“We have seen CRM shift its emphasis from transactions to interactions to, now, lasting relationships. And it is these relationships—enabled by marketing excellence—that will finally allow companies to transform the customer experience and build true brand value.”
-John Freeland, Managing Partner, CRM Global Service Line
The new paradigm is called Relationship Marketing, the development and maintenance of long-term, cost-effective relationships with individual customers, suppliers, employees, and other partners for mutual benefit. This strategy also benefits the bottom line, because retaining customers costs much less than acquiring them.
One of the key questions in relationship marketing is to evaluate the relations. As customers are properties for companies, marketing and communication investments can be analysed and valued like capital investments. Acquiring a new customer costs five times more than keeping the existing ones satisfied.
Over the past decade, Customer Relationship Management has evolved dramatically. Customers now have access to new technologies that provide a wealth of information—and power—making them more selective and independent. Competition in this converged communications market is more intense than ever. Competitors are just a click away from your customers, phone call prices are plummeting, and services are being bundled. To respond to these “smarter” customers and distinguish companies from the red hot competition, CRM decision-makers are now expanding their focus—from making standard customer transactions more efficient to fostering more meaningful, premium customer interactions throughout the life of the relationship.
II. OVERALL OVERVIEW
Relationship marketing is marketing as relationships, networks and interactions, like Gummesson, 1999 already said. Therefore I want to set my focus on these three characteristics which should be the corner support for an existing and working Network in general.
- INDUSTRIAL NETWORKS:
The model’s basic classes of variables are actors, activities and resources. These variables are related to each other in then overall structure of networks. This overall structure is mainly a matter of definition. Actors are defined as those who perform activities and/or control resources. In activities actors use certain resources to change other resources in various ways. Resources are mostly used by actors when they perform activities. Through these circular definitions a network of actors, a network of activities and a network of resources are related to each other.
a) Actors
Actors can be defined as those who perform activities and / or control resources. They are individuals, groups of firms or every mixture in between. They determine, which activities should be performed, in which kind of way these activities should be performed and what kind of resources are used for this activity. Through exchange processes, they develop relationships with each other. Actors are goal orientated and have differential knowledge about activities, resources and other actors in the network.
In a network, there are a number of conflicting and common interests as well as efforts to provide for those interests. In this struggle the actors use their knowledge of the network as well as their relationships with other actors in order to increase their control.
The activities are based on control over resources. Actors can have therefore direct (by ownership) or indirect (by relationship through others) control.
b) Activities
Activities appear when one actor or a group of actors form resources by using other resources. Two main activities can be characterized: Transformation and Transfer Activities
Transformation activities
are changing resources in some way and furthermore, they are always directly controlled by one actor.
Transfer activities
link transformation activities of different actors to each other. They are never controlled by only one actor and they affect and are affected by the relationship between the actors involved.
The activity network is always imperfect in the sense that new activities, changes in old activities or rearrangements of activities can make it more efficient.
c) Resources
Resources can be characterized by actors, who controls them, and by the activity, they are used for. Finally, the network of all three variables is bound together by forces, which make it possible to analyze the whole network in terms of these forces.
The first force is functional inter-dependence, all variables are related to each other. The second is power structure. Considering the control of activities and resources, there are important power relations between the actors.
The design of activities and the use of resources are bound together by the third force, the knowledge structure. It is the experience of present and earlier actors.
The fourth element is inter-temporal dependence. As the network is a product of history, all changes will be marginal and closely related to the past. Therefore development and stability are closely related in the network. If there is development in one are of the network, it needs stability in another part of it. Therefore stability and development are dependent on each other.
- RELATIONSHIPS
Definition:
Tentatively we can say that a relationship is a mutually oriented interaction between two reciprocally committed parties.
A relationship between two companies can be characterized by the relative importance of the following two dimensions:
The first dimension called “Substance” consists of the following three layers:
The activity links, resource ties and actor bonds.
These three layers of substance in business relationships are not independent; there is an interplay between activity links, resource ties and actor bonds. Actors carry out activities and activate resources.
