Professional Documents
Culture Documents
Marketing Process:
A Conceptualization
and Application
Joel R. Evans
Richard L. Laskin
Now that relationship marketing is gaining acceptance as
a valuable toolfor business-to-businessjrms,
it is time to devise
and enact more systematic relationship marketing processes. In
this article, a comprehensive modelfor effective relationship marketing is-discussed. It includes inputs (understanding customer
expectations, building service partnerships, empowering employees, and total quality management), outputs (customer satisfaction, customer loyalty, product quality, andprojitability), and
assessment (customer feedback and integration). ihe model is
then applied to one industry: automated immunochemistry testing products.
The authors would like to gratefully acknowledge Baxter Diagnostics Inc. and
the Business Research Institute at Hofstra University for their generous support
of this project.
Address correspondence
to Joel R. Evans, RMI Distinguished Professor of
Business, 134 Hofstra University, 222 Weller Hall, Hempstead, NY 11550-1090.
INTRODUCTION
Both manufacturing and service firms are finding it harder
to establish sustainable technology-based advantages. To
avoid commodity status, they must focus on strengthening
the value-added features of their products. For firms that
market to business customers to prosper, the challenge
is to determine what customers want and whether they are
satisfied with the company, its products, and its service
[24]. This means customers should be integrally involved
(consulted) in the design, development, manufacture, and
sales of products.
With relationship marketing, a firm can exploit the total
product concept and maintain stronger advantages. According to Levitt [22], a generic product is a commodity; if
customers feel a product is generic, they will buy solely
on price. An expected product represents customers minimum expectations. For example, although a hospital may
439
0019~8501/941$7.00
Relationship
MARKETING
PROCESS
Marketing
440
Inc.,
Marketing
Figure 1, derived from the authors definition of relationship marketing, shows a model of effective relationship marketing. The process consists of inputs, outcomes, and ongoing assessment.
Relationship
Marketing
Inputs
The four major relationship marketing inputs are understanding customer expectations, building service partnerships, empowering employees, and total quality management.
UNDERSTANDING
CUSTOMEREXPECTATIONS.This involves
a firms ability to identify what customers desire and to
market goods and services that are at or above the level
that they expect [27]. Although the concept seems simple,
many firms have trouble correctly identifying customer expectations. Zeithaml, Parasuraman, and Berry [36] state
that this is the result of: the gap between what customers
FIGURE 1.
Effective Relationship
Marketing
want and what they see the firm delivering (the customers
point of view), and the gap between what the firm believes
customers desire and what customers actually want (the
firms point of view).
In discussing why such gaps exist, Hepworth [20]
identifies three misconceptions. First, many firms think they
already know what customers want. Yet, firms that do not
interact properly with their customers may be perceived
as disinterested. Second, some firms feel there is little precision in ascertaining customer expectations. However,
Zeithaml, Parasuraman, and Berry [36] state that these elements can be planned in advance: tangibles are things customers see, such as physical facilities, equipment, and the
appearance of personnel; reliability is a firms ability to
act dependably and accurately; responsiveness is a firms
willingness to help customers and give prompt service; assurance is the knowledge and courtesy of a firms employees
and their ability to convey trust and confidence; and empathy is caring and individual attention provided to customers. Third, the cost of collecting customer expectation
data can be high. Yet, a firm can gather data from its own
employees who have customer contact, including salespeople, deliverypeople, account managers, and servicepeople.
Via the recent International Quality Study (IQS), the
American Quality Foundation and Ernst & Young jointly
reviewed firms practices in four major industries (auto,
banking, computer, and health care) in the United States,
Japan, Germany, and Canada. It found that only 22 % of
the U.S. firms used customer expectation data in designing new products. In contrast, 58 % of Japanese firms and
40% of German firms included such data in designing new
products (just 14 % of Canadian firms follow this approach).
These findings, along with the strong quality perceptions
that consumers have for both Japanese and German products, provide a good argument that more U.S. companies
should incorporate customer expectations into product design [6].
BUILDING SERVICEPARTNERSHIPS. Service partnerships
are bred when selling firms work closely with customers
and add desirable customer services to their traditional
product offerings. These partnerships let firms both differentiate and increase the usefulness of product offerings, and
devise specific customer-centered
approaches.
Service partnerships are gaining popularity for several
reasons: With the complexity of todays products, users need
more information and training. If products become more
commoditylike in nature (e.g., PCs), the firms that provide their customers with better service gain market share.
Good partnerships between industrial buyers and sellers
turn the former into walking testimonials [3].
