Relationship Marketing:
Contents, Meaning, and Strategies
Francesco Caputo fcaputo@mail.muni.cz
Introduction to Service Marketing
From old to new vision in management
Transaction-based marketing - Buyer and seller exchanges characterized by
limited communications and little or no ongoing relationship between the
parties
Relationship Marketing - Development, growth, and
maintenance of long-term, cost-effective relationships with
individual customers, suppliers, employees, and other
partners for mutual benefit
Francesco Caputo fcaputo@mail.muni.cz
Transaction Marketing Vs Relationship Marketing
Transactional marketing is
focusing all of its marketing
efforts on attracting customer for
one off sale
Francesco Caputo fcaputo@mail.muni.cz
Relationship marketing uses methods
to develop long term relationship
with customer in order to retain and
develop a healthy relationship with
their customer
Source: Gummesson, E. (2011). Total relationship marketing. Routledge, London.
From old to new vision in management
4
TRANSACTION
COLLABORATION
INTEGRATION
PAST
PRESENT
FUTURE?
Francesco Caputo fcaputo@mail.muni.cz
Core concepts of Relationship Marketing
a. Contrast transaction-based marketing with relationship-based marketing.
b. Identify and explain the four basic elements of relationship marketing, as well as the importance of internal
marketing.
c. Identify the three levels of the relationship marketing continuum.
d. Explain how firms can enhance customer satisfaction.
e. Describe how companies build buyer-seller relationships.
f. Explain customer relationship management (CRM) and the role of technology in building customer
relationships.
g. Describe the buyer-seller relationship in B2B marketing and identify the four types of business partnerships.
h. Describe how B2B marketing incorporates national account selling, EDI and Web services, VMI, CPFaR,
managing the supply chains, and creating alliances.
i. Identify and evaluate the most common measurement and evaluation techniques within a relationship marketing
program.
Francesco Caputo fcaputo@mail.muni.cz
Key drives of Relationship Marketing
ü Focuses on long term rather than short term
ü Emphasizes retaining customers over making a sale
ü Ranks customer service as a high priority
ü Encourages frequent customer contact
ü Fosters customer commitment with the firm
ü Bases customer interactions on cooperation and trust
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Key drives of Relationship Marketing
Firms build longterm
relationships
in four ways
Gather
information
about their
customers
Monitor
interactions with
customers
Use customers’
preferences and
knowledge
Analyze the data
and use it to
modify the
marketing mix
Francesco Caputo fcaputo@mail.muni.cz
Marketing mix and Relationship Marketing
Francesco Caputo fcaputo@mail.muni.cz
Price
ü The company will set a price based on the
relationship with the customer and the bundle of
features and services ordered by the customer.
ü In business-to-business marketing, there is more
negotiation because products are often designed
for each customer.
Place (Distribution)
ü RM favours more direct marketing to the
customer, thus reducing the role of middlemen.
ü RM favours offering alternatives to customers to
choose the way they want to order, pay for,
receive, install, and even repair the product.
Promotion (Communication)
ü RM favours more individual communication and
dialogue with customers.
ü RM favours more integrated marketing
communications to deliver the same promise and
image to the customer.
ü RM sets up extranets with large customers to
facilitate information exchange, joint planning,
ordering, and payments.
Product
ü More products are customized to the customers’
preferences.
ü New products are developed and designed
cooperatively with suppliers and distributors.
Levels of Relationship Marketing
First level: Price
Second level: Social interaction
Third level: Partnership
Source: Berry, L. L. (1995). Relationship marketing of services—growing interest, emerging perspectives. Journal of the Academy of marketing science,
23(4), 236-245.
Francesco Caputo fcaputo@mail.muni.cz
The focus: Customer satisfaction
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ü Customers experience of a product or a
service is multifaceted so hard to determine
ü It needs to be measured individually to get
an accurate total picture of customer
satisfaction
ü Customer satisfaction should not be viewed
in a vacuum.
ü For example, a customer may be satisfied
with a product or service and therefore rate
the product or service highly in a survey and
yet same customer may buy another product.
