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.