CONTEMPORARY ISSUES IN BUSINESS

Assignment # 2
Literature Review: Relationship Marketing

Submitted By: Enrollment No. Submitted To:

Raja Ali 01-221112-057 Sir. Junaid Tariq

Date of Submission: 27-12-2011

Faculty of Business and Administration Bahria University, Islamabad

Literature Review: Relationship Marketing

In the last twenty years, intellectualist and educationist have paid much attention on how firms relate to their markets. This has resulted in the materialization of the associate discipline of marketing know as Relationship Marketing. The relationship marketing is defined as marketing activities directed toward establishing, developing and maintaining successful relational exchanges, Morgan and Hunt (1994). The concept relationship marketing has emerged within the fields of service marketing and industrial marketing, Jackson, B.B (1985).The phenomenon described by this concept is strongly supported by ongoing trends in modern business, Webster, Jr F.E (1992). Grnroos (1990) defines relationship marketing in the following way: Marketing is to establish, maintain, and enhance relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met. This is attained by a joint exchange and fulfillment of promises. Such relations are usually but not necessarily always long term. Establishing a relationship, for example with a customer, can be divided into two parts: to appeal the customer and to shape the relationship with that customer so that the economic goals of that relationship are attained. An essential component of the relationship marketing tactic is the promise concept which has been strongly emphasized by Henrik Calonius (1988). According to him the tasks of marketing do not only, or mainly, include giving promises and thus persuading customers as inactive counterparts on the marketplace to act in a given way. A firm that is anxious with giving promises may attract new customers and initially build relationships. Though, if promises are not kept, the developing relationship cannot be preserved and improved. Satisfying promises that have been given is equally important as means of achieving customer gratification, retention of the customer base, and long-term profitability Reichheld, F.E. and Sasser, Jr, W.E (1990). Calonius (1988) also stressed on the fact that promises are mutually given and fulfilled. Relationship marketing involves nothing fancy and just entails a little more persistence but it is one heck of a way to increase sale.

Here are 5 important advantages of building relationships that offers to any entrepreneur willing to invest the time and why it is such an effective marketing strategy; People Do Not Feel Pressured It is the key to effective marketing, having the opportunity to deliver your message to the reader. In most cases when people sense a sales pitch is coming they tend to leave instantaneously. On the other hand if you are more resolved on building relationships with others, they are more inclination to stick around. People Feel Important Everyone desires to feel important and also in most cases people just do not care about you or your products and services. Their only focus is their personal interests and any problems they may have to solve. Loyalty Is Built The longer you maintain a 'reader first' attitude and supply their needs, the deeper their loyalty will be towards you. It is eventually the loyalty that you will be able to use to increase sales since people will be more incline to make purchases with you. Strong Viral Affect The deeper a persons loyalty and satisfaction is towards you the more likely they will be to refer you to their friends and colleagues. It is human nature that people always want to share a good thing. Reputation And Credibility Grow If you demonstrate a willingness to be helpful while also providing good quality information you can help boost your reputation and credibility. Being known as both reliable and knowledgeable will help you increase sales since people will have more trust in what you say and promote. Relationship marketing entails methods and tactics used to develop and maintain long term relationship with the customers in order to retain them. It is must for an organization to do more than just satisfying its customers in order to retain them and have a healthy relationship with its customers. Foremost focus should be on what matters to the customers, one should perform in the best interest of its customers and the things which matter to them the most should be the one to be focused with priority. A lot of business fail

no matter they work very hard and put enough capital in their business but unfortunately they just fail, it happens sometimes because people forget to focus on the right things and area to be focused, as just being on the right track eliminates a number of troubling factors and then one knows what are the things they need to do. Focus on customer relationship and let them feel privileged and they would result in extraordinary business for you. Technical advancement has enabled the customers to interact with the producers and the producers with the customers which was not an easy task in older days, the perfect example to this is the fan pages of different brands and organizations on Facebook, as its the medium where producers and consumers both can interact with each other and can convey their message. This has helped a lot to the producers in having a healthy relation with its customers and delivering with the expectations of the customers. Relationship marketing attempts to involve and integrate customers, suppliers and other infrastructural partners into a firms developmental and marketing activities (Mckeena 1991). Organizations should undertake a number of vital activities in order to do relationship marketing. First of all the company must devise some tactics to attract the customers. Some of the techniques used to attract customers may consist of promoting the brand or product, offering superior quality products and services and doing all this in competitive prices. Secondly the customers who are attracted towards the organization and who are loyal towards the brand should be given preference, so that they are retained. Methods used to retain a customer may include loyalty cards, coupons, samples, vouchers, free gifts, brand or product educational seminars, good customer service and an individual account manager may also be an appealing factor for some customers. The most important factors that affect the relationship between two parties are commitment and trust. All the deals that take place are the results of these two factors, if either of these factors is not taken care of or is transmitted with false approach this results to a very bad image and the respected customer never feels the same about the organization and results in being not the customer anymore, and in some cases it also leads to negative word of mouth from that customer which affects the business of that concerned organization very much as it loses some of its potential customers or even existing customers. So the trust of the customers shall never be broken and commitment should be met and in case of any ambiguity do let the customer

