Relationship Marketing

 Relationship Marketing

With globalization and liberalization of international markets, manufacturers, organizations and service providers have opted for newer forms of marketing as opposed to the traditional form of marketing. As a result the traditional forms of marketing among them being marketing that uses transactional philosophies have been revolutionized to embrace relationship marketing philosophies. Transactional approach to marketing is a form of marketing where the marketer is focused on attracting customer for the sole purpose of purchasing their product while relationship marketing describes a situation where a marketer develops a personal and interactive relationship with the customer after making a sale (Joshi, 2012). Whereas the former philosophy is more focused on making a single sell for a given products, the latter is aimed at ensuring that loyal customers are kept for future transactions.

Relationship is a very pertinent aspect of any business. Among the common relationships that a business needs to foster are those regarding; customers, suppliers, employees, dealers, retailers and distributors (Hochbaum, Moreno-Centeno and Yelland, 2011). By so doing a company forms a relationship capital which has been defined by business analysts as the sum of the trust, knowledge and experience that a company maintains with its stakeholders. It is these relationships that form the goodwill towards a company thus making good relationships more important as compared to the company’s physical assets. The bottom-line thus emerges that good customer relations have a longer lasting effect on the future of a firm because it determines customer loyalty and favor. Failure to maintain positive relationships will hurt the organizations long term performance as a result a firm needs to maintain a relationship score-card containing matrixes relating to strengths, weaknesses, opportunities and threats in the relationship between a business and its stakeholders. By so doing, the company will be able to identify weakening relations and correct them on time.

Whereas transactional marketing ignored relationship building, and constantly made the company to operate as an independent agency chasing after its own goals, relationship marketing has embodied a very different approach. With relationship marketing, a company strives to keep its current customers while putting in measures to gain new customers. With the new strategies, organizations have shifted their focus from competitive thinking into mutual cooperation and interdependence between stakeholders who in return benefit the company for a relatively longer period of time. This is due to the fact that relationship marketing exhibits the following characteristics; it focuses on customers and business partners as opposed to focusing on the company and its products. It emphasizes on the need to retain customers while at the same time acquiring more potential customers so as to offset competitors. Relationship marketing relies on cross-functional teamwork and not departmentalism as it was with the transactional marketing (Kerin & Roger, 2012). Lastly it the relationship marketing philosophy emphasizes on the need to learn from stakeholders rather than to talk.

Apparently the shift towards relationship marketing does not make the transactional marketing philosophies inapplicable in modern organizations. In fact integrating the two strategies could help the organization strike a common ground with its stakeholders. Mixing the transactional and relationship marketing especially for companies operating in multinational markets could be helpful as compared to using only one marketing philosophy or strategy. Additionally, the application of the relationship marketing means adjusting the 4P’s of marketing in that the company will have to customize its products so as to match the customer’s preference. Also the company will have to work closely with suppliers and distributors while designing new products. The aspect of pricing could be accommodated in such a way that the company will have to price its bundles of products depending on their relationship with the customers and the bargaining power exhibited by the customers. Relationship marketing also means that distribution or positioning will favor direct marketing so as to create a lasting bond with customers and also the customers will have power over distribution channels (Dobkin, 2009). The last P regarding promotion will be affected by communication channels used. Relationship marketing has a preference for personal dialogue with customers aimed at improving the image of the organization.

The American Marketing Association defines marketing as a deliberate action undertaken by any organization to create, communicate and deliver goods and services to customers while at the same time managing the relationship in such a way that it benefits all the parties involved. The original concept behind relationship marketing emanated from the Homeric Greece who found out that developing interpersonal relationship could help a long way into curbing increased competition caused by liberalized global markets, advancing communication over international markets and sustaining sales. Relationship marketing abbreviated as RH as it came to be called later on became applicable into the academic domain in the year 1980 and in the 1990’s when researchers identified that RM would present a new perspective into marketing (James, 2007). The application of this modernistic marketing strategy displaced the transactional marketing by shifting the focus of the definition and principles that defined the 4P’s of the marketing mix.

