Background &

Theory of
Relationship
Marketing
Compiled by Dr Rosaline Fernandez
Objectives of Lecture
By the end of this lecture you should know:
1. the definition of relationship marketing;
2. the background of relationship marketing;
3. theories of relationship marketing;
4. the difference between Customer Relationship Marketing &
Relationship Management.
Relationship Marketing

Relationship marketing is a
Relationship marketing is not
type of marketing that focuses
focused on short-term wins or
on cultivating deeper, more
sales transactions -- rather, it
meaningful relationships with
is focused on delighting an
customers to ensure long-
audience and your customers
term satisfaction and brand
for the long-haul.
loyalty.
Main Influencers of Relationship Marketing
Traditional
Marketing

Marketing of Industrial
Services Marketing

Customer
RELATIONSHIP Industrial
Service
MARKETING Networks
Quality

Customer
Supply Chain
Retention
Management
Studies

Total Quality
Management
 Focuses on long term rather than short term

Emphasizes retaining customers over making a sale

Ranks customer service as a high priority

Relationship
Marketing Encourages frequent customer contact

Fosters customer commitment with the firm

Bases customer interactions on cooperation and

trust

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• Firms build long-term relationships in

four ways
• Gather information about their
Elements of customers
• Analyze the data and use it to modify
Relationship the marketing mix
Marketing • Monitor interactions with customers
• Use customers’ preferences and
knowledge
 To build long-term relationships
firms must understand what
customers need, want, and expect

Understanding
Customer Must measure customer
satisfaction
Needs

Marketers need to keep in touch

with the needs of current and
potential customers

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Obtaining Customer Sources of
Some firms hire
Feedback mystery
information
shoppers
and Ensuring include toll free
posing as
Satisfaction numbers or
customers to
online
evaluate
feedback
service

Complaints
help firms Some firms
overcome conduct
problems and surveys to
demonstrate measure
commitment to satisfaction
service

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• Consumers form relationships to:

Building • Reduce choices
• Simplify information gathering and the entire buying
Buyer-Seller process

Relationships • Reduce the risk of dissatisfaction

 Perceived positive value
received in a long-term
buyer-seller relationships is
Building a key benefit for customers
Buyer-Seller
Relationships Customers may switch
loyalties if they perceive
better benefits from a
competitor
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 Retaining customers is more
profitable than losing them

How
Marketers Customer churn - Is expensive
for a
Keep Customer turnover company

Customers
Firms generate more profits
with each additional year of a
relationship

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 Frequency marketing -
Frequent-buyer or -user
How marketing programs that reward
customers
Marketers
Keep Affinity marketing - Solicits
Customers responses from individuals who
share common interests and
activities

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Theories of Relationship Marketing
GUMESSON’S NINE ISSUES TO CHALLENGE TRADITIONAL MARKETING THINKING

1. The many headed customer and the many headed seller.

2. The real customer does not always appear in the market place.
3. The customer as co-producer
4. Market mechanisms are controlled externally.
5. Market mechanisms are brought inside the company.
6. Inter-functional dependency and the part-time marketer.
7. Process management and the internal customer.
8. Internal marketing.
9. Relationship quality.
Four Partnerships Approach to
Relationship Marketing
Supplier partnerships
- Goods suppliers
- Service suppliers

Internal partnerships
- Employees External partnerships
_ Functional
departments
- Internal business
FIRM - Competitors
- Alliances
- Governments
units

Customer
partnerships
- Intermediate
customers
- Final customers

Source: Adapted from Morgan and Hunt (1994) and Doyle (1995)
The Six Markets Model

Internal
markets

Supplier and
Referral
alliance
markets
markets
CUSTOMER
MARKETS

Staff
Influence
recruitment
markets
markets
 GUMMESSON’S 30Rs
Classic market relationships Mega relationships
1. Supplier-customer 18. Personal and social networks
2. Supplier-customer-competitor 19. The real customer does not always appear in the marketplace

3. Distribution channels 20. Alliances change market mechanisms

Special market relationships 21. The knowledge relationship
4. Full-time marketers, part-time marketers 22. Mega alliances change market conditions
5. Customer-service provider 23. Mass media relationships
6. Many-headed customer-many-headed seller Nano relationships
7. Supplier – customer’s customer 24. Market mechanisms are brought inside the company
8. Close versus distant relationships 25. Internal customer relationships
9. Dissatisfied customers 26. Quality relationships between operations and marketing
10. Monopoly relationships
11. Customer as ‘member’ 27. Relationships with the employee market
12. Electronic relationships 28. Two-dimensional matrix relationship
13. Relationships to symbols and objects 29. Relationships to external providers of marketing services
14. Non-commercial relationships
15. Green relationships 30. Owner-financier relationships
16. Law-based relationships
17. Criminal networks
Criticisms of Relationship Marketing
(RM)
RM is Nothing New

RM Lacks Conciseness

RM is Easier Said than Done

5 Reasons Why Relationship Marketing is Important in Business

Build the Know, Power of Word of Create Business Stay On Top Of Your Add Your Own
Like and Trust Mouth Referrals Opportunities Audience’s Needs Sparkle
Factor
 Grassroots marketing - Connecting
directly with existing and potential
customers through nonmainstream
channels

Customers as Viral marketing - Satisfied

customers spread the word about
Advocates products to other consumers

Buzz marketing - Gathers

volunteers to try products and then
relies on them to talk about their
experiences
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Difference between Customer
Relationship Marketing &
Customer Relationship
Management.
 Reduce Reduce marketing and promotion costs

Database Boost
Boost sales volume per customer or
Marketing targeted customer group

Expand Expand loyalty programs

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• Possible sources of data

• Credit card applications
• Software registration
• Product warranties
Database • Point-of-sale register scanners
Marketing • Customer opinion surveys
• Websites
• Telecom companies database
 Combination of strategies and
tools that drive customer
relationship programs

Customer
Leverages technology to manage
Relationship customer relationships
Management
Integrates all stakeholders into a
company’s product design and
development
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 Software
systems can
make sense of
huge amounts
of data

Benefits of Simplifies
complex

CRM business
processes

CRM can be • On-demand

used at two
different levels • On-premises
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 Requires companywide
commitment and knowledge
to use the CRM system
Problems
With CRM Failure to effectively reorganize
firm’s people and processes to
take advantage of benefits a
CRM system offers

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The End