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The Relationship

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.

Industrial Marketing Management 23, 439-452 (1994)


0 Elsevier Science Inc., 1994
655 Avenue of the Americas, New York, NY 10010

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

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0019~8501/941$7.00

Relationship marketing can help a firm


escape commoditylike status.
buy disposable latex gloves on the basis of price, it would
expect them to be sturdy and not to rip when a person handles hazardous materials. To be more competitive, firms
need augmented products, which offer customers more than
they think is needed or have come to expect. A firm could
make gloves that would not rip even if pierced with a sharp
object. In the long run, competitors may copy tangible augmented product features. So, relationship marketing can
provide a more intangible, but stronger, long-term customer
benefit that may be difficult to match. For instance, a firm
marketing rip-proof disposable latex gloves could regularly
present a course to new hospital workers on the proper handling of biohazardous substances, among other services.
The purpose of this article is twofold. First, a theoretical
model of effective relationship marketing is presented. The
model is then applied in an actual business-to-business
setting.
THE RELATIONSHIP
Defining

Relationship

MARKETING

PROCESS

Marketing

Because relationship marketing is a rather complex


concept, there is no commonly accepted definition. It is
generally agreed that relationship marketing is a customercentered approach whereby a firm seeks long-term business relations with prospective and existing customers [3,
9, 12, 15, 23, 361.
Here is the comprehensive definition developed by these
authors. It is the foundation for the model presented in the
next subsection:

JOEL R. EVANS IS the RMI DistInguished


Professor of
Business at Hofstra Unlverslty,
where he also serves as
co-director
of the Business Research
Institute and the Retall
Management
Institute.
RICHARD
L. LASKIN IS in sales with Baxter Diagnostics
where he concentrates
on lmmunochemlstry
testing
products.

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Inc.,

Relationship marketing is the process whereby a firm


builds long-term alliances with both prospective and current customers so that both seller and buyer work toward a common set of specified goals. These goals are
met by: (1) understanding customer needs, (2) treating
customers as service partners, (3) ensuring that employees
satisfy customer needs; this might require employees to
exercise initiative beyond company norms, and (4) providing customers with the best possible quality, relative to
individual needs.
Effective relationship marketing will lead to these positive outcomes: (1) a higher percent of satisfied customers,
(2) greater customer loyalty, (3) a perception on the part
of a firms customers that it is offering better quality products, and (4) increased profits on the part of the seller.
Relationship marketing is a continuous process, requiring a firm to: (1) have constant communication with customers to ensure that goals are being met, and (2) integrate the relationship marketing process into its strategic
planning, enabling the firm to better manage its resources
and meet future client needs.
A Model of Effective Relationship

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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Empowerment means letting employees be


creative in solving customer problems.

EMPOWERING EMPLOYEES. Empowerment


generally
means turning the front line loose, thereby encouraging
and rewarding people to exercise initiative and imagination [3]. From a relationship marketing perspective, it means
workers can strive to meet customer requirements and resolve problems. That can lead to spontaneous, creative
rule breaking to turn a potentially frustrated or angry customer into a satisfied one [5]. Some firms have been slow
to embrace the concept. They have the attitude that empowered employees will give the store away, trying to buy
customer satisfaction at the expense of profit [3].
The benefits of employee empowerment are as follows:
By doing something outside the norm, empowered employees can turn superficial contacts into long-standing
relationships.
Customers are more apt to perceive that organizations
empowering their employees are truly committed to customer satisfaction.
Highly motivated workers will flourish in this work environment .
Giving employees more authority means less internal
bureaucracy, because a firm does not need multiple levels of approvals [30].
For employee empowerment to work, four conditions
must be met: It must be specified in relation to the firms
mission. Workers must have the skills to solve problems
and make decisions. Workers must have the responsibility
and authority to make decisions that better serve the customer. The firm must foster a spirit that jobs will not be
risked if empowered acts lead to-mistakes [14].
TOTALQUALITY MANAGEMENT. TQM involves the fully
coordinated effort of gaining competitive advantage by continuously improving every facet of the firm. Tobin [33]
points out five areas where TQM differs from traditional
management:
1. It calls for all business decisions to be made for the
express purpose of providing increased satisfaction to
the customer, rather than to the firm.

