Services and Relationship Marketing Management - Research Paper Example

? Services and Relationship Marketing Management: Research Review Report Introduction In today’s highly competitive and fast changingglobal business environment, businesses are increasingly becoming responsive to market trends developing a strategy towards sustainability and enhanced profitability. Market forces such as globalization, technological advancements, shifting consumer needs and increasing demands, in addition to pressures of increased competition, and product and/or service homogeneity have necessitated the adoption of strategic relationship marketing. Relationship marketing refers to the process of identifying and establishing, sustaining, enhancing, and when deemed necessary, ending relationships with customers and other organizational stakeholders at a gain; in doing so, all the parties involved achieve their objectives. In the pursuit of all these, mutual giving and fulfillment of promises becomes a focal point in businesses, thus making relationship marketing a very crucial aspect in the services and relationship marketing management of firms today. Relationship marketing is beneficial to firms because it is an effective way of fostering customer loyalty and re-patronage behavior; consumers who are actively engaged in relational exchanges present with higher levels of satisfaction than those who are in discrete transactions. These higher levels of satisfaction could be attributed to the ease and psychological comfort that consumers will tend to have because of purchasing from a familiar company. In this regard, many companies consider investments in complaint handling a strategic route of increasing customer commitment to the firms and building customer loyalty that lasts as long as both parties are in business. Service firms are prone to mistakes that oftentimes result in regrettable service failures that are potentially harmful to their profitability and market reputation; in this regard, service failures present the firms an opportunity to demonstrate excellent service experience and ensure customer retention. However, the service recovery paradox states that customers are more likely to leave a service failure more satisfied and loyal to their firms than when there is no service failure, so long as their problem is resolved efficiently. This paper presents a critical review of 3 peer-reviewed journal articles with an aim of establishing whether customer loyalty is considered a critical antecedent to the success of post-recovery satisfaction, whether compensation is always necessary in service recovery, and whether the “service recovery paradox” is influenced by the severity of the service failure. Review After a systematic, intensive, and extensive research review, it has emerged that indeed customer loyalty is a critical precursor to the success of post-recovery satisfaction, compensation is always necessary in service recovery, and the severity of the service failure influences the “service recovery paradox” accordingly. According to Tax, Brown, and Chandrashekaran (1998), recovering effectively from service failures contributes remarkably to customer evaluations of firms. Firms that engage in effective complaint handling strategies have extremely high customer retention rates, which eventually deflect the impact of bad publicity from damaging word of mouth, thereby achieving increased outcomes in terms of increased returns on investment, among other positive outcomes. A case study in the article recorded $11 million of additional revenue in a fiscal year, apart from the highest customer retention rate in the industry, after having implemented a service guarantee that was part of an initiative to ensure customer problems are dealt with effectively (Tax, Brown, & Chandrashekaran, 1998). Effective resolution of customer problems and relationship marketing lead to customer satisfaction, enhanced trust, and commitment; complaint handling strategies particularly in managing customer relationships in service businesses are very crucial in today’s highly competitive and fast changing global business environment. The daunting challenge faced by firms in managing quality, coupled with the role of customers in the service production process and evidence that customer loyalty drives profits, makes complaint handling a critical defining moment in maintaining and developing relationships (Tax, Brown, & Chandrashekaran, 1998). Overall, customer loyalty, established through subsequent previous experiences of firms’ complaint handling effectiveness, is thus a critical precursor to the success of post-recovery satisfaction: customers are more comfortable with their familiar organizations, so firms are more likely to benefit from effective problem handling. According to Randi (2003), relationship marketing is an effective way of developing customer loyalty, which results in positive outcomes for both consumers and marketers alike. Businesses may benefit from relationship marketing in terms of having satisfied customers, stronger profitability, better communications, and more effective firm planning, while customers may benefit in terms of simplified buying and information-processing tasks, reduced risk, and enhanced psychological comfort. Managers may utilize relationship-marketing techniques to deal with customer service issues that may impinge on the businesses, such as customer complaints about products and services; firms should be able to allow redress following customer complaints because showing genuine interest in customers’ satisfaction leads to long-term customer loyalty, positive firm evaluation, and increased profitability. Businesses should engage in more