KMV Model Hypotheses

H1      There is a positive relationship between relationship termination costs and relationship commitment.

H2      There is a positive relationship between relationship benefits and relationship commitment

H3      There is a positive relationship between shared values and relationship commitment

H4      There is a positive relationship between shared values and trust

H5      There is a positive relationship between communication and trust

H6      There is a negative relationship between opportunistic behaviour and trust

H7      There is a positive relationship between relationship commitment and acquiescence

H8      There is a negative relationship between relationship commitment and propensity to leave

H9      There is a positive relationship between relationship commitment and cooperation

H10    There is a positive relationship between trust and relationship commitment

H11    There is a positive relationship between trust and cooperation

H12    There is a positive relationship between trust and functional conflict

H13    There is a negative relationship between trust and uncertainty 

A First Summary of Previous Posts

Gummesson (1987) and Grönroos (1990;1992;1994;1995) among others criticize the pre-existing model of Marketing Mix, proposing a shift in Marketing towards Relationship Marketing.

Kotler (2003, pp. 151-154) says about: “Relationship Marketing (RM) marks a significant paradigm shift in marketing, a movement from thinking solely in terms of competition and conflict toward thinking in terms of mutual interdependence and cooperation”.

We live in the era of change. Markets change (globalisation, information diffusion, financial crisis), competitors change (new appear from “exotic” destinations, new products features or characteristics, prices continuously reduced), customers change (leaving the passive role and undertaking an interactive role in the sale), products and services more and more become as look-alike and perceived by the customers as commodities.

Marketing commodity products in business-to-business environments becomes tougher as the low cost strategies lead in a continuous and disastrous price competition, the so called “commodity trap”.

To avoid the commodity trap suppliers need to differentiate their offerings – to decommoditize them – in order to gain the customer for the long term and also to gain a price premium.

Clarke-Hill, Robinson and Clarkson (1999, p. 2 of 20) summarize these as: “In an era of strong competition, over capacity in many sectors and extreme price sensitivity, chemical companies are attempting to break out of the commodity trap. Companies that are operating in mature markets with commodity type products and with large investments in production capacity and the need to produce at or near optimum efficiency have begun to consider alternative marketing strategies for their products and have started to get nearer to their customers”.

Effective Use of Relationship Marketing as a Differentiation tool with B2B has been examined in order to create a sustainable Competitive Advantage for Commodity Businesses.

According to Peppers and Rogers (2001) companies identify their potential customers, differentiate in their approach, interact with the customer gathering information and learning his needs, customize then their offering to satisfy these needs, achieving an advantage towards the competition and aim to sustain this adapting themselves in the dynamic changes of these needs, adding this way value to their customers and profiting also themselves from customers loyalty (IDIC Model).

Morgan and Hunt (1994, p. 22) define their “KMV model” (key mediating variable) of Relationship Marketing, which focuses on one party in the relational exchange and that party’s relational commitment and trust” and they hypothesize “that relationship commitment and trust are key constructs, we position them as mediating variables between five important antecedents (i.e. relationship termination costs, relationship benefits, shared values, communication, and opportunistic behaviour) and five outcomes (i.e. acquiescence, propensity to leave, cooperation, functional conflict, and decision making uncertainty)”

The Extended KMV Model of Relationship Marketing (Morgan - Hunt, 1994)

The following Diagram presents “The Extended KMV Model of Relationship Marketing” as it was described by Morgan and Hunt (1994, p. 33) with the positive and negative precursors and outcomes of Relationship Commitment and Trust:

Based on the above work of Morgan and Hunt (1994) (“The Commitment-Trust Theory of Relationship Marketing”, p. 33), the Diagram shows the influence of the five major precursors of Relationship Commitment and Trust (Relationship Termination Costs, Relationship Benefits, Shared Values, Communication and Opportunistic Behaviour) on the outcomes of Relationship Commitment and Trust (Acquiescence, Propensity to Leave, Cooperation, Functional Conflict and Decision-making Uncertainty) in order to achieve a successful Relationship Marketing.

