University of Nottingham

Relationship Marketing in Professional Services: A Case Study of Architectural Practice

NIKHIL KILPADY

MBA

Relationship Marketing in Professional Services: A Case Study of Architectural Practice

by Nikhil Kilpady 2005

A Dissertation Presented in Part Consideration for the Degree of

MBA (General)

Abstract

Relationship Marketing has stimulated considerable interest as a new marketing paradigm in both the business and the academic worlds. This thesis contributes to the discussion by providing an analysis of the relationship formation process in professional services with particular reference to architectural practice. It involves theoretical discussion of the content and context of professional service relationships, and a substantial case evidence of relationship initiation pertaining to an architecture firm in the UK, i.e. Lewis & Hickey Ltd. and their clients.

Through the comparison of existing theory and the case description, an adapted process model of architect-client relationships in early stages of relationship formation is constructed. The role of reputation and its effects on professional service relationships is also identified and explored. Based on the analyses, recommendations for customer acquisition through RM strategies are provided for Lewis & Hickey Ltd., professional service firms, and their prospective clients.

Table of Contents
Abstract ............................................................................................................................... 1 Table of Contents ............................................................................................................... 2 Acknowledgements ............................................................................................................. 4 Abbreviations ...................................................................................................................... 5 Chapter 1 Introduction ...................................................................................................... 6 1.1 Theoretical Base........................................................................................................ 6 1.2 Research Area ........................................................................................................... 7 1.3 Research Aims .......................................................................................................... 8 1.4 Outlined Methodology .............................................................................................. 8 1.5 Method of Analysis................................................................................................... 9 1.6 Structure of the Dissertation ..................................................................................... 9 Chapter 2 Literature Review ............................................................................................ 11 2.1 The Concept of Relationship Marketing................................................................. 11 2.2 History and Development of Relationship Marketing ............................................ 15 2.3 Relationships in Business-to-Business Services Marketing ................................... 17 2.4 Business to Business Professional Services Marketing .......................................... 18 2.5 Firm-Client Relationships in Professional Services ............................................... 19 2.6 Selection Criteria for Professional Service Firms................................................... 20 2.7 Critical Review of Relationship Process Models.................................................... 21 2.8 Customer Acquisition in Professional Services...................................................... 24 2.8.1 Segmentation and Acquisition Approaches in a Relational Context ............... 26 2.9 Reputation of the Firm in Professional Services..................................................... 29 2.9 Conclusion .............................................................................................................. 33 Chapter 3 Industry Analysis ............................................................................................ 34 3.1 Marketing in Architecture Services ........................................................................ 34 3.2 UK Architecture Industry ....................................................................................... 35 3.2.1 Market Size & Structure .................................................................................. 35 3.2.2 Barriers & Deficiencies.................................................................................... 37 3.2.3 Market Trends.................................................................................................. 38 3.3 Lewis & Hickey Architects Ltd.: A Background.................................................... 38 3.4 Conclusion .............................................................................................................. 41 Chapter 4 Research Methodology ................................................................................... 42 4.1 Aims & Objectives of the Study ............................................................................. 42 4.2 Research Paradigm.................................................................................................. 42 4.3 Why Qualitative Methodology?.............................................................................. 43

4.4 Case Study Research............................................................................................... 44 4.5 Data Collection Process .......................................................................................... 45 4.6 Interview Process .................................................................................................... 47 4.7 Analytical Approach ............................................................................................... 48 4.8 Summary ................................................................................................................. 49 Chapter 5 Analyses........................................................................................................... 50 5.1 Interview Analysis .................................................................................................. 50 5.1.1 Job Role & Communication............................................................................. 50 5.1.2 Recognition of Business-to-Business Relationships........................................ 52 5.1.3 Individual Marketing Role............................................................................... 53 5.1.4 Reputation & Other Selection Criteria............................................................. 53 5.1.5 Identifying Business Opportunities.................................................................. 56 5.1.6 Approaching Prospective Clients..................................................................... 56 5.1.7 Ownership of Relationships............................................................................. 57 5.1.8 Tracking Prospective Relationships................................................................. 58 5.2 Analysis of the Research Diary............................................................................... 59 5.3 Critical Analysis of Internal Documents................................................................. 62 5.3.1 Customer Survey Report (2005) ...................................................................... 62 5.3.2 Residential Sector Report (2004)..................................................................... 64 5.4 Re-analysis of Market Segmentation Carried out by L&H .................................... 65 5.5 Conclusion .............................................................................................................. 67 Chapter 6 Discussion & Conclusion ............................................................................... 68 6.1 Adapted Model of Buyer-Seller Relationships in Architectural Industry .............. 68 6.2 Reputation & Customer Acquisition....................................................................... 71 6.3 Limitations & Directions for Further Research ...................................................... 73 Chapter 7 Recommendations ........................................................................................... 75 7.1 For Lewis & Hickey Architects Ltd........................................................................ 75 7.1.1 Segmentation Approach................................................................................... 75 7.1.2 Approaching Prospective Clients..................................................................... 77 7.2 For Professional Service Firms............................................................................... 82 7.3 For Clients............................................................................................................... 83 Bibliography ..................................................................................................................... 84 APPENDIX-A APPENDIX B APPENDIX C Challenges ........................................................................................... 96 Selection and Evaluation Criteria ................................................... 97 Interview Questions........................................................................... 99

Acknowledgements
This dissertation is the outcome of a long but enjoyable learning process. A number of people have contributed, to whom I would like to express my gratitude.

I wish to extend my warm thanks to Professor Caroline Tynan for the encouragement, guidance and constructive comments in various phases of the research process.

My sincere appreciation goes to everyone at Lewis & Hickey Architects Ltd., the firm that provided me with access to information and an opportunity to conduct the research.

A debt of gratitude is owed to my family who motivated me throughout my stay in the UK. Without their inspirational support, this thesis would not have been possible. A final vote of appreciation for my friends at Nottingham who stood by me through tough times.

Abbreviations

RM Relationship Marketing

B2B Business to Business

L&H Lewis & Hickey Architects Ltd.

Chapter 1 Introduction

The conventional marketing philosophies that have dominated marketing thought over the last few decades are now slowly losing their stranglehold (Gronroos, 1997). Such traditional strategies that include the marketing mix paradigm consider offensive strategies aimed at mass customer acquisition only (Egan, 2001). While such traditional marketing strategies have been successful in some contexts, they have not been particularly effective in industrial and service markets (Sheth et al, 2000). The concept of Relationship Marketing (RM) is fast gaining popularity in such industries as well as rest of the corporate and academic world as it offers a realistic and relevant approach to achieving greater competitive advantage through relationship-based strategies (Cranfield School of Management, 2000).

1.1 Theoretical Base

This thesis starts from the theoretical proposition, derived from a review of the RM literature (particularly Berry and Gresham, 1986), that customer acquisition is an equally important part of relationship marketing as customer retention is. Every business needs new clients and any fall in the number of customers affects its profitability. Any loss of customers has to be replaced merely for the company to remain stable. Hence customer acquisition is an important part of RM (Egan, 2001). While reviewing existing literature on customer acquisition, buyer-seller relationship process theories advocated by Ford et al (1980) and Dwyer et al (1987) are examined critically to gain insights on how relationships are initiated. The pre-relationship stage and the early stage of the models are of particular interest as they encapsulate most aspects of relationship formation between buyers and sellers.

Another area that is scarce in theory is the effect of reputation in initiating business relationships (Zabala et al, 2005). This thesis reviews academic research conducted so far on reputation, and proposes its importance in relationship formation. Nevertheless, such propositions on customer acquisition and reputation would not necessarily be true in all contexts and markets, and hence the relationship management research needs to be industry-specific (Buttle, 1996; Yorke, 1990). As Moller and Halinen (2000, p48) advocate, Different exchange characteristics and exchange contexts require different types of relationship marketing.

