1. Fundamentals of Relationship Marketing14 profit growth as a result of increased buying frequency and higher average purchases• profit due to lower distribution and administration costs• profit because of recommendation• profit out of mark-ups• 1.4 Relationship Drivers Within the previous sections the concept of ‘driver’ toward relational strategy was already introduced and discussed, such as high customer acquisition costs and high exit barriers. In this part we will look at other drivers that appear to have an important bearing on the decision to develop a relationship marketing approach, in particular: risk, salience and emotion• trust and commitment• customer satisfaction (Egan, 2008)• customer gratitude (Palmatier et al., 2009)• Risk, Salience and Emotion As noted above, marketing academics and the relationship marketing literature suggest that the greater the perceived risk , the greater a customer’s propensity to engage in relational-type behaviour and the more such strategies prove to be successful. A key reason why so-called high-risk purchases are likely to benefit from RM strategies is that a relationship is likely to lower the perceived risk as the customer gets to know the supplier. The existence of risk creates an opportunity for trust (Rousseau et al., 1998). Salience may be regarded as the level of importance or prominence associated with the relationship. In situations characterized by high risk and salience, the consumer may enter the exchange with specific expectations associated with rather intense emotions. Consequently, a customer is intensively seeking specific reassurance and reduction of risk and uncertainty. These situations therefore appear to benefit from the closer ties and more frequent communication associated with RM strategies. Products and services that generate emotions tend to be highly personalized and usually associated with self-worth. These categories include products such as clothing and services such as beauty. If the benefits associated with these products and services are emotionally important to consumers, then they are salient and the customer is likely to be risk averse. In these circumstances, relational strategies are instrumental to secure customer’s loyalty and drive RM strategies (Egan, 2008). Trust and Commitment Trust creates benefits for the customer (e.g., relationship efficiency through decreased transaction costs) that in turn foster his or her commitment and loyalty to the relationship (Morgan, 2000). Therefore, confidence benefits/trust should positively influence the customer’s commitment to the relationship. Morgan and Hunt define trust as confidence in the exchange partner’s reliability and integrity (Morgang and Hunt, 1994). Trust is seen as an important driver to both relationships and relationship enhancement in that it would seem to reduce risk perception. As well as generating cooperative behaviour, trust may (Rousseauch et al., 1998): Kapitel_1.indd 14 03.08.2010 12:45:31 Uhr 1.4 Relationship Drivers 15 reduce harmful conflict;• decrease transactional costs (e.g. negating the need for constant checks);• promote adaptive organisational forms (e.g. network relationships);• facilitate the rapid formation of ad hoc groups;• promote effective response to a crisis.• Berry (1995) suggested trust in a relationship reduces uncertainty and vulnerability, especially for so-called black-box-type services that are difficult to evaluate due to their intangible, complex, and technical nature. As such, he proposed that customers who develop trust in service suppliers based on their experiences with them have good reasons to remain in these relationships. This implies that loyalty to the firm will be greater when consumers have perceptions of trust or confidence in the service provider. Bitner (1995) echoed this proposition when she asserted that each service encounter represents an opportunity for the provider to build trust and thus increase customer loyalty. Relationship commitment is suggested to be central to relationship marketing as well. Commitment implies the importance of the relationship to the parties and their desire to continue it (Wilson, 2000). It also suggests that both parties will be loyal, reliable and show stability in the relationship. As it usually takes time to reach a point where a commitment may be made, it may also imply a certain ‘maturity’ in a relationship (Bejou and Palmer, 1998). High levels of commitment are also associated with perceptions of future rewards, relationship identification, limited desire to seek out alternatives, the amount of effort expended in a relationship and the individuals assumed accountability (Grossmann, 1998). What these descriptions of trust and commitment suggest is that, whatever the industry, it is important to build trust and commitment if the establishment of a relationship is the final goal. Customer Satisfaction Aside from confidence benefits/trust, relationship quality is generally considered to be composed of satisfaction and commitment. A high level of satisfaction provides the consumer with a repeated positive reinforcement, thus creating commitment-inducing emotional bonds. In addition, satisfaction is related to the fulfilment of customers’ social needs, and the repeated fulfilment of these needs is likely to lead to bonds of an emotional kind that also constitute commitment (Hennig-Thurau and Klee, 1997). The relevance of satisfaction in gaining loyal customers and generating positive word-of-mouth is largely undisputed. Indeed, studies have found satisfaction to be a leading factor in determining loyalty (e.g. Rust and Zahorik, 1993). Similarly, satisfaction has been identified as a key driver in the generation of (positive) customer word-of-mouth behaviour. Satisfaction is a psychological process of evaluating perceived performance outcomes based on predetermined expectations. Customers are, therefore, satisfied when their expectations of values are positively disconfirmed. In contrast, the greater the gap between the level of expectation and the matching of such expectations, the greater the level of dissatisfaction experienced by the consumer (Hutcheson and Moutinho, 1998). Jones and Sasser suggest that the ability to listen carefully to the customer is at the heart of any successful strategy to manage consumer satisfaction. They propose the following categories of approach to this process (Jones and Sasser, 1995): Customer satisfaction indices• are among the most accepted methods of tracking