Customer Loyalty

We believe that loyal customers are satisfied but the opposite is not always true.

Jackson (1985), Sewell and Brown (1990), Cannie and Caplin (1991), Reicheld (1993; 1994; 1996), Dick and Basu (1994), Fredericks and Salter (1995), McKenna (1997), Spekman (1998), Peppers and Rogers (2004) underline the importance of Customer Loyalty – beyond Customer Satisfaction.

Reicheld (1993) notes:

“The primary mission of a loyalty based company is to deliver superior value to customers. Success or failure in this mission can be clearly measured by customer loyalty (best quantified by retention rate or share of purchase or both). 

Customer loyalty has three second-order effects:

·       Revenue grows as a result of repeat purchases and referrals

·       Costs decline as a result of lower acquisition expenses and from the efficiencies of serving experienced customers

·       Employee retention increases because job pride and satisfaction increase, in turn creating a loop that reinforces customer loyalty and further reducing costs as hiring and training costs shrink and productivity rises”

Diagram from Customer Satisfaction to Customer Loyalty

The following Diagram shows exactly the way from Customer Satisfaction to Customer Loyalty and how a Company may measure and monitor through the Leading Indicators any positive or negative trends on customer’s behaviour, trying to understand the presence of not of real satisfaction and to predict the customer’s loyalty towards it.

Customer Equity Diagnostics (Leading Indicators)

As Reicheld and Sasser (1990) propose companies want to keep customers satisfied in order to keep them longer, as profits increase with the duration of the relationship.

They recognize “four factors contributing to the underlying profit growth:

·       Profit derived from increased purchases

·       Profit from reduced operating costs

·       Profit from referrals to other customers

·       Profit from price premium”

 Suggesting that “the longer an enterprise keeps a customer, the more   money it can make”.

Reicheld (1994) even though notes that “Customers who describe themselves as satisfied are not necessarily loyal” and the companies have really experiences many times the “satisfied” customers of the previous year Satisfaction Questionnaire to defect and leave the company (“60%-80% of customers defectors said that they were “satisfied” or “very satisfied” on the last satisfaction survey prior to their defection”). 

This may be caused by a better competition offering, new customer’s requirements and search for alternative solutions to cover his new needs or other parameters, leading to the conclusion that the company will have to go further than the satisfaction surveys, trying to measure not customer’s state of mind but annual retention rate, frequency of purchases, share of customer’s wallet to predict customer’s future behaviour.

As Peppers and Rogers (2004) also propose such “Leading Indicators” that the company might create to monitor positive and negative trends in each customer’s behaviour 

and Ganesan (1994) seeks the “Determinants of long term orientation in buyer-seller relationships”.

Seth (2001) suggests to deal with Brand (enterprise image, values, consistency of proposition), Quality (perceived quality, professionalism of the enterprise, its service and products), Interrelationship (the degree to which customer needs are met, amount of use, dependence and convenience all in the context of competitors) and Performance (service delivery, product, reliability, response time), 

while Ruekert and Churchill (1984) examine the reliability and the validity of the alternative measures of customer satisfaction.

Customer Satisfaction

Besu, Ennew and Palmer (1998, pp. 170-175) consider Customer Satisfaction as a necessary interactive dimension of Relationship Quality, noting that Length of Relationship, Trust, Ethics and Expertise are positive factors in building Customer’s Satisfaction while Sales Orientation of the Sales people is a negative factor.

In general a satisfied customer will remain more with the supplier, while a dissatisfied customer will try to move to another supplier. 

As Peppers and Rogers (2004, p. 47) suggest new customers during the early stages of their Relationship with a company may count differently a negative experience and lead with high probability to a defection, so they need the closer care to create satisfying experiences than an old customer, who will compare it with his other previous experiences.