1.2 Research Area

It is imperative to choose a specific research area in order to review any theoretical propositions. As far as research in professional services marketing is concerned, only a handful of studies have considered the initiation and development of buyer-seller relationships (Halinen 1997). Gummesson (1979) and Gronroos (1980) have carried out pioneering although limited work in the area, and most authors have not been interested in the initiation process of relationships. A number of experiential studies have shown that long-term business relationships are common in professional business service areas, such as legal, financial, and consulting professions. The clients of such firms are characterised by high switching costs and buyers inertia, influenced by providers reputation, which makes client acquisition more difficult especially for smaller sized professional firms (Halinen 1997). Research on the roles played by these factors in minimal which represents a significant gap in literature. Among professional services, Architecture practice is particularly characterised by complex interactions in service delivery, dependence on experience, referrals and webs of relationships with stakeholders such as clients, architects, employees, contractors, developers, etc. However, very less empirical research has been conducted on how such firms can initiate relationships with prospective clients in particular (Kolleeny, 2001).

The focus of this thesis is firmly concentrated on this neglected research area by investigating the initiation of client relationships in one specific professional business service sector, namely, Architecture, with Lewis and Hickey Ltd. L&H, an architectural firm in Nottingham, UK. This medium-sized firm has over 100 years of professional experience with operations in UK and Europe, and strongly believes in responding to clients local, national or international needs (www.lewishickey.com).

1.3 Research Aims

To address the issues in the previous section, the case study will have the following aims: To observe and examine the role played by corporate reputation in the relationships between professional service providers and their clients.

To recommend RM strategies through which customers can be acquired in the long run by Lewis & Hickey Architects Ltd. and other B2B professional service firms.

Thus the potential contribution of this research is to gain academic and managerial understanding of the role of reputation in client-professional service firm relationships, and to explore how such firms might promote and initiate relationships with clients.

1.4 Outlined Methodology

A phenomenological/social constructivist paradigm is utilised for conducting the research. This research paradigm that Habermas (1970) refers to as interpretive paradigm looks at the totality of the situation and allows one to develop ideas through induction from data (Easterby-Smith et al 2002). Using the case study approach backed up by qualitative research methods, architects strategic views of relationships and their policies for managing relationships is investigated. Such an approach relies on direct

observation of the events being studied and interviews of the persons involved in the events. The unique strength of such single case study-based research is its ability to deal with a full variety of evidence, i.e. documents, artifacts, interviews and observations beyond what might be available in a conventional historical study. Some of the methods of data collection used in this study are interviews, participant observation, industry databases and internal documents.

1.5 Method of Analysis

Since the research paradigm is phenomenological in nature, analysis will be part deductive and part inductive. The deductive method will include categorisation and unitisation to form a structure followed by inductive methods. The inductive analysis leads to subjective findings that are a feature of an interpretivist research philosophy, as it will try to seek depth and meaning of the data analysed. This process involves looking beyond categorisation and attempting to discover irregularities and inconsistencies in data by comprehending the meaning of text or action, and most importantly, reflections of the researcher (Saunders et al, 2003).

1.6 Structure of the Dissertation

The rest of the dissertation is organised in the following chapters:

Chapter 2, Literature Review explores some of the existing literature on RM, right from its inception to its development stages. It explores RMs context in professional services and critiques some existing relationship theories in order to get a clear understanding of the subject.

Chapter 3, Industry Analysis describes the role that marketing has played so far in the architecture industry. Also covered are the size, structure and trends in the

UK architecture industry, followed by a profile analysis of Lewis & Hickey Architects Ltd., which happens to be the research setting. This includes the general profile of the firm, its sector portfolio, and its reputation in the market.

Chapter 4, Research Methodology outlines the methodology used in conducting research at L&H. Included in this section is the research paradigm, types of data collection methods used, number of interviewees, and types of questions asked.

Chapter 5, Analyses discusses the findings of the research in a systematic manner. Several interesting insights are gained from the analysis of interviews, research diary, internal documents and the industry database.

An adapted relationship process model is prepared and discussed in Chapter 6, Discussion & Conclusion, which is based on some existing theory and inputs from the analyses. The role of reputation in relationship initiation is discussed in detail followed by some limitations and directions for further research. Using the adapted model as a framework, this chapter provides substantial suggestions that can be adopted for successful customer acquisition by L&H and professional service firms. This chapter concludes with a brief discussion on the relevance of relationship marketing in professional services firms and the value of RM strategies in customer acquisition.

Within Chapter 7, Recommendations, some RM strategies are recommended for L&H as well as suggestions provided for B2B professional service firms and their clients. These recommendations relate to areas such as segmentation, marketing approaches and reputation-building.

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Chapter 2 Literature Review

This chapter reviews existing research conducted on the subject of Relationship Marketing. It commences with the argument exploring whether RM is a paradigm shift or not, followed by a discussion about the plethora of definitions that have been written upon it. The next section takes the reader a few decades back in history when the seeds of relationship marketing were sown, and describes the development of the concept through the years. The focus then shifts to professional services marketing and relational aspects amongst such service providers and their clients.

After a brief look at selection criteria used by clients to hire professional services; some burning issues in the relationship process models are critiqued. Literature on customer acquisition in professional service markets is then reviewed, followed by a detailed section on the role of reputation in client acquisition and initiation of long-term relationships.

2.1 The Concept of Relationship Marketing

Gronroos (1997) emphasises that transactional marketing has dominated the marketing world for more than four decades. But with the globalisation of business, there is an increasing trend away from the marketing mix paradigm towards Relationship Marketing (Gronroos, 1997).

Relationship Marketing is being publicized as a potent strategy to provide organisations with the competitive edge they require for future success. Some authors such as Berry (1983) imply that establishing long-term positive relationships with ones customers provides an organisation with a perpetual flow of profits. A transaction-oriented view of the customer would consider the sales value of a single sale; on the other hand, a relationship-oriented view considers the revenues and contributions earned from a longterm relationship with a customer (Buttle, 1996). However, RM is a topic of hot debate 11

among academics and practitioners. Even though it is gaining popularity, it still has its share of critics who are apprehensive about the phenomenon. Gronroos (1994) emphasises that RM is an alternative to the mix paradigm, while Gummesson (1994) argues that both paradigms are complementary.

Thus a question has been raised whether RM is a new paradigm or an old idea in a new avatar. Gummesson (1997, p.53) metaphorically related it to the emperors new clothes while Egan (2001) observed that cynics perceived that it is nothing but a marketing makeover, as they felt that it always existed in society. Which of these statements holds true remains unresolved and more empirical evidence needs to be collected to make any judgments. Turnbull et al (1996, p.148) reiterates, There are no nice neat stages in its development, and from what Buttle (1996) understands, it has yet to acquire uncontested status or meaning. Although it has established itself as an underlying paradigm in modern industrial marketing and services marketing, RM is still in its infancy as a mainstream marketing concept.

Despite the dilemma, there is no doubt that there is a growing awareness of RM amongst most organisations. Various authors are taking notice of RM and Philip Kotler, the marketing guru himself, concluded in a publication that "companies must move from a short-term transaction-oriented goal to a long-term relationship-building goal" (Kotler et al, 1984, p.3). According to the relationship cost theory, a mutually satisfactory relationship makes it possible for customers to avoid significant transaction costs involved in shifting suppliers and to avoid suffering unnecessary quality costs (Gronroos, 1997). Thus RM seems like an effective management strategy in fostering profitable long-term relations with customers.