There are many considerations in building service partnerships:
They need to begin with both the buyer and seller having a clear mutual focus about the specific needs to be
met. The buyer and seller must perceive the service partnership to be win-win.
They are collaborative, which means that both parties
have to work together toward common goals. Industrial
buyers must realize they are responsible for helping the
relationship grow.
They must anticipate that things will go awry. Good
partnerships include action plans to be followed in the
event of problems.
They work if partners plan how they will handle price
changes, expansion, consolidation, etc. Both parties must
realize that instead of changes disrupting service relationships, they can be the impetus for discussion.
They must be based on honesty and openness, not on
superficial agreement. The parties must have regular communication [3].
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442
of the Relationship
promise more than they can deliver. There must be internal systems to back up promises. Fourth, some companies
do not adequately study satisfaction. Yet, because many
business-to-business firms lack the frequency of sales transactions that is normal for consumer-products
firms, they
must regularly monitor customer satisfaction to judge the
effectiveness of the relationship marketing process. In industrial marketing, when a company loses a key customer,
profits can drop dramatically. So, firms must have ways to
identify as early as possible any fall in satisfaction [18].
CUSTOMERLOYALTY. These responses encompass industrial customer loyalty: (1) Making repeat purchases; (2) Purchasing across product lines; (3) Giving positive word-ofmouth referrals to others; and (4) Having an immunity to
the pull of competitors [32]. To achieve these actions, a
firm must have a companywide system that includes understanding customer expectations, building service partnerships, empowering employees, and TQM (process
inputs).
Because relationship marketing fosters a one-on-one approach, buyer-seller relations and customer loyalty are
fostered: Companies that respond and listen to customer
needs have satisfied customers, and develop strong relationships that lead to customer loyalty [32]. Likewise, firms
that lose contact with their customers may be unable to
successfully differentiate their products. Ultimately, this
would lead to a lower level of customer loyalty.
QUALITYPRODUCTS. Another positive outcome of the relationship marketing process is that it constantly encourages
a firm to improve product quality, and customers perceive
these improvements.
The standards for the Malcolm Baldridge National Quality Award are a good guide by which to study the product
quality derived from a well-executed relationship marketing process. The Baldridge Award, created by Congress
in 1987, recognizes the achievements of world-class American firms (including large and small manufacturers and
service organizations). It rates quality on seven factors:
leadership, top managements commitment to improve quality throughout the firm; information and analysis, the firms
ability to define and understand customer expectations; strategic quality planning, the programs a firm uses to improve
quality companywide; human resource use, the level of service that all employees provide to internal and external customers; quality assurance, the systems a firm has in place
to measure conformance to quality standards within every
department; quality results, the level of sustained quality;
and customer satisfaction, how expectations have been
met [ll].
Assessment
Stage
As Figure 1 indicates, relationship marketing is a continuous process, requiring a firm to solicit customers feedback to ensure that their needs are being addressed and
to integrate the relationship marketing process into its strategic planning framework.
CUS-IDMER
FEEDBACK. There should be ongoing feedback.
This is the best way for a firm to keep in touch with customer perceptions of it [2]. A firm can get a big-picture
view of customer attitudes, as well as review its ability to
micro-manage individual accounts. A feedback system
should: (1) Gather, analyze, and distribute information about
customer needs, expectations, and perceptions; and (2) Let
a firm communicate regularly with customers [24].
Traditionally, customer complaints have been the major
feedback mechanism. Yet, for every complaint received,
there are twenty-six other customers who feel the same way,
but do not air their feelings to the firm. One satisfied customer usually tells two or three people; a dissatisfied person tells ten or more. The potential for unwittingly destroying a customer base is great [19].
A more comprehensive customer feedback system, not
so reliant on complaints as the key information source, is
needed for relationship marketing to flourish. Such a system is in place at Norand Corp., a maker of portable computerized data collections systems and handheld radio frequency terminals. It includes a customer feedback survey
program, a customer data base, a customer call monitoring and management system, and surveys of competitors
customers [24].
Norand benefits from its feedback system in many ways.
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standards. The latter entails four steps: (1) Identifying attributes that influence customer value perceptions; (2) Bating company performance; (3) Analyzing competitors performance; and (4) Closing the gaps between company
performance and customer expectations [29].
Benchmarking pushes a firm to review how relationship
marketing affects customers. It also gives the firm an opportunity to further incorporate customer desires in its strategic planning.
