Journal of Business & Industrial Marketing

The relationship marketing process: communication, interaction, dialogue, value

Christian Grönroos
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Christian Grönroos, (2004),"The relationship marketing process: communication, interaction, dialogue, value", Journal of
Business & Industrial Marketing, Vol. 19 Iss 2 pp. 99 - 113
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 An executive summary for managers and
The relationship executive readers can be found at the end of
this issue.
marketing process:
communication,
Introduction: the relationship marketing
interaction, dialogue, paradigm
value The relationship marketing perspective is based on
the notion that on top of the value of products and/
Christian Grönroos or services that are exchanged, the existence of a
relationship between two parties creates additional
value for the customer and also for the supplier or
service provider (Grönroos, 2000b; compare also
Ravald and Grönroos, 1996). An on-going
relationship may, for example, offer the customer
security, a feeling of control and a sense of trust,
minimized purchasing risks, and in the final
analysis reduced costs of being a customer.
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In a conference paper on service marketing,

Berry (1983) first introduced the term relationship
The author marketing, and a few years later Jackson (1985)
Christian Grönroos is Professor of Service and Relationship used it in a business-to-business context. However,
Marketing at the Center for Relationship Marketing and Service the phenomenon itself – a relationship approach
Management, Hanken Swedish School of Economics, Helsinki, to taking care of interactions with customers – is as
Finland. old as the history of trade and commerce. The
importance of relationships with customers was
Keywords given less attention following the industrial
Relationship marketing, Communication revolution, when the middleman was introduced
in the distribution chain (Sheth and Parvatiyar,
Abstract 1995a). Even before the 1980s, Arndt (1979)
The objective of the article is to discuss a framework of central observed a tendency of doing business in the form
processes in relationship marketing. The framework includes an of long-term relationships, which he labelled
interaction process as the core, a planned communication domesticated markets”. He concluded that “both
process as the marketing communications support through business markets and consumer markets benefit
distinct communications media, and a customer value process as from attention to conditions that foster relational
the outcome of relationship marketing. If the interaction and bonds leading to reliable repeat business” (Arndt,
planned communication processes are successfully integrated 1979, p. 72). A few years later, Levitt (1983a,
and geared towards customers’ value processes, a relationship
p. 111) used a marriage analogy in noting that “the
dialogue may merge.
sale merely consummates the courtship. . . how
Electronic access good the marriage is depends on how well the
relationship is managed by the seller”.
The Emerald Research Register for this journal is Before Berry and Jackson used the term
available at
“relationship marketing”, an explicit relationship
www.emeraldinsight.com/researchregister
perspective in marketing was inherent in the
The current issue and full text archive of this journal is Nordic School of thought (see for example,
available at Gummesson, 1983, 1987; Grönroos, 1980, 1983),
www.emeraldinsight.com/0885-8624.htm even though the term was not taken into use until
the end of the 1980s (Grönroos, 1989). The
relationship notion was also an integral part of the
interaction and network approach to industrial
marketing of the IMP Group (Håkansson, 1982;
Håkansson and Snehota, 1995). Similarities and
differences between relationship marketing studies
Journal of Business & Industrial Marketing
of these two schools of thought have been
Volume 19 · Number 2 · 2004 · pp. 99-113 discussed by Mattsson (1997). The nature of
q Emerald Group Publishing Limited · ISSN 0885-8624 relationship marketing as a contemporary
DOI 10.1108/08858620410523981 marketing practice has been discussed by Coviello
99
 The relationship marketing process Journal of Business & Industrial Marketing
Christian Grönroos Volume 19 · Number 2 · 2004 · 99-113