Starting from the proposition that long-term customers tend to be far more profitable than new ones (Reichheld et al, 1990), it is widely argued that companies in all sectors of economic activity should aim to retain their clients and encourage long-term loyalty (Karantinou et al, 2001). Developing relationships, including viewing clients, as longterm investments has been identified as critically important in strategic marketing

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(Gummesson, 1997; Halinen, 1997; Buttle, 1996). As a result, relationship marketing and management have been researched across a number of different contexts and from various theoretical viewpoints. This has significantly contributed to the confusion and the lack of conceptual consistency evident in the area (Buttle 1996; Barnes 1994). Moller et al (2000, p.30) support the case and stress that the RM concept is currently used to cover a very fragmented set of ideas and theoretical frameworks and the current discussion of relationship marketing has been characterised more by rhetoric than by rigorous examination of what the concept actually involves.

Besides it being touted as just a rediscovery of something old, there is also an existence of varying RM theories that were developed simultaneously independent of each other in different parts of the world. Some of the pioneers in this field are the Nordic School of Service Management, the Network approach to industrial (or business-to-business) marketing, the Anglo-Australian approach, services marketing, and strategic alliances (Egan, 2003). Such independent research on this subject was the prime factor in the generation of multiple definitions. Due to the lack of a single definition, at the broadest level, RM was seen as incorporating everything from databases to personalised service, loyalty programs, brand loyalty, internal marketing, etc. Despite considerable academic research and practitioner interest, RM is still regarded more as a general umbrella philosophy with numerous relational variations, rather than as a wholly unified theory with strongly developed objectives and strategies (Egan, 2001).

For example, in the services marketing area, Berry (1983, p.25) states, "Relationship marketing is attracting, maintaining and enhancing customer relationships." This thought implies that retention and development are of equal importance to the firm in the long run as customer acquisition. Berry and Parasuraman (1991, p.133) propose that "Relationship marketing concerns attracting, developing, and retaining customer relationships." In industrial marketing, Jackson (1985, p.2) refers to relationship marketing as "marketing oriented toward strong, lasting relationships with individual accounts." Buttle (1996) gives an explanation that relationship marketing is concerned with the development and maintenance of mutually beneficial relationships with strategically significant markets.

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According to Morgan and Hunt (1994, p.22), RM represents all marketing activities directed towards establishing, developing and maintaining successful relational exchanges. While Morgan and Hunt agreed with Berrys (1983) definition and recognised different forms of partnership, they did not consider dissolution of relationships to be a part of the concept. The concept of dissolution was first introduced by Gummesson (1990) and Gronroos (1994) in their research.

Gummesson takes a broader perspective and advocates that relationship marketing can be viewed as the building, maintenance, and liquidation of networks and interactive relationships between the supplier and the customer, often with long-term implications (Gummesson, 1990). Gronroos (1994, p.9) implies that RM is to identify and establish, maintain and enhance, and when necessary, also to terminate relationships with customers and other stakeholders, at a profit, so that the objectives of all parties are met, and that this is done by a mutual exchange and fulfillment of promises. The implication of Gronroos definition is that customer relationships are the raison detre of the firm and marketing should be devoted to building and enhancing such relationships. This definition seems to encompass not only customers but also stakeholders, which some other authors ignore. In reality and in the context of this dissertation, entities other than customers do exist who are dependent on the success of relational exchanges. These entities include the internal staff, intermediaries, shareholders, customers, and prospective customers with whom mutual exchanges can be established.

Needless to say, different authors have differing opinions about what should and should not be at the core of what constitutes relationship marketing. For RM to be accepted as a paradigm, it is imperative to have a single definition and important for authors and practitioners to speak a common lexicon on the subject. Besides the need for a single definition, it should not be used as a one size fits all strategy. As OMalley and Tynan (2000 p.809) note, the boundaries were completely permeable and elastic, and this resulted in difficulties in identifying appropriate contexts for empirical research and exacerbated conceptual problems within the emerging discipline.

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Many practitioners believe that the scope for RM is boundless and a panacea to all problems. On the contrary, Egan (2001) stresses that RM is not a universal law and does not apply to all products and services. Barnes and Howlett (1998) support the argument that relationships do not necessarily exist in all cases and not all companies can expect to form relationships with clients. Levitt (1983) used the metaphor of marriage, through which exchange relationships could be viewed and understood. However, research has proved that his analogy has been rejected by consumers who do not perceive relationships the way he does (OMalley & Tynan, 2001). The foundations of relationship marketing illustrate the development of the concept through the ages and make the notion more coherent.

2.2 History and Development of Relationship Marketing

During the 1970s in Scandinavia, there was a parallel development in industrial marketing literature that contributed to the development of relationship marketing (Aijo, 1996). The Nordic countries are strongly associated with RM, and one school of thought originated from the field of services marketing, i.e. the Nordic School of Services (Gummesson et al., 1997). The Nordic school appeared in the late 70s in response to perceived shortcomings in the transactional approach to marketing. The central core of researchers and practitioners developed the concept of service as a means of improving the quality of the relationship, stimulating customer loyalty, and extending the customer lifecycle. It viewed the marketing of services as something that cannot be separated from overall management (Gronroos, 1990; Gronroos and Gummesson, 1985).

A research group with links to Scandinavia is the IMP (Industrial or International Marketing and Purchasing) Group, which focuses on the understanding of organisational relationships in business-to-business markets (Turnbull et al., 1996). As with the Nordic school, it originated in the 1970s, when a group of researchers focused on the distinctive characteristics of business-to-business relationships and the factors that caused them to evolve. The IMP Group studies the interaction between companies on the basis that 15

transactions are not isolated events but part of a continual stream of interaction. (Gummesson, 1987). The group adopts the Interaction Approach in which both buyer and seller are considered to be active participants in the market, and the importance of long-term relationships is emphasised (Hakansson, 1982). This approach considers issues of longevity, transaction cost economics, active participation of parties, collaboration power, the importance of technology, logistics and procurement (Melewar et al, 2001).

In North America, research into service marketing has to a much greater extent remained within the boundaries of the marketing mix management paradigm (Sheth et al, 2000), while it was Gronroos who brought quality back into a marketing context by introducing the perceived service quality concept in 1982 (Gronroos, 2000).

The era of Information Technology in the mid-1980s heralded the rise of customer relationship management in the form of database marketing and direct marketing (Moller and Halinen, 2000). This raised a question in the 1990s whether the RM concept can be extended to consumer markets (OMalley et al, 1997, 1999). Although long-term profitable relationships with customers sound attractive for consumer markets, OMalley et al (1997) mention that integral concepts of relationships do not necessarily exist in consumer markets. RM is not a panacea and they emphasise that RM should be done if the context is appropriate and if the most useful RM concepts are explored, not all (OMalley & Tynan, 2002, p13).

Although the proposition that relationships and interaction are essential to corporate success is a relatively new one, the role of relationships in facilitating exchange pre-dates current approaches to marketing (Gronroos, 1996). In the pursuit of developing a relational perspective, contemporary researchers are attempting to revive the importance of relationships in the conduct of commercial activities. The dynamic nature of marketing relationships is encompassed in a number of process models of relationship development (for e.g. Dwyer et al, 1987; Ford, 1980; Gummesson, 1977; Sheth et al, 2000).

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The concept of a buyer-seller relationship lifecycle is employed within the literature based on the recognition that relationships evolve over time. For example, Ford (1980) portrays relationship development in terms of a pre-relationship stage, an early stage, a development stage, a long-term stage, and a final stage. Similarly, Dwyer et al (1987) conceptualise these phases as awareness, exploration, expansion, commitment and dissolution. Although these models in effect describe the same process, researchers have had trouble measuring the extent to which the nature of the relationship changes over time (Dabholkar et al, 1994; Hedaa, 1993). Nevertheless, it is assumed that exchange relationships become steadily closer (Halinen, 1997) and demonstrate rising levels of trust and commitment (Dwyer et al, 1987; Ford, 1980). In order to explore the significance of these relationship stages in the formation of relationships in B2B professional service industries, it is necessary to first understand what such industries are as well as the context of relationships in such industries.