Mutual Commitments

Morgan and Hunt (1994, p. 23) define Commitment as “the belief that the importance of a relationship with another is so significant as to warrant maximum effort at maintaining” and they consider it as like Trust an important dimension in the creation of the Relationship.

“Because commitment entails vulnerability, parties seek relationships with these who are trustworthy. Hence, trust is a strong contributor to commitment”.

Trust Building Process and Customer Satisfaction Diagram

The following Diagram explains the Trust Building Process with the Positive and Negative Factors and how then Trust (as an “interactive dimension of Satisfaction”) leads to the Customer’s Satisfaction:

Building of Trust (Positive and Negative Factors)

Giffin (1967) defines that “a trusting behaviour occurs when a person:

·       Relies on another

·       Risks something of value and

·       Attempts to achieve a desired goal”.

Young and Wilkinson (1989) examine the role of trust in marketing channels, 

Anderson and Narus (1990) and Anderson and Weitz (1989) note that “trust is a crucial concept in industrial marketing settings”, 

Brierley (1994, p. 25 (2)) proposes “respect, open communication and trust” as the recipe for successful relationship marketing, 

Morgan and Hunt (1994, pp. 20-38) suggest “trust, commitments and promises”, 

Cowles (1996), Foreman (1997) and Blois (1999, pp. 197-215) underline too “the role of trust” in business-to-business relationships and how to develop trust in buyer-seller relationships, 

Hart, Christopher and Johnson (1999, pp. 20-22) provide a Framework to develop relationships of trust, 

Hawles (1994, p. 215, 45) describes the process of earning buyer’s trust and suggests that “demonstrating trustfulness, providing benevolent service and establishing credibility are fundamental attributes which industrial sales persons must demonstrate to potential customers” and states that “trust is a prerequisite for success in selling industrial goods”, 

while Hawles, Mast and Swan (1989) and Guenzi (2002, pp. 749-778) describe how buyers and sellers think about industrial sales representatives trustworthiness.

Morgan and Hunt (1994, pp. 22-23) define their “KMV model” (key mediating variable) of Relationship Marketing, “which focuses on one party in the relational exchange and that party’s relational commitment and trust”.

“Because we hypothesize that relationship commitment and trust are key constructs, we position them as mediating variables between five important antecedents (i.e. relationship termination costs, relationship benefits, shared values, communication, and opportunistic behaviour) and five outcomes (i.e. acquiescence, propensity to leave, cooperation, functional conflict, and decision making uncertainty).”

Peppers and Rogers (2004, pp. 35-86) similarly note that to generate and sustain the trust of their customers companies have “to reconcile their own culture and behaviour” and that trust includes shared values, interdependence, quality communication, non opportunistic behaviour, integrity and expertise. 

They propose Charles Green (President of Trusted Advisors Associates) Trust Equation as a tool for identifying Trust influencing factors as:

Trust = (C+R+I)/S

Where C stands for Credibility (believability, trustfulness) related with Words, R for Reliability (predictability, familiarity) related with Actions, I for Intimacy (security, integrity) related with Safety as Positive Factors on Building Trust, while S for Self Orientation (selfishness, self consciousness, sell preoccupation) related with Focus as a Negative Factor, characterizing Credibility and Reliability as Rational and Intimacy and Self Orientation as Non Rational factors.

Michaels and Day (1985, pp. 443-446) propose the Customer Orientation of the Sales People, especially with Industrial Buyers, 

Besu, Ennew and Palmer (1998, pp. 170-175) suggest Expertise, Ethics and Customer Orientation as the Positive dimensions of a Sales person to build Customer’s Trust and Sales Orientation as the Negative dimension, while also consider Trust as a Positive among others requirement leading to Customer’s Satisfaction, 

while Swan, Trawick and Silva (1985, pp. 203-211) focus on Industrial Sales People approach towards gaining the Customer’s Trust.