and Brodie (1998) and Coviello et al. (1997). may easily start to develop and if the simultaneous
Finally, it is noteworthy that although it was not consumption and production processes turn out
explicitly expressed, a relationship notion was well, an enduring relationship may follow.
present also in the North American 7Ps model of When manufacturers of industrial goods and
service marketing of the early 1980s (Booms and equipment turn their interest from single
Bitner, 1981). transactions with their customers to doing business
on a long-term scale, the nature of consumption or
usage changes from pure outcome consumption to
an on-going process consumption or usage. In this
Objective and perspective process the customer uses the outcomes of the
manufacturer’s production processes (goods,
The objective of this article is to analyze the nature equipment) that are exchanged between the
and content of relationship marketing, seen as a parties in the relationship as well as a number of
process. The perspective of the article is service processes that are produced and consumed
predominantly that of the Nordic School of or used before, during and in between the
marketing thought, according to which exchanges of outcomes. The nature of this process
understanding and managing services in the becomes very similar to the process consumption
relationship is at the core of relationship building characteristic of services.
and maintenance, although relationship marketing From a marketing point of view, when the
also is supported by other factors, such as building outcomes (goods and equipment) constantly
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networks (Håkansson and Snehota, 1995), become more similar as competition increases, this
creating strategic alliances and making partnership change of the nature of consumption or usage is
agreements (Hunt and Morgan, 1994), developing emphasized even more. In most cases even
customer databases (Vavra, 1994) and managing continuous product development alone does not
relationship-oriented integrated marketing lead to a sustainable competitive advantage
communications (Schultz et al., 1992; Schultz, anymore. Hence, only services, such as tailor-
1996; Duncan and Moriarty, 1997). Marketing is made design, deliveries and just-in-time logistics,
also seen more as market-oriented management installing equipment, customer training,
than as a task for marketing specialists only, which documentation about how to install and use goods,
means that marketing is viewed more as an overall maintenance and spare part service, customer-
process than as a separate function (Grönroos and oriented invoicing, handling inquiries, service
Gummesson, 1985). In other approaches to recovery and complaints management are left for
relationship marketing, as in the network approach the marketer to use. Customer service as discussed
or in the strategic alliance and partnership by Christopher et al. (1991) also becomes an
approaches, other elements or phenomena are important means of competition. If one does not
seen as the ground pillar. It all depends on the want to use the price variable, which seldom
perspective of the researchers. creates a sustainable competitive advantage, only
services are left for developing such an advantage.
Of course, transaction marketing may be
justified in some cases (Jackson, 1985), but as the
Services in relationship marketing work by Reichheld and Sasser (1990), Reichheld
(1993) and Storbacka (1994) demonstrates, long-
An integral part of service marketing is the fact that
term customer relationships often form a base for
the consumption of a service is process
profitable business.
consumption rather than outcome consumption
In order to implement relationship marketing a
(Grönroos, 1998). The consumer or user perceives
shift of focus is required. In this article three areas
the service production process as part of service
that are vital for the successful execution of a
consumption and not only the outcome of a
relationship strategy are discussed:
process as in traditional consumer packaged goods
(1) An interaction process as the core of
marketing. Thus, service consumption and
relationship marketing.
production have interfaces that always are critical
(2) A planned communication process supporting
to the consumer’s perception of the service and to
the development and enhancement of
his or her long-term purchasing behavior. In the
relationships.
services marketing literature the management of
(3) A value process as the output of relationship
these interfaces is called interactive marketing, and
marketing.
this concept has been used in the relationship
marketing literature as well (see Bitner, 1995). The The term planned communication process is used
service provider almost always has a direct contact to indicate that in this process only communication
with its customers. In these contacts relationships through exclusive communication media, such as
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Christian Grönroos Volume 19 · Number 2 · 2004 · 99-113

advertising, TV commercials, internet banners developing in networks of suppliers, distributors,

and sales calls, are included. Customers’ and consumers or end users.
interactions with products, service processes and The focal relationship is the one between a
with other aspects of the interaction process also supplier or provider of goods or services and
include elements of communication. These buyers and users of these goods or services.
communication effects follow as a by-product from Relationship marketing is first and foremost geared
the manner in which the various interactions are towards the management of this relationship.
managed by the firm and perceived by the However, in order to facilitate this, other
customers. However, as part of a total stakeholders in the process may have to be
communications impact on customers these types involved. If marketing is to be successful, other
of communication may very well be even more suppliers, partners, distributors, financing
important than the planned communication institutions, the customers’ customers, and
efforts (Duncan and Moriarty, 1997). sometimes even political decision makers may have
to be included in the management of the
relationship in a network of relationships
(Gummesson, 1999; compare also the six markets
Relationship marketing and service concepts in Christopher et al., 1991).
competition A shift of focus in marketing decision making
from the transaction toward a process where a
Marketing from a relational perspective can been
relationship is built and maintained has important
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defined as the process of managing the firm’s

