Broad scope of relationship marketing theory

broad scope of relationship marketing theory

These changes have taken place against a wider systemic backdrop of easing of . success in banking sector but it has remained more of theory than practice. . The scope of relationship marketing has been classified by Morgan and Hunt. Kristian Möller1. and Aino Halinen Relationship Marketing Theory: Its RM does not form a general theory of marketing, and. that actually two and challenges of management involve broader and deeper interaction with. external partners believe some of these are useful contributions, but there is scope for further. Relationship Marketing – A New Paradigm in Marketing Theory and Practice . last broad approach that we make reference to is the Contemporary Marketing.

Emerging perspectives explored here include targeting profitable customers, using the strongest possible strategies for customer bonding, marketing to employees and other stakeholders, and building trust as a marketing tool.

The management of customer relationships is critical in services marketing for three reasons. First, many services by their very nature require ongoing membership such as insurance, cable television.

Second, even when membership is not required, customers may seek on-going relationships with service providers to reduce the perceived risk in evaluating services characterized by intangibility and credence properties.

Third, customers are more likely to form relationships with individuals and with the organizations they represent than with goods. Because services are performances where the employee plays a major role in shaping the service experience, the service setting is especially conducive to customers forming relationships with individual service providers.

Consequently, there have been calls for greater attention to the role of relationships in services. The goal of transaction marketing is to get customers, whereas the goal of relationship marketing is to get and keep customers.

Keeping customers becomes more important because it is normally less expensive to make a satisfied existing customer buy more compared to what it costs to get a new customer. The more standardized the process is, the more dominating the core service and the technical quality of the outcome of the production and delivery process and less difficult it is to manage the personnel from a marketing point of view. However, a few service firms apply a pure transaction marketing strategy.

Even highly standardized service operations include direct contacts with customers, and the customers do perceive the production and delivery process. It is important to create information systems where the firm is managing its customer base directly and not relying on market shore statistics and ad hoc customer surveys.

The core outcome of the definition has recently been presented as a specification of 30 relationships, the 30Rs of RM. In the 30R approach, a distinction is made between four types of relationships.

The first two are market relationships which are relationships between suppliers and customers. They constitute the core of relationship marketing, they are externally oriented and apply to the market proper.

  • What is Relationship Marketing?

Some of these are classic market relationships — the supplier-customer dyad, the triad of supplier-customer-competitor, and the physical distribution network which are treated extensively in general marketing theory.

Others are special market relationships such as the customer as member of a loyalty program and the interaction in the service encounter.

broad scope of relationship marketing theory

The next two types are non-market relationships which indirectly influence the efficiency of market relationships. Mega-relationships exist above the market proper. They provide a platform for market relationships and concern the economy and society in general.

Among these are mega-marketing lobbying, public opinion and political power, mega-alliances, such as the European Union, setting a new stage for marketingand social relationships such as friendship and ethnic bonds. Nano-relationships exist below the market relationships, i.

All activities inside on organization influence the externally directed relationships. Examples of nano-relationships are the relationships between internal customers, and the internal markets which arise as a consequence of the increasing use of independent profit centers, divisions and business areas inside organizations.

The boundary between the externally and the internally directed relationships is fuzzy; it is a matter of emphasis. For example, the physical distribution network is part of a logistics flow, involving internal as well as external customers.

Therefore an R can belong to more than one category, depending on the purpose for which it is used. As each R has several properties, other and more composite grounds for classification could be deployed. After comparing several options and taking readability into account, the above core categories have been retained. One-to-one marketing involves gearing the organization to deal with valuable customers on an individual basis. It is organized around processes that involve all aspects of the organization.

In fact, some commentators prefer to call relationship marketing "relationship management" in recognition of the fact that it involves much more than that which is normally included in marketing. Because of its broad scope, relationship marketing can be effective in many contexts. As well as being relevant to 'for profit' businesses, research indicates that relationship marketing can be useful for organizations in the voluntary sector [7] and also in the public sector.

Satisfaction[ edit ] Relationship marketing relies upon the communication and acquisition of consumer requirements solely from existing customers in a mutually beneficial exchange usually involving permission for contact by the customer through an " opt-in " system. Although groups targeted through relationship marketing may be large, accuracy of communication and overall relevancy to the customer remains higher than that of direct marketing, but has less potential for generating new leads than direct marketing and is limited to Viral marketing for the acquisition of further customers.

Research by John Fleming and Jim Asplund indicates that engaged customers generate 1. According to Buchanan and Gilles, [18] the increased profitability associated with customer retention efforts occurs because of several factors that occur once a relationship has been established with a customer.

The cost of acquisition occurs only at the beginning of a relationship, so the longer the relationship, the lower the amortized cost. Account maintenance costs decline as a percentage of total costs or as a percentage of revenue.

What is Relationship Marketing? | Management Study HQ

Long-term customers tend to be less inclined to switch, and also tend to be less price sensitive. This can result in stable unit sales volume and increases in dollar-sales volume. Long-term customers may initiate free word of mouth promotions and referrals. Long-term customers are more likely to purchase ancillary products and high margin supplemental products. Customers that stay with you tend to be satisfied with the relationship and are less likely to switch to competitors, making it difficult for competitors to enter the market or gain market share.

