Relationship MarketingV l ti d t t i l t tiValue creation and strategy implementation

A dAgenda

Th Ch i F i M k i• The Changing Focus in Marketing

• Traditional versus Relationship Marketing Approach

• Transactional versus Relationship Marketingp g

• Relationship Marketing: principle and orientationorientation

• The role of RM to competitive marketing strategystrategy

“ h ’d b h f i d i“As a merchant you’d better have a friend in every town”

An ancient Middle Eastern proverb

Th Ch i F f M k tiThe Changing Focus of MarketingCustomer relationship

Competitive position focus

relationshipfocus

Service d i t

Sales 

Marketing Mixfocus

k

dominant

exity

Production focus

focus Market dominant

Comple

Productfocus

Product DominantDominant

Pre 1800s 1920s 1950s 1970s 1980s 1990s 2000+

Time

Source: Christopher et al (1991)

T di i l M k i A hTraditional Marketing Approach• Marketing Mix (4Ps)ApproachMarketing Mix (4Ps)Approach

– Product 

Price– Price 

– Place 

P ti– Promotion

Problems with Traditional Marketing ApproachApproach

• It assumes all segments of customers are similar and may be treated in a standardized way

• It assumes consumers are passive absorbers of marketing information

• It assumes short‐term and often one‐off transactions based around the exchange of goods for money 

Source: Christopher et al (1991)

D fi iti f R l ti hi M k tiDefinition of Relationship Marketing

Perspective DefinitionPerspective Definition

Berry (1993) from a service perspective

“Relationship Marketing is attracting, maintaining and multi‐service organizations enhancing customer relationship”

J k (1985) f “M k ti t t d t d t l tiJackson (1985) from an industrial marketing perspective

“Marketing concentrated towards strong, lasting relationship with individual accounts”

Berry and Parasuramen “Attracting developing and retaining customerBerry and Parasuramen(1992) from a service perspective

Attracting, developing and retaining customer relationships”

Gronos (1995) from a  “To identify and establish, maintain and enhance ( )network perspective

y ,relationship with customers and other stakeholders, at profit so that the objectives of the partners interest are met, and this achieved by a mutual exchange and fulfillment of promises”of promises”

Source: Christopher et al (1991

General Model of RelationshipGeneral Model of Relationship Marketing

• Focuses on a relationship rather than transactional approach to marketing

d d h f• Understands the economics of customer retention• Highlights the critical role of internal marketing in achieving external marketing successg g

• Extends to more diverse market• Recognizes the quality, customer services and 

k ti d t b l l i t t dmarketing need to be closely integrated• Ensures that marketing is considered a cross functional context

The Transactional to RelationshipThe Transactional to Relationship Marketing

Emphasis on all k t d i d RELATIONSHIPmarket domains and 

customer retention

RELATIONSHIPMARKETING

Emphasis on customer acquisition

TRANSACTIONAL MARKETINGq

Functionality‐based Marketing

Cross‐functionality‐based Marketing Source: Christopher, 

Relationship Marketing, 2002

Transactional Marketing Relationship MarketingTransactional Marketing Relationship Marketing

‐Focus in volumeh d f

‐Focus on profitable retentionh l‐Emphasizes product features

‐Short timescale‐Little emphasis on customer 

‐Emphasizes customer value‐Longer‐term timescalers‐High customer service p

services‐Moderate customer contact‐Primary concern with product

gemphasis‐High customer contact‐Concern with relationship‐Primary concern with product 

quality‐Concern with relationship quality

Principles of Relationship Marketing• Maximizing Customer Lifetime Value (CLV) is aMaximizing Customer Lifetime Value (CLV) is a fundamental goal of Relationship Marketing– The future flow of net profit discounted back to theThe future flow of net profit discounted back to the present

• Focusing marketing action on multiple marketsg g p– Six Markets Model

• It must be cross‐functionalIt must be cross functional– “Marketing is too important to be left to the marketing department” (David Packard)

Th R l i hi M k iThe Relationship Marketing Orientation

Quality

RELATIONSHIPMARKETING

CustomerService

Marketing

Source: Christopher et al (1991)

Benefits RM to the firms• To win a new customer is more expensive than to pit is to to retain an existing customer

• Established customers tend to buy more (share of wallet)wallet)

• Satisfied customers are more likely to refer others (reduce cost of acquisition)(reduce cost of acquisition)

• Loyal customers can be less price sensitive and may be less likely to defect due to price increases

• Retaining customers makes market entry difficult for competitors

The Role of RM to Competitive Marketing StrategyMarketing Strategy

• Value as the central role to develop and implement relationship marketing strategyimplement relationship marketing strategy

• Stakeholders interaction process

K l ti iti• Key value activities

h l f lThe Role of Customer Value• Customer Perceive Value (CPV)Customer Perceive Value (CPV)

Is the difference between the prospective customer’s evaluation of all benefits and all the costs of an offering and the ‘perceived’ alternatives.

• Customers tend to be value maximizers

Component of Customer ValueP dProduct Attributes

ServiceAttributes

Perceived benefit

Perceived sacrifice

Expected CustomerValue

Transaction cost

Lif C l

Perceived sacrifice Value

Life CycleCost

Risk

Source: Customer Value Toolkit, 1st Edition, by E. Naumann and R. Kordupleski, 1995

The Value Process

• Value Determination

• Value Creation

• Value Delivery

• Value Assessment

Relationship Value ManagementCustomer retention

Employeerecruitment

Relationship Value Management Framework

Value determination

THE

Customer satisfaction Employee

satisfactionCustomers:‐Customer marketsR f l M k

Employees:‐Internal Market‐Recruitment 

Value assessment

Valuecreation

THE VALUE 

PROCESSCustomer 

Employeeretention

‐Referral Market markets

Value delivery

attractionretention

Stakeholderretention

Stakeholderengagement

External stakeholders:‐Shareholders‐ Other influence markets   ‐ Suppliers and alliance markets

Stakeholdersatisfaction

Source: Christopher, Relationship Marketing, 2002

Choice of Relationship Strategy• Three generic strategies identifies by Treacy andThree generic strategies identifies by Treacy and Wierseman:– Operational excellenceOperational excellence

Providing customers with reliable products or services at competitive prices and minimal inconvenience

– Product leadershipProviding products that continually redefine the state of art

Customer intimacy– Customer intimacySelling the customer a total solution not just a product or service

R fReferences• Chistopher, Martin, Adrian Payne and Davidballantyne (2002). “Relationship 

Marketing, creating stakeholder value”Butterwor.th‐Heinemann.

• Harwood, Tracy,T. Garry and A Broderick (2008). “Relationship Marketing: Perpectives, Dimensions and Context, McGraw Hill.

N E A d R K d l ki (1995) “C t V l T lkit 1st diti S th• Naumann, E. And R. Kordupleski (1995). “Customer Value Toolkit, 1st edition. South Western College \publishing.

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