Im

Instructor’s Manual
Relationship Marketing
Fourth edition
John Egan
For further instructor material

please visit:
www.pearsoned.co.uk/egan
ISBN: 978-0-273-73779-7
 Pearson Education Limited 2012

Lecturers adopting the main text are permitted to download and photocopy the manual as required.
Pearson Education Limited
Edinburgh Gate
Harlow
Essex CM20 2JE
England
and Associated Companies around the world
Visit us on the World Wide Web at:

www.pearson.com/uk
----------------------------------
First published 2002

This edition published 2012
© Pearson Education Limited 2012
The rights of John Egan to be identified as the author of this work has been asserted by him in
accordance with the Copyright, Designs and Patents Act 1988.
Pearson Education is not responsible for the content of third-party internet sites.
ISBN: 978-0-273-73779-7
All rights reserved. Permission is hereby given for the material in this publication to be
reproduced for OHP transparencies and student handouts, without express permission of the
Publishers, for educational purposes only. In all other cases, no part of this publication may be
reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise without either the prior written permission of
the Publishers or a licence permitting restricted copying in the United Kingdom issued by the
Copyright Licensing Agency Ltd. Saffron House, 6-10 Kirby Street, London EC1N 8TS. This
book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of
binding or cover other than that in which it is published, without the prior consent of the
Publishers.
2
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
3
Egan, Relationship Marketing, 4th edition, Instructor’s Manual on the Web
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
4
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.
5
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
6
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.
7
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
8
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.
9
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
10
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
11
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
12
(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’.
13
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.
14
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
• Case study: The art of the soft sell
15
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
16
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
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.
17
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
• Case study: Get fat on chat
18
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
19
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.
20
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
• Case study: Understanding and addressing your client’s needs
21
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
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.
22
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.
23
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
• Case study: Find a way into the hearts of customers
24
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
25
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
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.
26
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.
27
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
• Case study: Where customers go to praise (or bash) you
28
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.
29
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.
30
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 employee–customer 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
• Customer–employee interface
• Theory development
• The internal market
• The functional interface
• Climate and culture
• Employee retention and loyalty
• Empowerment
• Operationalising empowerment
• Internal marketing implementation
• Conclusion
31
• Summary
• Case study: Resetting the sun
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. 32–34), 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
32
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 supplier–customer
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
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.
33
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
• Case study: How to…choose the perfect partner
34
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
35
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.
36
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
• Case study: Mumsnet’s the word
37
1. Distinguish between network and collaborative strategies1.
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.
38
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.
39
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.
40
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
• Case study: A decisive edge
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
41
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
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.
42
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
• Case study: Social networks; cash cow or corporate headache?
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
43
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
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.
44
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
• Case study: Feature: The perfect touch
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
45
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
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.
46

Im

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Im

Hochgeladen von

Copyright:

Verfügbare Formate

Instructor’s Manual

For further instructor material

 Pearson Education Limited 2012

and Associated Companies around the world

Visit us on the World Wide Web at:

First published 2002

© Pearson Education Limited 2012

Companion Website for students

New to this edition!

Comprehensive web resources

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

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

• 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

100 years of marketing

• The early days

• Influences on relational strategy development

Further information: Box 2.2 TM and RM compared

Chapter 5 Strategy continuum

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

Further information: Pages 27–28 Services marketing

Pages 149–153 Services; Service industries

Further information: Pages 37 RM definition

Pages 154-161 Customer Service; Building customer relationships

Case study questions

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

3. How might smart businesses tune in to their customers’ legitimate concerns,

• Unrealistic relational development

• Case study: The art of the soft sell

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

Further information: Pages 48–49 Relationship terminology

Journal article: O’Malley and Tynan (1999)

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

Further information: Pages 50–56 Categorising relationships

Journal article: Palmatier et al. 2006

Further information: Pages 50–56 Categorising relationships

Page 53 Figure 3.1

Pages 80-83 Relationship stages – Stages models

Page 59 Figure 3.3

Page126-127 Perceived need for closeness

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

• 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.

Further information: Pages 60-61 Loyalty schemes

Case study questions

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

• Acquisition and retention costs

• Economics of retention strategies