Grönroos (1990) said that the purpose of marketing is to establish, maintain, enhance and commercialise customer relationships so that the objectives of the parties involved are met. This is done by the mutual exchange and fulfilment of promises.
He also said that if the relationship is close and long-term, the possibility is high, that it would also require lower marketing costs per customer. However, this does not mean that short-term relationships, where the customer only buys once, are not desirable or profitable. It means that the emphasis should be on developing and maintaining enduring, long-term customer relationships. If close and long-term relationships can be achieved, the possibility is high that this will lead to continuing exchanges. But if the relationship is not healthy the relationship should be terminated.
Christopher, Payne and Balllantyne (1991) suggested that the theory of relationship marketing, based on a broader perspective than earlier contributions, includes some key elements:
- The emphasis in the interaction between suppliers and customers is shifting from a transaction to a relationship focus.
- The relationship marketing approach focuses on maximizing the lifetime value of desirable customers and customer segments.
- Relationship marketing strategies are concerned with the development and enhancement of relationships with a number of key ‘markets’. It is concerned with the internal market within the organisation as well as building substantial external relationships with customers, suppliers, referral sources, influence markets and recruitment markets( the six markets model).
- Quality, customer service and marketing are closely related. However, frequently they are managed separately. A relationship marketing approach brings these elements into a much closer coherence.
The relationship marketing concept suggests that, instead of the narrow, transactional, one-sale-at-a-time view of marketing, marketing should emphasize relationships between the organisation and its markets more strongly. However, it is not just the transactional marketing paradigm which hampers the development of customer relationships. In many instances the structure of the organisation itself can also limit its ability to satisfy customers.
At a macro level, the organisation has relationships with many different parties such as customers, employees, suppliers, internal markets, referral markets and influencer markets (Christopher et al., 1991), the six markets model. Structurally, these combine to form complex networks, which involves many processes such as negotiation, co-ordination, and co-operation.
At a micro level, relationship marketing is concerned with the nature of the relationship between the firm and customer, the classic dyad. The relationship approach emphasis a longer time scale, taking account of the customer’s changing needs and value over time.
Grönroos (1994) said that relationship marketing is to identify and establish, maintain, enhance and when necessary also to terminate relationship with customers and other stakeholders, at a profit, so that the objectives of all parties are met, and that this is done by mutual exchange and fulfilment of promises.
In establishing and maintaining customer relationships, the seller gives promises concerning, goods, service, financial solution, transfer of information, and a range of future commitments. The buyer gives another set of promises concerning his commitment in the relationship. The promises have to be kept on both sides, if the relationship is expected to be maintained, and enhanced for the mutual benefits of the parties involved.
Grönroos (1996) said that long-term trusting relationship can and should reap mutual benefit for both buyer and seller.
Gummesson (1997) said that relationship marketing is a new term, but it represents an old phenomenon.
Relationship marketing has expanded its boundaries and definitions to include related concepts such as network theory (Morgan and Hunt, 1994; Coviello et al., 1997).
Gummesson (1999) said that relationship marketing is seen as relationships, networks and interaction.
Relationships require at least two parties, who are in contact with each other. The basis relationship of marketing is between a supplier and a customer. A network is a set of relationships, which can grow into enormously complex patterns. In relationships, the simple dyad as well as the complex networks, the parties enter into active contact with each other, interaction.
Relationship networks
As mentioned Mogan and Hunt (1994) and Coviello et al. (1997) said that relationship marketing has expended its boundaries and definitions to include related concepts such as network theory. Currently theorists from the area s of relationship marketing and network theory disagree as to the boundaries and the definitions of relationship marketing and network theory. Matterson (1997), said that the boundaries and definitions of relationship marketing and network theory are not internally consistent or homogenous’.
New Australian theorists Healy, Hastings, Brown, Gardiner (2001) suggested that a framework of marketing relationship can be divided in three themes: relationship marketing, neo-relationship marketing and network theory. The common denominator is that marketing management needs to be built on independent relationships rather than on one-off transaction.
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Relationship marketing: is a dyadic buyer-seller relationship that tends to ignore the role of other elements in the distribution channel and the role of other stakeholders.
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Neo-relationship marketing (relationship marketing plus stakeholders): the relationship is still dyadic but goes beyond the buyer-seller relationship to include all marketing activities directed towards establishing, developing and maintaining successful relationship exchanges.
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Network theory: is a more complex structure of networks involving three or more actors.
Relationship marketing:
According to Levitt (1993) relationship marketing focuses almost entirely on the buyer-seller relationship. However, this focus tends to ignore the role of other elements within distribution channels and the part that other stakeholders play in building and management of long-term relationships. Nevin (1995) and Pelton et al. (1997) have researched this view of relationship marketing further and provided a linkages between relationship marketing and distribution channels.
Neo relationship marketing:
As Mattsson (1997) said the interest in buyer-seller relationships marketing has been extended to other relationships.
Neo-relationship refers to a body of literature which goes beyond a simple buyer-seller dyadic relationship to include other stakeholders involved in marketing activities. Morgan and Hunt ( 1994) concluded that “relationship marketing refers to all marketing activities directed toward establishing, developing and maintaining successful relational exchanges”.
