Attracting Customers in Developed Countries: Guinness beer - Essay Example

Attracting Customers in Developed Countries: Guinness beer 1. Introduction The development of globalization worldwide has led firms to the differentiation of their priorities; the improvement of a firm’s position in its market has set as a key issue in most firms’ strategic organizational plans. The achievement of this target requires that the profitability of the firm involved will be increased; the measures implemented towards the increase of a firm’s performance cannot be standardized (Kasabov, 2007, 96); they are depended on the internal and external organizational environment but also the resources available. In any case, it is necessary that the marketing policies of each organization be reviewed as of their effectiveness and their feasibility – taking into consideration the strong turbulences in global financial market. Current paper focuses on the examination of a particular marketing type, the, so-called, relationship marketing. Reference is made to specific marketing activity, the attraction of consumers. The case of Guinness is used in order to highlight the value of relationship marketing for the increase of profitability of modern firms. Relationship marketing has been a concept mainly developed through the last 2 decades; the reasons for the appearance of this concept are many. It seems that Relationship Marketing was developed in order to help towards the completion of a series of tasks, which could not be handled effectively by existing marketing concepts (Eiriz et al., 2006, 278). The above assumption is supported by the study of Egan (2008) who emphasized on the appearance of Relationship Marketing under the pressure of a series of other marketing concepts. The definition of Relationship Marketing is given by Kotler et al. (2008); in the above study it is noted that ‘Relationship Marketing involves creating, maintaining, and enhancing strong relationships with customers and other stakeholders; Relationship Marketing requires that all the company’s departments work together with marketing as a team to serve the customer’ (Kotler et al., 2008, 387); in accordance with the above definition the core element of Relationship Marketing is the communication, which needs to be at high levels both in the internal organizational environment – among employees – as well as in the external organizational environment – between the organization and the customers. In accordance with the definition given by Lamb et al. (2008, 182) ‘relationship marketing is a strategy that entails seeking and establishing ongoing partnerships with customers’. From a similar view it is noted that ‘relationship marketing seeks to convert clients into becoming supporters’ (Hooley et al., 2008, 397). The concept of relationship marketing – as explained above – will be analysed in the sections that follow both in its theoretical – relevant theories - and its practical aspect – case of Guinness. 2. Relationship marketing – overview – theoretical and practical implications The person that mostly worked towards the establishment of relationship marketing has been Gummesson; the specific researcher asked in 1987 for the replacement of the existing marketing theory of 4P’s because this theory – in accordance with Gummesson – could not respond to the market needs. Francis Buttle in 1996 further supported the need for the development of Relationship Marketing as a marketing concept – claiming that existing marketing theories were inadequate and outdated (Tapp, 2009, 228). Through the years, the use of Relationship Marketing has been expanded while different theoretical frameworks – as indicatively presented below - have been used to describe its value. 2.1. Theoretical framework - Attracting customers as part of the relationship marketing Relationship Marketing is a marketing strategy that is particularly effective within the modern market; however, there are times that the above concept cannot lead to the achievement of the targets set by a firm’s leaders. Relationship Marketing can have a series of implications – especially if not being implemented successfully or if the conditions of its use are not monitored carefully. The theories developed on the specific marketing concept emphasize on its effectiveness but they also set the terms under which Relationship Marketing could perform well. In practice, the use of Relationship Marketing is proved to particularly helpful to face marketing problems that could not resolved through other marketing concepts – the case of Guinness is used as an example. In theory, the use of relationship marketing has been depended on specific conditions – the terms of the use of Relationship Marketing will be depended on the organizational structure, the resources available but also the targeted market (Hunt et al., 2006, 274). The specific issue is highlighted in the study of Kotler et al. (2008); the above researchers support that ‘transaction marketing, which focuses on one sales transaction at a time, is more appropriate than relationship marketing for customers who have short time horizons and can switch from one supplier to another with little effort or investment; in contrast, relationship marketing can pay off handsomely with customers that have long time horizons and high switching costs’ (Kotler et al., 2008, 395). In other words, the type of engagement of a customer in a specific firm is expected to influence the potential effectiveness of Relationship Marketing if being used by this firm as a marketing technique. It may be preferable for a firm to use an alternative marketing concept in case that the requirements of Relationship Marketing cannot be met; for example the firm that could not afford to develop long term relationships with its customers – establishing schemes through which customers would be bound to the firm’s products/ services – the use of Relationship Marketing would be not justified (Gronroos, 2004, 102). An issue highlighted in the study of Gummesson (2008) is the fact that the relationship used as the basis for the development of Relationship Marketing needs to be carefully examined; at a first level it is noted by the above researcher that there are two different types of relationship – in the context of marketing – the e-relationship which refers to the communication using appropriate IT systems – also through the WWW – and the human