Relationship Marketing

Chapter 1: Introduction
to Relationship Marketing

By Dr.Piyanuch Preechanont
Development of
Marketing Concepts
Development of Marketing Concepts

The managerial approach to the study of

marketing developed in the 1950s and 1960s.

During the 1960s, Borden (1964) produced his 12

variables (product, price, branding, distribution,
personal selling, advertising, promotions, packaging,
display, servicing, physical handling, fact finding and
analysis) of a marketing programme which later came
to be known as the ‘4Ps of marketing’ or the
‘marketing mix’
Development of Marketing Concepts

This framework viewed marketing as a strategic and

managerial matching process (Webster, 1992), and
this paradigm has continued to dominate both
research and practice. During this period, marketing
was characterised as ‘industrial marketing’
(Christopher et al., 1991).
During the 1970s, most brands experienced faltering
growth and markets were dominated by oligopolies
(Webster 1992; Grönroos 2004). Consumers in
particular became more demanding and sophisticated
and were less easily persuaded by simplistic
marketing strategies (Webster 1992).
Development of Marketing Concepts

The 1980s saw a significant rise in importance of the

service sector (Christopher et al., 1991). During this
period, The American Marketing Association defined
marketing (AMA Board 1985, p.2) as:

‘The process of planning and executing conception,

pricing, promotion and distribution of ideas, goods
and services to create exchanges that satisfy
individual and organisational objectives.’
4Ps model of marketing

McCarthy (1960) presented the

‘marketing mix’

Product Price Place Promotion

Transactional Marketing (TM)

(Kotler, 1992; Takala & Uusitalo, 1996; Aijo, 1996)
Marketing as a decision-making activity
Kotler (1967) characterized marketing as a decision-making activity
designed to satisfy the customer, at a profit, by targeting and making
optimal decisions on the various elements of the mix.

Product Price

Customer

Place Promotion

Marketing was seen as a way of achieving this but there was a perceived
need to formalize it to ensure that it was guaranteed to work every time
(O’Malley and Patterson, 1998).
 Development of Marketing Concepts
Marketing management is a conscious effort in order to achieve desired
exchange outcomes with target markets. Usually organizations conduct
marketing activities under the following marketing concepts which are as
follows.

Societal
Production Product Selling Marketing Customer
Marketing
concept concept concept concept concept
concept
Others marketing concepts

In addition to the 4Ps marketing mix a number of

concepts still prominent today were developed at this
time including market segmentation (Smith, 1956)
and brand image (Gardner and Levy, 1955).

In time these were to become the basis of what

would later be called ‘modern’ transactional
marketing (TM) (Kotler, 1992; Takala and Uusitalo,
1996; Aijo, 1996).
The development of
relationship marketing
Relationship Marketing (RM) is
perceived to be a key element in any
corporate strategy which aims to
enhance customer satisfaction, develop
customer loyalty, and sustain long-term
customer relationships.
(Henning-Thurau & Hansen, 2000)
Antecedents of Relationship Marketing

During the 1990s the situation became more complex

and confused. Companies were beginning to
question the high level of marketing expenditure
which often failed to deliver a worthwhile return on
investment (Gordon, 1998).
However, a number of marketers (e.g. Webster,
1992; Grönroos, 1994) recognised that a gap existed
between what was written in marketing textbooks and
practical implementation. The 4Ps marketing
framework was unlikely to win or retain customers
either in consumer or industrial markets
(Gummesson, 1987; Gronroos, 1994).
Antecedents of Relationship Marketing

The 4Ps concept concerned only mass marketing

and standardised consumer goods as opposed to
establishing relationships with individual customers.

The concept of relationship marketing emerged from

this perceived discrepancy between theory and
practice.
Development of Relationship Marketing

Transactional marketing remained dominant until it

was challenged by a theory called ‘relationship
marketing’.

1950s 1960s 1970s 1980s 1990s 2000s

Consumer Industrial Non-profit Service Relationship Relationship
marketing marketing and social marketing marketing marketing –
marketing CRM
Development of Relationship Marketing

The concept of relationship marketing stemmed from

research in service marketing (Aijo 1996; Grönroos
2007) which emphasised the importance of close
customer contact . The majority of literature in this
area focuses on the service encounter, and the
interaction between the customer and the service
provider. Literature on relationship marketing,
however, focuses on the importance of establishing a
long-term relationship between the customer and
service provider (Berry 1995).
Comparison between TM and RM
Transactional Marketing
(TM)
• Focus on customer volume
• Discontinuous customer
contact
• Focus on product features
• Short timescale
• Little emphasis on customer
service
• Limited commitment to
meeting customer expectations
• Primary concern with product
quality
(Source: Adapted from Christopher et al., 2002; Egan, 2004)
Relationship Marketing
(RM)
• Focus on customer retention
• Continuous customer contact
• Focus on customer value
• Longer timescale
• High emphasis on customer
service
• High commitment to meeting
customer expectations
• Concern with relationship
quality
Schools of thought

The
Nordic
School

The The IMP

Thai

Schools of
thought
The Anglo-
The Australian
Chinese
The North
American
The Nordic School

The key components of the Nordic School include:

an emphasis on the importance and relevance of
services marketing and industrial marketing as
opposed to customers goods marketing.

The Nordic School believed that managing services

was at the core of relationship building and
maintenance. (Grönroos & Strandvik,1997)
The IMP (Industrial Marketing and
Purchasing) Group approach
This approach is primarily concerned with
interactions and relationships among networks in
industrial markets (Christopher et al. 2002; Palmer et
al. 2005).

The theories were grounded in the context of

business-to-business markets (Palmer et al. 2005).
The Anglo-Australian approach

This approach underlines quality management,

service marketing and customer relationships. This is
regarded as a holistic or integrative approach to
business, operating in a cross-functional way to
provide customer satisfaction and increasing levels
of value’.
This approach emphasis on a relationship rather
than a transactional approach to marketing, an
understanding of the economic implications of
customer retention, an emphasis on the critical role
of internal marketing in achieving external marketing
success,
The North American approach

The North American approach stresses buyer and

seller relationships or company and end-user
relationships within the organisation environment.

This approach focuses on long-term business

relationships with existing customers; customer
service is central to this philosophy.
The Chinese business relationship
perspective
The Chinese business relationship perspective or
‘guanxi relationship’ is a key business practice in
Chinese society and in most Asian countries and
refers to social interaction within a networked group.

It is characterised by mutual trust and a willingness

to engage in a process that produces mutual
benefits.
The Thai

Similar to the Chinese business relationship

perspective that is focus on mutual trust and social
interaction within a networked group.
Defining
Relationship Marketing
Definition of Relationship Marketing

Grönroos (2007, p.29)

‘Relationship marketing is to identify and establish,

maintain and enhance, and when necessary
terminate relationships with customers (and other
parties) so that the objectives regarding economic
and other variables of all parties are met. This is
achieved through a mutual exchange and fulfilment
of promises.’
Definition of Relationship Marketing

Morgan and Hunt (1994, p.22)

‘Relationship marketing refers to all marketing

activities directed to establishing, developing, and
maintaining successful relational exchanges.’
Definition of Relationship Marketing

Jackson (1985, p.165)

‘Relationship marketing is marketing to win, build

and maintain strong lasting relationships with
industrial customers.’
Definition of Relationship Marketing

Relationship Marketing (RM) is perceived to be a

key element in any corporate strategy which aims to

- enhance customer satisfaction,

- develop customer loyalty, and
- sustain long-term customer relationships.