Customized Proposition Diagram

Based on Peppers and Rogers (2004, pp. 89-212) IDIC system, the following Diagram on Customized Proposition explains better the process:

Treacy and Wiersema (2000, pp. 84-93) note that “customers have an expanded concept of value that includes convenience of purchase, after-sale service, dependability, and so on” and that “companies that excel in customer intimacy combine detailed customer knowledge with operational flexibility, so they can respond quickly to almost any need, from customizing a product to fulfilling special requests”.

Customized Proposition

Peppers and Rogers (2004, pp. 161-212) note that the marketing in 20^th century era  was a mass marketing and the goal of the enterprise was to improve its brand awareness, preference and loyalty among its customers for its goods or services.

The 21^st century era is an “interactive marketing” with the enterprises to strategize how to gain a sustainable competitive advantage from the information they gather from their customers. 

There is a “2-Way Brand” or a “Branded Relationship”, that transforms itself based on the ongoing dialogue between the enterprise and the individual customer.

Customization may include among others the configuration of the product or services, bundling of multi products or services, packaging, delivery and logistics, ancillary services, training, service enhancements, invoicing, payment terms, pre-authorization etc.

As Brierley (1994, p. 22 (3)) suggests:

“Broadly speaking, the fundamentals of relationship management can be categorized into six major areas:

·       Building the framework

·       Establishing the relationship

·       Developing an ongoing dialogue

·       Maximizing the value of the relationship

·       Rewarding loyalty

·       Sustaining the relationship”

While Peppers and Rogers (2004, pp. 89-212) proposed their IDIC system (Identification of customer, Differentiation, Interaction, Customization), 

Sewell and Brown (1990), Seybold (2001), Spekman (1986) underline the interactivity process and the need “to enter into your customer’s life”, in order to build a long term relationship.

Customer Interactivity (Benefits to Customer, Benefits to Company)

As Peppers and Rogers (2001) suggest “A customer strategy enterprise interacts directly with an individual customer. The customer tells the enterprise about how he would like to be served. Based on this interaction, the enterprise, in turn, modifies its behaviour with respect to this particular customer. In essence, the concept implies a specific, one-to-one enterprise relationship, as in the case when the customer’s input drives the enterprise’s output for that particular customer”.

The Benefits to the Customer include among others time savings, technical assistance, assurance of performance, access to latest developments, superior responsiveness to service requests problems, superior fit to his needs because of personalised solutions etc.

The Benefits to the Company on the other hand from gathering customer’s information and trying to strategize on this creating a sustainable competitive advantage is among others lower rates of defection, greater loyalty and retention, higher profit margins than competitors.

Customer Differentiation Diagram

A schematic presentation of the process of finding (identifying) the prospective customer and then differentiating on him according to our product and his expectations about it, but also according to his needs, LTV, demographics etc., as it was described in our post "Differentiation on Customer (Customer Needs, Discounted LTV, Demographics)", based on Rogers and Peppers (2004, pp. 87-160), is shown in the following Diagram.

Differentiation on Customer (Customer Needs, Discounted LTV, Demographics)

Apart of the Differentiation on the Product, suppliers may also differentiate their marketing proposals based on the differences of their customers.

Peppers and Rogers (2004, pp. 113-160) propose a Differentiation on Customer based on:

·       Customer Needs (which are dynamic, often correlating with customer value, most fundamental human needs are psychological, no single best way to differentiate customers by their needs)

·       Customer Life Time Value (LTV) (Net Present Value of expected future financial  contributions from the customers - Most Valuable Customers: highest volumes, highest profits margins, most loyal, Most Growable Customers: highest growth potential, highest cross selling, longest time of cooperation, Below Zeros: Customers costing more to the company independently of its effort, Migrators: Been in the middle to be non profitable or to have growth potential)

·       All Others (Demographics, Geography, Size etc.)