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2. It calls for a quality-first approach vs. a traditional


profits-first approach.
3. TQM uses multiple quality dimensions rather than one
dimension. Garvin [17] says there are eight customeroriented quality dimensions: performance, features,
reliability, conformance to specifications, durability,
serviceability, aesthetics, and perceived quality.
4. TQM calls for worker involvement vs. the traditional
approach of no worker involvement. It empowers and
urges every employee, regardless of level, to find better
ways to act.
5. IQM has a process orientation rather than a big bang
one. With a process-oriented view, a firm has a longterm, incremental approach to improving quality.
Positive Outcomes
Marketing Process

of the Relationship

If a firm understands expectations, builds partnerships,


empowers employees, and embraces total quality management, four positive outcomes will occur: customer satisfaction, customer loyalty, quality products, and higher
profits.
CUSTOMERSATISFACTION.A key goal of relationship marketing is to improve customer satisfaction: A satisfied customer is one who receives significant added value from
a supplier-not
simply added products, services, or systems [18]. The benefits of fully satisfied customers are
repeat purchases, referrals of other customers, positive
word-of-mouth, and the lower costs associated with serving existing customers compared with attracting new ones.
Obstacles can get in the way. First, some firms do not
realize that customer satisfaction, unlike products, cannot
be made in a factory and kept in inventory [34]. It requires
the involvement of every company department and reseller
support. The best firms organize themselves entirely to address customer satisfaction goals [26]. Second, customer
satisfaction requires a commitment from top executives;
and personal contact between them and customers can increase market share and profits. Third, firms sometimes

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].

INCREASEDPROFITABILITY. Profitability is an element in


most firms mission statements; executives want to be able
to see how their actions will affect profits [13]. To succeed,
the relationship marketing process must lead to higher longrun profitability.
Relationship marketing inputs may require sizable expenditures. Yet, the outcome of the relationship marketing
process should be better sales performance, as well as cost
efficiencies in both production and marketing (via TQM
and lower customer turnover), thereby positively impacting on the profitability equation. This subsection has also
noted that good relationship marketing will increase customer satisfaction, gain greater customer loyalty, and improve product quality. All of these will positively affect
profitability.

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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More Japanese firms consider customer


satisfaction as a primary goal.
Since 1990, telephone surveys have gathered data from
l,OOO+ customers; because data are collected monthly, information is fresh. In-depth customer profiles give Norand
knowledge on individual customers. The feedback system
shows its commitment to learning about and responding
to customer concerns, which has led to better customer
loyalty. Executives can access customer data at any time.
Customer ordering bottlenecks are reduced. The firm has
enacted policies so that telephone surveyors contact the firm
as customer complaints are made. The system provides a
framework by which Norand can monitor and adjust relationship marketing inputs.
According to William Siefkin, DuPonts
INTEGRATION.
manager of sales development: The biggest challenge is
to really bring the voice of the customers into your company, so that they are at every meeting in some way and
that guidance comes from them when you are trying to make
decisions [35]. To work properly, the relationship marketing process requires that a firm integrate a customer focus into its strategic planning framework.
The International Quality Study (IQS) noted earlier
was the first attempt to evaluate the extent of quality practices across industries and national borders. It discovered
that fewer than half of responding firms had elevated the
goal of customer satisfaction to primary status on the
strategic-planning level. Approximately 25 % of the firms
in Canada, Germany, and the United States had that goal
in their strategic plans. In contrast, 95 % of Japanese firms
had customer satisfaction as a primary goal in their strategic plans [4].
Benchmarking is a way to integrate relationship marketing
into strategic planning by continuously measuring products, services, and practices against the companys toughest competitors or those known as industry leaders [8].
Benchmarking requires a firm to know its operation, assess its strengths and weaknesses, know industry leaders
and other competitors, and incorporate and go beyond the
strengths of key competitors in an effort to gain superiority.
Customer benchmarking measures customer satisfaction
and the gaps between company performance and customer

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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

guidelines imposed by the Food and Drug Administration


(FDA). As a result, the FDA has made it harder for them
to differentiate product offerings on the basis of traditional
product features.
Manufacturers in this industry usually seek technological advantages, with responsibility for developing innovations delegated to in-house R&D departments comprised
of technical people. After products are devised, marketing
and sales specialists try to sell them to diagnostic labs. There
are problems with this approach: it is not customercentered. By leaving product differentiation to scientists,
no long-term customer relationships are built. The costs
of new-product development are enormous, whereas the
risks of failure remain high. The relationship marketing
process may offer a way for makers of automated immunochemistry testing products to differentiate their offerings.
Unlike technology-based innovations, superior customer
relationships will be more difficult for competing firms to
copy.
Hypotheses
The research study covers three main hypotheses, with
Hypothesis 1 having five subhypotheses.
Hypothesis 1: Customers feel makers of automated immunochemistry testing products have implemented the four
inputs of relationship marketing. This hypothesis will test
whether firms have set the inputs of the relationship marketing model into motion. These subhypotheses will examine if there is a correlation between customer perceptions regarding relationship marketing inputs and customer
satisfaction, loyalty, and product quality (outcomes of the
relationship marketing model):
Hla: Firms that understand customer expectations will have
customers who are satisfied and loyal and perceive
that the$rms market quality products. Do customers
believe that firms understand their expectations and
actively solicit their opinions? If firms were to do
this, do customers feel there would be positive results?
Hlb: Building service partnerships with customers will lead
to firms having customers who are satisfied and loyal
andperceive that the firms market quality products.
Do customers believe that selling firms are treating
them as a service partners? If such partnerships were
to be used, do customers feel this would have positive results?
Hlc: The empowerment offront-line employees will lead
to firms having customers who are satisfied and loyal
andperceive that the firms market quality products.

