Research Topic: Relationship Marketing
It is not BMW or Porsche rather it is Toyota which is currently world’s the most innovative and profitable car manufacturer. The rapid growth of Toyota has been observed since 1990s because they developed a new term called ‘Relationship’ in their organization. Toyota built an extra ordinary relationship with its suppliers, contractors, employees and customers and as a result they received over a million ideas from them. Over 80% of those ideas have been found innovative and Toyota implemented those ideas accordingly. Toyota not only got people thinking about the right kind of ideas for the company but also actively encourages everyone in the organization to contribute ideas, (http://www.jpb.com/report103/archive.php?issue_no=20040427). The lesson to be considered here is that ‘Relationship’ can be a motivating factor of company’s overall success, because it may come up with some earth-shattering ideas. This relationship is now considered as Relationship Marketing, which means a practice that encompasses establishing, maintaining and enhancing all marketing activities with customers and other partners at a profit so that the objectives of both parties involved are met.
This essay has summarised the concept of relationship marketing and why has relationship marketing emerged as such an important area of marketing over the last decade. After highlighting some examples of relationship marketing practice in organisations, gradually this essay comes up with some views and finally it justifies the importance of relationship marketing for the smooth-running of an organisation. To complete this essay, information has been compiled from sources like text books, reference books, business journals and from internet. Well known examples have been given based on large organisations. Some real life experiences have been furnished also for better understanding about the topic.
In the time period from 1950 to 1970, concept of marketing has been developed rapidly. In 1964 Borden from Harvard Business School introduced twelve factors of marketing program which were later simplified further to four key factors like - Product, Price, Place and Promotion, known as the 4Ps of marketing. In the 90s three additional Ps had been included into this, such as People, Physical Evidence and Processes and turned into 7Ps, whereas, Kotler et al. (1999 p.110) suggested that marketers should view the 4Ps from a customer –orientated perspective. Thus the 4Ps become 4Cs where companies met customer needs economically, conveniently and with effective communication. Thus, price became the cost to the customer, place was substituted with convenience, products and services become customer needs and wants and promotion was transformed into communication, (Egan 2001). Finally, the importance of relationship marketing emerged from the early 90s as an ‘umbrella term’ which covers enabling organisations to bring an unprecedented level of utility and foresight to business planning. Customer Relationship Marketing (CRM) allows an organisation to study customer behaviour in depth, giving a detailed and flexible understanding of how customers behave, how to create and maintain a lifetime relationship with the customers, what should be the relation between the organisation and its employees and among the other parties like share and stakeholders, suppliers and contractors.
Though the traditional 4P marketing framework was quickly adopted by all groups and individuals, it could not serve the purpose of marketing in true sense because of the rapid change of consumer behaviour, consumer market, technology and socio-economic factors. Again, transitional marketing was mainly being focused on one-off sale, one way and sometimes biased communication, giving priority towards strict marketing policies and focuses on gaining new customers rather than existing customers. Transactional marketing practices also decrease the retention rate of customers; increase the cost of making new customers which reflects into lower profits. In recent years, marketing departments of most large companies have become so analytical that they have lost the ability to be truly creative. As a result, when research and development departments come up with innovative new products or ideas, marketing departments fail to market those products in an equally innovative ways because of the lack of information regarding their customer behaviour. So, marketing departments, relying on the traditional marketing strategies are often unable to see the new products' potential. For example, Shell the Anglo-Dutch oil giant closed its operation in Bangladesh in 2003 due to its poor marketing strategies, (http://www.weeklyholiday.net/080803/busi.htm) Shell entered into Bangladesh market without doing any prior market research. As a result, Shell failed to establish a proper communication with the Bangladesh Government as well as with the customers which lead them towards huge loss in investment and power plant establishment cost in ‘Shangu Gas Field’ in Bay of Bengal.
From the very beginning of the 1990s marketing situation starts going from bad to worst. Marketing functions in many organisations were marginalised due to hugely invested in unprofitable and unsuccessful marketing programs. As Doyle (1995 p.24) noted, marketers of the period generally made the mistake of seeing marketing as a functional discipline than an integrated business process. Organisations like Proctor & Gamble, Unilever were abolishing the position of marketing directors to concentrate on other functional activities, (Egan 2001), due to the result of open criticism made by the other departments of the organization. The Finance, Research & Developments departments were not pleased with the vague responses made by the marketing executives after a large expenditure had been made on marketing without a measurable return on the investment. Finally it appeared that marketing, the leading department of the first three quarters of the century was losing its primary to other organizational disciplines and doing little to resolve the problem, (Doyle 1995, p.23).
Moreover, the industrial and technological revolution, new sources of energy and precision engineering results into mass production that led to lower prices and great improvements in the quality and uniformity of products, (Forrest 2001, p. 12). The internet has been the spur for another revolution that may eventually be as wide-ranging and significant as the industrial one. The internet has led directly to a revolution in customer service. The web and database makes it possible for customers to use a new channel for delivering services and information, and for processing orders and buying goods. Customers are now more focused on loyalty programs which make them feel that they are ‘different’ or being ‘valued’ by an organisation. Consumer market has been segmented into different groups and each group needs to be treated in different ways. Moreover, presence of matured market, less natural growth, large dominant firms, newly emerged business trends, service sectors, availability of products and services, brand images, put most of the organisations in a very competitive situation where customers are more willing to get maximum benefits and services with the option of spending minimum. The on-going demand of retaining existing customers has been more keenly felt then ever before in the last couple of years. So the necessity and importance of relationship marketing is also increasing day by day.
