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Relationship marketing: why bother?

Tracy G. Harwood and Tony Garry

Tracy Harwood is a Senior Lecturer in Marketing and Teacher Fellow at De Montfort University. Tony Garry is a Senior Lecturer in the Department of Marketing and Course Leader for the Chartered Institute of Marketing courses at De Montfort University.

The classic marketing relationship (Gummesson, 1994) primarily refers to suppliercustomer or physical distribution network type relationships. The underlying conditions of this type of relationship are: J J its mutual bene®t to the parties involved (for pro®t or some other gain); and that these parties commit to adapting their behavior so as to accommodate the other organisation so as to ensure relationship longevity.

The overarching premise is that parties co-operate and become dependent on one another and, as described by Dwyer et al. (1987). The approach can be seen as a ``marriage'' between the buyer and seller, although this analogy may not capture the full complexity of business relationships! Nonetheless, it is through such collaborative arrangements, according to Ballantyne et al. (2000), that improved ®nancial and market performance is achieved (originally established by Reicheld and Sasser, 1990). Even so, there is still no universally acceptable de®nition of relationship marketing (RM). More importantly, there continues to be debate among academics and practitioners alike as to what RM is, when it is appropriate, who should be included in the relationship and even when a relationship may exist between the ``relevant'' parties. As a result of this, it is increasingly acknowledged that the label of RM covers a ``broad church'' encompassing differing types of relational roles. The reasons for this are largely historical. As it became increasingly apparent that the traditional marketing mix perspective (of the 4Ps) was too restrictive and failed to capture the broader complexities inherent within many markets (such as business-tobusiness and inter-organizational marketing) other marketing perspectives such as Relationship Marketing were suggested. The key differences between these perspectives are summarized in Table I. Drivers for this evolution from so-called ``transaction'' marketing to relationshiporientated marketing were based on the following factors: J J J Not all customers are the same in terms of their pro®tability to the organization. Retention of customers, rather than the acquisition of new customers could be more pro®table. The importance of supply chain management systems, such as just-in-time (JIT) concept, leading toward greater openness between buyers and sellers.

Despite relationship marketing being widely trumpeted as the future direction for marketing, reality suggests there are few companies that succeed in developing relationship-marketing programs that actually work to the satisfaction of both parties. Based on research undertaken in this area, this article considers the role of relationship marketing in a business-to-business context and offers insights into the key question on partnership development that many business managers are struggling to answer: Is it worth it?


HANDBOOK OF BUSINESS STRATEGY 2006, pp. 107-111, # Emerald Group Publishing Limited, ISSN 0894-4318, DOI 10.1108/10775730610618701


