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1.5 Relationship Marketing as an Integrative Management Approach in:

Svend Hollensen, Marc Oliver Opresnik

Marketing, page 31 - 36

A Relationship Perspective

1. Edition 2010, ISBN print: 978-3-8006-3722-5, ISBN online: 978-3-8006-4870-2, https://doi.org/10.15358/9783800648702_31

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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 1. Fundamentals of Relationship Marketing18 Exhibit 1.1 Nila Halter – From a model to an entrepreneur – selling N´oats Porridge The German Model, Nila Halter (29 years old) has travelled around the world for photo sessions in London, Milan and New York. She has worked for Diesel, Gaultier and Boss. Around 2007 she came to the conclusion that she had to prepare for a career after the modeling. She took a university degree in Business Administration (long-distance learning) at Euro-FH in Hamburg (www.Euro-Fh.de). During her study abroad in Northern part of England (University of Lincoln) she lived at a ‘Guest House’ and there her host (a ‘real’ Scotsman) started to serve the real Scottish Porridge, and after a while, Nila liked it, and she could not go without it in the morning. About Porridge Porridge is a dish made by boiling oats (rolled, crushed, or steel cut) or other grains or legumes in water, milk, or both. It is usually served hot in a bowl or dish. Porridge was a traditional food in much of Northern Europe and Russia back to antiquity. It was primarily a savoury dish, with a variety of meats, root crops, vegetables, and herbs added for flavour. In many modern cultures, porridge is eaten as a breakfast dish, often with the addition of salt, sugar, milk or cream. The traditional breakfast of Scotland is made with salt. Some manufacturers of breakfast cereal such as Scott’s Porage Oats (www.scottsporage.co.uk) sell ready-made versions. Porridge is one of the easiest ways to digest grains or legumes, and is used traditionally in many cultures as a food to nurse the sick back to health. It is also commonly eaten by athletes training for their events. Nila is developing the business concept – N’Oats After Nila came back to Germany she started to wonder how she could make the porridge into a business, starting out in Germany. She got in contact with the ‘boys’ at ‘Mymuesli’ (www.mymuesli.com) and this relationship has resulted in a number of different porridge variants: Today N’oats is part of the on-line product range at the partner Mymuesli and Nila Halter is also selling the product by her own website www.noats.de, where private consumers can buy it on-line. The brand name N’oats originates from the first letter in Nila’s name combined with the key component in the product, Oats. In 2009-10 the Kapitel_1.indd 18 03.08.2010 12:45:31 Uhr Exhibit 1.1 19 product was starting to sell off-line in German shops like the TEMMA Bio-Supermarket (REWE Gruppe) in Cologne. N’oats can also be bought in other German shops in cities like, Munich, Passau and Hamburg. Nila Halter is now considering how to bring N’oats to other international markets, after realizing that the product is being bought on-line, also from consumers outside Germany. Sources: www.noats.com www.nilahalter.com www.youtube.com/watch?v=lkld6ltfxXk Kapitel_1.indd 19 03.08.2010 12:45:32 Uhr 1. Fundamentals of Relationship Marketing20 In this marketing continuum model RM is placed at one end of the spectrum. Here the primary focus would be on building relationships with consumers and other key stakeholders. At the other end of this continuum is TM, where the focus is more likely to be short term and based on one transaction at a time. Grönroos (1994) suggests that industry type may influence a company’s position on the scale. He predicts that at one end is the end-user, consumer-goods market with a marketing mix approach based on discrete, transactional exchange and where customers are more sensitive to price than the development of any longer-term relationship. At this end of the continuum, traditional measures, such as the technical quality of the output and the monitoring of market share, are applied and internal marketing is not given paramount importance (Egan, 2008). At the other end are distribution channels, services and business-to-business marketers, who benefit from the application of relationship type strategies. The focus is rather on the long-term, with the use of an interactive approach based on the development, maintenance and enhancement of ongoing relationships. Price sensitivity is much less important and customers are seeking benefits which are delivered via the relationship with the supplier. The overriding measurement criteria is the quality of interactions with the customer and the successful management of the customer base (Egan, 2008). The role of internal marketing is of outstanding importance in this context (Figure 1.4). What the concept of a marketing continuum suggests is that, although RM strategies may well be feasible for many products, services and markets, their application may be inappropriate for others. On the other hand, the adoption of RM strategies does not guarantee success. Grönroos (1995) notes that the more an enterprise moves to the right on the continuum, away from the transaction-type situation, the more the market expands beyond the product and the more has to be invested in RM. Grönroos (1995) suggests that the marketing implications across the strategy continuum are elementary different concerning the following aspects: Dominant marketing orientation• : RM implies that marketing should not be restricted to ‘marketing mix activities’ nor should it be only and wholly the responsibility of the marketing department. In TM, the marketing role of personnel outside of the marketing department is minor and elements such as advertisement and price promotions Transactional marketing Relationship marketing Orientation to single sales (transactions) Orientation to customer retention Discontinuous customer contact Continuous customer contact Focus on product features Focus on customer value Short time scale Long time scale Little emphasis on customer service High emphasis on customer service Limited commitment to meeting customer expectations High commitment to meeting customer expectations Quality as the concern of production staff Quality as the concern of all staff Marketing as the