relationship. Other types of relationships, like the’ monopoly relationship or the relationship via full-time marketers’ (Gummesson, 2008, 37) are also likely to appear in the context of communication between the buyer and the seller; therefore, when building a Relationship Marketing scheme it would be necessary to choose the type of relationship – as explained above – on which this scheme is going to be based. At a next level, Blythe (2008) notes that service quality is of significant importance for the Relationship Marketing. Furthermore, an interaction between the relationship with the customer and the service quality is established. The specific issue is explained as follows: ‘a good relationship is a better predictor of buying behaviour than is service quality but it is service quality which builds the relationship in the first place’ (Blythe, 2008, 286). As for the value of the Relationship Marketing, the views of theorists seem to be based on similar criteria; Kurtz (2008) focuses on the importance of Relationship Marketing as a tool for creating channels of communication between a firm and its customers. It is noted that in the past the role of customer for the development of a business was rather underestimated; for this reason, marketing was used only in order to serve the following two needs: a) to attract customers and b) to close deals (Kurtz, 2008, 21); however, through the years it was made clear that the survival of a firm in the modern market is depended on its ability to develop long term relationships with its customers. It seems that the importance of Relationship marketing is based on the short time required for the appearance of its benefits (Sheth, 2002, 592) even if its complexity could be an obstacle for its rapid establishment in a specific organization (Ward et al., 2007, 281); on the other hand, the lack of skills of the persons involved in its implementation can lead to the limitation of its effectiveness (Harwood et al., 2006, 107). A common phenomenon when having to examine the value of relationship in the development of a firm’s performance is to limit the research avoiding developing an in-depth examination of the various elements of the specific concept – e.g. what is relationship in the context of the modern market (Eiriz et al., 2006, 275); however, the credibility of relationship marketing is strongly supported by the theorists using as a justification its significant advantages towards the existing marketing schemes (Gronroos, 1997, 322); the fact that the specific concept supports the development of ethical behaviour in modern organizations seems also to be an important reason for its use when need to develop critical marketing plans (Takala et al., 1996, 45). An issue that should be mentioned here is the fact that not all organizations have the environment required for the implementation of effective Relationship Marketing schemes (Rese, 2006, 88); it is also possible that the conditions of the whole market do not favour the use of Relationship Marketing techniques (Palmer, 1996, 18); The need for carefully examining the conditions of internal and external organizational environment before establishing a relationship marketing plan is also highlighted by Yau et al. (2000, 1111); because of its complexity – as already highlighted above – relationship marketing is open for research on its additional potentials – in opposition with other marketing concepts that have been proved as being limited as of their borders and potentials – for example the 4Ps marketing theory (Hunt et al., 2006, 72); it is possible in certain cases, that the implementation of Relationship Marketing plans requires specific measures that will be developed in advance – i.e. before the establishment of the plans that are based on the particular concept - for example the improvement of the customer value within a particular organization (Ravald et al., 1996, 19) In any case, the successful implementation of relationship marketing schemes requires that all of their aspects are clearly understood by the persons that participate in the specific initiative (Palmer, 1997, 319); the priorities related with the use of relationship marketing in modern organizations can be differentiated – in accordance with the existing marketing schemes – on this issue Gould (1998, 24) noted that ‘the prime concern of internal marketing is to get all employees to adopt a customer-supplier service ethos, relative to others in the organization’ – the targets related with the relationship marketing need to be within a framework clearly defined in advance in order to meet the organizational goals; the potential use of the principles of relationship marketing in marketing schemes that are based on different concepts, e.g. the internal marketing scheme, is also possible (Ballantyne, 2003, 1242). 2.2 Use of principles of relationship marketing in practice – Guinness Relationship marketing The value of Relationship Marketing has been extensively proved in practice – under real market conditions. An indicative example of the concept’s ability to support the organizational performance is the case of Guinness. The firm’s position in the Irish market was under threat for the following two reasons: ‘a) the increase of price of drinks in pubs and b) the prohibition of smoking in workplaces’ (Stone et al., 2007, 138); the above two facts led to the limitation of the people consuming the firm’s product – the Guinness beer. In fact, the consumption of the specific beer was limited to just 10% of the drinkers – an extremely low percentage that could put under severe threat the survival of the firm. A Relationship Marketing plan was established aiming to add about 100,000 customers in the firm’s existing customer base. The targeted market included: a) the customers of pubs – who are Guinness drinkers and b) the drinkers of beer in general – who are expected that they can change the brand of beer they consume at their home. In this context the following target were set: ‘a) development of brand loyalty by supporting the value of relationship between drinkers and their pubs and b) cross-selling cans of Guinness to customers that drink beer at their home’ (Stone et al., 2007, 138)’. At a next level, a series of measures were introduced for achieving the above targets: a) in pubs, owners were given the Big Black Book which included information on the training of the pub’s staff and the