2.3 Relationships in Business-to-Business Services Marketing

Industrial marketing or business-to-business (B2B) marketing can be formally described as the performance of commercial activities that facilitate exchange processes between producers and organisational customers, the rationale of which is to create value for customers with goods and services that address organisational requirements and goals (Hakansson et al, 1978). Business-to-business markets differs from customer markets in many ways i.e. fewer and larger buyers, often geographically concentrated, a derived, fluctuating and relatively inelastic demand, many participants in the buying process, professional buyers, a closer relationship, etc. (Kotler, 1994). Considering its complex nature, managing relationships has become an important issue in business markets, especially in business-to-business service firms, which is one of the fastest growing sectors in the global economy (Filiatrault et al, 1997).

In most business-to-business service exchanges, achieving a sale is not the fulfillment of an effort but rather an event in a broader attempt to build and sustain a long-term

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relationship with the customer and ensure that sales keep coming. Thus the major issue is to examine what influences the customer's willingness to remain with the existing supplier and furthermore to advance the relationship by investing in strengthening the ties with the supplier. Various authors including Ford (1980) have provided a framework that presents RM in business-to-business markets, as an interactive process. Within this framework, significant empirical contribution has been derived from studies conducted within IMP group who explored the management of relationships between suppliers and buyers (Hakansson, 1982). Within this broader stream of research, trust and commitment are two highly interrelated notions (Kumar et al., 1995), which encourage a relational bond between the supplier and the customer that facilitates the establishment of productive collaborations. Therefore, relational uncertainty is reduced, efficiency in resource deployment is increased and higher value is generated (Sarkar et al., 1998). However, when it comes to the marketing of professional services and specifically to B2B markets, the empirical documentation is even slimmer. (Gounaris, 2003)

2.4 Business to Business Professional Services Marketing

As far as professional services marketing is concerned, only a handful of studies have considered the formation and development of buyer-seller relationships (Gummesson 1979; Gronroos 1980). However, a number of experiential studies have shown that longterm business relationships are common in professional business service areas, such as legal, financial, and consulting professions, and they can provide many potential benefits for professional service companies and their clients (Halinen, 1997).

To understand the concept of RM in B2B professional services, it is first important to understand what this sector means professionally and what it constitutes. When firms sell industrial services that involve highly specialised skills and are of an advisory nature, the services rendered are referred to as professional business- to-business services (De Brentani et al, 1996). Over the past decade, the number and variety of firms offering this type of service have increased considerably, ranging from one-person public relations

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firms to accountants and specialised corporate lawyers, to large, multinational companies that offer IT expertise or engineering and architectural services (De Brentani et al, 1996). Distinct differences between professional services and the types of consumer services often studied (i.e. banking and retailing) include one-on-one interactions involving repeated, frequent encounters with the same professional service provider. In addition, differences include complexity, the intimate nature of exchange, and co-production of service outcomes (Lovelock, 1996). While these aspects may be present in other encounters, they form the fundamental exchange mechanism in professional services (Hausman, 2003). The precise nature of professional services as being characterised by the presence of complex relationships with clients also makes the RM approach particularly relevant (Lapierre, 1997).

2.5 Firm-Client Relationships in Professional Services

In business-to-business professional services, the existing exchange relationship, together with its past and expected future, constitute the most basic context for individual service performance (Halinen, 1996). The strength of the relationship between the professional service firm and the client company potentially has a considerable impact on service evaluation, and each service performance is a complex process where different components are distinguished and evaluated (Halinen, 1996). According to Hakansson and Wootz (1978), the service provider must demonstrate an ability to resolve the customers problem. The service provider must not only understand the dimensions of the problem, but must also provide solutions to it and he/she must demonstrate an ability to pass on the solution to the customer, hence possessing a solution-transferring ability.

A common characteristic amongst most professional services is the existence of face-toface contact between the supplier and the client. In the case of professional services, the contact is almost invariably personal and face-to-face (Yorke, 1990). This personal interaction leads to provider and clients joint production and delivery of the service (Gummesson, 1996, p.38).

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When purchasing professional services, clients purchase knowledge and creativity embodied in individual people. Therefore, the participating individuals significantly influence the perceived quality of the service and the whole business relationship (Halinen,1997,pp.28-29). Furthermore, professional services are consistently

characterised in the literature as the riskiest of purchases (Mitchell, 1994), high in experiential and credence qualities (Lovelock et al, 1999), which has significant implications in terms of the criteria clients employ when selecting architects and their propensity to remain loyal (Barnes and Howlett 1998). Although such intricate relationships call for the employment of RM strategies, Bloom (1984) stresses that there are certain legal and internal challenges that professional service providers need to overcome before adopting them. (Refer APPENDIX-A for a detailed list of challenges).

Professional services are often project-based and are subject to deadlines for completion and budgets (Karantinou et al, 2001). Managing professional relationships not only constitutes managing a long-term relation between firms but also managing day-to-day relations during the project. Projects or contracts in this industry are often won or lost on certain key criteria used by clients in selecting and evaluating firms.

2.6 Selection Criteria for Professional Service Firms

A vital stage in the professional service provider-client relationship is the selection process that initiates the relationship. Winning the contract, for example, is critical for a professional services firm, yet there is very little literature in academic and practitioner publications (Day et al, 2003) on the win-lose phase of bidding for a project.

Day et al (1992) specifically examined how businesses and organisations select professional services. They developed a comprehensive list of selection criteria based on interviews of buyers of architecture and engineering services, which emerged as critical to the selection decision. Some of them are: Perceived experience and expertise,

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reputation of firm, client orientation, technical ability of design team, provider's relationship and communication skills, competitive fee, efficiency, etc. (Refer APPENDIX -B for detailed list of selection criteria categorised in the four dimensions that emerged from the research).

Several implications for building and maintaining relationships between the professional services provider and client emerged from the research. It revealed that due to the lengthy duration of most projects, the relationship with the client can actually begin long before the firm is formally selected for a particular project. Clients can be courted through initial and subsequent contacts, including brochures and telephone calls, which influence client expectations, which in turn are reflected in the criteria used to select and evaluate a provider (Day et al, 1992). The professional service provider, therefore, can potentially influence selection and evaluation criteria. In customer acquisition, which is a very important part of RM, professional service firms need to observe selection criteria and keep a track of changes in the same, in order to avoid being surpassed by competitors. Thus this valuable research by Day et al (1992) demonstrates how selection and evaluation of professional firms takes place even before a formal relationship commences between the professional service firm and the client. Hence, in the light of this research, it is important to review certain issues pertaining to relationship formation stages in the old relationship process models for a deeper understanding.

2.7 Critical Review of Relationship Process Models

The following is a brief critique of some issues in the lifecycle models by Ford (1980) and Dwyer et al (1987) within the context of professional services relationships. Only the pre-relationship (awareness) stage and the early (exploration) stage have been discussed to remain within the boundaries of this thesis, which focuses on initiation of business relationships.

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Pre-relationship Stage (Awareness Stage) This is the first stage of the lifecycle process, one that sets the tone for relationships to develop. According to Ford (1980), buyers at this stage of relationships may be in a state of inertia and may continue with their existing seller due to a lack of knowledge of potential sellers available. It is at this stage that the prospective seller attempts to create awareness of his/her existence. Dwyer et al (1987, p.15) model defines the awareness stage as Party As recognition that party B is a feasible exchange partner. This stage is considered to be highly dormant with not much activity taking place between buyers or sellers. Both models assume that the seller is passive with the buyers playing a more dominant role.

Ford (1980) believes that this stage is also characterised by low interaction between both parties and considers that it is normally the buyer that evaluates potential sellers and selects the best candidate. He also emphasises that the client then uses selection criteria used in previous relationships to acquire the services of the prospective seller. However, additional research conducted in professional services relationships have shown that it is not just the buyers that can consider various alternatives (Morgan, 1991). Buyers can use market segmentation strategies and conduct market observation to arrive at a list of prospective business clients.