relational exchange transactions with their customers, which allow for constant interactions over time as opposed to mere discrete transactions, which simply involve the exchange of money for a product. Businesses should encourage their customers to seek redress because by responding to customer complaints, businesses may potentially remedy the problem and prevent bad publicity that may be potentially damaging to the firms’ reputation (Randi, 2003). Customers are more likely to complain if they feel that by doing so they may get successful outcomes, and less likely to complain if they think that such an action may not yield any successful results. Overall, compensation is very essential to service recovery and the severity of the service failure influences the service recovery paradox accordingly; in addition, the enhanced customer loyalty is crucial to the success of the post-recovery satisfaction. Finally, Myhal, Kang, and Murphy (2008) contend that relational marketing, as opposed to traditional marketing, is increasingly becoming a common phenomenon in firms due to emerging market trends. Businesses are responding to market forces such as globalization, increased competition, increasingly demanding customers, technological advances, and product or service homogeneity by applying relationship-marketing strategies. High quality business relationships are potential sources of competitive advantages to firms, thus firms develop certain competencies that are specific to their industries but unavailable to rival firms. These relationships are assets that comprise part of global value delivered to customers, and the ability of firms to assess and control these relationships and to enhance their quality is important in order to manage their contribution to customer retention and satisfaction. Parallelism exists between relationship marketing and relationship quality: relationship quality is for relationship marketing just as service quality is for service marketing. Extensive customization is essential in service oriented business-to-business situations. According to research, service business customers tend to stick with the same service providers so long as they are continuously satisfied (Myhal, Kang, & Murphy, 2008); firms that engage in conscious activities aiming to build and maintain such relationships can achieve greater financial performance, customer trust, commitment, and satisfaction. Customer-facing staff training should encompass good customer relationships such as being helpful to customers, offering a warm reception to customer queries, and response to individual customer needs, among other things; effective firm handling of customer complaints should also be every firm’s prime goal. In this regard, whereas compensation is always necessary in service regaining, customer loyalty leads to the success of post-recovery fulfillment, and the cruelty of the service disappointment influences the “service recovery paradox.” Discussion Ultimately, relationship marketing is a crucial aspect of services and relationship marketing management, especially in today’s fast changing and highly competitive global business environment. Market trends in response to emerging revolutionary forces such as globalization, increasing competition, changing consumer needs and preferences, etc. have rendered traditional marketing strategies ineffective. Firms are increasingly turning to relationship marketing strategies as a way of developing competitive advantages that strategically position them at the peak of industry competition; firms develop specific capacities that are essential for competition in industries. Relationship marketing inevitably focuses on establishing, sustaining, and enhancing relational exchange transactions that seek to allow for constant interactions over time as opposed to mere discrete transactions, which simply involve the exchange of money for a product. Customers derive extreme satisfaction even in the event of severe service failure, when firms commit to consciously addressing customer complaints, as they move towards service recovery. Customer loyalty is highly essential for the success of post-recovery satisfaction; service firms’ relationship marketing strategies are effective in increasing customer loyalty, customer commitment, and returns on investment. Also, customer compensation is always mandatory in service recovery; service firms should encourage customers to seek redress in case of complaints because they may potentially provide solutions to the problems, thus averting negative mouthing that can be damaging to a firm’s reputations. Conclusion In conclusion, the severity of service failure, ironically, influences the success of service recovery, thus the “service-recovery paradox”; customers tend to leave a service failure more satisfied and loyal to their firms than they would be in normal circumstances, so long as their problem is resolved efficiently. In this respect, a service failure presents firms with a valuable opportunity to provide an excellent service experience and ensure customer retention; firms cannot afford to be ignorant of relationship marketing strategies if they are to survive market competition today. References Myhal, G. C., Kang, J., & Murphy, J. C. (2008). Retaining customers through relationship quality: A services business marketing case. Journal of Services Marketing, 22(6), 445–453. Randi, P. (2003). Relationship marketing can mitigate product and service failure. Journal of Services Marketing, 17(1), 37–52. Tax, S. S., Brown, S. W., & Chandrashekaran, M. (1998). Customer evaluations of service complaint experience: Implications for relationship marketing. Journal of Marketing, 62(2), 60–76. Read More