customer satisfaction. However, there is a problem with how questions are asked. Dif- Kapitel_1.indd 15 03.08.2010 12:45:31 Uhr 1. Fundamentals of Relationship Marketing16 ferent results can be achieved with the same satisfaction survey dependent on how it was operationalised. Feedback• includes notes, complaints and questions. This belongs to the most effective means of establishing what the customers regards as a satisfactory level of performance as it is based on actual performance and perception. Market research• is a classic way of retrieving information but also one associated with high costs. Front-line personnel• can provide a good way of listening to the customer as a result of their direct contact. The crucial factor here is how this information is fed back into the decision-making process. Strategic activities• means to actively involve the customer in company decision-making and may be an effective way of establishing a sustainable relationship and create customers satisfaction through participation and co-creation. Customer Gratitude Finally, gratitude emerges as a key force that highly influences relationships across disciplines and represents the emotional core of reciprocity as well as a key motivating force in the development and maintenance of cooperative relational bonds (Bartlett and DeSteno, 2006). Extensive research suggests the inclusion of gratitude into RM claiming that gratitude represents an ‘imperative force’ that causes people to reciprocate the benefits they receive (Komter, 2004). In addition to this, gratitude increases a customer’s trust in the seller, both strengthening the quality of the relationship and positively affecting seller outcomes through Trust’s influence on commitment (Palmatier et al., 2009). Against this background, feelings of gratitude and a history of gratitude-based behaviour appear to change customer’s perceptions and evaluations of trust. Research by Palmatier et al. (2009) suggests that immediately after RM investments, customers may feel high levels of gratitude that result in their propensity to reciprocate although that propensity may decay over time. Consequently, managers should recognize the window of opportunity after a RM investment, during which they can ‘collect’ on feelings of gratitude. Thus, gratitude serves as a catalyst or trigger that promotes relationship development, which then influences social behaviour as long as the emotions lasts (Bartlett and DeSteno, 2006). In summary, gratitude appears to enhance RM performance in three main ways (Palmatier, 2009): Customers engage in gratitude-based behaviours to satisfy their feelings of obligation • in response to RM-induced feelings of gratitude. Increased levels of customer trust due to gratitude leverage customer commitment • and thus enhance relational performance. Gratitude promotes the development of relationships by initiating cycles of reciproca-• tion, which may have long-term positive effects on consumer behaviours. Kapitel_1.indd 16 03.08.2010 12:45:31 Uhr 1.5 Relationship Marketing as an Integrative Management Approach 17 1.5 Relationship Marketing as an Integrative Management Approach As Pels noted (1999) the debate regarding RM’s place within marketing theory in the 1990s could be summed up as a choice between four alternative viewpoints: RM as a concept:• By adding a relationship dimension to the marketing management approach the shortfalls identified in traditional marketing could be incorporated into the existing marketing paradigm. RM as the dominant theory:• Exchange Relationships should be regarded as a new marketing paradigm, suggesting that a paradigmatic shift had taken place in marketing from traditional marketing (Transactional marketing, TM) towards relationship marketing (RM). RM as one marketing perspective:• Exchange transactions and exchange relationships are separate paradigms and both paradigms separately coexist. RM as an integral part of marketing:• Transactional marketing (TM) and relationship marketing (RM) can coexist as part of the same marketing paradigm. Despite RM’S recent promotion to the highest levels of marketing theory, however, there remain doubts as to whether companies should always find it suitable and/or profitable to develop relational strategies. Kotler, as one of the most prominent writers, for example, suggests that reports of the demise of traditional mass marketing are ‘somewhat premature’ and that companies such as Coca-Cola, Gilette and Kodak will continue primarily to practice traditional mass-marketing techniques (e.g. mass communication using mass media) into the foreseeable future (Kotler, 1997). The logical consequence of this viewpoint is that some marketing activities may remain best handled through a transaction marketing approach. As Grönroos (1997, p. 408) suggests, ‘the main thing is … not whether a relational strategy is possible or not, but whether the firm finds it profitable, and in other respects suitable, to develop a relational strategy or a traditional strategy.’ The implication is that, if enterprises cannot economically justify a relational approach, then they should retain or re-adopt a transactional strategy. We suggest that that transactional marketing and relational marketing can indeed coexist and that RM should not be considered simply as a replacement for TM strategies but as another – more integrative – perspective in marketing and the marketing management process. TM and RM take different marketing approaches to customers as outlined in table 1.1. This implies that RM is not a delimited phenomenon but an instrumental perspective in approaching marketing and as such part of the same paradigm extremes on a ‘marketing strategy continuum ’ (Grönroos, 1995). Research suggests that a combination of TM and RM approaches are used by companies and that managers maintain a portfolio of strategy types (Brodie et al., 1997). Although the research conducted by Brodie et al. (1997) suggested that certain types of marketing (either TM or RM) are more common in some sectors than others, it dot not imply exclusivity. Their conclusion is that both transactional and relational marketing approaches can and do coexist. Purely relational strategies (either TM or RM) rarely exist. Consequently, it is better portrayed as a continuum of varying degrees of relational complexity. Exchanges, therefore, can be considered as falling somewhere along a spectrum ranging from the discrete to the relational. Kapitel_1.indd 17 03.08.2010 12:45:31 Uhr