CRM: An Introduction
Chapter One
Fundamental Theoretical perspectives of
Relationship:
•The term ‘Relationship’ can be defined as a series of
interaction that takes place between two parties over a
period of time.
•In the context of business these interactions can take
place between the Customer and the Organization
•This can be while purchasing a product, enquiring about
the product, making a Sales Call, negotiating terms and
Handling the Complaints
•Therefore Managing successful relationships with the
Customers is an imperative for any Organization
•Relationship Management is an approach that aims to
establish a partnership between an Organization and its
Customers
•On the other Hand the Customers will more likely
maintain relationship with those Organization that serves
their needs
•Therefore the organization must maintain effective
Communication with its Customers, understand their
needs and provide customized products and services to
them
•They should also resolve the Customer queries on time
and also take feedback regarding products and services
on regular basis
•Thus Relationship refers to a state of connection or
association between two parties.
•In business , a relationship exists when both the parties
, the business firm and the Customer, move from the
state of independence to dependence/ interdependence.
• Example : When a customer occasionally buys from
any organization it is called Transaction but when he
repeatedly buys from the same organization then it
means he is satisfied and there exists a relationship
between the organization and the customer
• A relationship changes with time as both the parties
become closer or distant or the interactions become
more or less frequent.
• According to Dwyer “A relationship between the
Customer and the Organization passes through five
different phases
• They are Awareness, exploration, expansion,
Commitment & Dissolution
• Sometimes the relationship between the two is
terminated due to several reasons such as
• Repeated Service Failures, or change in requirements
• the organization terminates relationship with those customers
who require high acquisition cost.
Theoretical perspectives/ Theories of Relationship:
As we all know, Relationship is a subject of an individual’s
personal feelings. The attempts have been made by several
theorists to explain this concept of Relationship. The important
theories are such as :
• Social Exchange Theory : It was developed by Thibant and
Kelly in 1959.
• Social exchange theory has Cost , benefit , Outcome,
Comparison Level, satisfaction & dependence as important
components. It says that
Outcome = Benefits - costs
while
Satisfaction = Outcome-Comparison Level
and Dependence = Outcome - Comparison levels of Options
• It propounds that an individual enters into
relationship that yields maximum profits
• The Business firms prefer to manage relationship
with those customers who are more profitable in the
longer run and require less cost for their acquisition
• Likewise the customers prefer to purchase products
/services from organizations which provides
maximum value/benefits. This theory does not apply
to Loyal Customers as they stick to a particular
Brand under all circumstances
• Social Penetration Theory: It was developed by
Altman and Taylor in 1973.
• It says that a relationship is developed between two
individuals through a gradual process of Self
Disclosure. For example: A Salesperson always tries
to buildup a rapport with the Customer and then
gradually attempts to make a Sales deal.
There are several stages of social penetration such
as:
• Orientation stage: Here the main focus is on small
talk and simple ,Harmless greetings such as ‘How
are you’ or comments on Weather.
• It means that the discussions follow Social
desirability standards and norms of Appropriateness
• Exploratory Affective Stage : with focus on
moderate Topics like Government and Education
• Affective Stage: having discussions on private and
personal matters
• Stable Stage: Now the personal things are shared
and prediction of emotional reactions of other
persons is done.
• Depenetration: The relationship starts to break
down when the cost exceeds the Benefits . Also
the there is withdrawl of disclosure along with
Bitching , Ditching and Mental Itching.
• This theory describes the relationship in terms of
Breadth and Depth.
• For example An Insurance Agent does not start the
Sales Call with immediate starting of the Benefits
of Policy or need of Insurance.
• Instead he tries to develop some Informality by
talking something very general and gradual
movement towards personal matters
• Equity Theory: It was given by John Stacey
Adams in 1963
• It says that one enters into relationship if
rewards are equal to Costs. If any thing out of
the them is less than it breeds Dissatisfaction
and results in quitting relationship
• He emphasized that Employees seek to
maintain Equity between the Inputs they bring
to a job and the outcome that they receive from
it against the perceived inputs and outcomes of
others.
• Inputs are defined as each participants contributions
to the relational exchange and are viewed as entitling
him to rewards or Costs. Inputs include any of the
following such as
• Time, Efforts, Loyalty, Hardwork, commitment, Ability,
Flexibility, Adaptability, Tolerance, Enthusiasm,
Determination, Sacrifice, Personal, Trust in Superiors,
Co-workers Support and Skills while
• Outcomes are the positive or negative Consequences
such as Salary, Employee Benefits, Job security,
Expenses, Recognition, Reputation, Responsibility,
Sense of Achievement, Praise, Thanks and Stimuli
Equity theory consists of four propositions
• Individuals seek to maximize their Outcomes
( Outcome = Rewards - Costs)
• Groups can maximize collective rewards by developing accepted
systems for equitably apportioning rewards and costs among
members.
• Individuals feel distressed when finding themselves participating
in inequitable relationships
• They try to eliminate their distress by restoring equity. The
greater the inequity, the more distress the people feel and the
more they try to restore equity ( Walster et.al. 1978)
• To Conclude this theory claims that we develop and maintain
relationship in which rewards are distributed in proportion to the
Costs.
• The cost-reward relationship plays important role in maturing of a
Sale
• Attraction Theory: It was given by Aronson in
1980 and is one of the most important theories.
• It says that an individual enters into a relationship
with other individuals who attracts him/her.
• There are four main factors behind this such as
Attractiveness(Physical Appearance &
personality), proximity, reinforcement and
Similarity.
• An individual tries to enter into relationship with
people who generate enough attraction for him.
• Persons with different backgrounds and working
in offices do enter into good relations due to this
factor.
• Cardinal rule in selling: Sell yourself before you
sell your product” This principle enables
salesperson to create attraction for oneself
Evolution of Relationship:
• Earlier producers used to interact with the
Customers on one to one basis.
• Now due to technology advancements they are
able to interact with several Customers and
resolve their queries through various Channels
like Telephone, E-Mails and Live Chat etc.
• The evolution of relationship between Producers
and Customer can be reflected through the
following points:
• Pre-Industrial Age : is the time period when there
was one to one relationship between producers
and Customers. In this age the producers were
busy understanding the needs of Customers and
provide them products accordingly.
• Industrial Age : It refers to a time period the
focus shifted to Mass production. Now the
producers were more concerned with reducing the
per unit cost of production by producing in large
Volumes.
• The relationship between the producer and the
Consumer was based on cost Advantages.
• Service Economy Age: Here in this the products
were combined with the Intangibles to satisfy the
needs and wants of the Consumers. At this
phase the producers were focused on creating
Value for the Customers by providing them
additional benefits.
• Knowledge Economy Age: In this period the
relationship between them was based on Mutual
collaboration of Knowledge
Evolution of Relationship as a
Marketing Tool
• The domain of Marketing has been redefined
as it has become more of Relationship oriented
rather than simple Transactions
• Today’s Technological advancement permits
producers to interact directly with a large
number of Users.
• The emergence of relationship focus provides
a “refreshed and expanded self concept” to
Marketing.
• This is the result of following four Observations
such as :
1.
Relationship Marketing has caught the fancy of
scholars in many parts of the World inclusive of
North America, Australia and Asia etc.
2.
Scope of RM is very wide enough to cover
disciplines of Marketing including Channels, B2B
Marketing, services Marketing, MR , Consumer
Behaviour , MC, MS, IM & Direct Marketing
3.
Marketing is also evolving discipline
4.
The scholars like Bagozzi , Kotler and Hunt who
were earlier proponents of exchange process are
now followers of relational aspects of Marketing