Activities are resource consuming and evolve as the capabilities of actors develop. Resources limit the range of activities an actor can pursue. The existence of bonds between actors is a prerequisite for them to actively and consciously develop strong activity links and resource ties. Activity links make it likely that bonds can develop, and so on.
The interplay of bonds, ties and links is at the origin of change and development in relationships. Actor bonds evolve, resource ties and activity links change and the three become mutually adjusted. The interplay of the three dimensions is a driving force in the development of business relationships. Changes in connections account for much of the dynamics in business relationships.
Strong activity links direct the attention of actors to possible uses of resource elements that can be accessed at the other company or through it. Strong resource ties tend as a rule to lead to strengthening of activity links. There is a tendency towards some kind of balance in activity links, resource ties and actor bonds as the substance of a relationship develops in an incremental way and solutions are sought by the companies in the vicinity of existing ones. The balance can, however, be on very different levels.
What connections will be acted upon and what level will be reached depend on different factors. First, it will depend on how the interaction evolves between the parties. Second, the characteristics and ambitions of the actors that reflect their situation and circumstances will have influence. This will to large extent be an effect of the relationship portfolio these actors have developed. Third, there are the features of the aggregate structure - the network - and how the relationship is related to other existing relationships to and between actors directly or indirectly connected.
Inter-organizational Relationships
Many research studies exist in the field of inter-organizational relations and networks. So far the research work was quite unstructured and the question arises, whether the subject is really so fragmented or if all these research studies have a common theme, on which further research work can grow.
The field of inter-organizational network research focuses on how organizational actors from different organizations are linked with each other. Only a limited number of concepts and theories appear at the core of research work and that there is a by far greater convergence in the concepts of those studies as it may seem by a short overview of the literature. Furthermore the field of inter-organizational network studies seems to be segmented into a small number of configurations of perspectives. Each perspective emphasizes different levels of inter-organizational ties and draws it focus on special theories and outcomes.
As the most frequently core concepts used in inter-organizational network studies, resource dependence, political power and network approaches are the best connected theories. The most central outcome variables are power / control, prevalence and success. General influencing variables are material and immaterial resources, dependence, network positions, goal congruence and resource munificence. The linking processes to other network variables are motivation and intention.
In general it can be said that some patterns tend to view to enhance the power and control of one networking company in a network due to dependencies among the parts of this network, in order to gain profit for the success of the organization. Another important point, which was revealed, is the fact that there seems to be no clear consensus, on which outcomes and consequences of particular forms of inter-organizational relations the research interest must be drawn.
The conceptual focus of motivation and intention is somehow difficult. It seems obvious that, when only emphasizing these variables, they alone give not a very good explanation and prediction of the actual outcomes. It should be clear that relying on motivation and intention alone leads to neglect the particular condition and situation, in which an actor is embedded. Also unintended outcomes are neglected.
Therefore future research work should develop conceptualizations of all processes that are involved in inter-organizational networking and create more detailed analyses of these processes as well as its triggers and consequences. Two guidelines can help to be successful: first, researchers can draw on a large number of longitudinal studies and second, research work can be inspired by earlier studies regarding to this issue. Therefore one can conclude that there is a great opportunity for a cross-disciplinary and cross-perspective discussion.
Buyer – Seller Relationships
A buyer-seller-relationship can be divided into two general aspects. First, they have a temporal dimension, which means that they tend to hold over a long time period and that they develop during more and more during this time. And second, they are dyadic, which means that there must be at least two parties involved in this relationship and which want to make profit by building this long-term connection.
For a better examination and understanding of relationships and its development, one must not neglect the temporal dimension. This can be done by a clear definition of the meaning of development and the design of the research work. But one has also to consider that the development of relationships follows not a certain pattern, but many varieties of certain states, not regarding to age or the previous phase of the relationship, are possible.
