Improving customer relations through relationship marketing - How can Greenheart Plants improve its relationships with customers to create a competitive advantage?

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Improving customer relations through relationship marketing - How can Greenheart Plants improve its relationships with customers to create a competitive advantage?

.0 Points of Departure

In this section I will present the reasons for choosing the topic. An introduction to the garden nursery industry and the case company, finally the research problem, purpose and its limitations, followed by an outline of the thesis.

.1 Areas of Interest

In deciding a topic for my dissertation an important factor was that I would enjoy the subject, and be interested in it. After enjoying the level two "Services Marketing" module, specifically the 'Relationship Marketing' topic, I thought it would be a challenging area of subject, one I could succeed in and enjoy enough to dedicate my time to.

Horticulture and more specifically the garden centre/nursery has been of importance to me because I have worked part-time, for five years in such a nursery.

The concept of relationship marketing is beginning to be major aspect of many businesses; however I had noted that it had not really been introduced into horticulture. This sparked an idea of combining those areas for my thesis.

I talked to the owners of the nursery and found that they wanted to introduce a marketing scheme and afterwards agreed to give me all the information needed to assist me in the project, in return for deciding on a relationship marketing strategy that would be successful for the nursery.

.2 Introduction to the Garden Centre/Nursery Industry

The garden centre is increasingly important to homeowners. The Horticultural Trades Association (HTA) valued the garden market at just over £3 billion in 2000 with consumer spending seeing an increase of £0.98 billion over the past six years (source: MINTEL). 2002 figures were predicted to be £4 billion. The rapid rise in popularity of television programmes, such as Ground Force, along with other increased media coverage has turned gardening into a fashionable past time encouraging comprehensive garden makeovers.

Gardening is one of the most enduring of leisure interests for the British. In common with other leisure pursuits, gardening as a hobby is linked to the various life-stages that consumers go through. It usually reaches full fruition among those who are recently retired from full-time work and have all the time necessary to cultivate the soil and grow plants. However, the trends to 'leisure gardening' and the media coverage (consumers have been attracted to the 'sexy' Charlie Dimmock and the makeovers and knowledge of Alan Titchmarsh) have certainly broadened out the market, bringing in a younger generation of consumers showing an interest in garden 'makeovers'. This new market along with the traditional gardener's base has to be kept happy. This makes it vital to investigate what the situation currently looks like, compare it to how it used to look, and try to imagine how it will come to look in the future.

.3 The Case Company - Greenheart Plants

The case company Greenheart Plants is a grower and supplier of horticultural plants and garden accessories. Located in Hopton, Stafford. Greenheart Plant was formed in 1993 when the owners Stewart and Maxine Pawley purchased a derelict garden nursery and opened it as a specialist grower of shrubs and annual summer bedding and winter pansies and polyanthus. Their aim is to offer the highest quality plants for the lowest possible price within the region.

Increased custom has led business to respond, and there is increased competition in the gardening world (from Wyevale the leading Garden Centre with 151 nurseries to a man selling home-grown plants at his local car-boot sale). Greenheart Plants is aware that, with increased choice in the wholesale and commercial areas, valuable consumers may go elsewhere.

The owners have decided to respond to this threat. The intention is to improve relationships with customers - wholesale and retail - by bringing them extra value through adapting the marketing and product to their needs. By having a customer relationship focus the company aims to help satisfy existing customers, as well as creating new business relationships through the competitive advantage they hope it will create.

.4 Research Problem

The garden industry has lagged behind in marketing terms, most not bothering at all. Crocombe, Enright and Porter, (1991), stated: "Traditionally agricultural producers have produced and operated with little regard to the needs of others Marketing approaches by agribusinesses (if they are done at all) are aimed at creating brand awareness among end consumers. Little research has been carried out on the development of competitive advantages through developing relationships".