know the truth, so that the customer has the feeling of not being cheated, which really means a lot to majority. Studies have established a fact that marketing is a cross functional process. All the employees and departments needs to works collaboratively with full devotion and hard work to maintain the relationship marketing functioning. Relationship marketing is of more importance in business to business market, as in business to business market trust is build over time and experience and the relationship between producer and customer in business to business market lasts much longer than any other field of market. Some studies do say that its the quality and service which ranks the most important in building lasting relationships, as the better value delivered by the firm better is the customer relationship. No matter which school of thought one follows finally its the customer retention which is the main goal to be achieved and main area to be focused (Rosenberg & Cazepiel, 1984). Customer Relationship is not just about doing the right things rightly; it is more about doing what the customer thinks is right. Successful marketers do not make customers just for one transaction they get in continuous contact with the customer and try to get the maximum business, as attracting a new customer costs much more than retaining an existing one. An important standard of relationship marketing is the retention of customers through fluctuating means and practices to safeguard repeated trade from preexisting customers by satisfying requirements above those of rival companies through a mutually advantageous relationship, Gordon, Ian (1999). This method is now used as a means of compensating new customers and opportunities with existing and prevailing customers as a means of maximizing revenue and counteracting the "leaky bucket theory of business" in which new customers expanded in older direct marketing oriented businesses were at the expense of or coincided with the loss of older customers, Kotler, Philip, Armstrong, Gary, Saunders, John and Wong, Veronica. (1999). This course of "churning" is less economically feasible than retaining all or the majority of customers using both direct and relationship management as lead generation via new customers requires more speculation. Numerous companies in competing marketplaces readdress or distribute large sums of resources or consideration towards customer retention as in markets with cumulative

competition it may cost 10 times more to appeal new customers than it would to retain existing customers, as direct or "offensive" marketing requires much more extensive resources to cause defection from competitors. It is claimed by Reichheld and Sasser (1990) that a 5% improvement in customer retention can cause an increase in profitability of between 25 and 85 percent. Kotler, Philip, Armstrong, (1999) Suggested that because of the extensive classic marketing philosophies center on means of attracting customers and generating transactions rather than maintaining them, the majority convention of direct marketing used in the past is now slowly being used more alongside relationship marketing as its importance becomes more identifiable. However, customer retention is not enough. Some long-lasting customer relationships, where the customers are obviously satisfied with what they get, are not profitable even in the long run, as Storbacka(1993) validated in a recent study in the retail banking industry Barnes, J.G. and Cumby, J.A.(1993). Therefore, segmentation based on customer relationship profitability analysis is a prerequisite for customer retention decisions. To conclude, there is clear evidence that from a profitability point of view intelligent relationship building and management make sense. Customer Relationship Management is an ample approach and course of acquiring, retaining and partnering with selective customers to generate better-quality value for the company and the customer. It engrosses integration of marketing, sales and customer service and supply chain functions of the organization to accomplish greater efficiencies and effectiveness in delivering customer value. Customer relationship management can be considered as an instrument for delivering marketing dream to enjoy a long term relationship with customers, particularly with the lucrative ones. Lastly it can be said that customer relationship management is not an end, its a means to guarantee long term success of marketing efforts. (Autl Parvatiyar, Jagdish N.Seth, 2001)

References Autl Parvatiyar & Jagdish N. Seth, 2001, Customer Relationship Management: Emerging Practice, Process, and Discipline. p. 5 Barnes, J.G. and Cumby, J.A., The Cost of Quality in Service-oriented Companies: Making Better Customer Service Decisions through Improved Cost Information, Research Paper, ASB Conference 1993, University of New Brunswick, Canada, 1993. Calonius, H., A Buying Process Model, in Blois, K., and Parkinson, S. (Eds), Innovative Marketing A European Perspective, proceedings from the XVIIth Annual Conference of the European Marketing Academy, University of Bradford, 1988, pp. 86-103. Grnroos, Copulinsky, J.R. and Wolf, M.J., Relationship Marketing: Positioning for the Future, Journal of Business Strategy, Vol. 11, July-August 1990, pp. 16-20. Gordon, Ian (1999). Relationship Marketing: New Strategies, Techniques and Technologies to Win the Customers You Want and Keep Them Forever. John Wiley and Sons Publishers. p. 336. Jackson, B.B., Build Customer Relationships That Last, Harvard Business Review, Vol. 63, November-December 1985, pp. 120-8. Kotler, Philip, Armstrong, Gary, Saunders, John and Wong, Veronica. (1999). "Principles of Marketing" 2nd ed. Prentice Hall Europe. Kotler, Philip, Armstrong, Gary, Saunders, John and Wong, Veronica. (1999)., p483 Morgan, R. M., & Hunt, S. D., 1994. The commitment trust theory of relationship marketing. Journal of Marketing, 58(3), p. 20-38. McKenna, R. 1991, Relationship Marketing: Successful Strategies for the Age of the Customer, Addison-Wesley Publishing Co., Reading, MA. Reichheld, F. and Sasser, W. (1990) "Zero defects: quality comes to services", Harvard Business Review, SeptOct, 1990, pp 105111 Rosenberg, L. & Cazepiel, J.,1984, A Marketing Approach to Customer Retention, Journal of Consumer Marketing, p. 45-51. Storbacka, K., Customer Relationship Profitability, Swedish School of Economics and Business Administration, Helsingfors, Finland, 1993.

 Webster, Jr, F.E., The Changing Role of Marketing in the Corporations, Journal of Marketing, Vol. 56, October 1992, pp. 1-17.