Trust and Distrust: the Dynamics of Relationship Marketing - Literature review Example

Trust and Distrust: the dynamics of relationship marketing You achieve customer satisfaction when you sell merchandise that doesn't come back to a customer who does. Stanley Marcus (1905 - 2002) U.S. Business person. Fortune Marketing is the process by which a product or service originates and is then priced, promoted, and distributed to consumers.("Marketing", 2006) The main marketing functions in many large corporations include market research, followed by development of the product, design, and testing before the production starts (Robbs, 2005). Marketing involves services done on the product to facilitate its movement from the point of production to the point of consumption. It makes sure the products are there when the customers need them, in the right form, and at the right place and at the right time. Marketing’s main concern is the consumer. After determining the customers’ needs and desires, marketers develop strategies and/or techniques that are designed to educate customers about a product’s most important features, persuade them to buy it, and then to enhance their satisfaction with the purchase. Marketing before was concerned with simply selling the goods, today however, firms think it is more beneficial for them to sell to old customers rather than new ones. Thus they market their products now in such a way as to turn one-time customers into long-term buyers. For this to be realized, it is necessary for an organization to monitor the level of satisfaction of its customers. This can be done by setting up a system that provides labor and other resources, for the purpose of increasing the value that buyers receive from their purchases and from the processes leading up to the purchase. This system is called Customer Service, and it has grown in importance with the rising dominance of the service sector in the global economy, as its impact on individuals, households, firms, and societies has become widespread. One of the core areas in customer service is in managing customer complaints. Many companies consider investments in complaint handling as a means of increasing customer commitment and building customer loyalty (Tax et al, 1998). “Customer loyalty is viewed as the strength of the relationship between an individual's relative attitude and repeat patronage. The relationship is seen as mediated by social norms and situational factors. Cognitive, affective, and behavioral antecedents of relative attitude are identified as contributing to loyalty, along with motivational, perceptual, and behavioral consequences.” (Dick & Basu, 1994). While some organizations are content with focusing on simply achieving customer satisfaction, gaining and sustaining customer loyalty constitutes the ultimate aspiration of many, contemporary corporate organizations. When customers are loyal, they buy more, are easier to deal with, and are the firms walking billboards. Word-of-mouth counts for a lot these days. Thus, because of this and as well as other reasons, “ultimate loyalty” is seen as an unreachable corporate goal of this century. Given the widespread acceptance of the causal link between loyalty and firm performance, it is perhaps not surprising to find that customer loyalty for brick-and-mortar firms has been linked to antecedent factors ranging from relationship duration, to service reliability, to servicescape attributes (Harris & Goode, 2004). Relationship Marketing: Theory and Practice One of the most salient factors in the effectiveness of our present complex social organization is the willingness of one or more individuals in a social unit to trust others. The efficiency, adjustment, and even survival of any social group depend upon the presence of such trust (Rotter, 1967). It is for this and other reasons that in the past two decades, as discussed in the literature, we have witnessed the inception of a major directional change in both marketing theory and practice. Considered by Webster (1992) to represent a ‘fundamental reshaping of the field’ and by others to be a genuine paradigm shift (Kotler, 1991; Parvatiyar & Sheth, and Whittington, 1992), the turn is toward relationship marketing, a concept that encompasses relational contracting (MacNeil, 1980), working partnerships (Anderson & Narus, 1990), symbiotic marketing (Varadarajan and Rajaratnam, 1986), strategic alliances (Day, 1990), co-marketing alliances (Bucklin and Sengupta, 1993), and internal marketing (Arndt, 1983. and (Zeithaml & Parasuraman, 1991). “Relationship marketing is part of the developing ‘network paradigm’, which recognizes that global competition occurs increasingly between networks of firms” (Thorelli, 1986). Indeed, Achrol (1991) forecasts the rise of ‘true marketing companies’ within networks of functionally specialized organizations whose interrelationships, being norm-driven are ‘held together and coordinated by market-driven focal organizations’ by means of ‘norms of sharing and commitment based on trust’. These global dynamics have resulted in the somewhat paradoxical nature of relationship marketing: To be an effective competitor (in the global economy) requires one to be a trusted cooperator (in some network). As McKinsey & Co. strategists put it (Bleeke and Ernst, 1993), ``For most global businesses, the days of flat-out, predatory competition are over... In place of predation, many multinational companies are learning that they must collaborate to compete.'' Business ethicists also stress that competition requires cooperation (Solomon, 1992): “However competitive a particular industry may be, it always rests on a foundation of shared interests and mutually agreed-upon rules of conduct, and the competition takes place not in a jungle but in a society that it presumably both serves and depends upon. Business life, unlike life in the mythological jungle, is first of all fundamentally cooperative. Only in mutually shared interests is the facilitation of competition possible. And quite the contrary to the `everyone for himself' metaphor, business almost always involves large cooperative and mutually trusting groups, not only cooperations themselves but networks of suppliers, service people, customers, and investors.” (Solomon, 1992) Some studies seek to investigate whether there are some quality determinants that are predominantly satisfiers and others that are predominantly dissatisfiers in handling customers. One particular study analyzed 579 anecdotes from personal accounts of the customers of a major UK bank. “The study's main findings are that the predominantly satisfying determinants are attentiveness, responsiveness, care and friendliness. On the other hand, the dissatisfiers are integrity, reliability, responsiveness, availability and