How Maintaining Relationship Can Be Profitable and Beneficial to Organizations - Essay Example

?Contemporary Issue in Marketing Introduction In this competitive environment, organizations are seen to give huge importance to maintaining relationship with the customers, dealers, distributors, suppliers and employees. The modern organizations have understood how the maintenance of relationship can be profitable and beneficial to them in long run. In this context, it is stressed on the fact that relationship capital of an organization is the total summation of trust, experience and knowledge that the company has regarding their distribution partner, suppliers, employees and customers. These values are even more valuable than physical assets of the organization and are expected to derive long-term benefits for the same. This report mainly focuses on relationship marketing, its importance in the modern business scenario and connection of relationship with technological innovation and discussion regarding the Integrated Marketing Communication (IMC). Lastly, a conclusion and recommendation is made regarding the close connectivity between these three aspects. Relational marketing In the last few decades, the marketing theories have experienced a colossal shift in both theories and practices of marketing. Relationship marketing is a developing network paradigm that recognises that global competition occurs between networks of organizations. In the context of relationship marketing, Morgan and Hunt (1994) have suggested the Commitment and Trust Theory that involves all types of relational exchanges. The researchers have argued that the central concept of relationship marketing rotates around those that distinguish an effective and productive relational exchange from those that are ineffective and unproductive. There are several factors that contribute towards the success or failure of relationship marketing effort. These scholars have stressed on trust and commitment that makes significant contribution. They theorised that relationship trust and commitment is the key to successful relationship marketing. These two aspects help the marketer in preserving relationship by cooperating with the partners, resisting their attraction towards short-term benefits in the hope to reap long-term ones by staying with the existing partners and looking at high-risk actions as prudent. Figure 1 (Source: Morgan and Hunt, 1994) Another research scholar, Reichheld and Sasser (1990), have stressed on the fact that there are very few companies who have succeeded in providing the service commitment made by them to the customers. For service companies, scrap heap signifies customers who are not going to come back. If the companies start measuring this scrap heap, they will realise that this scarp cost them heavily and ardent steps are needed to be taken in order to reduce the same. This will make them strive for “zero defects” in their quality movement and guiding light for making the organization gain profitability and achieve it soon. They have suggested that customer defection leads to a powerful impact on the bottom line. The company’s market share, profit, unit cost and many other factors related to competitive advantage are expected to be impacted positively. This strengthening and lengthening of relationship is expected to increase profit by 100 percent, by 5 percent retention of the existing customers. Technology development Computing technology is an omnipresent aspect that encompasses both personal lives of an individual and organizational framework. In order to understand the outcomes, resulting from technology acceptance, several theoretical models has been proposed such as, technology acceptance model (TAM) and innovation diffusion theory. The TAM is hugely recognised as robust but with parsimonious conceptualization. Based on the theory of reasoned action, it has been argued by TAM that the behaviour of IT acceptance can be explained, based on the belief of the individual, regarding the ease of use and usefulness of IT. On the other hand, the innovation diffusion theory, which works on technology acceptance, argues for a more comprehensive set of beliefs as an indicator of successive continuing usage behaviour as well as adoption. Karahanna, Agarwal and Angst (2006) suggested that compatibility is a significant belief, recurrent in the studies related to technology acceptance but has been missing in TAM. They suggested that compatibility helps in measuring the congruency between new technology, different aspects of an individual and the situation in which the technology is being utilised. Using the same TAM and IDT, Karuranga, Su and Beauregard (2006) had conducted a study to explain the intention for adapting to technological advancement in China. Their study suggested that the firm size, infomediaries and relative advantage, are important indicators of perceived usefulness. On the contrary, the perceived ease is significantly impacted by the training, peer usage and firm size. With the emergence of infomediaries, the customers are now able to search online, which enables them to compare and find the better retailers with whom they can transact, a prominent trend in e-commerce is. Infomediaries provide customers with powerful search capabilities through which they can access the list of potential retailers with effective and promising benefits while they select the best. Son, Kim and Riggins (2006) had used TAM and transaction cost analysis on the infomediaries, which suggested that it is a powerful searching option for the online consumers owing to its utilitarian benefits. It also suggests that whether a consumer uses an infomediary depends on how they evaluate the utilitarian benefits and also, subjective interpretation of the e-commerce environment. The study that they conducted, had suggested that the main intention of online shoppers were to compare the retailers and their relative ease in access. Moreover, the shoppers with low asset specificity, that is consumers who do not have transaction-specific investment towards a specific retailer along with high uncertainty than the consumers who believe that online retailers are opportunistic, are seen to appreciate the benefit