Relationship Marketing Management Ed Little and Ebi Marandi Thomson Learning©

CHAPTER TWO

Characteristics of RM

Relationship Marketing Management Ed Little and Ebi Marandi Thomson Learning©

CHAPTER 2 – Characteristics of RM

Learning Objectives

• What is a relationship?

• Relationship Marketing (RM) Vs. Transactional Marketing (TM)

• Definition and main components of RM

• The main aim of RM

• Applicability to different markets

Relationship Management in Banking Industry

Source: www.atomicbox.com

What is RM?“An alternative strategy to the traditional marketing mix approach, as a means of obtaining sustainable competitive advantage and the best way to retain customers in the long run.”

“The processes involved and how far within the micro and macro environments of a company relationship marketing should be applied are under debate, and will continue to be for some time to come.”

Little & Marandi, 2003

Relationship Marketing Management Ed Little and Ebi Marandi Thomson Learning©

CHAPTER 2 – Characteristics of RM

What is RM?Marketing, in relational terms means:

“To establish, maintain and enhance relationships with customers and other partners, at a profit, so that the objectivesof the parties involved are met. This is achieved by mutual exchange and fulfillment of promises.”

Gronroos 1997

Relationship Marketing Management Ed Little and Ebi Marandi Thomson Learning©

CHAPTER 2 – Characteristics of RM

What is a relationship?“..just merely a series of transactions where supplier & buyer do not really know each other does not constitute a relationship.”

“..voluntary repeat business between a supplier and a customer where the behaviour is planned, cooperative, intended to continue for mutual benefit and is perceived by both parties as a relationship.”

Little & Marandi 2003

Relationship Marketing Management Ed Little and Ebi Marandi Thomson Learning©

CHAPTER 2 – Characteristics of RM

Stakeholders

Internal markets

Employeemarkets

Referralmarkets

Suppliermarkets

Influencemarkets Customer

markets

Christopher, Payne & Ballantyne 1991

For RM to be successful, a long term and mutually trusting & committed relationship with other stakeholders is also required.

Relationship Marketing Management Ed Little and Ebi Marandi Thomson Learning©

CHAPTER 2 – Characteristics of RM

Transactional marketing (TM)

• Focus on single sale• Orientation on product features• Short time scale• Little emphasis on customer service• Limited customer commitment• Moderate customer contact

• Quality primarily a concern of production Based on Christopher et al 1991

Deciding who to have a relationship with…….

Table 2.1 :Textbook, Gronroos, 2000

Relationship Marketing Management Ed Little and Ebi Marandi Thomson Learning©

CHAPTER 2 – Characteristics of RM

Relationship Marketing (RM)• Focus on customer retention

• Orientation on product benefits

• Long time scale

• High customer service

• High customer commitment

• High customer contact

• Quality is the concern of all

Conditions: the nature of the service, the consumer & the situation

Characteristics of nature: importance, variability, complexity & involvement

Industry: Banking, insurance & hairstyling services

Based on Christopher et al 1991

Movement of salad tomatoes through a traditional marketing system, Dominican Republic, 1975

Relationship Marketing Management Ed Little and Ebi Marandi Thomson Learning©

CHAPTER 2 – Characteristics of RM

What is true loyalty?

“A customer’s willingness to continue patronising a firmover the long term, purchasing and using its goods and serviceson a repeated and preferably exclusive basis, and voluntarilyrecommending the firm’s products to friends and associates.”

Lovelock et al 1999

Relationship Marketing Management Ed Little and Ebi Marandi Thomson Learning©

CHAPTER 2 – Characteristics of RM

Characteristics of RM (Gronroos,1996)

• Long term orientation, win-win situation is the key feature, collaboration & creation of mutual benefits

• Commitment and fulfillment of promises ie:DHL service

• Customer share, not market share ie: private bankers

• Customer lifetime value (note that maintaining customer can be expensive, so long-term customers should be carefully selected)

• Two-way dialogue & communication (treat customers as strategic partners built via networking & interaction)

• Customisation (traditional marketing of ‘one size fits all’ no longer applies; RM creates value added services & products – but how???)

Relationship Marketing Management Ed Little and Ebi Marandi Thomson Learning©

CHAPTER 2 – Characteristics of RM

Approaches to customisation• Collaborative (used when customers cannot easily articulate their

requirements, and where size, fit, functionality, performance are highly desirable features.)

• Adaptive (ie: interchangeable mobile phone cover)

• Cosmetic (ie: printing of customer’s name or logo on a standard product like T-shirt)

• Transparent (a situation where unique goods or services are offered to customers without informing them explicitly that the offering has been customised ie: e-catalogue clothing retailer.

Relationship Marketing Management Ed Little and Ebi Marandi Thomson Learning©

CHAPTER 2 – Characteristics of RM

The RM-TM continuum

RM TM

High customer anxietyHigh degree of contactImportance of confidence, social and special benefitsCustomers in favour of relationships

Low customer anxietyHigh contact unnecessaryStandard productCustomers not seekingrelationships

Relationship Marketing Management Ed Little and Ebi Marandi Thomson Learning©

CHAPTER 2 – Characteristics of RM

Levels of RM• Tactical (tools for promotion)

• Strategic (customer are tied in by a mixture of legal, economic, technological, geographical and time bonds)

• Philosophical (focusing on customer needs and operating from a genuine customer orientation platform, concentrating on customer relationship life cycle)

Palmer 1996

Relationship Marketing Management Ed Little and Ebi Marandi Thomson Learning©

CHAPTER 2 – Characteristics of RM

Benefits of RM

• Suppliers– Added value– Increased loyalty– Cross-selling

(customer share)– Premium pricing– Lower promotional

costs

• Customers– High quality service– Customised products– Reduced anxiety– Feeling valued

Relationship Marketing Management Ed Little and Ebi Marandi Thomson Learning©

CHAPTER 2 – Characteristics of RM

Disadvantages of RM• Loss of control – in resources, activities and intentions

• Indeterminateness – relationship are subjected to change via historical experience, present exchanges and future expectation

• Resource demand - investment and maintenance cost

• Preclusion of other opportunities – priortise the use of limited resources.

• Unexpected demands – linkage of networks bring with it obligations or expectation by others of specific behaviours.

Belois 1998

Relationship Marketing Management

Stage one:Making the case for RM Stage two:

Identifying critical RM

success factors

Stage four:Adapting to

context-specific conditions

Stage three:Developing RM practices

Planning

ImplementingMonitoring

Ethics

CASE

You travelled to Hong Kong with your best friend. You book a 4 star hotel room via BOOKING.com, an online hotel intermediary. Upon arrival at HAPPY HOTEL, you found out that the hotel was overbooked. The front desk staff explained that the system might have experienced temporary failure that led to the hotel overlooking your booking. YOU ARE VERY DISSAPOINTED. What is a relationship and how do you know if you are in one? Do you consider yourself in a relationship with HAPPY HOTEL? If you are the manager of HAPPY HOTEL what are the action steps should you follow, given that the situation happened already?