Ancient Greeks had used relation-based exchanges in the years before 1900 when money had not come into existence. The relation-based exchanges were displaced by transaction-based exchange after the invention of money in the 1900 because people could now purchase goods and services without creating personal relationships as it was during the ancient times when they barter trade was still the only way to transact (Sandhusen, 2008). This is one reason why researchers describe the modernistic relationship marketing as a rebirth of the pre-industrial age marketing practices. Before the industrial age barter trade between farmers, buyers, local traders and craftspeople depended upon the relationship that was created between these four groups of people. This is because relationship created trust between these groups of people and with trust came confidence among traders and the buyers who began to have faith in the goods they were trading in. The ongoing relationship created among these people was essential in building business names.

With the emergence of industrial revolution which marked the onset of globalization, market liberalization and mass production for global markets, the dynamics that underplayed relationship marketing were replaced by dynamics presented by the diverse markets. Producers began enjoying economies of large scale production and voluminous profit margins which enabled them to produce more at a relatively lower cost. The need to reach out to a larger market created by the vast transport networks, storage and the vast geographic disparity undermined the growth of relations marketing for transactional marketing. Apparently the markets were vast and producers did not find it necessary to advertise or market their goods as the subtleties of demand and supply often balanced without coercing the customers. The people valued the manufactured goods so much that they had to begin moving to cities and towns so as to not only gain access to employment opportunities but also to be closer to the goods and services. As the people clustered and urban dwelling began to increase, the need for better living standards led to competition among the manufacturers and this triggered aggressive sales (Sheth and Atul, 2010; Young, 2009). Some manufacturers began losing out on their market segments because the customers had concentrated in towns and cities. These events marked the prerequisite to promotions as well as marketing which emerged at the same time.

The culmination of events starting from industrialization to concentration of customers in urban dwelling led to emergence of more industries especially in industries that required low capital investments. New industries emerged as well as middlemen, transportation and storage, retailing, wholesaling and selling. With the increasing competition, organizations began experimenting on the probability of gaining sales through product differentiation, focusing and cost variations. Businesses began concentrating on the salient features of offering based on varying the prices among other business dynamics likely to attract repeat sales. This apparently strengthened transactional marketing as manufacturers intensified their price wars and economic competitive strategies. Further research into curbing the increasing competition led to the development of sociological and psychological viewpoints which have led to the resurgence of the relationship marketing which was used in the 1900’s (Trachtenberg, 2007).

Upon experimenting on the salient benefits that could be accrued from this psychological and sociological analysis, organizations in Western countries found out that it was a worthy course for modern organizations to embrace relationship marketing because maintaining an affiliation with customers proved beneficial by creating customer loyalty because customers began gaining more trust in manufacturers. Cooperation between customers and manufacturers was increased and it was interesting how the business transactions were facilitated courtesy of the mutual relationship created. With this strategy also, organizations realized that it was easier to attract new customers because of the chains of friendships the customers kept. The channel of distribution was shortened with the elimination of middlemen, retailers and wholesalers who made the prices of the goods and services to be high (Di Virgilio and & Ludema, 2009). This is because the costs were increased at every stage of distribution making them expensive for the final consumers. Likewise, the manufacturers increased their bargaining power with the clients by running promotions meant to reward the relationship created between the customer and the manufacturers.

The applicability of relationship marketing to modern organizations is supported by the inter-firm relationship marketing theory (Dev and Don, 2008). This theory acknowledges the existence of a relationship between employees, employers, customers and firms as well as all the other stakeholders. The theory supports that an organization has a chain of relationships which require to be sustained at all times. The firm-to-firm relations are so diverse and can be affected by the networks of communication selected as well as the perception of people towards the organization as a whole.  The inter-firm relationship marketing theory is supported by the network theory developed by sociologists. The network theory provides a valuable understanding of structural characteristics inherent in the networks of interactions created to act as a link between multiple entities such as organizations and customers in the modern society. The network theory comes in handy when explaining the efficiency of inter-firm relationships.

From the integration of these two theories, it is acknowledgeable that relationships are varied depending on the five drivers of relationships which are relationship quality, breath, composition, efficacy and strength (Kotler, 2010). These drivers explain why relationship marketing has been integrated into modern marketing. The relationship quality driver was explained as being a bond that determined the degree of reciprocity and the closeness of people in the social network. The aspect of relationship quality covers the diversity of the interactions and the characteristics required by the parties involved in the relationship creation process. Thus quality defines such characteristics of relationship surrounding rationality of the exchange efficiency, bond, commitment, reciprocity norms, and trust. The quality of a relationship influences the outcome derived from a business exchange hence it influences the desire by the stakeholders to maintain their relationship after their first business transactions are completed.  Reciprocity on the other hand deals with the obligatory responsibility undertaken by the two parties so as to safeguard their relationships.