In Search of a Differentiation Advantage

Differentiation can be achieved in many ways, according to Kotler (2003, pp. 49-51):

·       Product (features, performance, conformance, durability, reliability, repairability, style, design)

·       Service (delivery, installation, customer training, consulting, repair)

·       Personnel (competence, courtesy, credibility, reliability, responsiveness, communication skills)

·       Image (symbols, written and audio/video media, atmosphere, events)

while he additionally notes that “The customer may have developed a satisfying relationship with one of the suppliers. We call this Relationship Differentiation”. He also suggests (2003, pp. 167-168) Service Quality as one of “the promising sources of differentiation and distinction” and states that “Every business is a service business. You are not a chemical company. You are a chemical services business”.

Similarly, Robinson, Clarke-Hill and Clarkson (2002, pp. 149-166) propose (for chemical companies in commodity products) that “If firms in this sector wish to break out of the commodity trap of blind allegiance to cost leadership as a generic strategy, then they must seek methods of differentiation” and conclude that “a servitisation strategy placed in the context of relationship management can be a means of creating differentiation advantage in a traditionally cost oriented sector”, 

while Ulaga and Eggert (2006, pp. 119-136) seek the Value- Based Differentiation in order to achieve the Key Supplier status 

and Muthuraman, Gupta, Seshadri and Narus (2006, pp. 4-6 of 27), for another commodity sector (steel), seek the differentiation advantage through a process of transitioning to a Customer Value Management and thus forming a relationship of the supplier with the customer that creates and shares value, increases partnership and cooperation, trust and relationship retention, 

McCune (1999, pp. 45-50) proposes escaping the commodity trap via innovation, niche marketing, new markets, new product features, better service experience than competition, leveraging company’s strengths and building relationships and Barwise (1995, pp. 45-59) notes especially in business-to-business markets  “a growth of closer, longer term partnerships, between firms within the same value chain”, putting emphasis on product development, information exchange, interdependence of various processes and  increased competitiveness for the related parties, 

while Innis and La Londe (1994, pp. 1-27) agree as well that superior customer service leads to customer satisfaction, customer loyalty and market share.

A Differentiation based on Relationship Marketing for Commodity Products (through Service or other personalised experiences) is related with the Customer’s Perceived Value for the offering.

Rust, Zeithaml and Lemon (2000; 2004) distinguish three drivers of Customer Equity (with us focusing mostly on Relationship Equity):

·       Value Equity (the customer’s objective assessment of the utility offering based on perception of its benefits relative to its costs) – Its sub-drivers are Price, Quality and Convenience

·       Brand Equity (the customer’s subjective and intangible assessment of the brand, above and beyond its objectively perceived value) – Its sub-drivers are Customer Brand Awareness, Customer Attitude towards the Brand, Customer Perception of Brand Ethics

·       Relationship Equity (the customer’s tendency to stick with the brand above and beyond objective or subjective assessment of its worth – more important than the other drivers especially when products are less differentiated) – Its sub-drivers are Programs for Loyalty, Special recognition and Treatment, Community and Knowledge Building

Grönroos (1990) notes about the Perception Gap through his Perceived Service Quality Model between Customer’s expectations and Customer’s experiences. Marketing can influence both the expectations (communicating proper ones) and also the technical and functional quality of the offering (what and how) narrowing the gap. 

What is a "Commodity Product"?

Clarke-Hill, Robinson and Clarkson (1999, pp. 1-2 of 20) define commodity products as:

“Commodity products are those products perceived by both buyers and suppliers in a market as being homogeneous and undifferentiated. A commodity product can be defined as follows: Manufactured to a standard or fixed specification, bought in response to basic and essential needs and used in markets where purchasing decisions are governed by rational factors. Typical commodity products include plywood, plastic, tubing, strip steel and salt [I add “glass” too as - in most cases - a commodity product]. In commodity markets, the products of one firm are perceived by the market as generically and functionally identical with those of the other suppliers. This does not preclude firms to differentiate their offering as a means of escaping the so called “commodity trap”.” and they continue “In an era of strong competition, over capacity in many sectors and extreme price sensitivity, chemical companies are attempting to break out of the commodity trap. Companies that are operating in mature markets with commodity type products and with large investments in production capacity and the need to produce at or near optimum efficiency have begun to consider alternative marketing strategies for their products and have started to get nearer to their customers”.

