Download Trust Commitment Cooperation

Relationships in Marketing
MANAGING BUSINESS RELATIONSHIPS
WEEK 6, LECTURE 2. FROM TRANSACTIONS
TO RELATIONSHIP MARKETING
Lecture Agenda
 Development of relationship marketing
 When to use relationship marketing
 KMV model of relationship marketing
 Satisfaction
 Relationship intensity
Relationship Marketing
Remember definition?
 “Identify and establish, maintain, and enhance, and
when necessary, terminate relationships with
customers and other stakeholders, at a profit, so that
the objectives of all parties involved are met. This is
achieved by a mutual exchange and fulfilment of
promises” (Gronroos, 1994, p. 9)
Relationship Marketing
RM has developed out of transaction and ‘product’
perspectives on exchange behaviour into one that
values the needs of the ‘people’ involved within a
series of exchanges.
RM is about collaboration….. not adversarial or
competitive activities.
Transactional or Discrete Exchanges
Product & Price Orientation
One-Off
Transactional
Exchanges
No History and No Future
Transactional
Driven by the 4Ps Marketing
Approach
Exchanges
Transactional Exchanges
Collaborative Exchanges
Relationship Orientation
A Series of Transactions
Collaborative
Exchanges
History and a Future
Transactional
Driven by a Customer Relationship
Exchanges
Approach
A Range of Relationships
Relationships are far from static nor are they polar: they vary
in intensity, are dynamic and change with context. We do not
always want, or choose, to have intense relationships.
To be successful it is necessary for marketing (managers)
to recognise the range and depth of relationships that
organisations and their customers desire.
Continuum of Exchanges
Fill (2011, p. 558)
A Range of Relationships
Emphasis on
long-term
loyalty
Advocate
Supporter
Client
Customer
Prospect
Emphasis
on one-off
transactions
When to Use Relationship Marketing
Use relationship marketing when:
 Customers have long time scales

Especially applicable for large scale B2B projects
 When switching costs for consumers are high
 Which would decrease the likelihood of winning customers
from competitors
 When customer has a relationship (rather than a
cost) orientation
 When benefits of the relationship outweigh the costs
Types of Relationship at DaimlerChrysler
Transaction
Coordination
Cooperation
Alliance
Based on….
Data
Information
Exchange
Knowledge
Transfer
Specialist
knowledge
build up
Lasts for…
Length of
Transaction
Length of
contract
Series
Life Cycle
Beyond the
Life Cycle
Level of
Commitment
Suppliers not
Integrated
Limited
Integration
Strong
Integration
Seamless
Examples
Pencils
Mouldings
Exhausts
Fuel Cells
Adapted from Wagner and Boutellier (2002)
Relationship revenue
Relationship Revenues v Costs
High
Sleeping
giants
Power
traders
Low
Pets
Delinquents
Low
Relationship costs
High
Kotler, et al (2008, p. 396)
Relationship Revenues v Costs
 Sleeping giants
 Very lucrative but undemanding
 Power traders
 Take up a lot of effort, but have high revenue
 Pets
 Similar to power traders
 Both could be best served with transaction marketing
 Delinquents
 Most difficult groups to deal with
 Can offer lower levels of service to reduce costs, since defection
is not such a loss
Trust and Commitment
Trust is the confidence that one party has in the other’s
reliability and integrity.
Commitment is associated with a partner’s
consistency, competence, honesty, fairness, willingness
to make sacrifices, responsibility, helpfulness and
benevolence
Morgan and Hunt (1994)
© Chris Fill
The KMV Model of Trust and Commitment
Commitment
Cooperation
Trust
Morgan and Hunt (1994)
© Chris Fill
The KMV Model of Trust and Commitment
TC
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RB
A
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PL
Commitment
+
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SV
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C
OB
Morgan and Hunt (1994)
Cooperation
+
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Trust
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FC
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© Chris Fill
Loyalty or Satisfaction?
Loyalty is possible without commitment
Satisfaction is derived from trust and
commitment
© Chris Fill
Trust, Commitment and Satisfaction
 A natural outcome from building trust and developing
commitment is the establishment of customer
satisfaction.
 Satisfaction is thought to be positively related to
customer retention which in turn leads to an improved
return-on-investment and hence profitability.
 Many organisations seek to improve levels of customer
satisfaction, with the intention of strengthening
customer relationships and driving higher levels of
retention and loyalty.
Ravald and Gronroos (1996)
Satisfaction and Retention
 “Totally satisfied customers were six times more likely to
repurchase Xerox products over the next 18months than its
satisfied customers” Jones and Sasser (1995, p. 91)
 For less than totally satisfied customers, the possible
increase in satisfaction from another brand, is worth the
risk of potentially lower levels of satisfaction
 Successful relationships are more likely to lead to totally
satisfied customers, but…


… totally satisfied customers are more likely return for another sale
The sooner the organisation can establish trust and commitment the
more likely it is to retain customers
Relationship Intensity
 Factors previously discussed can be combined with a
couple more into one model of relationship intensity
Fill (2011, p. 569 citing Bruhn)
Relationship Intensity
 Relationship quality is “the capability of one of the
relationship parties to reduce the complexity of
transactions, lower the uncertainty and raise the
interaction efficiency between the interaction
parties” Bruhn (2003, p. 63)
Relationship Intensity
Purchasing behaviour
 How does the buyer act in relation to the purchase (e.g.,
impulsive or deliberate)
Information behaviour
 Extent of search for competitive products
Integration behaviour
 How much information does the buyer share about
themselves that is relevant to the purchase
Communication behaviour
 Does customer spread WOM concerning the company?
Thing to Remember
 Development of relationship marketing
 That transactional and collaborative exchanges can
exist side by side
 The links between trust, commitment and
relationship
 How relationship intensity develops