The driver of relationship breath is determined by the effectiveness of the interrelation ties crated between an organization and its stakeholders. It is this breath that allows for transparency in disseminating information regarding profit enhancement and the continued interaction even after the purchase has been completed. This is because the firms marketing department hopes that the customer will be pleased by their services and come back for a repeat purchase. Relationship breath further determines the willingness for the two or more parties to be persistent in doing business together. Sociologists correlate breathe to the networking concept of quality as well as the degree of centrality of the relationship. Breath majorly affects knowledge transfer, cooperation, product development and efficiency of communications (Kotler & Armstrong, 2012). This is to mean that a buyer and a seller who have close interpersonal ties have a better access to sales opportunities and information. Relationship composition is concerned with the authority and the diversity of the stakeholders along the network. This driver regards the need for customers to have links and contacts to the various departments in the company so as to enhance their reach in the event that they want their issues to be solved by a specialized departmental head.

Relationship strength relates to the ability for the relationship network between the consumers and the company to withstand conflicts and stress. Thus with strength, the organization has to ensure that there exists a high-quality relationship between the customers and the company or the business. Accruing from the definition, there emerges the low quality and high quality relationship networks (Brenda, 2010). Organizations have to strive to ensure that they maintain high quality relationships so as to retain the customers. Lastly there is the driver concerning relationship efficacy which means that the created relationships between the business and the clients should have the ability to achieve the desired goals as set by the customers and the business. It integrates relationship strength, composition, quality and breath. Efficacy determines the ease with which a business implements its selling strategies to the customers. Likewise the driver of composition affects efficacy in the sense that customers are supposed to have contacts to essential departments so as to help in the attainment of efficiency.

Collectively, relationship marketing stands out as a customer centric marketing strategy since its business structures sell and marketing efforts towards fostering the bond between the company and its loyal customers. Relationship marketing is supported by several theories among them being the network theory and the inter-firm relationship marketing theory. From the definition given by the American Marketing Association, relationship marketing is pegged on the assumption that he customers have needs that require fulfillment therefore they need businesses while on the other hand, businesses require customers for them to survive, therefore there exists a mutual existence between manufacturers and the customers as well as the other stakeholders (Clow and Donald, 2009). From this realization, it is prudent for businesses to work hand in hand with the customers insuring that there is a beneficial relationship between them.

List of References

Brenda, K 2010, Crystallizing knowledge of historical Company performance into interactive landscapes (2^nd Ed.). New York: Wiles Press.

Clow, K & Donald, B 2009, Integrated Advertising Promotion and Marketing Communications, 3rd Edition, Upper Saddle River, New Zealand

Dev, C & Don, E 2008, In the Mix: A Customer-Focused Approach Can Bring the Current Marketing Mix into the 21st Century. Marketing Management Journal

Di Virgilio, M & Ludema, J 2009, “Let’s talk: creating energy for action through strategic conversations”, Journal of Change Management, Vol. 9 No. 1, pp. 76-85.

Dobkin, J 2009, Direct Marketing Strategies: Forget Theory – Here’s What Really Works, Danielle Adams Publishing, Mexico

Hochbaum, E & Moreno-Centeno, P & Yelland, R 2011, Rating customers according to their promptness to adopt new products, Operations Research, Canada

James, S 2007, The Business Communication Casebook: A Notre Dame Collection, (2^nd Ed.), Cengage.  United States

Joshi, R 2012, International marketing, New Delhi, USA

Kerin, K & Roger, A 2012, Marketing: The Core, McGraw-Hill Ryerson. Canada

Kotler, P & Armstrong, P 2012, Principles of Marketing, Pearson Education, United States

Kotler, P 2010, Marketing defined: Principles of marketing, Apple cross, Australia.

Sandhusen, R 2008, Chapter 6: Organizational markets and buyer behavior, Rohan, UK

Sheth, J & Atul, P 2010, Handbook of relationship marketing. Thousand Oaks, Calif.: Sage Publications, Inc.

Trachtenberg, J 2007, Borders Slashes Buyer Rewards: Cuts Discounts. Wall Street Journal, D1.

Young, L 2009, “Trust: Looking Forward and Back.” Journal of Business and Industrial Marketing 21 (7), 439–45.

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