Brainwave

RELATIONSHIP MARKETING: A PARADIGM SHIFT

Vibhava Srivastava

Research Scholar, School of Management Studies,

MNNIT, Allahabad

Vibhava.sri@gmail.com, +91-9450591896

 

RELATIONSHIP MARKETING: CONCEPT

In the present era of intense competition and demanding customers, Relationship Marketing (RM) has grabbed the attention of scholars and practitioners. Contemporary Marketing academia identifies RM as a paradigm shift from transaction oriented traditional marketing practices to a strategic approach towards building, managing and enhancing relationships with in the purview of marketing domain. It had a major impact upon the marketing discipline shifting the focus from transactional to relational marketing. Various terms synonym to RM, have evolved over the period of time viz relational contracting, symbiotic marketing, relational marketing, working partnerships, strategic alliances, internal marketing and co-marketing alliances. However these terms are encompassed in the concept of RM. The earlier and the first official definition of marketing, given by American Marketing Association(AMA,1985) states that “Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchange and satisfy individual and organizational objectives”. This view of marketing, however was considered outdated, and its’ relevance was found only to certain types of firms and markets (Hakansson 1982; Gummesson, 1987, 1994; Gronroos, 1989). Further, argument was made that AMA perspective is overly clinical and based solely on short-term economic transactions (Moller, 1992). Such criticisms have led to the suggestion that a paradigm shift in marketing is needed if marketing is going to survive as a discipline (Gronroos, 1995) and companies must move from short-term transaction-oriented goal to long-term relationship-building goal (Kotler, 1992). That is the reason why RM has been viewed as buyer–seller encounters that accumulate over time with opportunities to transform individual and discrete transactions into relational partnerships (Czepiel, 1990). This view supports the notion that a relationship exists when an individual exchange is assessed not in isolation, but as a continuation of past exchanges likely to continue into the future (Wong and Sohal, 2002). Thus it is pertinent to say that RM ensures the continuation of exchange process between buyer and seller by managing the existing relationship (Levitt, 1986).

The concept of RM has evolved gradually. It was first evident in service marketing as customer was identified as an integral part of the marketing and delivery process which subsequently necessitates a close relationship between the customer and the service provider. The phenomenon RM was first identified by writers like Berry (Berry et al, 1983), Gronroos (1990) and McKenna (1991). Although McKenna has often been credited with the term "RM", but it was Berry who first defined and analyzed in scientific literature. However there was also a parallel development in industrial marketing which contributed to the development of RM (Gronroos, 1990). In fact there have been two routes of the evolution of the present-day RM. The first was a gradual realization of the importance of relationships, initially in service marketing and partly in industrial marketing. The second route was through a transformation of business in general, due to rapid and radical changes in the environment. These changes resulted in an emphasis on service, close customer contact, and a holistic view of the parties and processes involved in marketing and business. The emphasis is on a holistic view of the supplier-manufacturer-customer chain and process quickly became visible (Aijo, 1996). Cravens and Piercy (1994) suggested that the cornerstones of RM are 'customer retention' and 'process orientation', two issues that are likely to strike a chord with every organization at the present time. RM is now considered to be a feasible strategy in mass consumer markets (Christy et al 1996; Gronroos, 1996; Sheth and Parvatiyar, 1995). Nevin (1995) quotes that RM has been used to reflect a variety of themes and perspectives which range from industrial marketing perspective to service marketing perspective. RM thus has evolved as a strategic marketing approach which is oriented towards attaining long-term profitability and value creation by interactions and mutual exchange among customers, suppliers and other stakeholders. It is an approach which can be adopted to enhance the competitiveness and profitability in current business scenario.

 

RELATIONSHIP MARKETING: PRACTICES

Having understood the concept and different aspects of RM, it can be said that a focal firm is supposed to manage a number of relationships ranging from supplier, intermediaries to customers and other stakeholders. Though the term RM and Customer Relationship Management (CRM) are used interchangeably but it is the term RM which encompasses CRM. CRM is primarily concerned with developing, managing and enhancing relationship with customers while RM has much wider scope. CRM has identified as a strategic approach towards retaining the existing customers as well as acquiring the new one. It is more visible in service industry due to the reason that service firms like banks, insurance providers, airlines, and telecom service providers etc. have more direct and frequent interaction with the customers. Though existence of CRM is also found in manufacturing industry but the same is being practiced mostly by the intermediaries firms since they have direct and frequent interaction with the customers. CRM is being practiced by such firms on different touch points. These touch points can be identified as points where customers are expected to interact with the representatives of the firm; it could be dealer’s outlet, service center, call center and even customer’s place where a representative eventually makes a visit. Various CRM programmes like loyalty programme, bonus point, and referral programme are being introduced nowadays to retain the customers. CRM intends to make a customer move through loyalty ladder in order to become partner to the firm. It starts with the identification of those who might be their customers and seem to be profitable in the long run with the help of external and internal database. Once they have been identified, effort is made by the firms to develop a sense of recognition among those customers who are loyal to the firm and it is done by rewarding them. This sense of recognition generates a huge impact which subsequently makes customers more attached and loyal to the firm. Apart from these activities providing information to the customers, getting regular feedback from them regarding the products and/or services offered, and making them satisfied rather delighted at different touch points, also comes under the purview of CRM. That is how relationship with customers is developed, managed and enhanced.

However managing relationship with customers is just a one aspect of RM. As it is evident that firm whether manufacturing or service does not operate in isolation. They operate in aggregations with various stakeholders and create synergies through value delivery network/supply chain. The key and more visible relationships across the network can be identified as relationship of focal firm with suppliers and with customers. In order to manage relationship with supplier(s) a number of programmes are practiced by the firms particularly in manufacturing industry as the supply chain is more visible in such industry. These programmes are mostly collaborative or cooperative in nature, based on the fact that the parties involved are non-competitors and the objective of such relationship could be strategic or operational. The most suitable example could be the Japanese automaker and US automakers as earlier has contractual relationship with their supplier while the later has adopted arm’s length approach i.e. no relationship with the supplier as such. That is the reason why Japanese automakers have been able to have edge over their US counterparts.

Discrete entities having mutual objectives signify successful relationship between the stakeholders. Intense competition and the growth of alliances force firms to develop better supplier relationships to maintain a competitive edge. A successful relationship with supplier can result into a number of benefits viz cost benefits and revenue benefits ultimately leading to value creation at all levels.