Levitt (1980) stated that “There is no such thing as a commodity. All goods and services are differentiable” 

and Pine, Peppers and Rogers (1995) agree noting “Even commodity products are a bundle of ancillary services, delivery times, invoicing, schedules, personalised reminders and updates and other features that are rarely commodities”. 

Unger (1983) defines various products categories with supplier companies with commodity products been characterised as production oriented, with relatively high capital investments and low administrative, selling and marketing costs. 

Wei, Russel and Swartzlander (1979) define commodity products as those that are sold mainly on price, reliability of delivery, convenience, little need for technical service or marketing, while Trout and Rivkin (2000) call organizations to “Differentiate or Die”.

Relationship Marketing

During the last 35 years a different approach to marketing was based not anymore to a passive buyer but to an interactive actor buyer in the selling process, long term, interactive relationships were developed between buyer and seller – but not only between them, but also including organization suppliers, employees, shareholders, competitors, government etc.

Grönroos (1990, p. 138) defines Marketing as:

“Marketing is to establish, maintain and enhance (usually but not necessarily long term) relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met. This is achieved by a mutual exchange and fulfilment of promises”, 

while Kotler (1992) suggests that “Relationship Marketing aims to build mutually satisfying long term relations with key parties – customers, suppliers, distributors – in order to earn and retain their business”.

Gummesson (1996) suggests for Relationship Marketing definition as “the marketing that is based on relationships, networks and interaction”.

Clarkson, Clarke-Hill and Robinson (1997, p. 6 of 20) propose “The relationship marketing approach is concerned with interaction, collaboration, customer service, processes and quality rather than just simply price, place, promotion and the product.”

Christopher, Payne and Ballantyne (1994) underline the differences in the approaches of the Transaction Marketing and the Relationship Marketing. While Transaction Marketing focuses on a single sale, it is production orientated focusing on products specifications and features, it has a short term character, emphasizing little on customer service or his commitment to the organization and a moderate communication with the customer, Relationship Marketing focuses on keeping customer for life (customer retention), it is customer orientated focusing on products benefits, it has a long term character, underlining the need for high customer service and commitment and in depth communication between the organization and the customer.

Grönroos (1990;1992;1994;1995) finds many common denominators among the various theories developed on The Relationship Marketing, Christopher, Payne and Ballantyne (1991; 1994) with their Six Markets Model, Kotler (1992, p. 50(3); 2003 pp. 49-51, pp. 151-154 & pp. 167-168) with his Total Marketing, Peppers and Rogers (1993; 1995; 2004) with their One-to-One Marketing and 2-Way Brand or Branded Relationship, Hunt and Morgan (1994, pp. 20-38) with their Four Categories of Partnership and 10 Types of Relationships, Doyle (1995) with The Core Firm and Partnerships, Peck (1996) with her Redrafting of The Six Markets Model, Gummesson (1996; 2002) with his 30 R’s suggest at the end the Relationship Marketing in favour of the previous Marketing Mix and as Clarkson, Clarke-Hill and Robinson (1997, p. 14 of 20) propose, all of them converge, even with different definitions or terminology, to a common Framework on Relationship Marketing, where “They acknowledge four main categories of relationships in which each firm is involved” (customers, suppliers, external – outside the supply chain – relationships, internal relationships - employees).