AN APPLICATION OF THE RELATIONSHIP
MARKETING PROCESS
The relationship marketing model just presented is next
applied in a business-to-business
setting. The U.S. automated immunochemistry diagnostic testing marketplace is
examined via a case study approach.
As noted below, the physical products in this industryas in many other industries- have become quite similar.
Thus, well-executed relationship marketing would be an
excellent way for a firm in the automated immunochemistry diagnostic testing industry to distinguish itself from competitors. Otherwise, the emphasis would have to be on price
cutting and much smaller profit margins.
The application presented in this article is especially relevant for firms in industries where the basic product offerings have taken on commoditylike status and it is hard to
differentiate products in terms of tangible features. These
firms should be looking for ways to build relationships with
their customers.
Relationship Marketing and Its Usefulness for
the Automated Immunochemistry
Diagnostic
Testing Marketplace
Automated immunochemistry analyzers and test kits are
used in medical laboratories to aid the diagnosis of patient
illness. The industry has certain traits that make it a good
candidate to test the relationship marketing model. Firms
that make automated immunochemistry analyzers and reagent test kits in the United States must adhere to stringent
Immunochemistry
Products
Immunochemistry
analyzers perform tests on patients
fluid specimens (blood and urine), such as infectious disease testing, therapeutic drug testing, hormone testing,
drugs of abuse testing, oncology testing, allergy testing,
serum protein testing, and anemia testing. Most analyzers
are automated and require little effort by technicians. The
445
Customer
STUDY METHODOLOGY
Categories
Testing is done in both hospitals and specialized laboratories. Hospital labs perform tests for hospital patients, as
well as patients of doctors affiliated with the hospitals. Reference labs perform tests for patients of any doctor; they
aggressively solicit physicians to send patients for their tests.
Hospital labs usually run tests as soon as patient specimens are received. This is because hospital patients may
be in immediate life-threatening circumstances. On the other
hand, doctors who send people to reference labs are not
treating those in life-threatening situations; the doctors use
the results for longer-term patient care. Thus, reference labs
may wait until all samples are received and then perform
tests (in large batches, often at night).
Hospitals vary according to size, with a common descriptor being the number of patient beds. For example, a hospital in a rural town might have 75 patient beds, whereas
one in a large city might have 950 beds. Typically, hospitals are divided into three categories: small, medium, and
large. The distinction is made for these reasons. First, the
446
The Sample
Special chemistry supervisors at hospital and reference
labs are decision makers for and users of automated immunochemistry testing products. Thus, the authors designated these individuals as the ones to whom a questionnaire on relationship marketing would be sent. These are
the qualifications for a special chemistry supervisor: (1)
the person must hold a masters degree with a major in one
of the sciences, (2) after graduation, the person must work
at least 2 years in the special chemistry area of a laboratory, and (3) the person must be a qualified lab technologist [16].
The authors obtained a mailing list from a leading maker
of automated immunochemistry analyzers and test kits. The
list included all of the firms 2,292 U.S. customers: Group
One, 509 reference labs; Group Two, 508 small hospitals;
Group Three, 757 medium hospitals; and Group Four, 5 18
large hospitals. Because Groups One, Two, and Four were
similar in size, it was decided to survey them in full. Because Group Three had many more potential respondents,
518 of these hospitals were randomly chosen, to balance
the four groups, bringing the total mailing for this study
to 2,053 laboratories. The firm supplying the mailing list
had no role in devising the study or analyzing the data.
After the study was completed, it received the same summary of results that was made available to respondents.
Survey Procedures
As a result of the samples size and geographic dispersion, a mail questionnaire was devised. All questions in
the four-page survey were close-ended, most Like&type
scales. For each relationship marketing input factor, a series of questions was preceded by a description of that factor so respondents were clear as to what was being asked.
For example, this preceded the empowerment questions:
Employee empowerment occurs when firms encourage
front-line workers to use initiative so as to satisfy customer
requests and address their problems. Employees are rewarded accordingly.
The cover letter was on university letterhead and identified
the universitys Business Research Institute as the sponsor. As an incentive, respondents were told that a summary
of the results would be sent at their request.
The survey was conducted in 1993. Because of the studys
magnitude and cost, a follow-up mailing to increase the
response rate was not possible. Twenty-six surveys were
returned as undeliverable by the Postal Service. The net
sample size was 2,027: Group One, 497; Group Two, 503 ;
Group Three, 5 13; and Group Four, 514.
