Download managing business relationships week 6, lecture 1. from

Relationships in Marketing
MANAGING BUSINESS RELATIONSHIPS
WEEK 6, LECTURE 1. FROM TRANSACTIONS
TO RELATIONSHIP MARKETING
Agenda for Weeks 6 & 7
 Week 6 Relationship Marketing
 Week 7 Customer Relationship Management (CRM)
Lecture Agenda
 What is a relationship?
 Relationship marketing definitions
 Relationship development
 Loyalty
What is a Relationship?
 Sale consummated the relationship with the customer and
after that the relationship begins (Levitt, 1983)
 Marketers perceive that (either metaphorically or in reality)
relationships of some sort exist in commercial exchanges
 They are not really interpersonal relationships, however,
but the attributes of personal relationships might be
usefully employed (O’Malley and Tynan, 1999)
 But buyers frequently have no wish to enter into a
relationship with a company (Palmer, 1996)
Think About….
 … how you would define ‘a relationship’
 Does this work fully in a inter-personal and business
context?
Developments in Marketing
1950’s
1960’s
1970’s
1980’s
1990’s
2000’s
Relationship marketing
Services
marketing
Non-profit
marketing
Industrial
marketing
Consumer
marketing
?
Relationship Marketing Definitions
 “Relationship marketing is marketing based on
interaction within networks of relationships”
(Gummesson, 2002, p. 3)
 “Establishing, developing and maintaining successful
relational exchanges” (Morgan and Hunt, 1994, p. 20)
 “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)
Research Marketing Definitions
Themes
 Elements of RM



Establishing relationship
Maintaining
Enhancing
 Success
 Objectives
Not always mentioned is the end of the relationship
Relationship Development
Holmlund, 1997, cited by Fill, 2009
Relationship Lifecycle
Customer relationship lifecycle
Baines, et al, 2011, p. 568
Relationship Lifecycle
 At each stage of the relationship, the customer has
different requirements and issues
 Therefore at each stage different marketing actions
are required
Acquisition
 Activity intended to recruit customers and begin to
gain information about them.
 Split into:
 Initiation Phase

Socialisation Phase
Bruhn (2003)
Acquisition
Initiation phase
 Comes before the purchase of goods or services
 Buyer finds information about seller, as part of buyer
decision making process
 Seller attempts to gain information about buyer

E.g., through promotional activity or list buying
 Initiation phase ends with first purchase
Bruhn (2003)
Acquisition
Socialisation phase
 Both buyer and seller become more familiar with
each other
 The first purchase, provides buyer with experience
of the product and seller with information
 This information allows for future customisation
 This stage generally involves a financial loss for the
seller
Bruhn (2003)
Development
 Also known as the growth phase
 Value both parties receive from the relationship
increases


Organisation is able to cross sell to buyer
Buyer values increased level of trust, service and customisation
 As relationship develops more and more information
is exchanged
Retention
 The potential value each side can gain from the other
is maximised
 Now both sides settle into a period of consolidation
 This is the period of maximum profit for the seller
Decline
 Relationship declines as one side or the other
perceives lower levels of value
 Relationship can be recovered, through recovery
activity or come to an end
 Either side may formally end the relationship or they
may simply drift apart
Advantages of Customer Retention
 Acquiring new customers costs 5 times more than
retaining existing ones
 Average company loses 10% of customers annually
 A 5% reduction in customer defection increases
profits by 25% - 85%
 Customer profitability increases over customer life
cycle
Kotler & Keller (2006)
Traditional
Marketing
Relationship
Marketing
Loyalty Ladders
Partners
Partners
Members
Members
Advocates
Advocates
Clients
Clients
Customers
Repeat Cust
1st Time Cust
Prospects
Prospects
Suspects
Payne et al 1995
Kotler 1997
Baines, et al 2011
Loyalty and Repeat Purchase
 Loyalty is about more than just repeat purchase
 Many possible reasons for repeat purchase other
than loyalty
 Loyalty relates to attitude as well as behaviour
Types of Loyalty
 Some of the more general types of loyalty
Source: Baines, et al (2011, p. 573)
Things to Remember
 What is a relationship in marketing terms?
 Nature of the development of relationships
 Customer loyalty