PAGE 107

J J Does size matter? Much of the research conducted within the ®eld of RM exists in the context of larger companies while. J PAGE 108 HANDBOOK OF BUSINESS STRATEGY 2006 | | . Avoidance of strategies that are confrontational because they risk impasse. usually the most loyal over time. which is viewed as failure. for cash ¯ow management. 1986). recognizing each relationship as unique is fundamental. and the variability of the types of marketing relationship that can be formed by and between organizations dependant on their size and the industry context they are in. and increases possibility that settlement may be more favourable to the other side than fairness would warrant. small ®rms engage in a range of relationship building activities. These will clearly differ on a relationshipby-relationship basis. Indeed. Kirby (2003) argues that a key characteristic of a successful ``entrepreneur'' is the ability to Questions to re¯ect on are: do the bene®ts of a relationship marketing approach outweigh these potential problems? Probably not in all cases but where there is the basis for a genuinely valuable marketing relationship. Requires substantial skill and knowledge of process to do well. Thus. Requires strong con®dence in own assessment powers (perception) regarding interests/needs of other party and other's payoff schedule. be that in a small or large business. For relationships with customers. the incentive will be to retain the most pro®table ones. the theory of relationship marketing revolves around adding value throughout the process of exchange (goods and services for money or other goods and services) rather than merely as a result of delivery of a core product. such as customers and potential customers. Thus. other factors may ultimately inhibit or promote relationship development. 2002). necessitating ``co-makership'' agreements that required more complex negotiation and con¯ict resolution processes and. so as to solve particular business and marketing problems (Blankson and Stokes. Dif®culty of establishing de®nite aspiration levels and bottom lines because of reliance on qualitative (valueladen) goals. These are summarized as follows: J J J Strong bias towards co-operation. This in turn led toward closer relationships between buyer and seller resulting from the need for more detailed product speci®cations. then it is incumbent on the parties to explicitly state the important underlying factors that make up their relationship and strive to manage these as relationship resources. For example: J For supply chain relationships. Parties may feel they can reach a more equitable solution but there may be vulnerabilities associated with rigidly applying this approach (Murray. Within this context.Table I Traditional Focus Orientation Time scale Service level Single sale Product features Short Little customer service Commitment Limited Customer contact Moderate Quality Concern of production Source: Ballantyne et al. it may not always be appropriate to pursue an entirely problem-solving approach. However. found that small companies are less sophisticated in their approach to markets because they have fewer resources available to formalize the social exchange processes involved. close interaction with other individuals. Similarly. depending on the age of the company. some of the reasons for its failure to achieve what it initially promised derive from a deep misunderstanding of the differing roles of relationship marketing. McAdam and Reid's (2001) empirical research. in practice. creating internal pressures to compromise and accommodate. Focus on being sensitive to other's perceived interests: increases vulnerability to deception and manipulation by a competitive party. the incentives will be to achieve greater value for end consumers by smoothing production processes. are key to success. Not recognizing how relationship objectives evolve Clearly. (2000) J The move from commodity-based transactions to specialty business and higher-value-added products. Trends in outsourcing. RM Customer retention Product benefits Long High customer service High High Concern of all manage a multitude of personal relationships in a ``lifelong learning network''. ultimately lead towards mutually bene®t outcomes. Inappropriate strategy While it is argued that the approach to relationship marketing is one of win-win. J J In essence. the incentives for establishing relationships within organizational contexts will be very different. there are considerably more small and medium sized enterprises (SMEs) for which RM is paramount. comparing SMEs to large organizations. business development and growth. squeezing out excessive cost and managing quality.