Many garden nurseries are unprofessional, mainly family businesses relying on old principles and gardening knowledge not business terminology and practice, not seizing competitive advantage through areas such as relationship marketing and not in return enjoying loyal customers who become advocates of them. This regard to marketing must change, and Greenheart realise this. To date, Greenheart has been successful with a very limited marketing plan, mainly advertising in local newspapers, and relying on referral marketing to bring in new custom. However, as the industry grows, management feels that there is a need to evaluate the marketing strategy and establish a strategy that is deliberately planned and intended with specific attention to the customer. Addressing this issue is the research problem.

.5 Purpose and Objectives

The purpose of this thesis is to establish a relationship marketing strategy for Greenheart Plants, helping to create a competitive advantage over competing firms in the gardening market. In order to achieve this, I will aim to satisfy the following objectives:

. To establish what relationship marketing is, and why a company which is focused to the needs of its customers (and which maintains close personal relationships with them) can be increasingly successful

2. To identify and assess the methods of relationship marketing which the owners of the company would feel effective to them in the gardening market. To identify possible improvements which could be made within the company, to attract new customers from the wide market for their products and service

3. To determine the marketing strategy of competitors to Greenheart Plants, their product and services, and whether their existence compromises Greenheart

4. To analyse the external environment of Greenheart in order to find opportunities for future profitability and success for the company

5. To determine the views of current customers, both in the wholesale and commercial markets, to determine their needs and how Greenheart Plants could satisfy those needs

6. To segment and critically analyse the customer base of the company and decide which of these segments the company should prioritise for the customer relationship marketing plan

7. To establish a focused customer relationship recommendation plan for the company, from which they can implement the recommendations into their business

.6 Scope and Limitations

-The business will be represented by Greenheart Plants.

-The focus will be on the garden nursery local to Greenheart Plants.

-The focus will be on the creation of a customer relationship marketing plan.

-When talking about competitors, customers etc, the focus is on the garden nursery segment similar to Greenheart Plants, and not those whose secondary service is the garden plants (e.g. B&Q).

.7 Outline of Dissertation

Front page

Table of contents

Table of figures

Chapter 1 Point of Departure

Chapter 2 Theoretical Framework

Chapter 3 Methodology

Chapter 4 Analysis of Empirical Results- Greenheart Plants

Chapter 5 Analysis of Empirical Results- Competition

Chapter 6 Analysis of Empirical Results- External Environment and Customers

Chapter 7 Conclusions

Chapter 8 My Recommendations to Greenheart Plants

References

Appendices

2.0 Theoretical Framework

In this section I will introduce the theories and concepts which are used in the project in order to generate background information which will be used to analyse Greenheart Plants, helping to complete the relationship marketing strategy.

2.1 Literature Review

2.1.1 Introduction to Relationship Marketing

The definition for relationship marketing according to the chartered institute of marketing is "... the process of getting closer to the customer by developing a long-term relationship through careful attention to service needs and their quality delivery".

The need for relationship marketing stems from the changing dynamics of the global marketplace and the expanding requirements for competitive success (Rich 2000). Literature seems to agree that the relationship approach is an emerging perspective in marketing literature (Gummerson 1997; Moller and Halien 2000). Scott (1995) stated the progression of relationship marketing by suggesting that "Relationship selling moves the dyadic exchange associated with personal selling from a short-term transaction orientation to a life-long process where immediate closings might be postponed on the basis of more effectively meeting customer needs", as Yau et al. (1999) stated "The primary impetus behind the concept of relationship marketing is to foster a long-term relationship and thereby create repeat purchases".

Wilson and Jantrania (1996) found that although relationship marketing is a relatively new concept, the whole idea of relationship is not when stating that "The importance of creating relationships is not a new concept, but to use relationships as a strategic weapon is".

Figure 2.1 Shows the position of Relationship marketing in comparison to other stems of research.

Relationship marketing originates from many stems of research therefore varying interpretations of the term arise (Gummerson 1996). According to Gronroos (1991) "...the aim of relationship marketing is to establish, maintain and enhance relationships with customers and other parties, at a profit, so that the objectives of the parties involved are met. This is achieved by a mutual exchange and fulfilment of promises". Ravald and Gronroos (1996) took this further when suggesting "exchanges are not considered individually (transactional based) but becoming meaningful insofar as they are connected to another past or future episodes". However, Yau et al (1999) stated concern about the exchange theory stating "... It is still not clear whether the exchange theory can sufficiently explain the existence of relationships.