Regular customers tend to be less expensive to service because they are familiar with the process, require less "education", and are consistent in their order placement.

broad scope of relationship marketing theory

Increased customer retention and loyalty makes the employees' jobs easier and more satisfying. In turn, happy employees feed back into better customer satisfaction in a virtuous circle. Relationship marketers speak of the "relationship ladder of customer loyalty ". It groups types of customers according to their level of loyalty. The ladder's first rung consists of "prospects", that is, people that have not purchased yet but are likely to in the future.

This is followed by the successive rungs of "customer", "client", "supporter", "advocate", and "partner". The relationship marketer's objective is to "help" customers get as high up the ladder as possible. This usually involves providing more personalized service and providing service quality that exceeds expectations at each step.

Customer retention efforts involve considerations such as the following: Customer valuation — Gordon describes how to value customers and categorize them according to their financial and strategic value so that companies can decide where to invest for deeper relationships and which relationships need to be served differently or even terminated.

CRM Customer Relationship Management - Marketing Video Lecture by Prof Vijay Prakash Anand

Customer retention measurement — Dawkins and Reichheld calculated a company's "customer retention rate". This is simply the percentage of customers at the beginning of the year that are still customers by the end of the year.

This ratio can be used to make comparisons between products, between market segments, and over time. Determine reasons for defection — Look for the root causes, not mere symptoms.

broad scope of relationship marketing theory

This involves probing for details when talking to former customers. Other techniques include the analysis of customers' complaints and competitive benchmarking see competitor analysis.

broad scope of relationship marketing theory

Develop and implement a corrective plan — This could involve actions to improve employee practices, using benchmarking to determine best corrective practices, visible endorsement of top management, adjustments to the company's reward and recognition systems, and the use of "recovery teams" to eliminate the causes of defections.

A technique to calculate the value to a firm of a sustained customer relationship has been developed. This calculation is typically called customer lifetime value. Retention strategies may also include building barriers to customer switching. This can be done by product bundling combining several products or services into one "package" and offering them at a single pricecross-selling selling related products to current customerscross promotions giving discounts or other promotional incentives to purchasers of related productsloyalty programs giving incentives for frequent purchasesincreasing switching costs adding termination costs, such as mortgage termination feesand integrating computer systems of multiple organizations primarily in industrial marketing.

Many relationship marketers use a team-based approach. The rationale is that the more points of contact between the organization and customer, the stronger will be the bond, and the more secure the relationship. Application[ edit ] Relationship marketing and traditional or transactional marketing are not mutually exclusive and there is no need for a conflict between them.

In practice, a relationship-oriented marketer still has choices, depending on the situation.

Relationship marketing - Wikipedia

Most firms blend the two approaches to match their portfolio of products and services. Social bond refers to the relationship established through the collective blood relationship between people.

Relationship marketing is to establish and strengthen these two kinds of bonds, especially the structural bond, so as to strengthen the relationship with clients and lock them in. Morgan and Hunt made a distinction between economic and social exchange on the basis of exchange theory and concluded that the basic guarantee of social exchange was the spirit of the contract of trust and commitment.

The traditional marketing concept of one-time transaction begins to transfer to the concept of relationship marketing. This is the transition from economic exchange theory to social exchange theory. The theoretical core of enterprise relationship marketing in this period is the cooperative relationship based on commitment. They define the concept of relationship marketing from the perspective of exchange theory, and emphasize that relationship marketing is an activity related to the progress, maintenance and development of all marketing activities.

Relationship marketing

Shows that trust and commitment is a trading enterprise and the basis of marketing activities to establish a long term good relations, also is the factors affecting the basis of cooperation for both sides, moreover the relationship effect of other factors include: Coptics and Wolf believe that relational marketing is the marketing of databases.

They think, the enterprise want to be able to continue to improve the effect of relationships with customers, when access to the data and information to improve the effect of relationship with the customer's cost is low, enterprises will pay the cost to improve relations with customers, at present, due to tell the development of communication technology and Internet technology, makes the information costs have dropped substantially, so the argument that relationship marketing is for database marketing is increasingly valued, this view emphasizes the relationship marketing is through the Internet technology database data lock with the customers, to establish and maintain good relationship with customers.

broad scope of relationship marketing theory

Liker and Klamath introduced the relationship between enterprises and suppliers into the scope of relational marketing, believing that in the marketing process, manufacturers make suppliers assume corresponding responsibilities, and enable them to give play to their technological and resource advantages in the production process, which can improve the marketing innovation ability of manufacturers.

Lukas and Bryan a. Ferrell believe that the implementation of customer-oriented marketing concept can greatly promote the innovation ability of marketing, and at the same time encourage enterprises to break through the traditional relationship model between enterprises and customers and propose new product Suggestions with technical feasibility.

Lethe through the observation of the benchmarking customer research, to confirm the relationship between enterprises and customers to enterprise's product innovation capacity there is a positive correlation, the enterprise can in the development and in the process of benchmarking customer good relationship, to identify those more market potential for development of new products, it can save a lot of for the enterprise cost of new product development and market acceptance of this kind of product is high.

In addition, he also proposed that all the relationships established with relevant parties to enterprise marketing activities are centered on the establishment of good customer relations, that is, the core relationship of relationship marketing is the relationship with customers.