Grönroos (1996) expanded the concept further to include “other stakeholder”. He stated that relationship marketing is to identify and establish, maintain and enhance relationship relationships with customers and other stakeholders, at a profit, so that the objectives of all parties involved are met. This is achieved through mutual exchange and fulfilment of promises (Grönroos, 1996).
Network Theory:
‘Network is based on the actors-activities-resource model which suggests that networks are dynamic entities exhibiting interdependence and connectedness between actor bonds, activity links and resources ties’ (Hakansson and Snehota, 1995).
The 30 relationships of relationship marketing:
The philosophy of relationship marketing has to be changed into tangible relationships, which then can become part of a company’s marketing planning.
Gummesson (1999) converted the philosophy of relationship into tangible relationships by defining the thirty relationships.
Gummesson (1999) said the 30 relationships can be grouped in four types: - classic market relationships; - special market relationships; - mega relationships and – nano relationships.
The first two are market relationships, which are relationships between suppliers, customers, competitors and other who operate on the market. They constitute the basis for marketing; they are externally oriented and apply to the market in proper. Some concern relationships to both consumers and other organizations, others are either focused on consumers or inter organizational relationships. The market relationships 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.
- Special market relationships: they represent certain aspects of the classic relationships, such as the interaction in the service encounter or the customer as member of loyalty programme.
The second two types are non-market relationships, and therefore they have an indirect influence on the efficiency of market relationships:
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Mega relationships exist above the market relationships. They provide a platform for market relationships and concern the economy and society in general. Mega marketing is marketing above the market proper, which addresses public opinion and political power, Mega alliances are alliances above companies, industries and nations and social relationships such as friendship and ethnic bonds.
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Nano relationships exist below the market relationships, such as relationships inside an organization (intra organizational relationships). All internal activities influence the externally bound relationships. Relationships between internal customers, and relationships between internal markets are examples of nano relationships. They arise as a consequence of the increasing use of independent profit centres, divisions and business areas inside organizations. The boundary between the externally and the internally directed relationships is sometimes fuzzy, and it is a matter of emphasis. For example, the physical distribution network is part of a logistics flow, concerning internal as well as external customers.
Total relationship management:
Total relationship management is a very recent marketing strategy and philosophy. It focuses on and is concerned with all integrated internal and external activities within and between organisations.
Gummesson (1999) said’ Total relationship marketing (TRM) is marketing based on relationships, networks and interaction, recognizing that marketing is embedded in the total management of networks of the selling organization, the market and society. It is directed to long-term win-win relationships with individual customers, and value is jointly created between the parties involved. It transcends the boundaries between specialist functions and disciplines. It is made tangible through the thirty markets, mega market and nano relationships.
Today’s managers have to ensure that all their employees’ top priority is on improvement of customer-driven quality through creating high products and service quality at an acceptable price and with the customer’s needs and wants in mind.
According to Payne (1995) and Zineldin (1996) satisfied customers will return to the company that had given them better service than competitors if they need to repurchase the same product or service in the future.
Effective marketing stresses managing the total relationships right will bring additional values (Zineldin et al., 1997).
Total relationship management is viewed as a strategy philosophy. It is “total”, because it considers and co-ordinates all the company’s activities (internal and external relationships, networks, interactions and co-ordinations as well as all activities involved in getting, keeping, enhancing and satisfying customers through quality). It is a strategy because it emphasizes maintaining high products/services, internal and external relationships quality, and trying to keep customers over the long run.
It is a philosophy because it should be used to communicate the idea that major goal of management is to continuously improve the total quality and to plan and build appropriate close and flexible long-term relationships with the parties who contribute to the organization’s success and long-term growth.
TRM focuses on maintaining high products/services quality, and trying to keep customers by continuous improvement of five qualities:
- Quality of object: the technical quality of the product or service (Grönroos, 1990).
- Quality of processes, the functional quality of how the customer receives the product of service ( Grönroos, 1990).
- Quality of infrastructure: the quality of internal competence, experience, know-how, technology, internal relationships, motivation, attitudes, internal resources and activities, and the management of these activities.
- Quality of interaction: the quality of information exchanges (Ford 1997).
- Quality of atmosphere: the relationship and interaction process between the parties are influenced by the quality of the atmosphere (terms of dependence/ interdependence, conflict/ cooperation, mutual expectation, communication, trust and commitment) in a specific environment where they co-operate and operate.
Conclusion:
Relationship marketing is a new term, but it represents an old phenomenon. In the recent years relationship marketing has expended its boundaries and definitions to include related concepts such as network theory.
The framework of marketing relationship can be divided in three themes: relationship marketing, neo-relationship marketing and network theory. The common denominator is that marketing management needs to be built on independent relationships rather than on one-off transaction.
The philosophy of relationship marketing has to be changed into tangible relationships, which then can become part of a company’s marketing planning. Converting the philosophy of relationship into tangible relationships was done by de defining the thirty relationships which can be grouped in four types: - classic market relationships; - special market relationships; - mega relationships and – nano relationships.
TRM focuses on maintaining high products/services quality, and trying to keep customers by continuous improvement of five qualities: quality of object, processes, infrastructure, interaction and atmosphere.