STUDY RESULTS
Response
Rate
Testing
Hypothesis 1: Customers feel makers of automated immunochemistry testing products have implemented the four
inputs of relationship marketing. Table 1 shows how the
overall respondent base rates makers of automated immunochemistry testing products. Clearly, the overall hypothesis must be rejected; respondents rate the actual relationship marketing performance of firms as mediocre. The most
positive answer relates to the respondents willingness to
participate in manufacturers TQM processes. Interestingly,
respondents do feel that firms have done a better job of
empowering employees than they have with the other factors.
Table 2 summarizes the data pertaining to the first four
subhypotheses related to Hypothesis 1:
Hla: Firms that understand customer expectations will
have customers who are satisfied and loyal andperceive that the jirms market quality products.
Hlb: Building sewice partnerships with customers will lead
to firms having customers who are satisfied and loyal
andperceive that thejirms market quality products.
Hlc: The empowerment offfont-line employees will lead
to firms having customers who are satisfied and loyal
and perceive that the$rms market quality products.
Hld: Firms that seek product improvements via a total quality management program will have customers who
are satisfied and loyal and perceive that the firms
market quality products.
There is a marked distinction between the data in Tables
1 and 2. Whereas respondents rate the relationship marketing performance of firms as mediocre, they say their
satisfaction and loyalty would be greatly affected and that
better quality products would result if relationship marketing is conducted well. Hypotheses la to Id are all proven,
with the lowest mean answer a high 3.72 (for customer loyalty resulting from a good understanding of customer expectations; even here, 66.6% say this input affects their
loyalty).
Hypothesis le was examined separately:
Hle:
Because
a repeat
projected
in terms
447
TABLE 1
How Customers of Automated
Marketing Inputs
RelationshIp
Marketing
Inputs
Understanding
customer
expectations
Immunochemistry
service
partnerships
Products
Key Question
Topics
Rate Manufacturers
Performance
of Relationship
Number
Responding
Mean
Answer
% Answenng
4 or 5
215
3.35
43.8
275
2.19
29.5
275
3.12
34.2
214
3.02
34.3
Manufacturers salespeople
and customer service
personnel regularly go
out of their way to
meet customer
needs
Manufacturers salespeople
and customer service
personnel do everything
possible to rectify
problems
215
3.37
46.2
274
3.55
56.2
Manufacturers
do not need
to make major quality
improvements in their
products
Customers would like to
be consulted about
possible quality
improvements
274
2.65
20.4
274
3.97
73.0
Manufacturers
understand
customer expectations
Manufacturers
actively
solicit customer
Building
Testing
Manufacturers
opinions
treat
customers as business
partners
Manufacturers
voluntarily
offer extra customer
services without being
asked
Empowering
employees
Total quality
management
In this table, the means are reported on a I to 5 scale, with 5 representing always, strongly agree, or definitely yes (depending
ing never, strongly disagree, or definitely no (depending on the question).
448
Hypothesis 3: Customers for automated immunochemistry testing products view the relationship marketing process similarly, regardless of whether they work in small,
medium, or large hospitals, or in private laboratories. Tables 5 to 7 parallel to the presentations in Tables 1, 2, and
4; but they compare answers by respondent type: small,
medium, or large hospital, or reference laboratory.
There are strong differences by respondent category as
to how well manufacturers understand their customers (Table 5). Those working in small hospitals rate manufacturers
lower than their counterparts at medium and large hospitals and at reference labs. The same situation occurs for
one of the two key questions on service partnerships. Feel-
TABLE 2
How Much Effect Customers of Automated immunochemistry
Testing Products Say There Would Be if Manufacturers
Perform Relationship Marketing inputs Well
RelatIonship
Marketing
Inputs
Relationship
Marketing
Outcomes
Number
Responding
Mean
Answer
o/o
Answering
4 or 5
3.86
3.12
3.82
12.9
66.6
69.4
Understanding
customer
expectations
Customer satisfaction
Customer loyalty
Quality products
213
276
271
Building
service
partnerships
Customer satisfaction
Customer loyalty
Quality products
275
215
213
4.24
4.10
3.91
89.8
82.9
74.7
Empowering
employees
Customer satisfaction
Customer loyalty
Quality products
275
275
275
4.35
4.23
4.16
92.8
86.5
83.3
Total quality
management
Customer satisfaction
Customer loyalty
Quality products
275
275
275
4.35
4.15
4.23
88.8
82.9
86.9
TABLE 4
Customer interest in Long-Term Relationships
Manufacturers of Automated immunochemistry
Testing Products
Relationship Questions
Would you like an active and
long-term relationship with
your current supplier of
immunochemistry analyzers
and assays?