effects on central marketing areas, such as
market relationships (Grönroos, 1996), or more
organization, planning, organizational
explicitly as the process of identifying and
development and the measurement of success in
establishing, maintaining, enhancing, and when
the marketplace (Grönroos, 1999; Brodie et al.,
necessary terminating relationships with
1997). As this process becomes as important for
customers and other stakeholders, at a profit, so
the customer as the outcomes, for example, in the
that the objectives of all parties involved are met,
form of goods and equipment, the nature of the
where this is done by a mutual giving and
product concept changes. The product as the
fulfillment of promises (Grönroos, 1989, 2000a).
This definition bears clear similarities with Berry’s outcome of a production process is basically a
services marketing definition from a relationship transaction-oriented construct. In a relationship
perspective (Berry, 1983) and with more recently perspective physical goods and equipment
offered definitions by Hunt and Morgan (1994), (products) become a part of the process together
Sheth and Parvatiyar (1994) and Christopher et al. with other element such as a host of services. In the
(1991). Gummesson (1999) defines relationship best case these services enhance the value of the
marketing as marketing seen as interactions, products as with just-in-time deliveries, prompt
relationships and networks, thus emphasizing service and maintenance and customer-oriented
three central phenomena in this marketing and timely service recovery. In the worst case, for
perspective. example with delays in deliveries, or unsuccessful
As most definitions imply, relationship maintenance and unclear documentation about
marketing is first and foremost a process. All the use of equipment that has been bought, they
activities that are used in marketing have to be damage or altogether destroy their value.
geared towards the management of this process. Customers do not only look for goods or
Hence, no marketing variables are explicitly services, they demand a much more holistic
mentioned in these definitions. According to offering including everything from information
Grönroos’ definition, the process moves from about how to best and safest use a product to
identifying potential customers to establishing a delivering, installing, repairing, maintaining and
relationship with them, and then to maintaining updating solutions they have bought. And they
the relationship that has been established and to demand all this, and much more, in a friendly,
enhance it so that more business as well as good trustworthy and timely manner. Moreover, the
references and favorable word of mouth are core product is less seldom than the elements
generated. Finally, sometimes relationships are surrounding the core the reason for dissatisfaction.
terminated either by the supplier or by the As Webster (1994, p. 13) exemplifies, “the
customer (or by any other party in a network of automobile purchaser is unhappy with the car
relationships), or they just seem to fade away. Such because of lousy service from the dealer; the
situations must also be managed carefully by the insurance customer has problems with the agent,
supplier or service provider. As the Gummesson not with the policy”. What Levitt (1983b,
definition implies the relationship process includes pp. 9-10) concluded already in the early 1980s
interactions that form relationships which may be about what should accompany the sale of the mere
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product, “having been offered these extras, the (Schultz et al., 1992; Schultz, 1996; Stewart,
customer finds them beneficial and therefore 1996). Integrated marketing communications is
prefers to doing business with the company that clearly influenced by the relationship perspective
supplies them”, is very much true today. By and in marketing. “As we are committed to two-way
large customers are more sophisticated and better communication, we intend to get some response
informed than ever and therefore more from those persons to whom the integrated
demanding. Moreover, the increasing global marketing communications program has been
competition offers customers more alternatives directed. . . . We adapt the customer’s or prospect’s
than ever before. communication wants or needs and begin the cycle
In a customer relationship that goes beyond a all over again. This is truly relationship marketing
single transaction of a product, the outcomes at its best” (Schultz et al., 1992, p. 59).
themselves including goods, services outcomes or Sometimes, communications researchers seem
industrial equipment become just one element in to treat integrated marketing communications
the holistic, continuously developing service using various means of communications in an
offering. For a manufacturer, the physical good is a integrated manner almost or totally as a synonym
core element of this service offering, of course, for relationship marketing. However, in
because it is a prerequisite for a successful offering. transaction marketing effective marketing
However, what counts beyond this prerequisite is communication about a bad or inappropriate
the ability of the firm to manage the additional product does not lead to a good result. By the same
elements of the offering better than the token, if the customers’ interactions with products
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competitors to create value for customers in their and services and other elements in the contacts
internal value-creating processes. The product between buyers and sellers are bad and create a
becomes a process (compare Storbacka and negative communication effect, effective
Lehtinen, 2000), and the supplier has to truly integrated marketing communications as a purely
serve its customers (Grönroos, 1996). For communications program does not develop lasting
manufacturers this means that products must be relationships. Hence, integrated marketing
turned into elements of a holistic service offering. communications is not the same as relationship
They must be servicefied (Grönroos, 2000a). marketing, but clearly, it is an important part of a
The product seen as a process or a total service relationship marketing strategy (Duncan and
offering thus becomes a service including tangible Moriarty, 1999). If relationship marketing is to be
elements such as physical goods and equipment successful, an integration of all marketing
and intangible elements such as a host of various communications messages is needed to support
types of services. In a long-term relationship, firms the establishment, maintenance and enhancement
face a competitive situation for which we in of relationships with customers (and other
another context have coined the term service stakeholders). Consequently, the integrated
competition (Grönroos, 1996). When service management of marketing communications
competition is the key to success practically for activities, regardless of the source of
everybody and the product has to be defined as a communication messages, is required in
service, every business is a service business relationship marketing.
(compare Webster, 1994).

Interaction
In a transaction-oriented approach to marketing,
The key processes of relationship the product is the core of the marketing mix. There
marketing must be a product so that decisions can be made
about how to distribute it, how to promote it, and
Communication how to price it. However, the product exists at one
In transaction marketing, marketing given point of time; it does not evolve in an
communication including sales is a central on-going relationship. Hence, the product as the
component. Marketing communication is core construct has to be replaced with a long-term
predominantly mass marketing, however with a construct that fits the nature of relationship
growing element of direct marketing. Sales are a marketing. The relationship approach puts
directly interactive element of the communication customer processes, or rather the internal value-
process. In the field of marketing communication a generating processes of customers, not products,
new trend towards integrating communication at the center of marketing. To be successful, the
elements such as advertising, direct marketing, supplier or service provider has to align its
sales promotion and public relation into a two-way resources, competencies and processes with the
integrated marketing communications perspective customer’s value-generating processes. This being
has emerged in North America during the 1990s the case, interaction evolves as a concept which
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Christian Grönroos Volume 19 · Number 2 · 2004 · 99-113