In the context of professional firms, Day et al (1992) in their research emphasise that a professional firms relationships with prospective clients should begin long before it is formally selected for a particular project. The research also shows that such firms can influence selection and evaluation criteria used by buyers.

The Ford (1980) model at this stage assumes low levels of communication where both parties are unfamiliar with each others way of working, i.e. the social distance is considerably high. However, Sheth et al (2000) are of the belief that the partner search and selection stage is more active than is implied in the model. They believe that social bonding begins when buyers and sellers interact in the early stages itself. This interaction

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allows the development of mutual trust, even though the level of commitment may be low. Such nature of bonding and interaction can be quite crucial to success in the professional service industries where the product/service is very expensive and market uncertainty is high.

Thus this stage, as described in the two models, may not be as latent after all in professional service relationships. Research shows the possibility of a higher degree of communication and interaction that can influence selection criteria in the sellers favour, which in turn influences the formation of a relationship.

Early (Exploration) Stage Both models imply that this is the trial phase of the relationship, where both parties consider the possibility of an exchange. Both Ford (1980) and Dwyer et al (1987) unanimously agree that once the potential seller has been short listed by the client, the former has to be in contact with buyers to negotiate a contract. However, both reiterate that there will be no social relationship between the buyer-seller as both parties have minimal experience of each other and most decisions will be taken based on reputations. This is again not necessarily correct in the case of professional services where sellers can influence buyers decisions and influence selection criteria (Day et al, 2003). However, in early stages of relationship formation, reputation still exerts powerful influence whether it is a professional service firm or any industrial firm (Ewing et al, 1999).

Ford (1980) stresses that geographical and cultural distance may also be large at this stage, e.g. A Scottish architect may be rejected only because the client from the East Midlands prefers working with local architects. As negotiation will be on for future work with low levels of trust and commitment, the time and distance gap is bound to be wide.

Attraction plays an important role at this stage, as a certain level of attraction is a precondition for the commencement of interaction (Halinen 1997). Dwyer et al (1987) highlight that the attraction phase in the relationship determines the reward-cost outcome. It is during this stage of the relationship that the norms and standards between

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the potential exchange partners are developed (Dwyer et al 1987). By adopting such norms, the partners set the tone for future exchanges that can make communication channels and negotiations smoother. It is at this stage that Dwyer et al (1987) for the first time acknowledge the importance of bilateral communication where both parties, through questions and answers, develop an interaction process for negotiating and bargaining. Both models advocate some level of communication during this stage, but still consider social distance to be high (which should not necessarily be the case as argued by Sheth et al, 2000).

One can infer from the literature that both models are highly useful in mapping industrial buyer-seller relationships. However, with regard to relationships between professional firms and their clients, these models have some areas that need to be addressed. The existing models require certain adaptations with regard to awareness and social interaction especially in the early stages of relationship formation. It is these early stages that influence and determine the customer acquisition process used by firms consciously or otherwise to improve customer strength.

2.8 Customer Acquisition in Professional Services

The focus of traditional marketing has always been on creating new customers using offensive marketing strategies (Egan, 2001). RM, in contrast, postulates that although the acquisition of customers is important, it is an intermediate step in the process (Berry and Gresham, 1986). Christopher et al (1991) support the argument and suggest that RM has the dual focus of getting and keeping customers. RM highlights the proposition that, in addition to offensive strategies, companies need defensive strategies that minimise customer turnover (Storbacka et al, 1994). The leaky bucket metaphor best explains this dual strategy by emphasising that a company must have both a flow of new customers and restrict customer exit. Every business needs new clients and any fall in number of customers affects its profitability. Any loss of customers has to be replaced merely for the company to remain stable. Hence customer acquisition is an important part of RM (Egan, 2001). 24

Figure 2.1: The Leaky Bucket Theory (Source: Egan, 2001)

Despite RMs dual focus, customer retention is given more prominence as it is perceived to offer more benefits in saturated services markets (Egan, 2001). Specifically, outside the direct marketing industry, many firms have yet to develop sophisticated databases that contain detailed interaction data on prospective customers. Most of the databases that exist tend to have data only on existing customers (Thomas, 2001). However, all firms, even those with high retention rates, lose customers who defect and thus must continuously acquire new customer assets (Reichheld et al, 1990). Second, the more capable and effective a company's customer acquisition strategy, the larger the pool of affordably acquired clients whose retention value can be captured (Blattberg et al, 2001). Hence using the leaky bucket theory, it is imperative that service organisations maintain information of prospective customers and track their movements, as they could be the customers of the future.

Jap (2001) proposes some marketing tasks in the acquisition phase for firms. He stresses that the exploration stage, which is also the search and trial stage (Holmes 1991), aims

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to reduce uncertainty. This stage would include segmentation strategies in a relationship marketing context as advocated by Storbacka (1997). Bruhn (2003) proposes two acquisition strategies i.e. Stimulation strategy and the Persuasion strategy for acquiring customers in a relational context. The Stimulation strategy involves offering customer incentives to entice the client to enter into a relationship with the firm. For example, special sale, discounts, or package deals. In the context of professional services, this strategy can be effectively reduced to redundancy as professional ethics bar firms to offer any gifts or special offers. (www.architecture.com). The Persuasion strategy depicts firms capabilities to fulfill customer needs and expectations. This can be done through assurances such as quality guarantees or directly through recommendations, sales representatives, personal selling and word of mouth publicity. Another noteworthy approach is that of Customer Socialisation (Bruhn, 2003) which would improve familiarity of customer with the product/service, the firm, its employees, and its systems. The tools would include personal customer representatives, Internet information, communication by phone or email, or acclimatising indirectly through open days or seminars.

2.8.1 Segmentation and Acquisition Approaches in a Relational Context Although potentially more difficult to manage, the selective customer acquisition approach creates customer equity. Because the profiles of the acquired customers are more likely to match the firm's ideal target market, retention rates and add-on buying rates are likely to be higher (Blattberg et al, 2001). These advantages are especially critical to firms for which (a) customers are more costly to acquire than retain, and (b) the majority of the potential customer base is not very profitable. Customer segmentation can be included in the search and trial stage of relationships as proposed by Holmes (1991), which however offers little attention in RM literature.

In contrast to consumer markets, industrial markets are often characterised by stability and source loyalty, as well as high switching costs. Such markets are often sticky with idiosyncratic relationships (Hedaa, 1996, p. 509). Long-term but not perpetual seller-

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buyer relationships exist, creating considerable barriers for sellers entry into new client relationships (Turnbull et al, 1996). Despite this experiential reality, conventional marketing strategies, including segmentation, are frequently transaction-based (Plank, 1985).

This issue is magnified in the context of professional service industries in which relationships assume greater prominence. Reviews from such industries have shown a less sophisticated approach to market segmentation. Most of the approaches have been intuitive and not based on careful data collection and analysis. Marketers in professional services have been practicing uncontrolled, ad hoc segmentation, which has often led to wrong choice of clients due to which profit opportunities elsewhere was lost, with firms being overtaken by the competition (Webster, 1991). Considering that professional service firms do not survive on single transactions, it is important that segmentation is done such that clients shortlisted are those that have the propensity to engage in profitable long-term relationships.

Marketing literature states that each segment must be targeted using an organised approach involving marketing tools, some of which are sales promotion, direct marketing, personal selling, and advertising (Kotler, 1997). Implementing some of the persuasion tools mentioned earlier coupled with customer socialisation, an appropriate relational marketing strategy can be developed to target client segments. However, in professional services that require a relational marketing strategy, advertising and sales promotions have not been beneficial due to professional regulations restricting their use (www.architecture.com). Secondly, with regards to advertising, complex messages to potential clients cannot be communicated (Webster, 1991).