Would you readily point out
to an immunochemistry
firms employees (e.g.,
sales and technical
servicepeople) the aspects
of products with which
you are satisfied?
Would you readily point out
to an immunochemistry
firms employees your
negative comments
regarding products?
with
Number
Responding
Mean
Answer
O/oAnswering
4 or 5
274
3.94
12.6
215
4.57
94.2
275
4.66
94.9
ings about manufacturer performance in the areas of empowering employees and TQM do not differ statistically
by lab type.
There is greater consistency among respondent categories as to how their behavior would be affected by good
relationship marketing efforts (Table 6). In only two instances are there significant differences: customer loyalty
resulting from understanding customer expectations and
customer satisfaction resulting from TQM. In the first instance, the projected behavior of respondents from large
hospitals would be less affected (because they already believe firms listen to them); in the second, the projected be-
TABLE 3
Comparing the impact of Relationship Marketing
Customers Perceptions of Relationship
Marketing Outcomes
Relationship
Marketing Outcomes
inputs on
df
F Value
Probability
Customer
satisfaction
3,813
36.92
0.00
Customer
loyalty
3,822
34.48
0.00
3,804
24.61
0.00
Quality products
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TABLE 6
How Much Effect Customers Say There Would Be if
Manufacturers Perform Relationship Marketing
Inputs Well: by Laboratory Type
TABLE 5
How Customers Rate Manufacturers Performance of
Relationship Marketing Inputs: by Laboratory Type
RelatIonship
Marketing
Inputs
Questlon Topics
df
f Value
Probability
Relationship
Marketing
Inputs
Relationship
Marketing
Outcomes
df
f Value
Probability
Understanding
customer
expectations
Manufacturers
understand
customer expectations
Manufacturers
actively
solicit customer
opinions
3,272
2.77
0.04
3,271
5.45
0.00
Understanding
customer
expectations
Customer satisfaction
Customer loyalty
Quality products
3,269
3,272
3,267
0.38
2.92
2.03
0.76
0.03
0.11
Building
service
partnerships
Manufacturers
treat
customers as business
partners
Manufacturers
voluntarily offer
extra customer
services without
being asked
3,271
2.12
0.10
Building
service
partnerships
Customer satisfaction
Customer loyalty
Quality products
3,271
3,271
3,269
0.32
1.70
0.47
0.81
0.17
0.71
3.270
2.99
0.03
Empowering
employees
Customer satisfaction
Customer loyalty
Quality products
3,271
3,271
3,271
0.14
0.06
1.20
0.94
0.98
0.31
Total quality
management
Manufacturers
salespeople and
customer service
personnel regularly
go out of their way
to meet customer needs
Manufacturers
salespeople and
customer service
personnel do
everything possible
to rectify problems
3,271
Customer satisfaction
Customer loyalty
Quality products
3,271
3,271
3,271
3.96
0.56
1.49
0.01
0.64
0.22
3.270
0.26
0.85
Manufacturers
do not
need to make major
quality improvements
in their products
Customers would like to
be consulted about
possible quality
improvements
3,270
1.35
0.26
3,270
2.22
0.09
Empowering
employees
Total quality
management
1.55
0.20
impact on customer satisfaction, customer loyalty, or product quality. Although respondents say the effects of building service partnerships, empowering employees, and TQM
are similar, understanding customer expectations does not
have as big an effect. This does not mean that understanding customer expectations is unimportant. Rather, it probably means that (a) this factor is really perceived by
respondents as part of the expected product offered by
manufacturers and, thus, is not an augmented product reason for satisfaction, loyalty, or quality; and (b) the other
input factors are more concrete, so their imprint on performance is more clear.
The strongest overall survey answers deal with the two
questions on whether respondents would readily commu-
450
with
df
F Value
Probability
3,270
0.98
0.40
3,271
1.57
0.20
3,271
4.22
0.01
lations with manufacturers and rates the manufacturers actual performance on the relationship marketing inputs as
so-so. But respondents from smaller hospitals are less
pleased than their counterparts at other labs on some measures and less apt to make negative comments to manufacturers. This finding is quite consistent with the fact that
many companies tend to place less emphasis on smaller
customer accounts and that salespeople spend less time with
those accounts. It also represents another potential competitive advantage for firms that decide to focus on the small
account niche.
6.
7.
RECOMMENDATIONS
8.
To succeed in todays tough marketplace,
9.
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