Steps towards Customer satisfaction
Understanding
customer needs
Satisfying
customer
needs
Forecasting
customer
needs
ü To build long-term
relationships firms must
understand what customers
need, want, and expect
ü Must measure customer
satisfaction
ü Marketers need to keep in
touch with the needs of current
and potential customers
ü Sources of information include
toll free numbers or online
feedback
ü Some firms hire mystery
shoppers posing as customers
to evaluate service
ü Complaints help firms to
overcome problems and
demonstrate commitment to
service
ü Some firms conduct surveys to
measure satisfaction
ü Consumers form relationships
to:
ü Reduce choices
ü Simplify information
gathering and the entire
buying process
ü Reduce the risk of
dissatisfaction
ü Perceived positive value
received in a long-term buyerseller
relationships is a key
benefit for customers
Francesco Caputo fcaputo@mail.muni.cz
Reasons of Relationship Marketing
ü Retaining customers is more profitable than losing them
ü Customer turnover is expensive for companies
ü Firms generate more profits with each additional year of a relationship
ü Connecting directly with existing and potential customers through nonmainstream
channels
ü Satisfied customers spread the word about products to other consumers
ü Gathers volunteers to try products and then relies on them to talk about their
experiences
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A possible pathways: Customer Relationship Management (CRM)
13
“Customer relationship management is an enterprise-wide customer-centric business model
that must be built around the customer. It is a continuous effort that requires redesigning core
business processes starting from the customer perspective and involving customer feedback”.
Source: Chen, I. J., & Popovich, K. (2003). Understanding customer relationship management (CRM) People,
process and technology. Business process management journal, 9(5), 672-688.
“As we move from the industrial economy to the knowledge-based economy, the focus of
production efficiency is shifted to value creation throughout the entire value chain. Customer
relationship management is a key ingredient in the value creation strategy”.
Source: Chan, J. O. (2005). Toward a unified view of customer relationship management. Journal of American
Academy of Business, 6(1), 32-38.
Francesco Caputo fcaputo@mail.muni.cz
Implementation strategies
ü Combination of strategies and tools that drive customer relationship programs
ü Leverages technology to manage customer relationships
ü Integrates all stakeholders into a company’s product design
and development
Francesco Caputo fcaputo@mail.muni.cz
Elements of CRM
15
Call center telephone sales
E-commerce
Field sales
Retail
Web-based
self service
Field services
and dispatch
Third-party brokers,
Distributors, agents
Call Centers
Managing aspects
Of customer contact
Data analysis
And business
Intelligence tools
Content
management
Campaign
management
Data warehouse
Sales force automation Customer service/call
center management
Marketing automation
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Role of ICT in CRM
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ü Technological approaches involving the use of databases, data mining and oneto-one
marketing can assist organisations to increase customer value and their
own profitability
ü This type of technology can be used to keep a record of customers names and
contact details in addition to their history of buying products or using services
ü This information can be used to target customers in a personalised way and
offer them services to meet their specific needs
ü This personalised communication provides value for the customer and increases
customers loyalty to the provider
Benefits of CRM
ü Software systems can make sense of huge amounts of data
ü Simplifies complex business processes
ü While company is quickly growing, customers are more satisfied as well
ü Service provided in a better way, and a quicker way
ü Integrated customer information
ü Certain processes are eliminated
ü Operation cost cut, and time efficient
ü Brand names more quickly established
ü Sales and marketing teams can benefit from having knowledge about customers
Francesco Caputo fcaputo@mail.muni.cz
Different CRM strategies for different stakeholders
Francesco Caputo fcaputo@mail.muni.cz
Strong relationship Weak Relationship
HighWillingness
PROMOTERS CONNECTORS
LowWillingness
PRIVACY SEEKERS AVOIDERS
Source: Elaboration on research published in “Referrals Revisited,” Investment Advisor, December 2007.