functionality. Responsiveness is identified as a crucial determinant of quality as it is a frequent source of satisfaction, and the lack of it is a major source of dissatisfaction. Contrary to the existing literature, the study also shows that the causes of dissatisfaction are not necessarily the obverse of the causes of satisfaction and, furthermore, that reliability is predominantly a source of dissatisfaction not satisfaction (Johnston, 1995).” Disengaged Employees, Dissatisfied Customers For post-industrial societies which subsist mainly on the production of services and information, service is a key source of competitive advantage. Companies which offer services need to have properly set-up and implemented customer care services to ensure costumer satisfaction and loyalty. The key people who deliver services represent these organizations, and without the core values of ensuring quality customer service, these people can damage the organizations reputation for service all too easily and put the company’s future in the realms of uncertainty. Thus, it is important to keep employees committed to their jobs and are trained to deliver optimum service is an essential business exercise that must be given high priority. One of the identified reasons for the breakdown of the customers’ trust in the quality of services being offered by the companies is the supposed disengagement of its employees. Gallup Management Journal publishes a semi-annual Employee Engagement Index that states engagement of employees is as follows: 29% are actively engaged 54% are not-engaged 17% are actively disengaged The above figures do not only pose an alarming rate of discontent workers but it also implies a deterioration of the quality of services being offered by companies. As employees depend on each other more, the complications created by actively disengaged can greatly disrupt the functions of the organization. Simon Hayward, CEO of Academee Learning Solutions (Hayward, 2005), says that there can be significant negative effects on performance, when employees are in some way isolated from their organization, disengaged, untrusting of others, resentful or indifferent. He mentioned a US car-manufacturing leader which cited the voluntary effort from its workers that fostered an engaged atmosphere, which he says can deliver performance 25-30% higher than average. Convert this into improved productivity; it is obvious what the company’s gains can be- economically. In as much as if this effort is withheld, the negative impacts on organizational performance can also be great. In an article published in the Leadership Advantage website (2006), the author reported that “…actively disengaged employees are not just unhappy at work. Their discontent is actualized and they spread negativity every chance they get. They destroy other people’s work. Not only are they indifferent to the company’s beliefs, they express distrust and utter hostility.” The author further describes actively disengaged employees as those who “thrive on negativity and those who choose to create problems rather than solve them.” However the same article argues that “engaged workers are more productive, they earn more for the company, cultivate emotional engagement, and create loyal customers. They help create healthy working atmospheres wherein there is greater productivity, ethics, and where people are more accountable. Engaged employees stay with the company longer, and are more after quality and development than the other two groups of not-engaged and actively disengaged workers”. It is the managers’ task and a challenge for him to know when the first signs of disengaging appear from an engaged worker. These signs should be given immediate attention otherwise the apparent disengagement may continue. More often than not this process of disconnection can be stymied by having meaningful talks that strengthen commitment through relationship. Because engaged workers have the initiative to do their jobs well, they are also receive lesser focus and attention from their superiors, partly because they are able to function without constant direct monitoring. These employees also set goals. They are able to meet what is expected of them and even exceed them. Also they heartily look forward tougher tasks. Lastly, they tend to be more content and are therefore better colleagues and service-providers. The link between service and profit is now well established and connections between customer service, and loyalty, leadership, and employee management, and improvement of performance are very important. The challenge is for the managers to delineate and address immediately the symptoms of disengagement among its workers and device strategies to counter them in order to avoid further damage to staff morale and organizational progress. Creating a Customer Service Culture: The Key to Establishing Excellent Customer Relations According to Wikipedia (2006), for an organization’s members and/or employees to deliver superior service consistently, they must be “acculturated”, or instilled with the values, traits, patterns, and behaviors associated with a service culture. The mechanisms of this acculturation include recruitment, training, empowerment, and accountability, within the framework of an organization’s ideology of service. It is also helpful to use a variety of engagement techniques to enable employees to engage positively with proposed changes in company strategy, structure, or process. This is according to Mr. Hayward in his work with UK and international blue chip organizations. Committed employees can help spell the difference between an expensive failure and long-term success. It is also crucial to sustaining the voluntary effort mentioned above. Mr. Hayward finds these following categories of engagement techniques most helpful in enabling organizations to engage effectively with their employees: 1. Leadership management engagement; 2. Meaningful internal communications; 3. Relevant support and help line provision; 4. Just-in-time web-based communications and access to resources; and 5. Project management and evaluation to demonstrate payback. Engaging employees and keeping them engaged in their work is also a crucial task for business managers. Managers must regularly check expectations, monitoring and evaluation of employee performance, if they were to be able to grow and achieve sustainability in employee management. As discussed above, the key to providing quality customer service is by engaging employees to do their job as efficiently and as productively as possible and by keeping that engagement intact. However, the characteristics of a “quality customer service” are yet to be articulated in this paper. The discussion that follow reviews the prescriptions of an expert on what “quality customer service” means and how best to deliver them. Bruce Wilson, of Wilson-Oyler Group, documented the best practices in customer-service and suggested some key elements in customer satisfaction (Wilson, 2005): 1. Consistent core service delivery. This is ensuring that delivery of core maintenance service is as perfect as possible. Training employees and making sure that best practices are executed so that services are consistently delivered perfectly is also included. The company must be able to consistently render the best service possible starting with their basics. Unique to this business is the firms’ dependence on unskilled laborers to make up a large part of their workforce. Thus they know why things sometimes go wrong. However, it is very much fruitful to establish best practices and customs of service that are adopted as habits by the company’s work teams. This move can offset the unskilled labor force factor to an extent. 