1.2 Definition of Relationship Marketing 7 ring of time and place boundaries. For example, Procter & Gamble has assigned twenty of its employees to live and work at Wal-Mart’s headquarters to improve the speed of delivery and reduce the cost of supplying P&G goods to Wal-Mart’s branch outlets (Kotler, 1994). It is therefore hard to distinguish the elements as well as the time of occurrence of exchange. In RM, organisational boundaries are hard to distinguish as companies are more likely to be involved in shared relationship with their stakeholders. Some of these activities relate to joint planning, co-production, co-marketing, co-branding, co-creation, co-invention etc. where the parties in the relationship bring their resources together for creating a greater market value. In summary, we observe that a relational orientation to marketing existed until the early years of industrial development. It was only when mass production led to an oversupply of goods that marketers became transaction oriented. However, this transaction orientation in marketing is giving way to the return of relationship orientation. This re-emergence of RM has the potential for a new ‘General Theory of Marketing’ (Sheth, Gardener and Garrett, 1988), as its fundamental axioms better explain marketing practice. 1.2 Definition of Relationship Marketing Although a clearer picture of RM is becoming evident in the framework of the above mentioned evolution of the concept we would like to determine, more specifically, what is meant by the term. Despite considerable academic research and management interest, RM may still be regarded more as an ‘umbrella philosophy’ with several relational variations rather than as a wholly unified concept with strongly developed objectives. There are numerous published definitions on the concept and further other terms have been frequently used either as substitutes for RM, or to describe similar concepts. These include direct marketing, customer relationship management, micromarketing, one-to-one marketing, loyalty marketing and interactive marketing, to name but a few. In general, however, the major characteristic of these techniques are more transactional than relational in nature (Egan, 2008). As stated above RM is not an independent philosophy but draws on conventional marketing principles (Gordon, 1998). This view implies that the basic focus upon customer needs still applies but that it is the way marketing is practiced that requires change. As RM is a descendant of traditional marketing a good starting point in developing a definition is to look at how marketing has traditionally been perceived. This view might be summed up using the Chartered Institute of Marketing’s definition of marketing: Marketing can be defined as the management process of identifying, anticipating and satisfying customer requirements profitably (CIM, 2005). This definition of traditional marketing and others of similar nature emphasize above all the functional and process nature of traditional marketing and make no explicit recognition of the long-term value of the customer. Berry was among the first to introduce the term ‘relationship marketing’ as a modern concept in marketing and suggested it to be defined as attracting, maintaining and enhancing consumer relationships (Berry, 1983). While recognizing that customer acquisition was, and would still remain, part of marketer’s responsibilities this viewpoint Kapitel_1.indd 7 03.08.2010 12:45:30 Uhr 1. Fundamentals of Relationship Marketing8 emphasized that a relationship view of marketing implied that maintenance and development were of equal or perhaps even greater importance to the company in the long run than customer acquisition. Due to the fact that customer retention is much more important than attracting new customers, companies pursuing RM principles design strategies to develop close and lifelong relationships with the most beneficial customers. By differentiating between customer types the RM concept further suggests, that not all customers or potential customers should be treated in the same way. RM, in contrast, saw the need to communicate in different ways dependent on customer’s status and value. This view of marketing also implied that suppliers were not alone in creating or benefiting from the value created by the corporation. Rather RM can be seen as an ongoing process of identifying and creating new value with individual consumers and then sharing the value benefits with them over the lifetime of the association (Gordon, 1988). This is due the fact that a higher customer value will raise customer satisfaction; thereby customer loyalty will be instilling, which, in turn, creates higher profit due to increased volume resulting from positive word-of-mouth and repeat purchases. Thus the overall objective of RM is to facilitate and maintain long-term customer relationships, which leads to changed focal points and modifications of the marketing management process. The familiar superior objectives of all strategies are enduring unique relationships with customers, which cannot be imitated by competitors and therefore provide sustainable competitive advantages. Most of the concepts, ideas and developments discussed briefly above are present in the following refined definition which describes the objectives of RM as to identify and establish, maintain and enhance and, when necessary, terminate relationships with customers and other stakeholders, at a profit so that the objectives of all parties involved are met; and this is done by mutual exchange and fulfilment of promises (Grönroos, 1994). The growing interest in RM suggests a shift in the nature of marketplace transactions from discrete to relational exchanges, from exchanges between parties with no past history and future prospects to interactions between parties with a history and plans for upcoming interaction. As Doyle noted, practitioners and marketers often made the mistake of seeing marketing as a functional discipline rather than an integrated business process (Doyle, 1995). In the following chapters and throughout the book relationship management ideas, concepts and perceptions will be explained and we will establish the importance of RM as an integrated management approach. 1.3 Relationship Economics It is almost impossible to discuss RM without discussion the concept of loyalty as it is frequently seen as an expected outcome of RM and the phrase ‘loyalty marketing’ is often used interchangeably with RM (Palmatier et al., 2006). The frequent assumption is that, from whatever sources the loyalty is derived, it translates into an unspecified number of repeat purchases from the same supplier over a specific period. A comprehensive definition of loyalty in this context is: ‘The biased (i.e. non-random) behavioural (i.e. re-visit), expressed over time, by some decision-making Kapitel_1.indd 8 03.08.2010 12:45:30 Uhr