Do customers believe that manufacturers employees


regularly go out of their way to address customer
needs? If such employee empowerment were to occur, do customers feel this would have positive results?
Hld: Firms that seekproduct improvements via a total quality management program will have customers who
are satisfied and loyal andperceive that the$rms market quality products. Do customers believe that
manufacturers do not need to make major quality improvements in their products? If TQM were to be utilized, do customers feel this would have positive
results?
Hle: Customers view the four inputs to the relationship
marketingprocess with equal importance. This tests
whether customers believe that sellers understanding customer expectations, building service partnerships, empowering employees, and utilizing TQM
have the same importance to the customers. In planning a relationship marketing strategy, it is valuable
to know whether one or more factors have a greater
or lesser impact than other factors.
Hypothesis 2: Customers for automated immunochemistry testing products want a high-involvement relationship
with the makers of theseproducts. This hypothesis will address the assessment (integration) stage of relationship marketing: Do buyers want long-term relationships with sellers?
Do they want to give feedback about products, both positive and negative?
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. This
hypothesis deals with these questions: Is the relationship
marketing process perceived differently by customer category? Do customer categories differ in their desire for longterm relationships with sellers?

THE AUTOMATED IMMUNOCHEMISTRY


DIAGNOSTIC TESTING INDUSTRY
Automated

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

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Any industrial firm can perform better by


using relationship marketing.
current generation of analyzers was introduced in 199 1 and
is known as random access analyzers. They can perform
a variety of tests on several patient specimens at one time
and give results in 45 minutes.
Makers of immunochemistry
analyzers do not make a
profit on the analyzers but on the accompanying test kits
that are used each time tests are performed. Most firms
place their analyzers in labs at no charge. Labs keep the
analyzers as long as they purchase test kits from the
manufacturers placing the analyzers.
1991 sales of immunochemistry test kits and reagents were
$5 to $6 billion [21]. This is the most profitable and fastestgrowing segment of the $14.8 billion in vitro diagnostic
market. Spectrum Decision Resources [31] estimates the
3-year growth rate of the automated immunochemistry testing market at 12 % . The industry is dominated by a handful of firms. This situation is the result of both government
regulation and the hefty R&D costs associated with immunochemistry analyzers and test kits [21].

usage of testing products varies according to hospital size.


With increased usage, many other factors come into play
(e.g., purchase discounts, and the speed and reliability of
equipment under heavy use). Second, the layers of internal hospital bureaucracy go up with size. The added
bureaucracy makes it tougher to get quick purchase authorizations. Third, the complexity of medical conditions and
procedures is greater for large hospitals. These hospitals
might perform more specialized tests than smaller facilities.
For this study, four respondent groups are used: Group
One, reference labs; Group Two, small hospitals of 100
beds and under; Group Three, medium hospitals of 101
to 299 beds; and Group Four, large hospitals of 300 beds
and over. According to the American Hospital Association, there are 5,800 U.S. hospitals; the College of American Pathologists estimates that there are 2,100 U.S. reference labs [l, lo]. No breakdown by hospital size was
available.

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

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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

In all, 276 usable questionnaires were received, a net


overall response rate of 13.6 % . The group response rates
were: Group One, 10.1% (50); Group Two, 14.5% (73);
Group Three, 14.0% (72); and Group Four, 15.8% (81).
The number of usable questionnaires is large for a study
of this type and permits the use of appropriate statistical
tests. In comparison, the Morris and Davis study [25] on
customer service in industrial firms had 90 usable surveys;
because the study covered only Central Florida, they could
do a telephone follow-up and get a response rate of 22 % .
When Rosenbloom and Larsen [28] used a dispersed mailing
list to research the perceptions of foreign companies with

direct U.S. investments, they had a 14.2 % response rate


and 96 usable questionnaires.
Hypothesis

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:

Customers view the four inputs to the relationship


marketing process with equal importance.

Because
a repeat
projected
in terms

this subhypothesis relates to the overall sample,


measures ANOVA was used to compare the
impact of the four relationship marketing inputs
of customer satisfaction, customer loyalty, and

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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).

quality products. As Table 3 shows, the subhypothesis is


disproven. The inputs differ in their effect for all three of
the outcome measures: Although the respondents have rated
understanding customer expectations as important, they
feel it is significantly less important than the other process
inputs.
Hypothesis 2: Customers for automated immunochemistry testing products want a high-involvement relationship
with the makers of these products. As noted in Table 4,
three questions were asked to test this hypothesis. In general,
respondents have a strong interest in an active, long-term
relationship; they are eager to share both their positive and
negative feelings with manufacturers.