In conjunction with most of theorists, Morgan and Hunt 1(994) defined relationship marketing as "all marketing activities directed toward establishing, developing, and maintaining successful relational exchanges". In later work Hunt (1997) said that relationship marketing can be seen as a means of gaining competitive advantage especially through the acquisition of intangible assets. Primary findings indicate a regular positive response to literature of relationship marketing and its abilities in the business world.

Findings that relationship marketing can help introduce successful strategies were put forward by Li and Nicholls (2000) who said "For most companies, the adoption of relationship marketing approach represents a strategic choice". The need for relationship marketing was stated by Paul (1998) "As the business environment changes and customers become more demanding, firms must practice relationship marketing to compete effectively".

However, not all research supports the advantages of relationship marketing. Those outside of the marketing world find marketers less than productive for the compensation they receive. They feel marketers should eliminate their obsession with loving customers since it has become a distraction from the basics of selling and tracking the origins of sales success (Shaw 1999) and research by Moorman et al. (1992) was unable to support the hypothesised link between relational factors and client's use of marketing services. However, Smith (1991) conducted research which showed a positive correlation between relationship marketing and business performance. His research studied direct marketing in the insurance sector and found that relationship marketing will help to maximise long-term profitability.

Theorists also admit that much of what is written is untrue or substantiated, Gummerson (1996) stated that much of what is written on relationship marketing is theoryless. "a stack of fragmented philosophies, observations and claims which do not converge in the direction of emerging relationship marketing theory". He gives the example that relationship marketing is often presented as a new promotional package to be sold to the customer.

Most of the studies on relationship marketing were criticised as overly simplistic because of their use of a uni-dimensional perspective (Yau 1995). A common approach, which came under criticism, is researchers' use of only a single dimension such as trust, commitment or satisfaction to assess relationship marketing.

For the purpose of this project, relationship marketing will be assessed of the following key characteristics; Relationship value, quality, customer satisfaction, commitment and management.

Figure 2.2 shows important variables on the process to building relationship (Rott 2000).

2.1.2 Relationship Quality and Value

Important issues remain poorly addressed in relationship marketing literature (Naude 2000), questions such as: "What are the features that distinguish successful relationships from unsuccessful ones? What is it that makes a relationship highly valued by those within it?" are poorly answered. Despite this lack of address and a variety of approaches used by authors, there has been some useful information to address the issues (Naude 2000). Their research showed that there is some face validity to the sentence "high quality relationships will create value and be regarded as successful by the parties in it".

A general definition of quality is "the totality of features and characteristics of a product or service which bears on its ability to meet/satisfy stated or implied needs; fitness for use".

Gummerson (1987) identified relationship quality as one of four forms of quality encountered by customers. He stated "... high relational quality contributes to customer perceived quality and thus enhances the chances for a long term relationship".

It has been suggested that relationship based strategies are required for developing a point of differentiation, and an effective way of achieving competitive advantage (Sheth 2001, Cravens 1998). Crosby's work highlighted that relationship quality had a significant influence on the customer's anticipation of future commitment (1990).

Despite these arguments, the need for more work in this area is highlighted by Mohr and Spekham (1994) who stated that "... an understanding of the characteristics associated with partnership success is lacking". They decided that the following areas are needed for successful relationships: commitment, coordination and trust, communication quality and participation, and conflict resolution through joint problem solving.

Relationship marketing is about targeting customers with the best long-term value (Rott 2000) and also about creating mutually beneficial relationships where both parties are gaining knowledge and understanding from the relationship and continuous learning and improvements are made which will increase the overall quality of any customer relationship.

It is clear that high quality relationships hold a high value with consumers, which can favourably impact the chance of long-term relationships.

2.1.4. Customer Satisfaction

It has been long thought that customer satisfaction was sufficient to promote customer retention (Naude 2000). However further research indicates that: Satisfied customers may defect, and dissatisfied customers may remain loyal (Buttle 1999). It shows that a significant percentage of satisfied customers are not retained, taking their business elsewhere despite their satisfaction with products and services. Research by Reicheld (1993) points out that 65-85% of recently defected customers claimed they were satisfied or very satisfied with their previous suppliers.

