, ‘database marketing’ and ‘customer relationship marketing’.

Relationship marketing has been defined previously (see page 38) as identifying and establishing, maintaining and enhancing, and when necessary terminating, relationships with customers and other stakeholders at a profit so that the objectives of all parties are met (Grönroos, 1994b, p. 9). It is, therefore a holistic approach (strategy) not just to marketing but to the entire business. One way (not the only way) to differentiate RM from these other terms is to suggest that database and direct marketing and customer relationship management utilise the power of computing to promote knowledge and communication with customers. They are, therefore, tactical rather than strategic as well as relating to only one of the organisation’s many relationships.

Further information: Pages 256–257 Database, direct and digital marketing

4. How is the Internet changing the marketplace?

McKenna (1991, p. 1) noted ‘technology is transforming choice and choice is transforming the marketplace’. Nowhere is this more evident than with the Internet. Although the Internet’s effect on retail sales is almost certainly overblown, it is having an effect in other ways. It is encouraging the rise of ‘bottom-up’ information flows and dialogue between customers and marketers and the development of ‘reverse marketing’ infomediaries. Marketers too are working together on the Internet to promote site access and allow for the creation of the one-stop shop. It is also probable that the Internet’s ability to bring people together will lead customers to create or join ‘communities of interest’.

Further information: Pages 258–260 Technology and marketplace relationships

Case study questions

1. What are the pitfalls associated with non-engagement?

Those companies that do not engage do not know what is being said about them and are missing an opportunity to engage and interact with customers.

2. What is the best response to those who are ‘vocal about our business’ in positive and negative ways?

The internet gives the organisation the opportunity to respond to complainants while using the ‘loyalty’ of positive WOM to promote the business.

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CHAPTER 13

Conceptual developments

Overview

The first edition of this text concluded after Chapter 12. This additional chapter was added to the second edition (under the heading ‘Back to the Future’) and was designed to bring the relationship marketing (RM) debate up to date with consideration of the influence of customer relationship marketing (CRM). In this edition these ideas discussed are revisited. In addition, in the best part of a decade since the original publication, other distinct (but not wholly disconnected) concepts have developed which owe their existence, at least in part, to relationship marketing research. Two of these concepts, social marketing and service-dominant logic, are discussed.

Chapter contents

Introduction

Relationship management research

Customer relationship management

Social marketing

Service-dominant logic

Conclusions

Summary

Discussion questions

Case study: Feature: The perfect touch

Discussion questions

1. To what extent do you agree or disagree with Payne (2006, p.4) that CRM ‘unites the potential of new technologies and new marketing thinking to deliver profitable, long- term relationships?

CRM and relationship marketing are frequently discussed as if they were the same thing. In the view of this author, they are distinct (albeit they may have the same objective). In simple terms RM looks to build relationships, which it recognises as complex (particularly in regard to B2B and services), and which may use technology where appropriate. CRM uses technology to simplify (often distant) relationships with customers.

Further information: Pages 266–269 Customer relationship management

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Egan, Relationship Marketing, 4th edition, Instructor’s Manual on the Web

2. To what extent does social marketing theory contribute to marketing in general?

Promotion of community benefits (especially when you are asking people not to do something) has always been difficult. Social marketing looks to learn from the experience of commercial marketers to help resolve these problems. However, the CIM (2009) have stated that mainstream marketers were now at a stage where they can learn from social marketers especially in regard to customer psychology and motivation.

Further information: Pages 269–270 Social marketing

3. To what extent does service-dominant logic change our perception of value?

Value, in transactional marketing terms was always associated with price. RM associated value with relationships (co-creation) and how they can be delivered to the customer and other stakeholders. S-dL’s FD10 takes this one step forward when it states ‘value is always uniquely and phenomenologically determined by the beneficiary. In this regard, companies can only make value propositions.

Further information: Pages 270–275 Service-dominant Logic

Case study questions

1. What does the author mean by ‘customer journey mapping’ and why is it recommended that ‘fresh eyes’ are the key to success?

Customer journey mapping is a means of examining the various ‘touchpoints’ (or interfaces) between the organisation and the customer. It is closely associated with the ‘interactions and episodes’ discussed in Chapter 7 (pages 155–156). It is difficult for marketers (who may have certain ideas about their customers’ habits) to do this and the suggestion is that ‘fresh eyes’ will be able to examine this without prejudice.

2. Using a service or product provider with whom you are familiar, analyse the customer ‘touchpoints’ and which are most crucial to customer satisfaction.

Responses on this question will be determined by the supplier that the individual chooses. Reference back to pages 155–156 may help define relevant touchpoints.

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