registration of customers in the firm’s program – in the context of this program customers would receive – by mail – vouchers of free pints in their local pub; this program had the support of pub owners giving them the opportunity to develop their relationship with their customers – the latter were likely to receive periodically vouchers for free pints and they would visit their local pub, b) in the second part of the program, the number of drinkers that drink beer at their home but do not prefer Guinness had to be increased. The database developed through the first part of the program was used in this case. More specifically, through this database – that was created through the forms filled in by customers of pubs – the drinkers of Guinness who do not drink Guinness at home were identified; these drinkers were asked to sign up their friends in a firm’s scheme through which they had the chance to watch football matches in pre-arranged parties where Guinness would be offered by the firm; moreover, the drinker that would accept to participate in this program – and sign up his friends – was given ‘product vouchers and drinking glasses’ (Stone et al., 2007, 139). The results of the above program have been impressive; within three months, 70,000 customers were added to the firm’s existing customer database. The firm’s second part of the program managed to gain the attraction of 73% of the targeted drinkers (named as ‘hosts’ in the context of the above program). The firm managed to increase its brand conversion rate by 42% - its managers had set the percentage of 20% as a target. It is obvious that the use of the concept of Relationship Marketing helped the above firm to increase its profitability; however, it should be noted that the specific program was carefully designed and perfectly executed being monitored constantly as of all its phases by the firm’s managers. 3. Conclusion - Opportunities for future research within this area Relationship Marketing has been found to have significant advantages compared to other concepts that have been also been developed in the marketing sector. The most important feature of Relationship Marketing has been its emphasis on the development of communication between the customer and the firm (Kurtz, 2008); all other marketing schemes suggest a variety of methods for attracting customers but do not emphasize on the direct communication with customer – as in the case of Relationship Marketing. Most of the theories presented above present a common justification for preferring the relationship marketing for the promotion of products/ services in the modern market – the value of this concept – as it has been proved through relevant research – is extremely high in opposition with other marketing schemes that have become outdated (Sheth, 2002, Gronroos, 1997, Takala et al., 1996, Hunt et al., 2006); on the other hand, it has been proved that the implementation of a Relationship Marketing scheme may require specific measures – preparation of the organizational environment (Harwood et al., 2006, Yau et al., 2000, Ravald et al., 1996, Palmer, 1997, Ballantyne, 2003); the complexity of the specific marketing concept has been considered as a potential barrier towards its implementation in modern organization – the conditions of internal or the external orgnaizational environment might be responsible for this outcome(Ward et al., 2007, Eiriz et al., 2006, Palmer, 1996, Rese, 2006). However, the benefits of this scheme have been found to be more than its risks – for this reason, Relationship Marketing is preferred by marketers worldwide. The effectiveness of the Relationship Marketing has been proved in practice through the reference to the case of Guinness. The existing framework of Relationship Marketing could consist the basis for future research on the retention of customers, i.e. the methods for keeping customer loyalty, after the end of the initiatives developed in the context of Relationship Marketing – because the cost involved in this initiative can be high it would be valuable for alternative plans – less costly – to be in place for the period that will follow the end of the specific scheme as it has been implemented in a particular organization. The potential development of the borders of Relationship Marketing in order to respond to the needs of the firms that focus on the one-time transaction would be also examined – the introduction of a Relationship Marketing scheme that will focus on the short-term relationship and not the long – term relationship with customer – as currently – would be possibly the solution in this problem. Despite the fact that relationship marketing is a quite successful marketing concept, research would required to test its effectiveness in the future – especially under the potential appearance of unexpected risks and turbulences (Szmigin et al., 1998, 544); the uncertainty regarding the performance of relationship marketing schemes in the future and the limited research on this area is also highlighted in the study of Veloutsou et al. (2002, 433); its performance under market conditions with different cultural and social characteristics has not being also adequately examined (Hansen, 2008, 1156). Most important, the issue of keeping the benefits of the relationship marketing for a specific period of time needs to be particularly examined – an example is the level of customer loyalty through the relationship marketing scheme – fluctuations are likely to appear under the influence of various factors in the local or the international market – an issue also not adequately examined through the existing literature. References Ballantyne, D. (2003) A relationship-mediated theory of internal marketing. European Journal of Marketing, Vol. 37, Issue 9, pp. 1242-1260 Blythe, J. (2008) Essentials of Marketing. Pearson Education Egan, J. (2008) Relationship Marketing: Exploring Relational Strategies in Marketing. Pearson Education Eiriz, V., Wilson, D. (2006) Research in relationship marketing: antecedents, traditions and integration. European Journal of Marketing, Vol. 40 No. 3/4, 2006 Gould, B. (1998) Relationship marketing and human capital. 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Journal of Services Marketing, Vol. 21, Issue 4, pp. 281-290 Yau, O., McFetridge, P. (2000) Is relationship marketing for everyone? European Journal of Marketing, Vol. 34, Issue 9/10, pp. 1111-1127 Read More