Concepts and Emergence of Relationship Marketing - Assignment Example

? Relationship Marketing Relationship marketing has emerged as a stiff contestant to the theories of traditional marketing. Individuals supporting the evolution of relationship marketing have criticised the concept of traditional marketing, because of its transactional nature. In this perspective, many companies are facing the dilemma of how to conduct their business. Discarding traditional marketing strategies entirely will be almost impossible as it has been used for ages. However, the organisations are also in dire need of new strategies, not only to increase growth but also to maintain relationship with its customers. In order to get a deeper insight into the matter, various concepts of traditional marketing and relationship marketing have been compared and evaluated. The slow decline of traditional marketing is a signal that marketers need to revive their strategies and shift their focus from suppliers to customers. The research will also throw light on the critical matter of relationship establishment and its influence as well as importance in overall success of relationship marketing. The topic will also discuss the emergence of relationship marketing as well as its fundamental values. This will be followed by a discussion on a strategic alliance between traditional marketing as well as relationship marketing. Finally, various application of relationship marketing will be discussed. Table of Contents Table of Contents 3 3 Introduction 4 The Case Study 4 Conclusion 11 Reference List 13 Introduction Economic conditions as well as market environment have changed dramatically, sometimes through quantum leaps and discontinuities. The changes are continuous and in some situations, are quiet progressive. A simple corollary to this announcement is that the marketing scholars and marketing practitioners will also have to change. This declaration is so evident that there is no denying as it comes naturally (Moller and Halinen, 2000). Traditional concepts of marketing are becoming desolate and marketers are in dire need of new strategies and technologies. The rapid evolution of consumers’ tendencies is accompanied with increasing complexities in understanding them as well as devising the right strategies to attract them. Services and products are offering similar services and consumers are now exposed to a host of available options. The reduced loyalty towards brands has created a new sensation among marketers and they have started shifting the focus of their marketing strategies towards relationship building with the consumers. Establishing relationship with the customers not only helps in maintaining consumer base but also reduces the cost of attracting new customers every now and then. According to Gronroos (1995, p. 252) relationship marketing can be described as a way “to identify and establish, maintain and enhance network perspective, relationship with customers and other stakeholders, at profit so that the objectives of the partners’ interest are met, and this is achieved by a mutual exchange and fulfilment of promises.” The purpose of the current research is to identify the paradigm shift from traditional marketing to relationship marketing and the reasons behind this shift. The paper will also evaluate the critical differences between the philosophies and concepts of traditional marketing and relationship marketing and how the application of these theories could contribute to the success in the present business environment. The Case Study Concepts and emergence The last half of the decade had faced barriers in case of international trade and a host of firms have adapted global strategies for achieving competitive advantage. However, these benefits related to globalization are found to differ from organization to organization. To successfully create a global strategy and sustainable competitive advantage, it is very important to understand the nature and functioning of the industries in a global environment as well as the dynamics of relationship marketing. The emergence of relationship marketing as a distinct marketing domain can be traced back to the mid 1980s and early 1990s. Researchers have argued that there has been a paradigm shift in marketing from traditional focus on market transactions where 4P model was extensively used for making marketing strategies (Gronroos, 1994). According to Sheth and Parvatiyar (2000), marketing practices were reborn in the form of relationship marketing during the industrial age. Mass consumption and production during the period of industrial revolution altered the dynamics between consumers and producers. Relationship marketing evolved as a popular paradigm only after 1980s. It can be described as a recent phenomenon and one of the latest marketing thoughts (Palmer, Lindgreen and Vanhamme, 2005). Organizations must minimize emphasizing on short term profit making strategies and look forward to building long term goals and relationships. The goal of relationship marketing is to provide opportunities to the firms in order to build strong long term relationship with various stakeholders such as suppliers and customers, as these relationships are described as critical marketing assets (Hunt, 1997). Both practitioners and academics have indicated that relationship marketing has definite positive effects on business and improves the overall business performance (Fuhrman, 1991; Gummesson, 1994; Morgan and Hunt, 1994; Izquierdo, Cillan and Gutierrez, 2005). Traditional marketing concepts focus only on dyadic relationships such as those of customer and supplier (Sheth and Sharma, 1997). Gummesson (1999) has argued that relationship marketing domain should be extended to all marketing activities such as networks, partnerships and internal customers. Companies should create long term partnerships with stakeholders so that their core competiveness is enhanced. In the current business environment, a form should focus on four categories of relations, namely, lateral, suppliers, internal partnerships and buyers. Traditional marketing Traditional marketing which is one of the earlier forms of marketing comprises of basic 4Ps of marketing which are product, price, place and promotion. Though the concept of traditional marketing is becoming increasingly obsolete, it is still one of the majorly followed strategies in organisations. Traditional marketing is a complex of conceptions, methodology and principles, working off by consults, marketing practices and scientists. The concepts and principles of traditional marketing talk about products and services and their nature and competition between categories. These concepts are used for creation of new products, sales planning, brand assortment, communicating project with consumer and competitor actions. The orientation of traditional marketing is towards superiority and functional characteristics of the commodity. Importance is given to product attributes as marketers believe that products