1998). The strategies employed to add value will differ signi®cantly but all emphasize the importance of the interpersonal interaction process. 1993). 2000). Furthermore. which. and error at worst. based on personal experience and observation. experience and satisfaction. Intangibles may include commitment. this assumes that a closer relational match results in longer-lasting relationships! Thus. This has resulted in instances of Inappropriate communication In all marketing relationships. ``customer orientation''. perceived de®ciencies with the actual product offering can be overcome by strong relationships (Keillor et al.or organization-based (Peters and Fletcher. More measurable aspects may comprise the communication frequency and physical proximity between buyers and sellers (Boles et al. it is an imbalance of power in relationships that creates competitive advantage. although existence of an imbalance does not automatically mean the power superior party will exert leverage. telephone or computer-mediated methods (Valley. suppliers and even competitors move closer as the relationship develops. where parties share the belief that each will act in a fair manner. The role of trust and commitment Research suggests that the key to relationship success is the presence of trust and commitment between parties. ``risk-taking'' and ``dependability'' which may be process-. time taken and satisfaction of the parties. In effect this may represent a ``commoditization'' of the service. It has been suggested (Davenport. the remaining from documentation. Canon and Homburg. researchers postulate this comprises ``likeability''. Rich and Smith. In examining the components of trust and commitment. Hogg et al. ``competence''. 2000. 1999). ¯exibility. ``play them off'' against each other to ensure check and balances between them in terms of the cost and delivery of the service provided. They may. 1999. for example. is seen to be essential for an organization's success (Dougherty. There is a clear need to understand relational behavior which some argue is a controllable determinant in satisfying customers. ensures that the service is almost entirely cost-driven. the core assumptions and principles remain the same: the need for trust and commitment and to address issues of risk. 1995. The key to management of these is the ability and willingness of the parties to communicate and share information. incompetence. The problem with this is the willingness and ability of the parties to create a shared understanding of the information. the incentives may be to minimize competition and maximize market coverage. or integrity. however.J For strategic alliances. | HANDBOOK OF BUSINESS STRATEGY 2006 | PAGE 109 . 2000. failure may result from a lack of understanding or an acknowledgement of the evolution of the relationship.. Indeed. or even personal chemistry among individuals representing the parties (Conway and Swift. argued that the `` While it isto relationship approach marketing is one of win-win.. through intangible components and more rational aspects of the delivery process. Some organizations choose to renew their suppliers cyclically as a matter of course. buyers may be prepared to use a short list of suppliers. this debate highlights that even with sound managerial decision-making. is personal face-to-face interaction. Clearly. character. implies that relationship managers need to match ``social styles'' to achieve strategic bene®ts. 2000) and this. Indeed. there is a reliance on human behavior. trustworthiness. so the objectives should adapt to re¯ect the now shared interest of the parties. ``honesty''. Of course. Purdy and Nye. lack of skill and inability to recognize factors that add value within a dynamic market environment are obvious reasons for failure to successfully implement RM. which is often prone to misinterpretation by others at best. in turn. power and return on relational investment. as well as the core product. Pruitt and Carnevale. in terms of outcome ef®ciency. 1994) that up to two-thirds of information and operational knowledge derives from informal face-to-face interaction. as customers. which provides the glue for relationships. thus debasing the value of any marketing relationship (Garry. '' Not recognizing how value is added in the relationship Value is created and added in relationships in a number of ways.. it may not always be appropriate to pursue an entirely problemsolving approach. in effect. It is the ability to resist using the imbalance that creates successful marketing relationships! Research conducted within business-to-business markets suggests that where there is an imbalance of power between buyers and sellers. 2005). ``reputation''. trust. 2001). ¯exibility and responsiveness of the parties to one another. is a considerable source of power in relationships. 2000. Thus. Research has also established the most effective means of achieving collaboration. customer orientation and empathy. indicated by ¯exibility in reaching a mutually satisfactory agreement. rather than videoconferencing. However. and that tacit knowledge. even if the original reason for engaging in RM is clear.