Kotler (2003, pp. 151-154) says about: “Relationship Marketing (RM) marks a significant paradigm shift in marketing, a movement from thinking solely in terms of competition and conflict toward thinking in terms of mutual interdependence and cooperation” and he continues:

“Here are the main characteristics of relationship marketing:

·       It focuses on partners and customers rather than on the company’s products

·       It puts more emphasis on customer retention and growth than on customer acquisition

·       It relies on cross-functional teams than on departmental level work

·       It relies more on listening and learning than on talking

In relation with the Marketing Mix and the 4 P’s, Kotler (2003, pp. 151-154) on Relationship Marketing suggests:

“Product

·       More products are customized to the customer’s preferences

·       New products are developed and designed cooperatively with suppliers and distributors

Price

·       The company will set a price based on the relationship with the customer and the bundle of features and services ordered by the customer

·       In business-to-business marketing there is more negotiation because products are often designed for each customer

Place (Distribution)

·       RM favours more direct marketing to the customer, thus reducing the role of middlemen

·       RM favours offering alternatives to customers to choose the way they want to order, pay for, receive, install, and even repair the product

Communication

·       RM favours more individual communication and dialogue with customers

·       RM favours more integrated marketing communications to deliver the same promise and image to the customer

·       RM sets up extranets with large customers to facilitate information exchange, joint planning, ordering and payments”

Kotler (1992, p. 50(3)) also defines various levels of Relationship Marketing (Basic, Reactive, Accountability, Proactive, Partnership) and proposes to the organisation to win through value added.

“Customers change; competitors change. To remain competitive organisations must continually amplify or enhance their value added package. This is the key to relationship marketing; organisations do not sell products alone. The bundle of benefits that the firm puts together is what it keeps the customers for life.”

Moving from the transactional logic of the short term marketing relations to create a marketing network based on the Relationship Marketing guide the company to aim not – only – to acquire new customers to increase its market share, but to achieve this increase its share in its customer’s purchases spectrum, selling to him not only one product (cross selling, up selling) and as Reicheld (1993) noted in the above to increase its profitability not through a short term transaction but based on a long term relationship with its customers and thus increasing its Shareholder Value.

Classic Marketing Mix Theory and the 4 P's

Professor Neil Borden at Harvard Business School introduced first in the 1960s the concept in the marketing literature identifying a number of organizational performance actions that influence consumer’s decision making on purchasing a product or service. Borden (1965) suggested that these actions represent a “Marketing Mix” of twelve different elements.

Marketing theory during the last 50 years focused its development on the marketing mix concept simplifying these actions in four basic elements, the 4 P’s (Price, Product, Place and Promotion). American Marketing Association adopted this also in the definition of Marketing and academics found it easily communicated to their students, in order to explain how Marketing works.

The marketeer aims to create an exchange that satisfies the consumer and the organization by deciding on the proper mix (adjusting the price – not necessarily of a monetary only value, the product or service specifications, the distribution and availability or the market segment that the product or service is addressed, the advertising, branding, sales promotion etc.).

Marketing Mix seems to explain better packaged consumer products or durables (mostly of low value) but it seems to face limitations when a higher value of consumer goods or an industrial product or service is in discussion.

Clarkson, Clarke-Hill and Robinson (1997, p. 4 of 20) also refer to Gummesson (1987) and Ford (1990) criticisms about Marketing Mix: “Gummesson (1987) suggested that the application of the marketing mix concept to areas other than consumer goods can be destructive, as it fails to recognise the unique features of, for example, services marketing and industrial marketing. Ford (1990) and the IMP Group have a similar view; they criticise the four P’s approach for trying to transfer its analysis to industrial markets where the only differences between approaches occur through greater emphasis on the sales force than on advertising and the occasional inclusion of a service function.”

Grönroos (1990;1992;1994;1995) considers that the Marketing Mix concept is nothing more than a list of P’s without theoretical roots and oversimplified, a production rather orientated than market orientated view. More suitable for the so called Transaction Marketing, Marketing Mix concept focuses mainly on a single transaction, considering an active seller and a passive buyer.

Kotler (1999) proposes the 4 C’s of Marketing (Customer Value, [Lower] Cost[s], [Better] Convenience, [Better] Communicating); in the Industrial Age the firm would focus on Market Share, while today the firm should focus on Customer Share (to increase business with existing customers, focusing on customer retention, customer loyalty, customer satisfaction), using cross-selling, up-selling and customer referrals.