‘Ask not what your customers can do for you; ask what you can do for your customers’- is the term that best fits into Relationship Marketing. RM emerged with a tremendous value where marketing has come up with some new terms like bonding, mutual interdependence, mutual information sharing with high level of communication, high level of trust, not using of coercive power and shared vision of relationship. It is a marketing which establishes, nurtures and enhances relationships with customers and other partners at a profit, so that the objectives of both parties involved are met. This is achieved by a mutual exchange and fulfilment of promises. There are a lot of advantages of relationship marketing if it can be developed and implemented properly. RM’s goal is to attract, maintain and enhance a chain relationship with customers and between the organisation and its main stakeholders, including suppliers, distribution channels, intermediaries and shareholders. Thereby it recognises that existing customers would be more valued rather than creating new customers. So it focuses on improving the retention rate of existing customers. It creates opportunities to cross-sell, reduces operating costs, focuses on long-term customers because they ‘buy more’ than short-term customers. It also enables organisations to bring an unprecedented level of utility and foresight to business planning by studying customer behaviour in depth, giving a detailed and flexible understanding of how customers behave. As a result, RM benefits everyone. Customers receive the products and services they need when they need them, at the right price, and via the most convenient delivery channel. Marketers benefit because they minimise the loss of marketing resources and can target potential and existing customers far more accurately. Relationship marketers will not, for example, try to sell a new car to someone who has just bought one, nor will they attempt to sell motor insurance to someone who only rides a bicycle. “Once RM has been implemented properly, marketing to an audience of one starts to becomes a reality”, (Ellis 2004, p.57).
Like the Toyota example, another real life example is the Westfield Group. Westfield practices relationship marketing to gain maximum customer satisfaction. Among many techniques, one little effort is ‘Customer Service Information Desk’ in their shopping complexes. Those customer service officers have been advised not to say ‘no’ to any customer queries. For ensuring this quality, Westfield provides broadband internet, own online store directories and all other possible ways to collect information about anything, (CSD brochure for CSD officers, Westfield). Another good example if General Motors Corporation (GM). This US nation's largest advertiser is now putting less emphasis on "traditional" advertising. But GM, the no.1 U.S. ad spender, has reapportioned its marketing budget to put more money into relationship marketing, including sponsorships and the internet. GM is now looking for ways to target its customers in the most productive way, and it has become easier to identify its prospects when they visit its GM web sites or show rooms than when they view its TV commercials. GM is serious about RM practice and they also expect others to follow their path. So, it's a clear reminder that even the biggest advertisement spender sees advertising as just one component in an expanding mix of marketing avenues and put more emphasis on RM, (Advertising Age 2003, p.20).
Recent days, there are lots of views and criticism can be seen regarding Relationship Marketing. Among them, two important views can be discussed here. According to Gummesson (1999), “Marketing is more than just the dyadic relationship between the buyer and the seller; rather, it represents the whole series of ‘relationship’, networks and interactions’ which the company undertakes as part of its commercial dealings”. Considering this fact, it is obvious that, RM has some significant impacts over an organisation’s overall profit margin. It is time to face the reality that customers do not want to have a relationship with all the companies. Relationships require a commitment from everyone involved. Today's hectic world leaves little time for most people to connect with their families, so how can we realistically expect them to connect with a company? Increasing sales to existing customers, where too many marketers involves establishing a relationship with them, is one of the two ways of growing a business. Acquiring new customers is the other way, but acquisition is painfully expensive and often remains unprofitable. So it is better to focus on defining and fulfilling the needs of existing and potential customers. This will help the company to cross the line from providing generic product delivery to inspiring loyalty and commitment, increasing lifetime value and profitability along the way. An effective customer relationship management (CRM) strategy will help defining customers' needs and expectations so that marketing and fulfilment plans are more targeted and profitable.
On the other hand, it is evident that there are still major gaps in relating the conceptual ideas about relationship marketing to real-life practices both on a strategic and on an operational level. One of the reasons for this gap is the lack of a clear and commonly shared definition of ‘relationship marketing’. As Morris et al. (1998) pointed out, many relationship marketers do not tell us much more than that ‘relationship marketing is about forming relationships’ (http://webpages.dcu.ie/~martins/interent1paper.html). According to Morris et al, a good relation with the customer can not always fulfil the organisational profit maximisation. There are some biased customers who are rather loyal to a particular brand rather than being motivated by other products or manufacturers, no matter how brilliant those companies behave with them or offer them extra services. A Holden lover will not change his behaviour and buy a Toyota, no matter if he receives bad service from a Holden and being offered exceptional service from a Toyota dealer.
A car with a full tank of gas, well-tuned engine, good set of tires, quadraphonic CD system, and a sleek, polished exterior can not be started up with the key in the ignition. Similarly, only establishing large organisation, gorgeous office in posh location, expanding huge amount of budget in marketing and other departments can not achieve the ultimate goal of the business. From the above discussion it is evident that though Relationship Marketing is still a newly emerged theory of marketing, the importance of RM is creating a successful image to those companies which are practicing it. Today’s business world has moved away from the old thinking that customers should accept whatever product quality and service level a vendor foists upon them. But even in today's customer-orientated world, there is still too much ordinary and mediocre in the way customers are treated, (Martin 2004, p.53). Most organisations do not yet know enough about their customers' needs and aspirations and RM is still regarded as experimental by many organisations even though their utility is widely accepted by various consultants and famous organisations. A large organisation can have thousands of employees but they have to think of the millions of customers that they have to deal with. The most powerful way of thinking of customers and clients is as partners. Managements need to create an environment where everyone works together for the common good which will establish the foundation for successful implementation of every RM initiative. (end)
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