with good attributes are given preference over others. There are various reasons that state the ways in which continuous usage of traditional market philosophies in the business environment can prove to be dangerous and cascading. Acquiring a new customer is always more expensive than keeping an existing one. Traditional marketing usually focuses on mass advertising with the objective of achieving sales target. Traditional marketing activities focus on the final purchasing decision of the consumer but fail to focus on consideration and awareness. It can also be said that traditional marketing is forced on the consumer. There is a lack of brand community and as a result, little attention is given to the promotions or any brand awareness programs (Peppers, Rogers and Dorf, 1999). The use of static advertising or advertising commercials is very common in traditional marketing. Though these strategies have worked in the past and are profitable in short term run, they are of no use in terms of long term planning for the organisation. For example, while placing ad in newspaper, it is important to understand the ratio of demand and supply. If demand for some product increases many fold due to the ad and the organisation fails to supply, this will result in unhappy customers. However, using internet as a medium to share information can prove to be beneficial for the marketers as they can update their current supply of products as well as get relevant feedbacks from the customer in a cost effective manner (Brodie et al., 1997). Another disadvantage of traditional marketing is that measurement of results is extremely difficult. This is because of the channels used. However, in case of mass media advertising and spreading information to a large population group, traditional marketing is still one of the preferred marketing strategies. Thus, it can be said that though traditional marketing is increasingly overpowered by the need of strategic and relationship marketing, it cannot be completely neglected. The new-age marketers will have to use a combination of these strategies for different products and service portfolios. Debate on RM as paradigm shift With gradual changes in business environment and economies, researchers are suggesting the marketers to adopt a more rational approach to marketing. It has been suggested that services sector should shift their focus from order taking and product marketing to a relational marketing approach (Berry, 1983). This relational approach was described as attracting, enhancing and maintaining client relationships. Transactional approach of services marketing was challenged and accused of diverting the service industry from the rapid environmental changes. Gummesson (1987) argued that the nature of transactional (or traditional) marketing is short term in nature and it does not apply to industrial marketing as well as services marketing. Other researchers have identified that industrial and services marketing emphasizes on interactive and long term relationship between sellers and buyers. Even though traditional marketing focuses on consumer behaviour, this relationship is not considered as a crucial factor in the process of exchange. Nine significant issues have been raised which suggest the deficiencies in traditional marketing concepts. 1. There is a need to understand the relationship webs in a thorough manner which consists of individuals in various units of operations from both seller and buyer organizations. 2. The manipulations of policies and regulations by various government and professional authorities have hampered the marketing mix is such a way that it is unable to identify the critical decision makers in any process of exchange. 3. The primary purpose of customer feedback is to strengthen the overall marketing process and refine the marketing mix. This element is highly missing and neglected in traditional marketing. Interaction between seller and buyer provides refinement on the spot so that customer can be served in a much better manner. Through this, the customer also becomes a co-producer in the process of exchange. 4. Another deficiency in traditional marketing is that it fails to analyze the complex relationship between industries. The industries are interlined to each other through a relationship which is inter-dependent. In order to gain a better access and identify market opportunities, this network has to be analyzed properly. 5. With increasing number of business partnerships like joint ventures, strategic alliance and cross or joint shareholding between firms, various market mechanisms are incorporated by the firms. If there are no clear boundaries to define the seller, buyer and competitor, internal marketing issues will remain unsolved. Traditional marketing can also fail in cases where immediate development of strategies is required. 6. Interactions between staff and customers in various units of operations during the process of trade exchange have made marketers out of these individuals in addition to those professionals who are already working as full time marketers. Thus, it is becoming increasingly difficult to challenge their demands as well as knowledge through mere transactional marketing concepts. 7. Production, purchasing, product development, marketing as well as other operational functions within a firm function together in order to achieve a common objective of serving the consumers. Employees and individuals in an organization should also treat each other as internal customers. 8. Internal human resource management process as well as internal marketing relations is important for building a strong bonding among the employees. This strong bond will be transferred to the customers in the form of strong relationship marketing. 9. It has been confirmed that maintaining a relational quality between employers, employees, buyers and customers has a major influence on the long term success of the business and its relationship with the consumers. Bridging the gap between relationship marketing and traditional marketing 1. Marketing management can be re-established as a strategy which is organisational value oriented. Researchers have observed that few functional units should reach the entire organisation so that these functions operate in a closed loop with the sales and marketing team. The first objective of relationship marketing is to make every employee a part-time marketer of the company. In this way irrespective of expertise and tasks, they are able to influence customer relationships. 2. Long term and win-win collaboration is critical for establishment of relationship marketing. Core values of relationship marketing emphasises on collaboration and mutual value creation. It advocates treating customers and suppliers as partners and not as opposite parties. Unlike traditional marketing which is only involved in sales and profit gains, relationship marketing highly focuses on establishing a win-win situation (Ravald and Gronroos, 1996). Extension of the relationship period is another major goal of marketing. In traditional marketing concepts, major emphasis is given on new customer acquisition and little on retention of existing customers. However, in relationship marketing, retention of customers is considered as the first preference and attraction marketing that is new customer acquisition comes second (Smith and Higgins, 2000). 