2. Meeting customer expectations. Understanding customers’ expectations is the most important part of this piece. Studies show that as time increases in business relationships, the more that the customers’ level of expectations increases. This means that the longer a company does business with a certain client, the more that the clients’ expectations from the company increases. It is important to have enough contact with the customers to know when their expectations change. This is as well part of the sales process. However, it is all too easy for employees to fall into the trap of promising the world to the customers in an effort to please them. This leads to a deteriorating relationship filled with distrust. As such, business people should put an extra effort into molding their clients’ expectations so that they are achievable as well as economical making sure to be at least partially responsible for setting a standard of saying that the clients’ expectations are too much. 3. Responding to customer requests in a timely fashion. Other than core services, customers have additional needs. These are many and varied and how the company or in this case the employees responds is very telling on consumer satisfaction. Customer requests and complaints should be properly tracked and monitored. There should be a system that makes sure there concerns are immediately addressed. This is another main function of the person in charge of customer management and there should be good accountability on this. 4. Building personal relationships. Efficient and speedy service, meeting expectations and responsiveness isn’t always enough. Somehow to the fault of the employees or not, service problems arise which cannot be accounted for. This is where a personal relationship with the customer becomes most important. A more personal touch can be of help in situations such as these. If such relationships are non-existent, it is all too easy for a client to “take their business elsewhere”. However, a bit more personal touch to the business relationship would most probably see them trying to work things out. There could be a slight delay on the delivery of an important shipment or a slightly lower bid from a competing contractor at contract renewal period, but being “friends” with the clients can help get the company through it. Each of the above-mentioned moves needs to be designed collaboratively and successfully to ensure it is very much centered eon achieving important objectives, and are in-line to the company’s values and culture. Ready made solutions rarely pass the employees’ standards- especially if they are not obviously relevant and not phrased in the particular vernacular and culture of that certain group. Conclusion: According to Wikipedia (2006), trust, as defined in the social sciences, is the belief in the good character of one party; the parties are believed to seek to fulfill policies, ethical codes, laws and their previous promises. As noted above, the concept of trust is not new in the history of mankind. In fact, it is in the ideas of trust and cooperation that humans are able to flourish as a species. Contrary to prevailing notions of trust as relevant only in personal relationships, it is ironic to see that in terms of business, however competitive a particular industry may be, it always rests on a foundation of shared interests and mutually agreed-upon rules of conduct, and the competition takes place not in a jungle but in a society that it presumably both serves and depends upon. Business life, unlike life in the mythological jungle, is first of all fundamentally cooperative. The facilitation of competition is possible only in mutually shared interests. And quite the contrary to the ‘everyone for himself’ metaphor, business almost always involves large cooperative and mutually trusting groups, not only co-operations themselves but networks of suppliers, service people, customers, and investors. In this age of increasing international competition, as the western dominance is being challenged by developing economies, and wherein the balance of power has shifted from the suppliers to the consumers, these concepts of trust and cooperation are not to be held obsolete or irrelevant. In this age of globalizing economies and empowering consumers, the power of businesses lie in the way consumers trust them and are satisfied with their services, and therefore these businesses should structure their organizations based on these elements. This growing significance of meeting - or exceeding - customer demands for quality service can also have special implications for small and even dying businesses. For it is in this arena that small companies can, in the least expensive way, set themselves apart from the competition, by being creative, and by making trust and providing quality customer service at the core of their organization’s ideologies. Ultimately, the success of any service-based organization rests on how well it manages customer relations based on the elements of trust and loyalty. This relationship also applies, by extension, to the employees as well. By going an extra distance in meeting the customers’ needs and by empowering employees to make decisions that benefit the customers, efforts to build customer loyalty and organizational growth will certainly pay off, as it had in the past. Works Cited: Robbs, B. (2005). Marketing. In Microsoft Encarta [CD-ROM].Redmond, WA: Microsoft Corporation. Dick, A., & Basu, K (1994). Customer Loyalty: Toward an Integrated Conceptual Framework. Journal of the Academy of Marketing Science. 22, 99-113. Tax , S., Brown, S., Chandrashekaran, M., & (1998). Customer Evaluations of Service Complaint Experiences: Implications for Relationship Marketing. Journal of Marketing , 62, 60-76. Harris, L., & Goode, M. (2004). 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