``Knowledge is about people. Harvard Business Review. 11/12. 65 No. and Barksdale. T. Relationship Marketing: Bringing Quality. 7. 262-6. Vol. Vol. Cannon. where organizations have been successful. (1999). the more proposing undertaken around the issues identi®ed.. Lewicki et al. 5 No. (1998).. and Swift. pp. D. overemphasis merely wastes valuable face-to-face time. 1997). D. J Conclusion There are many examples of good practice in relationship development. and support individuals actively at the table ± this communicates genuine empathy and promotes understanding of important issues J Building the relationship through face-to-face interaction Research into face-to-face exchanges at different stages of relationship development (Harwood. (1994). Hogg. Making proposals around the key issues identi®ed by the parties is seen to reduce risk in the relationship ± in fact. and Davison..P. At earlier stages of the lifecycle. International Journal of Service Industry Management. these parties have undertaken the level of analysis implied by the points made in this article. the parties may empower one another by releasing control over resources. ``Making relationship marketing operational''. '' J avoid posturing ± while it is important that both parties understand where they are in the marketplace. or letting the less powerful party know just how it is to them. ensure the processes for a face-to-face meeting are well understood by both parties ± and maintain the procedures during the meeting. on a project basis. and Payne. A summary of face-to-face techniques for building relationships is: J prepare for face-to-face exchanges thoroughly ± aim to understand real needs and wants before getting to the table. 72. be wary about using conditional offers at the table ± these have the potential to communicate power and imply a certain willingness to exert power over the other party. However. March-April. 2003) provides clues on how marketing relationships can be successfully pursued. for example. Vol. this also indicates the parties have not undertaken suf®cient research into each other prior to interaction. Christopher. 119-31. the greater the opportunity for satisfying the long-term relationship expectations. ``Buyer-supplier relationships and customer ®rm costs''. (2001). not databases''. Vol. and a total relationship breakdown. and Homburg. Bellenger. which in itself poses a threat to longevity. Exploitation of common ground. then the pointers offered from research reported on may provide clues as to how potential bene®ts identi®ed for individual relationships may be realized. Similarly. 5-20. M. 5. Butterworth-Heinemann. establish the key issues to be discussed early during the meeting ± this enables maximum exchange during the meeting which may be otherwise limited because of time or availability of resources. D. 1. Jr (2000). focusing on issues of common interest (rather than individual interest). Brashear. Industrial and Commercial Training.S. therefore. Long. pp 141-53. V. J. 15 Nos 2-3. Gummesson. in relationship marketing.. ``International relationship marketing: the importance of psychic distance''. T. 29-43. important to focus on a professional footing during exchanges. `` Recognizing each relationship as unique is fundamental. the more speci®c the issues identi®ed by the parties are. Davenport. the greater the perceptions are of power in the relationship. Customer Service and Marketing Together. 31 No. Journal of Marketing. J. (2000). is a primary tactic in developing trust and commitment leading to successful relationships (Fisher and Ury.. pp. Oxford. they can be seen to `get in the way' and it is. 1981. Conway. pp. which is shared by the parties. Boles. M. The Journal of Business & Industrial Marketing. and clarifying points of information received. 34 No. This is because it indicates the parties do not have the required underpinning knowledge (which may be implicit knowledge) into the relational bene®ts. European Journal of Marketing. Interactions that focus on questioning of the other party. achieve less successful outcomes. J.supplier ®rms refusing to service buying ®rms. 1391-413. Nuttall. (2000). ``Relationship marketing: the challenge of operationalizing the components of J J PAGE 110 HANDBOOK OF BUSINESS STRATEGY 2006 | | . H. ``Relationship selling behaviors: antecedents and relationship with performance''. pp. Personal feelings are also an important component of relationship development. pp. T. J References Ballantyne. E. Dougherty. J.. J. Vol. A. however. G. ``Saving IT's soul: human-centred information management''. Whereas. Vol. In answer to the question: ``why bother?'' some organizations clearly do ®nd it a worthwhile strategy. particularly at advanced stages of the relationship lifecycle. (1994). If there is a genuine basis for adding value.

Proceedings of The Academy of Marketing Annual Conference. N. pp. M. 606-15. 1. University of Bradford. (1996). Saren. 2. ``Relationship marketing: what if . pp. pp. and Gronroos. and Minton. 433-49. Lewicki. Keillor. January-Februay. 7-22. (2000). The Journal of Business & Industrial Marketing. Parker. .D.C.M. D. Vol. R. (1995). 242-59. Veloutsouc. European Journal of Marketing. Shef®eld Business School. Boston. 15 No.D. and Pettijohn. R. Essentials of Negotiation. pp. The Journal of Business & Industrial Marketing. 628-9. B. Peters.. Vol. pp. pp. Saunders. ``The electronic negotiator''.M. J. 15 No. Proceedings of the Annual Conference Making Marketing Work. P. (2000). D. 36 No. Vol. K. ``The role of trust in facilitating information exchange''. 2-3.relationship marketing''. and Tzokas. 11 No.P. C. International Journal of Con¯ict Management. Vol. 30 No. MA. and Nye. 162-87. 4. (1997). C. C. 2. ``The impact of communication media on negotiation outcomes''.J. . and Fletcher. ``Determining relationship skills of prospective salespeople''. K. (2002). European Journal of Marketing.W. Valley. 4.. 19-30.. L. Shef®eld Hallam University. Harvard Business Review. Purdy. J. ``Relationshiporiented characteristics and individual salesperson performance''. M. Irwin McGraw-Hill. Rich. and Smith. | HANDBOOK OF BUSINESS STRATEGY 2006 | PAGE 111 .K. (2000). Bradford. (2000). Ravald.E. ``The value concept and È relationship marketing''. Vol. A.S. ?''. pp. pp.

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