takes the place of the product concept. It has been However, the value process has another aspect
developed as one key construct in services as well. Before the development of elements of the
marketing and in the network approach to interaction process and of the dialogue process the
industrial marketing as well, and has been taken marketer must develop an understanding of the
over by relationship marketing. Thus, as the customer’s internal process which the solution
exchange of a product is the core of transaction provided by the seller should fit. The customer has
marketing, the management of an interaction some needs but also a process whereby the
process is the core of relationship marketing. In organizational customer fulfils these needs. Hence,
this process, a supplier of goods or a service firm it is not enough to understand the needs of
represented by people, technology and systems, customers, one must also know how they strive to
and know-how interact with its customer achieve the results required to fulfill these needs.
represented by everything from a single consumer This can be labelled the customer’s value-
to a group of buyers, users and decision makers in generating process (Grönroos, 2000a; compare
a business relationship. Sometimes, more parties also Storbacka and Lehtinen, 2000). Moreover,
in a network may be involved in the interactions one must know the value systems of the customer
(Gummesson, 1996). that guide this internal need-fulfilling and value-
Interactions may be prompted by planned generating process. Examples of such values are an
communication messages and programs, but for a interest in preserving the rain forests, in recycling
commercial relationship to develop successful waste, in minimizing stocks, in creating a
interactions have to follow. A dialogue between the manufacturing process with a minimum of
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supplier or service firm and its customers only ecologically harmful effects, and in keeping
emerge from value-enhancing interactions. Only standstill costs at a minimum. If the firm does not
planned communication activities easily lead to understand this aspect of the customer’s value
parallel monologues, where the two parties never systems and value-generating processes (this
actually meet and get access to what is shared or process could also be labeled the customer value
common between them. A dialogue process is chain), products, services, information and other
required for a sharing and even creation of elements of the interaction process cannot be
knowledge among the parties to occur. We will developed and offered in a satisfactory way, and
return to this in a later section. value for the customer cannot be created
successfully.

Value
One recent research stream in marketing is related
to customer perception of value created in on- The core: the interaction process of
going relationships (Ravald and Grönroos, 1996). relationship marketing
The importance of adding a relationship aspect in
studies of customer value has also been As was noted in the previous section, successful
demonstrated, for example, by Lapierre (1997), marketing requires a good enough solution for the
Payne and Holt (1999), Tzokas and Saren (1999), user. In transaction marketing, this solution is a
Collins (1999) and Wilson and Jantrania (1994). product in the form of a physical good or a core
In the interaction processes a value base is service. In relationship marketing the solution is
transferred to and also partly created together with the relationship itself and how it functions and
customers, and in the final analysis, the ultimate leads to value creation and need satisfaction for the
perceived value for them is emerging in the customer. Customers” perceptions of
customer processes. Thus, if the supplier or service relationships are holistic and cumulative. As we
provider manages to successfully align its resources have concluded before, the exchange or transfer of
(physical product elements, service elements, products managed in a trustworthy and timely
information and other resources of various kinds) manner are part of the relationship, but in addition
and competencies with its customers’ internal to that a host of service elements is required.
processes, in these processes this value base is Without them the products may be of limited value
turned into customer perceived value. This or without value for the customer. For example,
creation of value should be supported by delayed deliveries, late service calls, badly handled
marketing communication before and during the complaints, lack of information or unfriendly
interaction process of the relationship. Therefore, personnel may destroy an otherwise good solution.
a value process is needed to demonstrate how the The relationship proceeds in an interaction
customer indeed perceives the creation of value process where various types of contacts between
over time. When all three processes are in place the supplier or service firm and the customer occur
and well understood we have a good part of a over time. These contacts may be very different
theory of relationship marketing. depending on the type of marketing situation.
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Some contacts are between people, some between Interrelated acts form a minor natural entity in a
people and machines and systems, and some relationship, an episode such as a negotiation, a
contacts are between systems of the supplier and shipment of goods and dinner at a hotel restaurant
the customer, respectively. during a stay at that hotel. Every episode includes a
In order to be able to understand and in series of acts. For example, “a shipment may
practical marketing situations analyze and plan the include such act(ion)s as the placement of an order
interaction process one has to divide it into logical by telephone, assembling and packing the
parts. In the context of services the interaction products, transporting, . . . unpacking, making a
process has been studied in terms of acts, episodes complaint, and sending and paying an invoice”.
and relationship (Liljander, 1994; Liljander and (Holmlund, 1996, p. 49)
Strandvik, 1995; see also Storbacka, 1994; Interrelated episodes form the next level of
Strandvik and Storbacka, 1996; Stauss and analysis in the interaction process, a sequence.
According to Holmlund (1996, pp. 49-50)
Weinlich, 1995). According to Liljander and
sequences can be defined in terms of a time period,
Strandvik (1995) an episode is, for example, a visit
an offering, a campaign or a project, or a
to a bank office to discuss a loan, whereas an act
combination of these. “This implies that the
among other is the meeting with the loan officer
analysis of a sequence may contain all kind of
during the visit. In the context of business
interactions related to a particular year, when a
relationships, IMP researchers have traditionally particular project . . . has been carried out.
offered a two-level approach including short-term Sequences may naturally overlap”. To take another
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episodes including exchange of goods and services, type of example, in a restaurant context a sequence
information, financial and social aspects, and long- comprises everything that takes place during one
term processes leading to adaptation and visit to a particular restaurant.
institutionalization of roles and responsibilities The final and most aggregated level of analysis is
(Håkansson, 1982; Möller and Wilson, 1995). In a the relationship. Several sequences form the
more generic business relationship context, relationship. Sequences may follow one another
Holmlund (1996, 1997) has developed the directly, may overlap or may follow with longer or
understanding of the interaction process further, shorter intervals depending, for example, on the
in order to achieve an extended analytical depth in type of business. This way of dividing the
the analysis of relationships. In Figure 1 the interaction process in several layers on different
interaction process of the on-going relationship is levels of aggregation gives the marketer, and the
divided into four levels of aggregation: the act[1], researcher, a detailed enough instrument to be
episode, sequence and relationship level. used in the analysis of interactions between a
Acts are the smallest unit of analysis in the supplier or service providers and their customers.
interaction process, such as phone calls, plant In the formation of a relationship over time all
visits, service calls and hotel registration. In the different types of elements in the interaction
service management literature they are often called process, goods and service outcomes, service
moments of truth (Normann, 1992). Acts may be processes, information, social contacts, financial
related to any kind of interaction elements, activities etc. can be identified and put into their
physical goods, services, information, financial correct perspective.
aspects or social contacts.