Morgan (1991) considers personal selling to be the most effective marketing tool in persuading prospective clients to enter into relationships with a professional services firm. He strongly advocates that in comparison to other marketing tools, personal selling allows customisation of the service offering, facilitates two-way communication, and most importantly, offers complete control over the marketing message. In the context of

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RM, personal selling provides an opportunity to develop an identity bond with customers due to the close interaction (Sheth et al, 2000). Such bonding sets the tone for smoother communications that allows new relationships to progress to a stronger level.

Morgan (1991) advocates the use of a sequence of steps in personal selling for professional service firms to undertake, i.e. Initial contact, client courting, negotiations, and closing. Initial contact is considered to be the most vital stage and can be the most difficult for professionals to undertake. The medium of telephone can be most effective at this stage to ascertain whether the client is worth pursuing and also to communicate the firms message to prospective clients. This stage involves leveraging on the initial contact to sustain the interest of the client. Using presentations at the courting stage is quite common as it is important at this stage to communicate to the client what the firm stands for and how useful it can be.

The next stage of negotiations is an extension of the previous stage and involves face-toface contact as complex issues need to be communicated. Promotional tools such as brochures, audio-visual presentations, and Internet websites can all be used in tandem within the approach to make it more effective (Webster, 1991). The Internet has been particularly useful in not only selling but also to offer information about the firm as well as to augment offerings through links to other websites. Emailing has particularly been useful in providing customised information about industrial publications and recommendations on topics related to their expressed interests (Cranfield School of Management, 2000).

However, it has often been seen that in conventional marketing, presentations, brochures, and websites have been too firm-specific, filled with technical jargon, and with little focus on the customer (Webster, 1991). Literature has also shown that professional firm clients are not looking for a sale but rather a relationship based on commitment and the ability to deliver regularly and efficiently (Karantinou et al, 2001). Hence, personal selling and other marketing tools should be used not to hard sell but rather to get closer to

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the customer by engaging in customer socialization (Bruhn, 2003), by understanding client needs and developing a channel for dialogue.

One of the most important selection and evaluation criteria revealed from the research by Day et al (1992) has been that of reputation of the professional service firm. Since firm selection by the client is just the beginning of a relationship, it will be useful to explore the extent to which reputation plays a role in customer acquisition.

2.9 Reputation of the Firm in Professional Services

Before describing the concept of reputation in the context of professional services, it is important to understand what it really means. It is quite an enigmatic word considering that it had been used in literature synonymously with image and identity, making it even more complex to understand (Caruana, 1997).

According to Davies et al (2003, p.61) reputation constitutes a number of elements, i.e. mainly the views held of the firm by external stakeholders as well as internal stakeholders. They consider image to mean the view of the company held by external stakeholders, especially that held by customers, while identity is taken to mean the internal, that is the employees, view of the company. Reputation is considered to encompass all stakeholders views of corporate reputation, including image and identity.

Mahon et al (2003) believe that reputation is not totally under the direct control of the organisation. Reputation develops out of the nature of the interactions between and among stakeholders in specific contexts and around issues. However, some authors such as Van Riel and Balmer (1997) argue that not only can reputation be controlled but it can also be managed successfully to drive financial performance of the organisation. According to them, corporate reputation refers to the perception of an organisation, which is built up over a period of time depending on what it does and how it behaves (Balmer 1998). A positive corporate reputation is an important driver of successful organisational relationships with clients, which can have a significant impact on the business 29

performance of a firm. Reputation is itself a relationship between its past, present, future choices and particular environmental issues that a professional service firm is exposed to. This is confirmed in the literature by Day et al (1992), who in their research of architectural firm clients, discovered that reputation was indeed an important selection and evaluation criterion in professional service firm selection.

In professional service industries, reputation is often used as a way to signal quality. The intangible nature of the output makes it difficult to assess its value, not only before the service is produced, but usually also after it is delivered. Furthermore, the large human involvement in production induces variability in the quality of services (Dunning, 1989). This variability also implies that past experience may not be a valid indicator of future performance (Enderwick, 1992). Therefore consumers use a firms reputation as an indicator of the quality of its services (Farrell et al, 1991). The more abstract and complex the service is, the greater the need for developing a reputation. However, creating a reputation is a difficult and time-consuming process (Itami, 1987), and results in high entry barriers that protect existing firms from potential new entrants. The firm with a good reputation is usually a desirable place to work, and it can recruit the best available talent. These qualified employees have the ability to do a better job, thus enhancing the company's reputation (Aharoni, 1993).

Generally speaking, the better a company's reputation (Nachum, 1996), the better are its chances of:

(l) Getting a favourable first hearing for a new product/service among customer prospects. (2) Gaining early adoption of that product/service. (3) Support for a company in times of controversy. (4) Enhancing a companys value in the financial marketplace.

The value of a firm's overall reputation is reflected in its relationship with a firm's revenues, i.e. as a firm's reputation increases, so do its sales (Shapiro, 1982). This is

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mainly because a firm with a good overall reputation owns a valuable asset, i.e. goodwill, which includes brand names, corporate logos and loyalty of customers.

Complementary to the work done by Shapiro, the 2002 edition of Hill and Knowlton's Corporate Reputation Watch Survey is particularly revealing. Conducted by Harris Interactive between February and July 2002, the survey polled 800 chief executives and senior managers from across the USA, Canada, Germany, Italy, Belgium, the Netherlands and the UK on issues to do with corporate governance and reputation. The survey indicated that reputation played an important part in corporate warfare. From the findings it was revealed that the majority of European and US executives believed that reputation was most important in driving sales, with the enhancement of the company stock price a further benefit favoured above all by European executives. German executives placed the promotion of strategic partnerships at the top of their list of business objectives assisted by reputation, while the recruitment and retention of employees was seen as a key benefit by US CEOs (Figure 2.2).

Figure 2.2 Source: (Pharoah, 2003)

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In research conducted by Morgan (1991), reputation of law firms was yet again ranked reasonably high as one of the factors influencing firm selection by organisational clients. Having researched agency-client relationships, Halinen (1997) advocates that a firms reputation, together with referrals, plays an important role, particularly in attracting new clients. Often, professional firms use their successful campaigns with well-known clients as credentials to offer some form of tangible evidence for the prospects concerning an agencys capabilities. Conversely, the loss of an important client may mean losing referrals and can damage a firms reputation in the minds of existing as well as prospective clients.

Referrals and reputation are most decisive for comparing standards when the client has no experience of professional firms at all. Both are likely to have more importance in the initiation of a new relationship (Halinen, 1997). In many cases, prospective clients are less willing to try out new firms with no track record, particularly for large-scale projects, because they fear negative consequences that may have an adverse effect on their businesses (Ewing et al, 1999). Thus, seller reputation does seem to influence buyers, decision-makers, and the decision-making process. However, the research conducted by Halinen (1997) does not investigate the effect of reputation on ongoing business relationships.

So far literature shows that it certainly pays for a professional service firm to be favourably well known. However Balmer (1998) argues that superior sales messages and well-trained salesmen can help less well-known companies to overcome some of the disadvantages of their relative anonymity. A well-organised and well-executed marketing strategy can be an especially strong competitive weapon for lesser known firms. Herbig et al (1995) make a point by saying that a good reputation allows a company to get its salesman's foot in the door but has smaller effects in the final buying decision. Corporate reputation may also differ between different stakeholder groups. However Zabala et al (2005) warn that the attainment of a favourable corporate reputation among key stakeholders should not be seen as an end in itself as it has been proven through research that there are other drivers of organisational success. He explains that the rationale for the

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acquisition of a favourable corporate reputation is that it is likely to mean that an individual is more influenced to buy a firms products or services, to invest with, to trade with, or to work for the company.

