Relationship Marketing (3)

Relationship marketing in practiceHow can organisations implement relationship marketing

Chris Chapleo

Commitment

Expansion

Exploration

Awareness

Partners

Clients

Customers

Prospects

Members

Advocates

Partners

Clients

Repeat Cust

Prospects

Members

Advocates

1st Time Cust

Suspects

Tra

dit

ion

alM

arke

tin

gR

elat

ion

ship

Mar

keti

ng

(Dissolution)

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.

Remember Stages of Relationship

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=qFZV3y-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

VauxhallOngoing ; ‘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