Getting nearer to your customers

CLARKE-HILL, C., ROBINSON, T. and CLARKSON C., (1999) in their “Service Strategy in Commodity Chemicals markets to hierarchies: escaping the commodity trap”, International Journal of Customer Relationship Management, v2, i3, p. 243(15) note: 

“In an era of strong competition, over capacity in many sectors and extreme price sensitivity, chemical companies are attempting to break out of the commodity trap. Companies that are operating in mature markets with commodity type products and with large investments in production capacity and the need to produce at or near optimum efficiency have begun to consider alternative marketing strategies for their products and have started to get nearer to their customers”.

Generalizing for commodity producing companies (not only chemical), we suggest the use of an alternative approach of marketing, other than the 4Ps, using a Relationship Marketing approach and values, to offer to those companies “the other way” of continuing doing a profitable business “getting nearer to their customers”.

Interesting books and articles about Relationship Marketing

I have tried to collect in this post some interesting books and articles related with Relationship Marketing and B2B.

I hope you will find useful the list and please feel free to complete it with additional sources of respective information.

References

1.     ANDERSON, J.C. and WEITZ, B.A.,  (1989), “Determinants of Continuity in Conventional Industrial Channel Dyads”, Marketing Science, Vol. 8, No. 4, p. 310-323

2.     ANDERSON, J.C. and NARUS, J.A., (1991), “Partnering as a Focused Market Strategy”, California Management Review

3.     BARNES, J., (1994), “Close to the Customer But Is It Really a Relationship?”, Journal of Marketing Management, Vol. 10, No. 6, p. 561-570

4.     BARWISE, P., (1995), “Marketing Today and Tomorrow”, Business Strategy Review, Spring, Vol. 6, No. 1, p. 45-59

5.     BEJOU, D., ENNEW, C.T. and PALMER, A., (1998), “Trust, Ethics and Relationship Satisfaction”, International Journal of Bank marketing, 16/4, p. 170-175, MCB University Press

6.     BERRY, L.L., (2001), “The Old Pillars of New Retailing”, Harvard Business Review on Customer Relationship Management

7.     BLOIS, J. K., (1999), “Trust in Business to Business Relationships: An Evaluation of Its Status”, Journal of Management Studies 36:2 March

8.     BRIERLEY, H.M., (1994), “The Art of Relationship Management”, Direct Marketing, May, v. 57, n. 1, p. 25(2) and Sept., v. 57, n. 5, p. 22(3)

9.     BORDEN, N.H., (1965), “The Concept of the Marketing Mix”, Journal of Advertising Research, p. 2-7, June

10. CANNIE, J.K. and CAPLIN, D., (1991), “Keeping Customers for Life”, American Management Association

11. CHRISTOPHER, M., PAYNE, A. and BALLANTYNE, D., (1991), “Relationship Marketing”, Butterworth Heinemann

12. CHRISTOPHER, M., PAYNE, A. and BALLANTYNE, D., (1994), “Relationship Marketing”, Butterworth Heinemann

13. CLARKE-HILL, C., ROBINSON, T. and CLARKSON C., (1999), “Service Strategy in Commodity Chemicals markets to hierarchies: escaping the commodity trap”, International Journal of Customer Relationship Management, v2, i3, p. 243(15)

14. CLARKSON, R.M., CLARKE-HILL, C. and ROBINSON, T., (1997), “Towards a General Framework for Relationship Marketing: A Literature Review”, Marketing Conference, Manchester Metropolitan University

15. COWLES, D.L., (1996), “The Role of Trust in Customer Relationships: Asking the Right Questions”, Asia-Australia Marketing Journal, Vol. 4, No. 1

16. CRAM, T., (1995), “The Power of Relationship Marketing”, FT/Pitman

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