This research makes it a clear argument that customer satisfaction alone is not a cause of relationships between the buyer-seller. Ulrich (1989) compounded this thought when stating: "Satisfied customers are pleased, humoured and fulfilled; committed customers are dedicated and faithful". An aspect of commitment is needed to bring the loyal customers into a relationship plan.

Figure 2.3 Shows the stages of the buyer-seller relationship

2.1.5 Trust and commitment

In marketing literature there is a lack of clarity in the concept of trust (Blois 1999): however it can be described as "the willingness to rely on an exchange partner in whom one has confidence" (Moorman, Deshpande and Zaltman 1993). Morgan and Hunt (1994) argue that trust is the cornerstone of relationship commitment, without it commitment flounders. Research by Geyskens and Steenkamp (1995) showed that trust brings about a feeling of security, reduces uncertainty and creates a supportive environment.

An objective of marketing strategies is to change customer behaviour so that loyalty replaces the threat of defection to the increasing competitive products. This loyalty will come about through trust, which creates satisfaction and long-term association over and beyond any normal buyer-seller relationship. Another way of increasing loyalty and trust is for both parties to make investments in the relationships. These investments can be intangible (e.g. knowledge) or tangible (e.g. property). Investments serve as exit barriers (Naude 2000).

Commitment is the ability to maintain a relationship and it consists of three different components; sacrifice of some value, willingness to act in certain ways, and efforts to secure consistency and continuity in the relationship (Rott 2000). Commitment is important as it saves time and effort in looking for new partners. In addition to trust, commitment is the second most important component of a relationship (Johansson et al. 2000).

Rich (2000) said: "Many companies perceive that the best initial approach toward relationship marketing is investing in complaint handling procedures to demonstrate customer commitment resulting in customer loyalty". A study by Tax et al. (1998) found that satisfaction with complaint handling has a direct impact on trust and commitment as can override the initial negative experience if handled to the customer's satisfaction or delight.

This research concludes that increased trust and commitment has a direct impact on the likelihood of further collaborations, good relationships are based on the model of high trust and commitment between the involved parties.

2.1.6 Importance of management

Successful relationships begin with internal commitment to relationship performance and success (Wilson 2000). Successful implementation of the relationship strategy can be brought about by a commitment by the key functions that support the delivery of value to the relationship. In the case of Greenheart this is the owners of the company,

Management has to allocate resources between different relationships in order to make sure each is successful. Existing customers should be maintained, new ones should be added, and unprofitable ones should be fired, whilst assessing its customer portfolio in order to understand what customers are contributing and what they will contribute in the future. It will then be easier for the company to see which are valuable relationships, and which are unprofitable (Ford 1998).

As Rich (1998) stated: management must not only accept the proposition of relationship marketing from an intellectual perspective, but should be willing to invest the necessary time, labour, and financial resources to make it an effective reality.

2.1.7 Relationship Marketing in Horticulture

Unfortunately, except for some works in general horticulture relationship strategy literature, little attention has been paid to the specific garden nursery industry. Therefore to date, there is a poor understanding of any role of relationships in garden nurseries.

A lack of uptake of relationship marketing in the garden nursery market gives the case company a chance of taking a first mover advantage. This can be defined as when the initial occupant of a strategic position or niche gains access to resources and capabilities that a follower cannot match (Rott 2000). A company can attain a first mover advantage by acquiring resources and capabilities in a new market before competitors do (Grant 1998).
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2.1.8 Aspects for Further Attention

Wyner (1999) stated the following; "Relationship marketing forces the examination of some classical methodological issues in a new way. As the marketing focus shifts to relationships, key questions need to be answered for that transition to be effective, including:

. Who is the customer?

2. What is the provider's presence?

3. How extensive is the customer relationship?

4. How long has the relationship with the provider lasted?

5. Who else participates in the relationship?"

The objectives of this thesis will answer these questions.

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