Relationship Marketing (3)
Chris Chapleo
Relationship marketing in
practice
How can organisations
implement relationship marketing

Remember Stages of Relationship
(Dissolution)
Traditional
Marketing
Relationship
Marketing
Commitment
Expansion
Partners
Partners
Members
Members
Advocates
Advocates
Clients
Clients
Customers
Repeat Cust
Exploration
Awareness
1st Time Cust
Prospects
Prospects
Suspects
Dwyer et al 1987
Payne et al 1995
Kotler 1997
Source: Based on Dwyer, F.R., Schurr, P.H. and Oh, S. (1987) ‘Developing buyer-seller relationships’, Journal of
Marketing, 51, 11–27; Adapted from Payne, A., Christopher, M. and Peck, H. (eds) (1995) Relationship Marketing for
Competitive Advantage: Winning and Keeping Customers: Oxford: Butterworth Heinemann; Based on Kolter, P. (1997)
‘Method for the millenium’, Marketing Business, February, 26–7.
Higher relationships

How to we engender partnership?

What makes you an advocate in your
personal/ business life?

How can organisations capitalise on
this?
A reality check?





Important to separate reality from rhetoric!
No research to suggest that those involved in
loyalty marketing actively pursue people ‘up
the ladder’?
BA actively differentiate between levels of
membership depending on commitment (NB
expenditure)
Charities may associate higher level of
membership with increased status
May not be a linear progression up ladder? –
consumers may ‘demote’ themselves.
Lifetime value




Project the individual value of a
customer over time
This may lead to ‘barriers to exit’ rather
than a true relationship?
No guarantees – especially in sectors
with low exit barriers e.g. retail
Gas and Electricity companies seek to
‘bribe’ switchers?
Loyalty?

Key for companies is a cost- benefit
analysis of when it is worth seeking to
induce customers to move to the next
level? ( Kotler , 1992)
Amazon – reverse loyalty?





May –sep 2000 Amazon tried out
dynamic pricing
Regular customers would pay more and
should be charged more?
Differentiated ‘new’ and ‘existing’
customers.
Talk on forums was rife and confusion
became outrage!
Amazon apologised and backtracked!
Nationwide Building Society

http://www.youtube.com/watch?v=qFZV
3y-p_NY

Financial services may preach
relationship marketing but may actually
use differential pricing?
Your thoughts?


Consider a brand with which you feel
you have a relationship?
Break down that ‘relationship’? – why
do you feel it exits
Vauxhall – examples; campaign objectives


Primary objective: the programme had
to demonstrate a genuine uplift in sales
and an improved return on investment
Secondary objective: a strengthening of
the relationship between customers and
local Vauxhall dealers
Vauxhall’s RM
Vauxhall
Ongoing ; ‘dialogue building’
3 months prior to ‘switch’ ( new car buying date)
Brand Values – influence loyalty




The constituent elements of the overall
brand
Brand comprises functional and
emotional values
E.g. Brand values for Ryanair/ BA/
Virgin?
MacDonalds v Pret a Manger
Organix
Organix – a case study in
brand loyalty?




Tightly focused segmentation
Clear brand values
A motivated consumer group
A good basis for real RM programmes?
RM in Organisational Markets




‘Trading partnerships’ are not new
Bonds between B2B partners have a
long history
During 1950s golden age of marketing it
was brand owners who developed
brands and dominated distribution
70-80s saw change in power balance
between suppliers and retailers in fmcg
RM in Organisational Markets





1980s ‘vertical integration’ trend – often
through acquisition
Later in 1990s companies realised it made
sense to concentrate efforts on core
competencies
This led to more outsourcing and partnering
E.g. MacDonalds and Coca Cola
Retailers and Transportation e.g. Ocado Waitrose
RM in Organisational Markets; Benefits
for organisations





In depth understanding of customer
requirements
Familiar with customer’s ‘way of doing
things’
privileged access to future info?
Ability of both partners to focus on value
added chain
Relationship termination costs
RM in Organisational Markets; Costs for
organisations





Dulling of market ‘incentivisation’
Complacency?
Over reliance on few customers
Lack of creativity or innovation over
time? “ new blood”
Restrict true competition?
B2B partnerships’ Advertising Agencies








Classic example
Won by ‘pitch’
Require close synergy
Alignment of organisational objectives
Tendency to cultural and size ‘fit’
Often tend to rely on key individuals
Tendency to have finite lifespan due to
changes in decision makers
Are these examples of RM?
RM in Consumer Markets


Modern IT allows some form of
individual treatment ; “mass
customisation” e.g. VW use mail shots
to keep Golf buyers ‘warm’, Unis using
SMS to ‘convert’ prospects
If we accept that loyalty schemes are
examples of RM?…..do they build ‘ real’
relationships?
Loyalty Schemes
Eg Tesco’s
Clubcard and
Nectar card

RM in Consumer Markets; Tescos




Constant data capture - Clubcard
28,000 targeted offers
Understanding and segmentation by
‘lifestyle’
But is this real loyalty or convenience?
The service paradox; are the most loyal
customers the most satisfied / profitable?







Gummesson (1999) introduced the ‘service
paradox’
Less profitable customers are, the more
satisfied they are with service?
Eg SAS research – flights Europe to NY
Business class is $3000 but very demanding
Economy cheap but low price = satisfaction?
Ryanair is classic example
Lessons for practice? = no simple answers
Criticism of RM





Is RM management ‘fad’?
Is it new anyway? ( see Egan 2004 p 240)
One sided communication? – do we
want relationships? ”voice of customer
missing” ( Buttle 1996)
Selective research used to justify it?
Hardly rises above common sense?
The future..





End of 1990s saw question fundamental
assumptions behind RM theory:
That it focussed wholly on supplier- customer
relationship
Approach was about attracting, maintaining
and enhancing customer relationships
Customer service central to this philosophy
All had common factor – concerned with
buyer-seller interface
The future..




But later writers such as Gummesson sought
to widen RM’s scope
Not just buyer – seller relationship but ‘whole
series of relationships and networks are
important’?
NB relationships with customers and other
stakeholders are important
New theory was that organisations should
compete through development of long term
relationships with all it’s stakeholders ( Egan
2004)
The future; Implications



There has undoubtedly been an attempt
to apply RM theory to areas where it is
not suited as consumers want little
relationship
Companies start to believe that there is
more to their relationship than is the
case
CRM approaches typical = call centres
The future; Implications





Companies must not assume that all
Customer - supplier contacts are capable of
closeness
70-80% failure of CRM projects KMPG 2002
RM had moved us away from functional and
transactional approach
Can provide healthy and imaginative
marketing environment
Genuine relationships can be built with
brands we trust?
Your thoughts?

Brands you Trust?

In what circumstances, as a consumer,
do you want a ‘relationship’?
Further Reading

MBR p 275-300

Egan ( 2004) Relationship Marketing
p248-258

PS remember RM case study for next
weeks seminars
The end