Figure 1 Interaction levels in a relationship The planned communication process of

relationship marketing
According to the integrated marketing
communications concept, various marketing
communications media and communication
efforts have to be integrated into one consistent
message. However, only communicative activities
that are more or less purely marketing
communication, such as traditional advertising,
direct response, public relations and also sales
activities, are included (see the definition of
integrated marketing communications by the
American Association of Advertising Agencies”
Integrated Marketing Communications
Committee quoted in Reitman, 1994; see also
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Christian Grönroos Volume 19 · Number 2 · 2004 · 99-113

Frischman, 1994). Other communications efforts personally addressed letter creates an expectation,
are included only if they become transparent and and the interaction process must follow up on this
merge with the marketing communications expectation. If, for example, only the planned
elements, as when distribution and communication process is considered part of
communication might become the same in the case relationship marketing, negatively perceived acts
of direct response marketing (Stewart et al., 1996; or episodes in the interactions process easily
Stewart, 1996). destroy the initially good impression of a planned
The characteristic aspect of marketing communication effort, and no relationship
communication in a relationship marketing development takes place.
context is an attempt to create a two-way or As a conclusion, although communication
sometimes even a multi-way communication efforts such as sales negotiations and personally
process. Not all activities are directly two-way addressed letters may look relational, just planning
communication, but all communication efforts and managing marketing communication through
should lead to a response of some sort that distinct communications media, even as a two-way
maintains and enhances the relationship. Any process, is not relationship marketing. Only the
given effort, such as a sales meeting, direct mail integration of the planned communication and the
letter or an information package, should be interaction processes into one strategy that is
integrated into a planned on-going process. This systematically implemented creates relationship
planned communication process includes a variety marketing. In such a case customers’ perceived
of elements that, for example, can be divided into value of the relationship is developing favorably, as
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sales activities, mass communication activities, indicated by the value process circle in the middle
direct and interactive communication (other than of Figure 2.
sales efforts where a direct response is sought) and
public relations. Any other number or type of
categories could of course also be used, and the
Relationship marketing dialogue
suggested groups naturally include a number of
subgroups. Mass communication includes Activities on both the interaction process and
traditional advertising, brochures, sales letters planned communication process send messages to
where no immediate response is sought and other customers about the firm and its way of serving its
similar activities, whereas direct communication customers. Duncan and Moriarty (1997) divide
includes personally addressed letters including the possible sources of messages into four groups,
offers, information, recognition of interactions that namely, planned marketing communication (i.e.
have taken place, request of data about the messages sent as part of the planned
customer etc. Here, a more direct response is communication process), product and service
sought in the form of feedback from previous messages (i.e. messages created throughout the
interactions, request for more information or an interaction process) and unplanned messages,
offer, data about the customer, a purely social where the first group can be expected to have the
response, etc. lowest credibility and the last group the highest
In Figure 2 the planned communication process credibility in the minds of customers. Planned
is illustrated as a circle which parallels the marketing communication makes promises of how
interaction process, which in turn includes a a solution to a customer’s problems should
number of episodes consisting of individual acts. function. Product messages include, for example,
For the sake of illustration, various types of what the design, technical features, durability and
communication efforts have been depicted distribution of product elements in a relationship
throughout the on-going planned communication communicate to customers. Service messages
process. As can be seen this process often, but by originate from interactions with an organization’s
no means not always, starts before the interaction customer service and other processes. Unplanned
process. This is, of course, the stage where the messages are communicated via news stories,
relationship is established. From the point where employee gossip and word-of-mouth
the two processes go together the relationship is communication. In this context one should
maintained and further enhanced. At some point remember that absence of communication also
the relationship may be broken or terminated. The sends distinct messages and therefore also
interaction and planned communication processes contributes to the total communication process
indeed parallel one another, which means that they (Calonius, 1989). In Figure 3 these five sources of
should support and not counteract one another. communication messages (including absence of
The two-way arrows between the two circles in communication) in on-going relationships are
Figure 2 indicate this. An activity in the planned summarized and illustrated with examples
communication process, a sales meeting or a (Figure 3).
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Figure 2 The interaction, planned communication and value processes

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Figure 3 Sources of communication messages in a relationship

Planned marketing communication takes place in minds of customers their effects are probably
the planned communication process in Figure 2. accumulating. This is illustrated in Figure 4 by the
Product and service messages are created in the relationship communication globe. In the middle
interaction process. Word-of-mouth referrals and of the globe is the flow of interactions building up
other unplanned messages are a result of how episodes, sequences of related episodes and
customers and other individuals perceive these two eventually growing into a relationship (the
processes and how they support or counteract one interaction process zone of the globe). If the
another. The various types of messages are planned communication process with its planned
developing in a continuous process, and in the marketing communication (source 1 in the upper
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Figure 4 The relationship communication globe