By the inclusion of temporal aspects, research work usually becomes more complex. If you take a look on the evolution of models in the two fields of industrial and service markets the relationship development in industrial markets for example emphasizes the individual buyer-seller relationship. But on the other hand one may also consider that a relationship is not isolated, and influenced from other factors as well. A business relationship is a function of network business relationships and therefore is affected by many environmental conditions.
There is an inevitable need for a further research in relationship marketing, which use longitudinal studies, because only in this way the dynamic nature of relationships can be understand. This new methodological approach of real-time study of the development of relationships can reveal important managerial implications
Business Relationships in general
If relationships in the context of business networks are defined, two important aspects must be considered: the participating parties, at least two of them, are interdependent or becoming it during the relationship and a longer lasting exchange and interaction is taking place, so all parties are active.
In this definition at least three main points can be figured out.
The first one is the long-lasting character of a relationship, because one or two single interactions can really be called a relationship. Therefore the element of time is important.
The second element can be determined as mutuality of the parties. It can be described in terms of commitment and trust. If one of these elements is missing, then a relationship will hardly survive over a longer period.
The third, but not less important element is the aspect of process within such relationships, which means that the parties have to interact, otherwise nothing is going to happen. The have to exchange something in several interactions in order to establish a relationships They can exchange for example information, products, raw materials, money, personnel and so on.
In short it can be claimed Relationships consist (at least) of Mutuality and Interaction over a longer period of time. It is sure that a relationship can be determined not only by these three elements, but they are the essential ones.
As an additional element, one can maybe suggest communication, which is the framework for mutuality as well as the interaction process and inevitable for establishing and maintaining a relationship.
Communication – an interlinking element
The current focus of marketing research is turn from the examination of products and consumer research towards social processes in business relationships. Hence, one can say that the role of communication in marketing research, especially in business relationships and networks becomes increasingly important.
The earliest studies suggest that in a business relationship both supplier and customer are active, therefore the name "interaction" process. The main conclusion of the European IMP group was that firms have to be examined no only in the focal net, but also in a larger set of inter-firm relationships forming the business context of the focal dyad.
Most of the current marketing research works are directly influenced by mass communication. But nevertheless this development is still important, there is a need for individual and interpersonal communication, because a development of a long-term buyer-seller business relationship is highly influence by individual persons and the communication between them. Therefore communication should be an additional process element of relationships..
- INTERACTIONS
As a company can be seen as an embedded unit in a complex network of business relationships and interactions, one can say that the activities of these companies are also interacting with activities from a larger industrial system. These interaction activities between organizations are made by human beings. They have certain intentions during the interaction process and also interpret the intentions and interactions of others. Every interaction is growing from the intentions of at least two sides and is also interpreted from both sides.
Four features, considering the complex structure of a bilateral or multilateral interaction process, should be focused when looking at an interaction process from a point of view of intensions and interpretations.
They are called capability, mutuality, particularity and inconsistency.
Capability describes the relationship from the point of view, what every party can do for the other one. By looking at capability both relationships partners form a functional entity and the interdependence between their capabilities is revealed.
Mutuality emphasizes the social relations between the parties. It is assumed that both parties share to some extend the same goals or interests. It measures, how much a company is willing to give up its own interests in order to increase the benefit of another organization and, through this, gains from profits for its own. It reveals the trust that exists between the parties during a long-term relationship.
Particularity examines the interaction process in terms of direction and uniqueness, for example, if the organization is willing to negotiate about the price with one individual customer.
Inconsistency, finally, refers to the situation that a company exists of individuals and subgroups. Therefore it will not be possible for a company, to develop a unified approach in interactions. Every person, which is involved in an interaction process, has unique experiences and expectations about an interaction. Therefore the outcome of one single episode in a long-term relationship can be very different. This can be identified as “interpersonal inconsistency”.
These four dimensions may be used to describe interaction, which in terms is related to time. Therefore as interaction can be seen as a learning process, the knowledge and the experience of the participants will increase during the time. Moreover a relationship can be defined in terms of existing and previous patterns of interaction and no single element can be considered in isolation.