of the infomediary. Integrated Marketing Communication IMC has been defined as a process and concept by many of the authors. Kliatchko (2005) has defined IMC in form of three pillars such as, audience focused, channel centred and result-driven approach. Under the first approach, IMC gives high importance to the non-consumers and consumers on whom the program is targeted. The entire brand communication program is targeted towards the external and internal audiences. In the channel centred approach, multiple channels are used to establish communication with the target audience such as, sales promotion, advertising, public relations and internet. The third pillar is related to financial measure, which signifies that IMC should be measurable and accountable via a process of estimation of return on customer investments and valuation of customers in the identified markets. Kim, Han and Schultz (2004) have defined IMC as a paradigm shift in the field of advertising. Especially in case of non-English speaking countries, where the main focus is on mass communication and mass advertisement, IMC is paving the pathway for increased impact public relation events, direct marketing and sales promotion. Kitchen and Li (2005) has conducted a study on the Chinese market regarding the diffusion of IMC. The study revealed that IMC is widely used in China, but in Beijing specifically, IMC is the most accepted approach in public relation and advertising. Linkage IMC is a strategic business process that provides opportunity to coordinate together with several communications disciplinary. Through advertising and public relation the organization will establish long term relationship with the customers, which again stresses back to relationship marketing. The research scholars have stressed on the importance of relationship marketing. While Morgan and Hunt (1994) has looked at maintaining relationship with not only the customers or the employees but also with other business partners, Reichheld and Sasser (1990) has highlighted on the importance of relationship with customers. Trust and commitment should be maintained, which serves as strong pillars on which every relationship stands. Again the study of Son, Kim and Riggins (2006) shows how technology has an important impact the choice of the consumers while choosing the retailer. Apart from infomediaries, the firms can also use technology for maintain CRM, which helps them in maintaining relationship with the customers. This emphasizes on the relationship marketing aspect. Thus, it can be suggested that technology innovation also have a significant impact on relationship marketing. Moreover, the use of IMC is expected to accelerate and boost the same process of maintaining relationship. Hence, it can be concluded that all the above mentioned three components are interrelated to each other and traces to maintaining relationship. The Citigroup, which is an internationally recognised business organization, has made new additions in its business-to-business arena. The Citigroup has announced that worked with the organization Commerce One cmrc to create Citibank Procurement Connection, which is a new online marketplace. This was an important step taken by Citigroup for the B2B marketplace (Patsuris, 2000). Again, Marks & Spencer has appointed Underwired, to work jointly with their marketing team dealing in customer relationship. This will enhance the customer’s relationship management. The organization has claimed that this process will positively impact the incremental revenue, purchase frequency and brand consideration (Briggs, 2012). Conclusion and Recommendation The modern organizations have understood how maintaining relationship can be profitable and beneficial to them in long run. In this context it is stressed on the fact that relationship capital of an organization if the total summation of trust, experience and knowledge that the company has regarding their distribution partner, suppliers, employees and customers. These values are even more valuable than the physical assets of the organization and are expected to derive long term benefits for the organization. Hence the following recommendations are made: Technology innovation can help the organization to use IMC in an effective way to communicate and maintain relationship with the customers. By maintaining strong relationship with the customers based on trust and commitment the organizations can increase the profit margin. Infomediaries should be used to enhance communication with the customers. Reference List Briggs, F., 2012. Marks & Spencer appoints digital customer engagement agency, Underwired. Retail Times [online] Available at : < http://www.retailtimes.co.uk/marks-spencer-appoints-digital-customer-engagement-agency-underwired/> [Accessed 6 January 2014]. Karahanna, E., Agarwal, R. and Angst, C.M., 2006. Reconceptualising compatibility beliefs in technology acceptance research. MIS Quarterly, 30(4), pp. 781-804. Karuranga, E., Su, Z. and Beauregard, R., 2006. Technological innovations diffusion in China. Proceedings of the Academy of Management, pp. XI-X6. Kim, I., Han, D. and Schultz, D.E., 2004. Understanding the diffusion of Integrated Marketing Communications. Journal of Advertising Research, March, pp. 31-45. Kitchen, P.J. and Li, T., 2005. Perceptions of integrated marketing communications: A Chinese ad and PR agency perspective. International Journal of Advertising, 24(1), pp. 51–78. Kliatchko, J., 2005. Towards a new definition of Integrated Marketing Communications (IMC). International Journal of Advertising, 24(1), pp. 7–34. Morgan, R.M. and Hunt, S.D., 1994. The Commitment-Trust Theory of Relationship Marketing. Journal of Marketing, 58(July), pp. 20-38. Patsuris, P., 2000. Citigroup to launch B2B portal. Forbes. [online] Available at: < http://www.forbes.com/2000/02/17/mu5.html> [Accessed 6 January 2014]. Reichheld, F.F. and Sasser, W.E., 1990. Zero defections: Quality comes to services. Harvard Business Review, September-October, pp. 105-111. Son, J.Y., Kim, S.S. and Riggins, F.J., 2006. Consumer Adoption of Net-Enabled Informediaries: Theoretical explanations and an empirical test. Journal of the Association for Information System, 7(7), pp. 473-508. Read More