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part of Figure 4) is supporting and supported by Being involved in a dialogue means that one avails
the product and service messages (sources 2 and 3) oneself of existing knowledge but also is involved in
created in the flow of episodes of the interaction creating new knowledge (Gummesson, 1999),
process, favorable unplanned communication which, among other things, may lead to the
(source 4) resulting in positive word-of-mouth development of better solutions for customers than
communication will probably occur (Grönroos otherwise would have been possible (Wikström
and Lindberg-Repo, 1998). Both the firm and the and Normann, 1994).
customer can be expected to be motivated to Customers should feel that the firm which
communicate with one another, which according communicates with them shows a genuine interest
to Dichter (1966) is a prerequisite for two parties in them and their needs, requirements and value
to engage in a dialogue. systems and in a convincing way argues for
A dialogue can be seen as an interactive process products, services or other elements of the total
of reasoning together (Ballantyne, 1999/2000), so offering. Furthermore, they should see that the
a common knowledge platform is possible. If this firm appreciates feedback and makes use of it. In
knowledge platform enables the supplier to create such a situation the communication aspects of the
additional value for the customer, relationship interaction process of relationship marketing
marketing is facilitated. Moreover, this should merge with the planned communication process
create extra value for the supplier as well. A into one single two-way communication process,
connection between the firm and the customer has i.e. the two processes merge into a relationship
to be made, so that they find that they can trust one dialogue (Grönroos, 2000a, 2000b). The
another in this dialogue or process of reasoning integration of planned communication messages
together. The intent of this process is to build with messages from the interaction process is
shared meanings, and get insights in what the two required for dialogue to emerge. When a customer
parties can do together and for one another gets personal experiences of products, services,
through access to a common meaning or shared information etc. in the episodes of the interaction
field of knowledge (Schein, 1994; Bohm, 1996). process, what Berlo (1960) calls connotative
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meaning might then be created. Through our for purchasing from a given supplier” (Lapierre,
personal experiences messages take on meaning[2] 1997).
and a common knowledge platform of shared One can also imagine that even if the solution in
meanings has a chance to develop. However, for terms of goods and services is not the best possible,
this to happen, all the parties involved have to be if the relationship is considered valuable enough
able to listen and respond to the other party’s the parties involved may still find an agreement.
messages. In other words, planned communication “Value is considered to be an important
messages do not lead to a dialogue. They may constituent of relationship marketing and the
initiate a dialogue process, but interactions and ability of a company to provide superior value to its
interaction-based messages are required for one- customers is regarded as one of the most successful
way or even parallel monologues to develop into a strategies...” (Ravald and Grönroos, 1996, p. 19;
dialogue. Finally, the nature and content of word- Heskett et al., 1994; Nilson, 1992; Treacy and
of-mouth referrals will probably differ depending Wiersema, 1993).
how long the customer has been involved in the When transactions are the foundation of
interaction process (Lindberg-Repo and marketing, the value for customers is more or less
Grönroos, 1999). totally embedded in the exchange of a product for
money in an episode. The perceived sacrifice
equals the price paid for the product. However,
when relationships are the base of marketing, the
The value process of relationship
role of the product becomes blurred. In the case of
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marketing industrial robots, for example, if the customer is to

be satisfied with what has been bought, delivery,
Clearly, relationship marketing takes more efforts
customer training, maintenance and spare part
than transaction marketing. Therefore, a
service, information and documentation about the
relationship marketing strategy must create more
use of a robot, claims handling and perhaps joint
value for the customer or for some other party,
development of the final robots, and a number of
such as a distributor, than the value of the mere
other activities, are necessary additions to the core
transactions of goods or services in single episodes.
solution – the robot. If the additional services are
The customer has to perceive and appreciate this
value that is created in the on-going relationship. missing or not good enough, it is easy to see how
As a relationship is a process over time, value for the value of the core of the offering becomes highly
customers is also emerging in a process over time. questionable. In a case like this the role of the core
We call this a value process. If relationship product to the value perception of customers is
marketing is to be successful and accepted as indeed very much blurred. Without the value-
meaningful by the customer, there must be such a adding additional services it is highly questionable
positive value process paralleling the planned whether the core product, in this case the
communication and interaction processes that is industrial robot, has any value at all.
appreciated by the customer. In a relationship context the total offering
Traditionally, value has been used in the includes both a core solution and additional
marketing and consumer behavior literature as services of various kinds (for instance, as
“the value of customers for a firm”. Only to some demonstrated by the example of industrial robots).
extent has “value for the customer” been discussed The sacrifice includes a price and also additional
in the literature (for example, Peter and Olson, costs for the customer, owing to the fact that one is
1993; Zeithaml, 1988), and then it has more or less in relationship with another party. In a relationship
been in a transaction marketing context. For context such additional sacrifice can be called
example, Zeithaml (1988) defines customer relationship costs (Grönroos, 2000a). Such costs
perceived value as the consumer’s overall follow from the decision to go into a relationship
assessment of the utility of a product based on a with a supplier or service firm. Relationship costs
perception of what is received and what is given. may increase, if the customer, for example, has to
However, as Ravald and Grönroos (1996, p. 23) keep larger inventories than necessary because of
observe, “the relational aspect as a constituent of the delivery policy of the supplier (directly
the offering is not taken into account. . . . We occurring relationship costs) or suffer from higher
suggest that the relationship itself might have a standstill costs than expected because of delayed
major effect on the total value perceived. In a close repair and maintenance service or some other
relationship the customer probably shifts the focus deviation from what has been agreed on (indirectly
from evaluating separate offerings to evaluating the occurring relationship costs). Sometimes
relationship as a whole. The core of the business, relationship costs are also purely psychological
i.e. what the company is producing, is of course costs caused by the customer’s feeling that he or
fundamental, but it may not be the ultimate reason she has lost control of the situation or cannot trust
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Christian Grönroos Volume 19 · Number 2 · 2004 · 99-113