concern of marketing staff Marketing as the concern of all staff Source: Adapted from Payne et al., 1995, modified Table 1.1: TM and RM compared Kapitel_1.indd 20 03.08.2010 12:45:32 Uhr 1.5 Relationship Marketing as an Integrative Management Approach 21 are instrumental. In RM, these factors are also there but more as supporting activities to interaction and internal marketing strategies. Against this background, RM fosters a more integrative approach of marketing. Dominant quality function• : In RM, although the technical quality has to be satisfactory, it is no longer the only quality dimension. Rather, all the interactions within the company support the quality perceptions of the customer. Customer information system• : Companies pursuing TM strategies are likely to have little direct customer contact. TM relies instead on ad hoc customer satisfaction surveys and statistics for information about the behaviour of customers. An enterprise that applies RM strategies would monitor customer satisfaction by continuous contact and by directly managing its customer base (Egan, 2008). Interdependency between business functions• : The level of interdependency between functions and departments is a business depends the strategy chosen by the company. In TM the marketing department takes care of the marketing function whereas in RM the interaction between marketing, operations, finance and other functions becomes critical to success. Role of internal marketing• : Non-marketing employees and their marketing tasks are an important element of RM strategy. Enterprises operating such strategies have to take a proactive approach towards getting the commitment required to develop integrative marketing behaviour among all employees. The more people in the company are involved in marketing and a corresponding mind-set, the greater the need for internal marketing. As we have discussed above, certain drivers may influence whether a company adopts a relational or transactional strategy. Table 1.2 enumerates these drivers (Table 1.2). Some of these drivers have been discussed in previous sections while others will be referred to in subsequent chapters in the framework of the marketing management process with special respect to a relationship approach. Observation of marketing practice in international enterprises indicates that a hybrid managerial approach suggested by the above stated continuum concept is the most appropriate and differentiated response to prevailing market circumstances. Thus, there may exist a number of alternative marketing styles, any of which, depending on the customer-supplier relationship, may be more applicable (Chaston, 1998). Rather than suggesting that RM is taking over as the new marketing paradigm, it is more beneficial Source: Adapted from Grönroos, 1995, modified Tr ad iti on al m ar ke tin g R el at io ns hi p m ar ke tin g Importance of core product Importance of customer service Figure 1.4: The RM/TM continuum Kapitel_1.indd 21 03.08.2010 12:45:32 Uhr 1. Fundamentals of Relationship Marketing22 to accept it as part of marketing’s tool box. It is therefore not TM versus RM or mass marketing versus customer-specific marketing that should be the argument (Kotler, 1997). A more adequate interpretation is that RM is not an appropriate strategy for all customers; moreover, multiple relationship marketing strategies may be necessary for different market segments and situations. The idea of a single, all-embracing, general unified theory of marketing is not suitable as strategies should, in a situational framework, be appropriate to given circumstances (Berry, 2000). Against this background, the subsequent chapters will look at the marketing management process from the perspective of both relational and transactional approach suggesting that a company should in any case pursue an integrative marketing management approach with respect to the specific conditions the company is facing. 1.6 Fundamentals of Marketing Planning Marketing is the organisation function charged with defining customer targets and the best way to satisfy their needs and wants competitively and profitably. Because consumers and business buyers face an abundance of suppliers seeking to satisfy their every need, companies and not-for-profit organisations cannot survive today by simply doing a good job. They must do an excellent job if they are to remain in the increasingly competitive global marketplace. Many studies have demonstrated that the key to profitable performance is knowing and satisfying target customers with competitively superior offers. This process takes place today in an increasingly global, technical, and competitive environment. There are some key reasons why marketing planning has become so important. Recent years have witnessed an intensifying of competition in many markets. Many factors have contributed to this, but amongst some of the more significant are the following (Hollensen, 2006): A growth of global competition, as barriers to trade have been lowered and global • communications improved significantly. Drivers promoting relational strategies Drivers against using relational strategies High acquisition costs relative to retention costs Acquisition/retention cost differential minimal High exit barriers Low exit barriers Buoyant/expanding market Saturated market High risk/high salience products or services Low risk/low salience products or services High emotion involved in exchange Low emotion involved in exchange Satisfaction benficial to retention Repeat behaviour strategy beneficial Source: Adapted from Egan, 2008, modified Table 1.2: Drivers affecting strategic decision-making Kapitel_1.indd 22 03.08.2010 12:45:32 Uhr

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Zusammenfassung

Marketing – A Relationship Perspective

Moderne Grundlange zum Marketing

Das Lehrbuch behandelt eines der wichtigsten und aktuellsten Themenfelder des modernen Marketings. Der Ansatz verbindet dabei den klassischen Ansatz der strategischen Marketingplanung und seiner Instrumente mit dem neuen Ansatz des Relationship Marketing. Der ganzheitliche Ansatz des Buches umfasst dabei die aktuellen Marketing-Grundlagen, Praxisbeispiele sowie anwendungsorientierte Fallstudien und eignet sich somit ideal sowohl für Manager und Entscheidungsträger im Marketing-Bereich, Studenten in Bachelor- und Materstudiengängen sowie Dozenten und Trainer.