448

on the question) and 1 represent-

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

In this table, the means are reported on a 1 to 5 scale, with 5 representing


a great deal and 1 representing not at all.

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

In this table, the means are reported on a 1 to 5 scale, with 5 representing


definitely yes and 1 representing definitely no.

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-

havior of respondents from large hospitals would be more


affected (because they have more interest in TQM).
There is no difference among respondent categories as
to the interest in long-term relationships and the willingness to provide positive feedback (Table 7). But, there is
a significant difference as to the willingness to pass on negative feedback. Although all respondent categories would
readily make negative comments, those at small hospitals
say they are less apt to do so.
In sum, the tests on Hypothesis 3 yield mixed results.
There are some differences by manager category but many
similarities as well.
Discussion

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

Similar questions regarding customer satisfaction, customer loyalty, and


quality products were used with each of the four relationship marketing inputs. The results in this table are based on repeat measure ANOVAs for the
three outcome measures. That is why the degrees of freedom are so high.

According to this study, there is a strong desire by the


overall sample (customers of automated immunochemistry testing products) for manufacturers to engage in the relationship marketing process. Nonetheless, customers perceive that manufacturers have had a so-so record on the
four input factors examined in the survey: understanding
customer expectations, building service partnerships, empowering employees, and total quality management. Only
in regard to salespeople and customer service personnel
doing all possible to rectify problems do most respondents
believe manufacturers are doing an above-average job.
The four relationship input factors do not have an equal

449

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

nicate the positive and negative aspects of products to


manufacturers. The mean answers were greater than 4.5
(on a 5point scale), and more than 94 % of respondents
expressed an above-average willingness to share their feelings. These results are the surest indication that respondents want a close interface with manufacturers and that
they would not hesitate to be honest with them. Therefore,
better new products and improved existing products would
result from such relationships. The value of this feedback
as a long-term competitive advantage should not be underestimated.
In general, each of the respondent groups (reference labs
and small, medium, and large hospitals) wants strong reTABLE 7
Customer Interest in Long-Term Relationships
Manufacturers: by Laboratory Type
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

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,

it is imperative for firms in any business-to-business


situation to engage in relationship marketing. To do this properly, a wellintegrated and systematic process-like
the one shown in
Figure l-must be devised and enacted.
Here are several specific recommendations:
1. Relationship marketing should be conducted as a continuous and systematic process that incorporates the
needs of both buyers and sellers.
2. Relationship marketing needs top management support; its principles should permeate a firms corporate
culture.
3. At a minimum, relationship marketing should center
on these inputs: understanding consumer expectations,
building service partnerships, empowering employees,
and total quality management (from buyer and seller
perspectives). A firm should
(a) build in customer expectations at all stages of product development and marketing planning. Clear performance goals should be set.
(bj add more high-contact customer services to its
core products as a means of strengthening service partnerships.
(c) empower front-line employees to exercise initiative beyond stated policies, without the risk of being
overruled or criticized.
(d) implement a IQM program to enhance the specific
product features (including services) that customers
deem as needing improvement.
4. Customers should be surveyed, by customer type, to
determine which aspects of relationship marketing
should be emphasized for them.
5. Although increased profitability is a desirable result
from relationship marketing, other important measures

9.

of success are customer satisfaction, customer loyalty, and product quality.


The relationship marketing process should be continuously assessed by obtaining regular customer feedback and integrated into strategic plans. Both positive and negative feedback (that goes far beyond just
passively receiving customer complaints) can provide
meaningful information to an open-minded, customeroriented firm. Benchmarking would be useful here.
Sellers need to communicate to their customers that
relationship marketing involves responsibilities, as well
as benefits, for both parties. This requires an unambiguous signaling strategy (such as the one used by
Norand).
Mutually agreeable (by buyers and sellers) contingency
plans should be devised in case anything goes awry.
Although the model in Figure 1 has proven quite applicable for the automated immunochemistry
diagnostic testing industry, it should be studied in more
settings.

As progressive firms such as Siemens Components Inc.


(an independent operating company of Siemens Corp.)
recognize:
Its more than just, heresthe product. Heres the sell sheet.
Were doing more and more relationship building as the number of suppliers in our field grows and the competition intensifies. To win a contract, you first need a good salesperson. Secondly, you need a technical marketing person to
solidify the design with technical information. Another team
member is the factory or the applications laboratory. And
the materials control people make sure the product is built
and available when the customer needs it. Once youve won
the business, you have your customer service people, who
actually book the orders and make sure things ship on time.
More and more customers have individual requirements on
how they want the product shipped or what they want the
boxes to say. The whole process is very integrated. If theres
one weak link in the chain, theres going to be a problem [7].

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