MANAGING BUSINESS RELATIONSHIPSWEEK 6, LECTURE 1. FROM TRANSACTIONS TO

RELATIONSHIP MARKETING

Relationships in Marketing

Agenda for Weeks 6 & 7

Week 6 Relationship Marketing

Week 7 Customer Relationship Management (CRM)

Lecture Agenda

What is a relationship?Relationship marketing definitionsRelationship developmentLoyalty

What is a Relationship?

Sale consummated the relationship with the customer and after that the relationship begins (Levitt, 1983)

Marketers perceive that (either metaphorically or in reality) relationships of some sort exist in commercial exchanges

They are not really interpersonal relationships, however, but the attributes of personal relationships might be usefully employed (O’Malley and Tynan, 1999)

But buyers frequently have no wish to enter into a relationship with a company (Palmer, 1996)

Think About….

… how you would define ‘a relationship’

Does this work fully in a inter-personal and business context?

Developments in Marketing

1990’s 2000’s1980’s1970’s1960’s1950’s ?

Consumer marketing

Industrial marketing

Non-profit marketing

Services marketing

Relationship marketing

Relationship Marketing Definitions

“Relationship marketing is marketing based on interaction within networks of relationships” (Gummesson, 2002, p. 3)

“Establishing, developing and maintaining successful relational exchanges” (Morgan and Hunt, 1994, p. 20)

“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 involved are met. This is achieved by a mutual exchange and fulfilment of promises” (Gronroos, 1994, p. 9)

Research Marketing Definitions

ThemesElements of RM

Establishing relationship Maintaining Enhancing

Success Objectives

Not always mentioned is the end of the relationship

Relationship Development

Holmlund, 1997, cited by Fill, 2009

Relationship Lifecycle

Customer relationship lifecycleBaines, et al, 2011, p. 568

Relationship Lifecycle

At each stage of the relationship, the customer has different requirements and issues

Therefore at each stage different marketing actions are required

Acquisition

Activity intended to recruit customers and begin to gain information about them.

Split into: Initiation Phase

Socialisation Phase

Bruhn (2003)

Acquisition

Initiation phaseComes before the purchase of goods or

servicesBuyer finds information about seller, as part

of buyer decision making processSeller attempts to gain information about

buyer E.g., through promotional activity or list buying

Initiation phase ends with first purchase

Bruhn (2003)

Acquisition

Socialisation phaseBoth buyer and seller become more familiar

with each otherThe first purchase, provides buyer with

experience of the product and seller with information

This information allows for future customisation

This stage generally involves a financial loss for the seller

Bruhn (2003)

Development

Also known as the growth phaseValue both parties receive from the

relationship increases Organisation is able to cross sell to buyer Buyer values increased level of trust, service and

customisation

As relationship develops more and more information is exchanged

Retention

The potential value each side can gain from the other is maximised

Now both sides settle into a period of consolidation

This is the period of maximum profit for the seller

Decline

Relationship declines as one side or the other perceives lower levels of value

Relationship can be recovered, through recovery activity or come to an end

Either side may formally end the relationship or they may simply drift apart

Advantages of Customer Retention

Acquiring new customers costs 5 times more than retaining existing ones

Average company loses 10% of customers annually

A 5% reduction in customer defection increases profits by 25% - 85%

Customer profitability increases over customer life cycle

Kotler & Keller (2006)

Loyalty Ladders

Partners

Clients

Customers

Prospects

Members

Advocates

Partners

Clients

Repeat Cust

Prospects

Members

Advocates

1st Time Cust

Suspects

Tra

dit

ion

al M

ark

eti

ng

Rela

tion

ship

Mark

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ng

Payne et al 1995 Kotler 1997 Baines, et al 2011

Loyalty and Repeat Purchase

Loyalty is about more than just repeat purchase

Many possible reasons for repeat purchase other than loyalty

Loyalty relates to attitude as well as behaviour

Types of Loyalty

Some of the more general types of loyaltySource: Baines, et al (2011, p. 573)

Things to Remember

What is a relationship in marketing terms?

Nature of the development of relationships

Customer loyalty