a supplier or service firm to perform according to should always remember that the value-enhancing
plans. effect of new services is counteracted and often
Another way of looking at value for customers is offset by the value destruction of existing services
to distinguish between a core value of an offering that are perceived in a negative way.
and an added value of additional elements in the Finally, as demonstrated by equation (3), on top
relationship. Finally, the value for customer in a of the value created by singular episodes (including
relationship can be seen as the sum of an episode the exchange of, for example, product elements,
value component and a value component that is service elements, information or other kinds of
embedded in the relationship itself. Hence, resources), customer perceived value can be
customer perceived value (CPV) in a relationship expected to include an explicit value component
context can be described with the following three related to the mere fact that a relationship with a
equations (Grönroos, 2000a): supplier or service provider exists (compare Sheth
Coresolution þ additional services and Parvatiyar, 1995b; and Bagozzi, 1995). This
CPV ¼ ð1Þ value component includes, for example, a feeling
Price þ relationship costs
of security, and a sense of trust, controlled
relationship costs and minimized purchasing risks.
CPV ¼ Core value ^ added value ð2Þ This relationship value part of the equation should
be positive, of course. However, if value
CPV ¼ Episode value ^ relationship value ð3Þ destructors are present in the relationship, it can
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also be negative. In that case it is debatable

In a relationship customer perceived value is whether the customer perceives that a relationship
developing and perceived over time. In equation with the other party really exists. The customer
(1), the price has a short-term notion; in principle may continue doing business with the same
it is paid on delivery of the core product. However, supplier only because of bonds related to, for
relationship costs occur over time as the example, price, location or technology.
relationship develops, the usefulness of the core Theoretically, it seems important to keep the
solution is perceived and the additional services are episode and relationship value components apart.
experienced in sequences of episodes and single Customer may, however, not always perceive them
acts. In equation (2), a long-term notion is also separately.
present. The added value component is The core solutions and additional services
experienced over time as the relationship develops. provided in the sequences of episodes in the
However, here it is important to observe the interaction process should create a perceived value
double signs. Often added value is treated as if for the customer on an on-going basis. The core
something is always indeed added to a core value. value should not be counteracted by negative
This is clearly not the case, because the added added value through badly or untimely handled
value can also be negative. For example, a good services. Simultaneously, the communication
core value of a machine can be decreased or even activities in the planned communication process
destroyed by untimely deliveries, delayed service, should support this value process and not
lack of necessary information, bad management of counteract or destroy it.
complaints handling, unclear or erroneous In conclusion, a successful relationship
invoices, etc. The additional services do not add a marketing strategy requires that all three of the
positive value, instead by creating high and processes discussed be taken into account in
unexpected relationship costs they subtract from relationship marketing planning. The interaction
the basic core value, i.e. they provide a negative process is the core of relationship marketing, the
added value or cause value destruction. planned communication process is the distinct
In situations with negative added value, creating communications aspect of relationship marketing,
added value for customers does not necessarily and the value process is the outcome of
require the addition of new services to the offering. relationship marketing. When these processes are
Instead, in order to reduce or altogether eliminate integrated a consistent total marketing
the negative added value or rather value communication impact is created. If this
destruction effects, the firm must improve existing integration is successful, the interaction and
services in the relationship, such as deliveries, planned communication processes may merge into
service and maintenance, invoicing, etc. Probably, a dialogue in an on-going relationship between a
this is a faster and more effective way of creating customer and a supplier or service provider.
added value in most relationships than what the If the progress of the customer value processes is
addition of new services is. When appropriate, new not carefully analyzed, wrong or inadequate
services, or physical product components, can of actions in the two other processes may easily be
course be included in the offering. However, one taken. In that case, owing to conflicting signals to
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Christian Grönroos Volume 19 · Number 2 · 2004 · 99-113

customers and promises which are not fulfilled, the customer relationships has often been minor.
value process may easily take a negative turn. If Marketing departments have frequently been
anyone of the three key processes is not analyzed preoccupied with planned marketing
and planned carefully, the implementation of communication, however without integrating this
relationship marketing may suffer. very much with other elements of the relationships
with the firm’s customers. In business-to-business
relationships the relationship perspective offers a
comprehensive framework for integrating planned
Conclusions communication with the whole range of interactions
with customers that take place. In that way
In the literature relationship marketing is often
marketing can truly be instilled in the organization
offered as a solution for all customers in all
and a true customer orientation be achieved..
situations where such a relationship approach is
The phenomenon “marketing”, i.e. managing
suitable. This is probably not the case. Some
the market relationships of an organization, is
customers may be more willing to accept a
increasingly important, but the term “marketing”
relational contact with a firm, whereas others may
may not always be the best possible anymore.
want to have a transactional contact. Moreover, a
Although in principle, people outside the group of
person may in one situation be interested in a
marketing specialists, for example the part-time
relationship and in other situations not. “Thus, in
marketers and their supervisors and managers,
a given marketing situation the consumer (or user
may accept their role and responsibilities as part-
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in a business-to-business relationship) is either in a