A good reputation takes time to build and may involve years of hard work (Zabala et al, 2005). However, by the time a firms reputation is established, the individuals responsible may have left the firm and others may have replaced them. Since in professional services, production is closely linked with the person rendering the service, it is quite interesting to note whether it is the firm that is reputed or the individuals working for it. This is, after all, one issue yet to be answered about reputation, i.e. the separation of entity (the firms name) from identity (the agents in the firm) requires further researching (Tadelis, 2001).

Hence one can deduce from the literature that reputation does play a significant role in relationship formation. However, in order to strengthen the relationship and take it to another level, it is not effective on its own. Some B2B professional service firms have been concerned about developing and maintaining a high-quality reputation; however, the methods utilised by professionals for accomplishing this objective have been severely limited (Hite et al 1986). Added by the fact that little empirical work has been done on reputation in the context of long-term relational exchanges, the progress of firms in reputation management have been hampered further.

2.9 Conclusion
The literature provides a deep insight of the development of the RM concept and its relevance in professional services. However, with comparatively less literature on customer acquisition in a relational context, there is a need for more research on initiation of buyer-seller relationships in the professional services industry. Some of the process models in the professional services environment require necessary updates based on additional research that has been conducted. Such research will facilitate the coherence of the RM concept in B2B professional services, especially in the area of client acquisition, which has been neglected so far.

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Chapter 3 Industry Analysis

This chapter briefly observes the role played by marketing in the global architecture industry so far. After viewing size, structure, barriers and trends in the UK Architecture industry, a profile of an architecture firm, namely, Lewis & Hickey Architects Ltd., is examined in detail. The objective is to gain an understanding of the environment in which the industry operates, its code of conduct and the barriers it faces to growth.

3.1 Marketing in Architecture Services

The Architecture industry worldwide has attracted little attention from researchers into professional services, and represents a significant gap in the marketing literature on relationship management. However, architecture services are an important context for researching relationships as their assignments tend to be project-based, long-term in nature, and since client-firm interactions are characterised by complexity, asymmetry of information, power balances and existing differences in perceptions and expectations between customers and firms (Karantinou et al, 2001). Marketing is a science that embraces skills and strategies to sell a certain commodity successfully in a specific targeted market where the prospects are turned into clients. However, in the context of the architectural profession, there are numerous reservations around its benefits and its utilisation (Richardson, 1996). Architects rarely regard their profession as a business to be advertised, and accordingly, they are usually skeptical of its effectiveness and are apprehensive about its worthiness. The professional code of conduct in many such professions legally restricts firms in marketing themselves through normal channels. In architecture particularly, running promotions and advertising is dissuaded, which further hampers marketers in reaching out to clients using existing communication media (www.architecture.com, 2005).

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However, it is important to note that the old school of thought that Quality of Work and Reputation sells itself is long redundant (Kolleeny, 2001). While the two factors do play a role in satisfaction and acquiring new customers in the short-run, they do not necessarily assist in developing lasting business-to-business relationships. Literature on RM also shows that a satisfied customer is not necessary a loyal customer. A customer may be locked-in and defect as soon as a better offer comes along (Dick & Basu, 1994). Work done by Lapidus (1967) on the subject, accentuates that in reality, architecture has to be both a profession and a business simultaneously. While it should conform to the ideals of providing a service to the client in the best aesthetic yet functional terms, its main aim should be to maximise profit. In the mid-twentieth century, being an architect was considered to be a privilege and most architects had no dearth of clients (Lapidus 1967).However, architects today cannot afford to believe in such a myth. In reality, architectural services are subjected to the same market demands as other client-based service are subjected to. The client is now shopping for the best possible service at the optimum value (Ballast, 1984), and the market is wide open for competition at all levels of design and construction. It has also been observed that the type of architectural work (e.g. design, implementation) could also affect the propensity of relationships to develop (Lundberg, 1994) and there is evidence (Karantinou, 2001) that projects in general management and strategy development require more frequent, numerous interactions, favour longer-term cooperation and facilitate the development of closer relationships.

3.2 UK Architecture Industry

3.2.1 Market Size & Structure Official statistics from Market & Business Development (MBD, 2004) believe that there were some 7635 architectural practices active in UK in 2003. Reports confirm that 42% of businesses in the architecture industry achieved annual sales of less than GBP 50000 in 2003, largely reflecting the number of small, local practices. These are typically involved in private residential repair and maintenance work such as housing extensions and other 35

small-scale projects. Only 2% of the industry achieved annual sales in excess of GBP 1 million. (MBD, 2004) The majority of firms in the UK Architecture industry comprise professional partnerships that may or may not have limited liability status. There is also the existence of vertically and horizontally integrated firms varying in degrees of integration. Vertical integration typically takes the form of design and build capabilities with a number of contractors operating internal architecture practices. Horizontal integration refers to the range of construction areas that architects work in. Some practices specialize in individual sectors, such as education design or industrial design, while others are active across a range of sectors (MBD, 2004). A further distinction can be made in the geographical coverage of the practice in terms of the customer base. Smaller architects practice typically in geographically specific local markets, while larger ones offer national coverage. Many of the major architects in terms of size in UK do operate internationally as well as international practices especially USA-based architects find UK to be a good market to operate in. Architects form part of the value chain of activities in building contracts. The demand for architectural services in UK is heavily influenced by the trends in the construction sector since it is the economic performance of this sector that drives the economic environment in which architects operate. Other factors influencing the demand for architects work are: The nature of the work involved. The importance of design to the project. The cost restrictions on the projects.

While large national builders/developers do exist in the construction industry, it is highly localized and fragmented. Hence this allows smaller niche players to thrive at the expense of larger national firms. This affects the architects as well who have to operate at regional level rather than national in order to cater to the fragmented construction industry (Barker, 2003). While it is common to assess architects performance as a proportion of construction contract revenue, most major partnerships prefer to arrive at fees based on

36

negotiation rather than as a proportion of contract cost, as this latter approach tends to encourage architects to design buildings at the most efficient and low cost criteria.

3.2.2 Barriers & Deficiencies A low level of commercial approach is a characteristic of many UK architectural partnerships. This factor contributes to the low profitability experienced by the majority of organisations in the industry (Barker, 2003). The low profitability in the market stems from the previous recession when many architects priced projects almost at cost in order to sustain workload levels and to avoid the potential of expensive lay-offs. The failure to adopt commercial approaches to architectural practices is mostly cultural and reflects the management structure of partnerships that are run by architects whose main training is in design rather than specific management skills. (MBD, 2004) Reputation and previous design projects act as considerable barriers to entry into the UK market, although there are opportunities for internationalization. Previously, significant differences in building regulations acted against cross-border activity due to the need to establish country-specific expertise, but increasingly these differences are becoming less prominent, particularly after the formation of the EU (Barker, 2003). However, reputation still remains an enduring characteristic of this industry and allows existing companies a strong potential. Clause 2.7 of the RIBA Code of Professional Conduct (1997) stipulates not to give or accept any commissions or gifts or other inducement to show favour to any person or body, nor allow his name to be used in advertising any service or product associated with the construction industry (www.architecture.com, 2005). Thus the UK architectural industry has to some extent been bound by rules and professional ethics and has failed to embrace marketing practices which is the need of the hour.

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3.2.3 Market Trends The shift towards mixed land use developments is one of the most major developments in the UK architecture market. Architects who tend to specialize in specific sectors such as industrial projects or leisure facilities seem to the gain the most out of this development. The ability of architects to respond to mixed use developments has been facilitated by a major change in the industry in the last few years, namely the increasing level of information technology intensity in the sector (MBD, 2004).

