MANAGING BUSINESS RELATIONSHIPSWEEK 6, LECTURE 2. FROM TRANSACTIONS TO

RELATIONSHIP MARKETING

Relationships in Marketing

Lecture Agenda

Development of relationship marketingWhen to use relationship marketingKMV model of relationship marketingSatisfactionRelationship intensity

Relationship Marketing

Remember definition?“Identify and establish, maintain, and

enhance, and when necessary, terminate relationships with customers and other stakeholders, at a profit, so that the objectives of all parties involved are met. This is achieved by a mutual exchange and fulfilment of promises” (Gronroos, 1994, p. 9)

Relationship Marketing

RM has developed out of transaction and ‘product’ perspectives on exchange

behaviour into one that values the needs of the ‘people’ involved within a series of

exchanges.

RM is about collaboration….. not adversarial or competitive activities.

Transactional or Discrete Exchanges

Transactional Exchanges

Transactional Exchanges

Transactional Exchanges

Product & Price Orientation

One-Off

No History and No Future

Driven by the 4Ps Marketing Approach

Collaborative Exchanges

Transactional Exchanges

Collaborative Exchanges

Relationship Orientation

A Series of Transactions

History and a Future

Driven by a Customer Relationship Approach

A Range of Relationships

Relationships are far from static nor are they polar: they vary in intensity, are dynamic and change with context. We do not always want, or choose, to have

intense relationships.

To be successful it is necessary for marketing (managers) to recognise the range and depth of

relationships that organisations and their customers desire.

Continuum of Exchanges

Fill (2011, p. 558)

A Range of Relationships

Prospect

Customer

Client

Supporter

AdvocateEmphasis onlong-termloyalty

Emphasison one-offtransactions

When to Use Relationship Marketing

Use relationship marketing when:Customers have long time scales

Especially applicable for large scale B2B projects

When switching costs for consumers are high Which would decrease the likelihood of winning

customers from competitors

When customer has a relationship (rather than a cost) orientation

When benefits of the relationship outweigh the costs

Types of Relationship at DaimlerChrysler

Transaction Coordination Cooperation Alliance

Based on…. Data Information Exchange

Knowledge Transfer

Specialist knowledge build up

Lasts for… Length of Transaction

Length of contract

Series Life Cycle

Beyond the Life Cycle

Level of Commitment

Suppliers not

Integrated

Limited Integration

Strong Integration

Seamless

Examples Pencils Mouldings Exhausts Fuel Cells

Adapted from Wagner and Boutellier (2002)

Relationship Revenues v Costs

Sleeping giants

Power traders

Pets Delinquents

Low High

High

Low

Relationship costs

Rela

tion

ship

re

ven

ue

Kotler, et al (2008, p. 396)

Relationship Revenues v Costs

Sleeping giants Very lucrative but undemanding

Power traders Take up a lot of effort, but have high revenue

Pets Similar to power traders Both could be best served with transaction marketing

Delinquents Most difficult groups to deal with Can offer lower levels of service to reduce costs, since

defection is not such a loss

Trust and Commitment

Commitment is associated with a partner’s consistency, competence, honesty, fairness,

willingness to make sacrifices, responsibility, helpfulness and benevolence

© Chris Fill

Trust is the confidence that one party has in the other’s reliability and integrity.

Morgan and Hunt (1994)

The KMV Model of Trust and Commitment

Trust

Commitment

Cooperation

© Chris Fill

Morgan and Hunt (1994)

The KMV Model of Trust and Commitment

© Chris Fill

Trust

Commitment

TC

C

OB

SV

RB

Cooperation

A

PL

FC

U

Morgan and Hunt (1994)

+ +

+

+ +

++

+

+

-

- -

+

Loyalty or Satisfaction?

Satisfaction is derived from trust and commitment

© Chris Fill

Loyalty is possible without commitment

Trust, Commitment and Satisfaction

A natural outcome from building trust and developing commitment is the establishment of customer satisfaction.

Satisfaction is thought to be positively related to customer retention which in turn leads to an improved return-on-investment and hence profitability.

Many organisations seek to improve levels of customer satisfaction, with the intention of strengthening customer relationships and driving higher levels of retention and loyalty.

Ravald and Gronroos (1996)

Satisfaction and Retention

“Totally satisfied customers were six times more likely to repurchase Xerox products over the next 18months than its satisfied customers” Jones and Sasser (1995, p. 91)

For less than totally satisfied customers, the possible increase in satisfaction from another brand, is worth the risk of potentially lower levels of satisfaction

Successful relationships are more likely to lead to totally satisfied customers, but… … totally satisfied customers are more likely return for another sale The sooner the organisation can establish trust and commitment

the more likely it is to retain customers

Relationship Intensity

Factors previously discussed can be combined with a couple more into one model of relationship intensity

Fill (2011, p. 569 citing Bruhn)

Relationship Intensity

Relationship quality is “the capability of one of the relationship parties to reduce the complexity of transactions, lower the uncertainty and raise the interaction efficiency between the interaction parties” Bruhn (2003, p. 63)

Relationship Intensity

Purchasing behaviourHow does the buyer act in relation to the purchase

(e.g., impulsive or deliberate)

Information behaviourExtent of search for competitive products

Integration behaviourHow much information does the buyer share about

themselves that is relevant to the purchase

Communication behaviourDoes customer spread WOM concerning the

company?

Thing to Remember

Development of relationship marketing

That transactional and collaborative exchanges can exist side by side

The links between trust, commitment and relationship

How relationship intensity develops