Different CRM strategies for different stakeholders
Francesco Caputo fcaputo@mail.muni.cz
SHORT-TERM CUSTOMERS LONG-TERM CUSTOMERS
HIGHPROFIT
Butterflies
ü Aim to achieve transactional satisfaction,
not attitudinal loyalty
ü Milk the accounts only so long as they are
active
ü Key challenge is to case investing soon
enough
True friend
ü Communicate consistently but not too often
ü Build both attitudinal and behavioural loyalty
ü Delight these customers to nurture, defend and
retain them
LOWPROFIT
Strangers
ü Make no investment in these relationships
ü Make profit on every transaction
Barnacles
ü Measure both size and share of wallet
ü If share of the wallet is low, focus on up- and
crossing-selling
ü If size of the wallet is small, impose strict cost
control
Source: Reinartz, W., & Kumar, V. (2002). The mismanagement of customer loyalty. Harvard business review, 80(7), 86-95.
Problems with CRM
Francesco Caputo fcaputo@mail.muni.cz
ü Requires companywide commitment and knowledge to use the CRM system
ü Failure to effectively reorganize firm’s people and processes
ü Organizational wise change of priority to customers
ü Significant investment of time and money
ü Threatens management’s control/power struggle
ü Heightens people’s resistance to change
ü Inappropriate integration leads to disaster
How to develop a CRM strategy?
To develop a CRM strategy organizations need to address four issues:
1. What is our core business and how will it evolve in the future?
2. What form of CRM is appropriate for our business now and in the future?
3. What IT infrastructure do we have and what do we need to support the future
organization needs?
4. What vendors and partners do we need to choose?
Francesco Caputo fcaputo@mail.muni.cz
Steps to improve a CRM strategy
ü Building customer knowledge - Develops a thorough knowledge of their customers and the local market. Has close
enough relationships with key customers to know what is going on for them and their work area.
ü Understanding needs - Focuses on the needs of customers rather than just on own agenda. Is skilled, attentive and
patient when listening to customers. Facilitates customers in identifying their own needs.
ü Managing customer information - Keeps accurate customer information to enable the business to optimize the
relationship and actively passes information to others. Maintains regular communication exchanges with customers.
ü Adding value - Provides help and solutions to meet customer needs. Uses a wide range of activities to work alongside
customers. Links their understanding of the customer needs to relevant services or products.
ü Building trust - Has integrity and is trusted by their customers. Develops a track record of delivering what they
promise and sorting out problems. They readily gain testimonials and referrals from existing customers.
Francesco Caputo fcaputo@mail.muni.cz
Source: Hennessy, J., & Vincent, R. (2005). The Psychology of Customer Relationship Management. Business Psychology in Practice, 256-268.
A short summary
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References
Francesco Caputo fcaputo@mail.muni.cz
Berry, L. L. (1995). Relationship marketing of services—growing interest, emerging perspectives.
Journal of the Academy of marketing science, 23(4), 236-245.
Chan, J. O. (2005). Toward a unified view of customer relationship management. Journal of American
Academy of Business, 6(1), 32-38
Chen, I. J., & Popovich, K. (2003). Understanding customer relationship management (CRM) People,
process and technology. Business process management journal, 9(5), 672-688.
Gruen, T. W., Summers, J. O., & Acito, F. (2000). Relationship marketing activities, commitment, and
membership behaviors in professional associations. Journal of marketing, 64(3), 34-49.
Gummesson, E. (2011). Total relationship marketing. Routledge, London.
Hennessy, J., & Vincent, R. (2005). The Psychology of Customer Relationship Management. Business
Psychology in Practice, 256-268.
Lemon, K. N., White, T. B., & Winer, R. S. (2002). Dynamic customer relationship management:
Incorporating future considerations into the service retention decision. Journal of marketing, 66(1),
1-14.
Ravald, A., & Grönroos, C. (1996). The value concept and relationship marketing. European journal of
marketing, 30(2), 19-30.
Reinartz, W., & Kumar, V. (2002). The mismanagement of customer loyalty. Harvard business review,
80(7), 86-95.
Reinartz, W., Krafft, M., & Hoyer, W. D. (2004). The customer relationship management process: Its
measurement and impact on performance. Journal of marketing research, 41(3), 293-305.
Winer, R. S. (2001). A framework for customer relationship management. California management
review, 43(4), 89-105.
Relational Marketing:
Contents, Meaning, and Strategies
Francesco Caputo fcaputo@mail.muni.cz
Introduction to Service Marketing
Thank you for your attention