time marketers, they do not necessarily want to
relational mode or in a transactional mode.
associate themselves with something that is
Furthermore, consumers in a relational mode can
labelled marketing. For many of them the term
be either in an active or passive relational mode.
marketing has a meaning which is colored by its
Consumers or users in an active mode seek
contact, whereas consumers in a passive mode are transaction marketing history. Frequently
satisfied with the understanding that if needed the marketing as practised by the marketing
firm will be there for them” (Grönroos, 1997, department has lost its credibility. “To create an
p. 409). There has been some suggestions in the understanding of relationship marketing in an
literature why customers choose to enter a organization and to implement a culture of
relational mode and react favorably to a relationship marketing, it may be necessary to
relationship marketing approach (for example, replace the term marketing with a psychologically
Sheth and Parvatiyar, 1995b; Bagozzi, 1995), but more readily accepted term to describe the task of
so far there is almost no empirical research in this managing the firm’s customer relationships”
area. For example, we know far too little about the (Grönroos, 1999, p. 334). This notion offers
antecedents of an active or a passive relational interesting and challenging research opportunities.
mode, and about endogenous or exogenous factors To some people, academics as well as practitioners,
that trigger a shift from a transactional mode to a the idea of abolishing the term marketing may
relational mode or from a passive relational mode sound unnecessary, even heretic, but there are
to an active one. examples of firms that have renamed the process of
When the process of managing the firm’s market managing their market relationships, and with
relationships is approached from a relationship successful results as far as the customer orientation
perspective, marketing is spread throughout the of the organization as well as an increased
organization. Marketing resources, for example acceptance of “marketing” throughout the firm are
part-time marketers (Gummesson, 1991), are concerned (see, for example, Grönroos, 2000a).
found all over the firm, and not only in a marketing We should also remember that the term
department. Although specialists on traditional “marketing” is not more than a century old,
marketing areas such as market research, whereas the phenomenon “marketing” is as old as
marketing communication and pricing still are the history of trade and commerce. The term used
needed, of course, marketing is no longer only or for this phenomenon has been changed before.
even predominantly a function of its own. It A shift towards the adoption of a relationship
becomes part of many functions in the firm. In marketing approach will demand a number of
such a situation “marketing cannot be organized. changes to old structures and attitudes.
. . . Marketing can only be instilled in the Substantial internal marketing (George, 1990;
organization” (Grönroos, 2000a, p. 311). Ballantyne, 1997; Grönroos, 2000a; Voima, 2000)
In business-to-business relationships the will be required. The traditional way of organizing
problems with traditional marketing mix the firm, the system for planning marketing, the
approaches have long been recognized. In many methods and instruments for measuring success in
firms the role of marketing as a separate function in the marketplace, the philosophy of market
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Christian Grönroos Volume 19 · Number 2 · 2004 · 99-113

segmentation as a way of structuring the total marketing”, Marketing Thought and Practice in the 1990s,
market into a meaningful market platform, to Proceedings from the XVIIIth Annual Conference of the
mention a few only, have to be challenged, which European Marketing Academy, Athens.
Christopher, M., Payne, A. and Ballantyne, D. (1991),
we have done in another context (Grönroos,
Relationship Marketing: Bringing Quality, Customer
1999). The need for such changes is really not very Service and Marketing Together, Butterworth-Heinemann,
surprising. After all, most of the structures and Oxford.
attitudes that still are dominating marketing Collins, B. (1999), “Pairing relationship value and marketing”,
research and the practice of marketing alike are Australasian Marketing Journal, Vol. 7 No. 1, pp. 63-71.
from the industrial era where a transactional Coviello, N.E. and Brodie, R.J. (1998), “From transaction to
approach to marketing did well for firms. relationship marketing: an investigation of managerial
perceptions and practices”, Journal of Strategic
However, today we live in a post-industrial society, Marketing, Vol. 6 No. 3, pp. 171-86.
sometimes labeled “the new economy”. Marketing Coviello, N.E., Brodie, R.J., Brookes, R.W. and Collins, B. (1997),
cannot live on untouched by the changes in the “From transaction marketing to relationship marketing: an
surrounding world. investigation of market perceptions and practices”, Fifth
International Colloquium in Relationship Marketing,
November, Cranfield University, Cranfield.
Dichter, E. (1966), “How word-of-mouth advertising works”,
Notes Harvard Business Review, Vol. 44 November-December,
pp. 147-66.
1 Holmlund (1997) uses the term action, but here we use the Duncan, T. and Moriarty, S. (1997), Driving Brand Value,
term act, originally suggested by Liljander and Strandvik McGraw-Hill, New York, NY.
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