3. Responsibility should be distributed among all members and all the parties should be encouraged to remain equally active. Relationship marketing should be kept separated from traditional marketing. Even though the marketers have supported the fact that they can co-exist, it is still doubted whether they will perform as expected if the activities are mixed. Thus, managers should understand that the selling perspective of relationship marketing starts is initiated by the salesperson or the individual who is in direct contact with the customers (Christopher, Payne and Ballantyne, 1993). 4. Relationship marketing focuses on service and relationship values instead of legal and bureaucratic values. Bureaucratic values are characterised by legal jargons, rigidity, dysfunctional law application and regulations. The focus is more on internal rituals and routines than on attaining right results. These legal values treat consumers as ignorant and suppliers as the expert. These legal values have been dominating governments and associated agencies. However, as a result of increasing deregulation, privatization and stiff competitive scenario, the traditional outlook of marketing has been forced to change. Relationship marketing is based on unique service based values and relies on establishment of strategic relationship with its customers (Berry, 1995). Application of RM for organisational success 1. Role in defining moments of truth The effectiveness of service industry is defined by their relationship with customers. In service sector, a form of social or direct contact between the service firm and the consumer is always present. This social and direct contact is known as service encounters (Johns, 1999). Consumer decision making is a perpetual process and all of us are consumers in one way or other. Decision making among consumers has been of much interest to business and researchers for a long time (Berry, 1982). As early as three hundred years ago, leading economists of that era such as Nicholas Bernoulli, Oskar Morgenstern and John von Neumann, had started examining the basis of decision making by consumers. Contemporary researches on the behaviour of consumers have considered a wide range of attributes which influence the consumer (Gronroos, 1996). The theory also acknowledges a wide range of activities which a consumer performs beyond the act of purchasing. 2. Relationship marketing improves profitability According to the relationship model of Gummesson (1999), good relationships result in good quality and customer satisfaction. As employee and internal relationships are fostered, good quality appears to arise. 3. Relationship marketing helps in building partnerships Relationship marketing helps in fostering external partnerships which cater to the higher marketing and business needs. This partnership is established with the help of networks or individual relations as well as collaborations or organisational relations formed during alliance (Mattsson, 1997). Market elements are brought into synergy through these external relations. It helps in creation of personal and deep-rooted social contacts which in future will help in solving external as well as internal decisions. 4. Relationship technology facilitates better customer understanding Deeper customer insights are possible through relationship technology. This in turn helps in preparing effective and successful market strategies. Latest informational technology helps in storing and manipulating extensive information regarding customers and their preferences. This customer information is then used in customer relationship management. With the use of CRM technology, relationship marketing is able to uncover useful consumer insights. According to Kelly (2000), the key analytical applications of CRM include analysis of customer profile, sales analysis, loyalty analysis, campaign analysis, analysis of customer contacts and profitability analysis (Storbacka, Strandvik and Gronroos, 1994). Another relationship technology is database marketing which uses database in order to analyse and hold customer information and it helps in the successful creation of marketing strategies (Chaffey et al., 2000). Direct marketing is the third most widely used relationship technology apart from CRM and database marketing (Weitz and Bradford, 2000). It is also known as one-to-one marketing. This form of marketing advocates long term relationship development with every customer so that their needs are better understood and better service can be delivered. Conclusion The ultimate aim of relationship marketing is to serve the actual needs of consumers and communicate the objective of the organisation (McKenna, 1991). Marketers are observing a continuous change in the behaviour of consumers. This is evident by consumers choosing healthier and best suited products than before. This is due to the easy access to information about products and their benefits, which was not available a few years ago. As a result of the evolved information processing approach, there has been a paradigm shift in the way products are manufactured and sold. For example, manufactures put more emphasis on detailed and correct product information, effective and qualitative product packaging, and effective communication to the consumers (Palmer, 2005). Organizations are now more concerned with production of customised services and products rather than focussing only on mass production. Typical customers in today’s world, who follow their eating habits, are also concerned about their dressing and lifestyle and are also exposed to the various factors that bring these changes in their living style. The most crucial and apparent change which the marketers have observed is the change in the demographics of population. Most of the developing and semi-developed countries are experiencing a rise in the percentage of young individuals in their population. Owing to this, the demographics of populations and the objectives of corporate are conflicting. To remain competitive in this changed environment, organisations are now changing their marketing objectives and strategising it according to the changed relationship with its consumers. Thus it can be said that relationship marketing has come out of age and in order to remain competitive, organisations will have to focus on its shareholders in their business. Reference List Berry, L. L., 1982. Bank marketing priorities in the United States. European Journal of Marketing, 16(3), pp. 5-13. Berry, L. L., 1983. Relationship marketing. Utah: American Marketing Association. Berry, L. L.,1995. 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