Rapid advancements in IT and software development have allowed practices to improve productivity and efficiency but they have to some extent threatened the competitive advantage offered by practices with strong design reputations since a proportion of this tacit knowledge is now effectively codified in software programs rather than remaining proprietary to the individual architectural firms. (MBD, 2004)

3.3 Lewis & Hickey Architects Ltd.: A Background

Lewis & Hickey architects are a highly successful architectural practice with over 100 years of professional experience and who strongly believe in responding to clients local, national or international needs. The firm has operations in London, Guildford, Nottingham and Edinburgh in the United Kingdom, Dublin in Ireland and Prague in the Czech Republic. The firm covers most aspects of architectural design and building procurement methodology within many major sectors including retail, office, leisure, residential, industrial warehousing, mixed use, education, health and culture. (www.lewishickey.com)

Some of the complementary services it provides are in the fields of: Interior design, research & development, services engineering, project management & building surveying, safety management and 3D visualisation. The firm takes pride in their approach which is based on design excellence and innovation, photo realistic 3D

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visualisation, fast & flexible response, quality management system accredited to ISO 9001 and full Director involvement. (www.lewishickey.com) A recent ranking released by BD in May05 ranked L&H 90th in the UK market place. A contributing factor to this low ranking was that the organisation scored zero points for profile. In this category, when respondents were asked how they had first heard about L&H, there was not a single respondent in the sample who had first heard about L&H through local media, industry publications, brochures or signage on site. This reflects L&Hs low profile and reputation within the construction industry (Caldwell, 2005). Figure 3.1 shows the net income in pounds sterling earned by L&H Nottingham office from its portfolio of clients in various sectors.

Nottingham net income 2004-05

0% 1% 5% 2% 8% 1% 8% 59% Retail 16% Retail Banking Education Residential Leisure Office Mixed use Industrial Local authority

Retail Retail Banking Education Residential Leisure Office Mixed use Industrial Local authority Total net income

1092910 156125 16612 146981 30206 99500 20000 8000 299024 1869358

Figure 3.1 (Source: Marketing Strategy Update, 2005) 39

About 59% of the firms revenues come from the Retail sector and the dangers of overdependence on a single source of income has been identified. In order to spread their portfolio risk and expand business, L&H is setting sights on other growing sectors such as Residential and Education. The firm has recognized the Residential sector in the construction industry as a high priority sector because of its long term growth potential, profitability and sustainability. Three segments within the sector were identified as Urban Living, Affordable homes and Elderly homes (Caldwell 2004). The firm is attempting to make a foray into this sector and as explained within the research aims in Chapter 1, this thesis discusses various ways to segment the prospective clients in the residential sector and an approach to customer acquisition i.e. the appropriate marketing tools to be used.

The following is the SWOT analysis of the Lewis & Hickey Nottingham office (Marketing Strategy Update, 2005)

Strengths On time, reliability, implementation design, retail heritage, creative individuals, accessibility to clients, on budget.

Weaknesses Poor internal communications, dependency on key individuals, low profile in the local region, lack of partnerships, do not make effective use of IT, low margins, high costs, single office mentality, ineffective database.

Opportunities The firm has identified opportunities in Residential sector, Education sector which involves building schools for the future, Public departments, retail sector which includes creative front end design work yielding higher margins, Mixed Use sector, health and leisure sector.

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Threats Fees margins being driven down, contractors providing design services, intense competition, L&H becoming lost and squeezed in the middle. L&H deals with many stakeholders such as construction firms, builders, developers, city councils, contractors etc but it has never reaped full benefits from its value chain. Despite the identifications of strengths and opportunities, marketing procedures in the L & H Nottingham office have been limited and some marketing tools were implemented without considering why they were being used and no clear objectives were identified or agreed hence success was limited. Marketing has never been given a serious thought and only a year ago in affiliation with the Knowledge Transfer Partnership (University of Nottingham), a marketing manager was appointed. (Marketing Strategy Update, 2005) Currently, there is no marketing budget and most marketing decisions are ad hoc.

3.4 Conclusion
As discussed in this chapter, the architectural sector has been potentially a rich area for investigation because of the strategic importance of business-to-business relationships. Architectural assignments give ample opportunity for relationship development as they often extend over a substantial period of time, within which interactions are very frequent and of a close and confidential nature (Gummesson, 1996). Such intimate interaction seems to provide the perfect stage to adopt a relational marketing approach in order to acquire clients for long-term profitability. Lewis & Hickey, an architectural firm offers just the right opportunity to adopt RM strategies due to its openness in embracing marketing practices and its vision to improve its future position in the industry.

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Chapter 4 Research Methodology

The previous chapters have made the context of this dissertation clear and further research will allow for a better understanding of relationship marketing in business-tobusiness professional services, especially the architecture industry. This chapter will describe the type of methodology that will be used to carry out the research, providing explanations for adopting the most appropriate method. It will also reveal the research settings and the process of conducting it. Finally the approach of data analysis will be discussed in detail.

4.1 Aims & Objectives of the Study

The objectives of the study as mentioned in the introduction chapter is to recommend methods through which customers can be acquired in the long-run for Lewis & Hickey and similar business-to-business professional service firms. In doing so, the role of reputation in initiating business relationships will also be gauged. With very little empirical work done on how relationships with prospective clients can be initiated and developed, this thesis uses multi-methods in conducting research and developing recommendations.

4.2 Research Paradigm

Understanding the research paradigm is central to the research activity as it not only helps the researcher to clarify research designs but also recognise which designs will work and which will not. To understand how one can build relationships in professional service firms such as Lewis &Hickey Ltd, a phenomenological/ social constructivist approach will be used. This paradigm that Habermas (1970) refers to as interpretive paradigm looks at the totality of the situation and allows one to develop ideas through induction from data (Easterby-Smith et al 2002). The rationale behind adopting this philosophy is

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to focus on meanings and try to appreciate the different constructions and meanings that people place upon their experience. Using this approach, the research focus is on what people within the firm, individually and collectively are thinking and feeling. This paradigm not only seeks to understand the subjective reality of the phenomena it studies but also allows the use of multiple approaches and methods to establish different views of phenomena.

4.3 Why Qualitative Methodology?

Within research philosophies, methodologies largely fall into two main categories, namely qualitative and quantitative methods. In order to achieve the research aims described earlier, qualitative research was selected over quantitative research as the appropriate methodology in the context of this thesis. Quantitative methods are more appropriate for answering what and how questions and unsuitable in this context as this approach seeks to reveal variables that are only measurable (Carson et al, 2001). The focus of this research is to observe the role of reputation of the seller in business relationships and initiation of client relationships, which are highly subjective and difficult to measure by the researcher. By adopting a qualitative approach, the experience, opinions as well as how and why questions can be answered. It facilitates an interpretive study of a specific issue in which the researcher is central to the sense that is made. (Silverman, 2000)

In the words of Van Maanen (1979, p520), qualitative research methods are defined as an array of interpretive techniques which seek to describe, decode, translate and otherwise come to terms with the meaning, not the frequency, of certain more or less naturally occurring phenomena in the social world. The aim of qualitative studies is to gain an in-depth understanding of a situation which is based on researcher immersion in the phenomena to be studied, gathering data which provide a detailed description of events, situations and interaction between people (Patton,1980). It is concerned with events that really happen in organisations as researchers and people experience them. Qualitative studies are essential in the study of marketing activities within and by

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organisations, as these cannot be adequately studied in isolated and artificial settings (Goodyear, 1990).

4.4 Case Study Research

Since the research setting is a single architectural firm, the analysis and findings of the research will be presented as a case study. Case studies are the preferred strategy when how or why questions are being posed, when the investigator has little control over events, and when the focus is on a contemporary phenomenon within some real-life context (Yin, 2003, p.1) Using the case study approach backed up by qualitative research methods, architects strategic views of relationships, their policies for managing relationships is investigated. The unique strength of case study is its ability to deal with a full variety of evidence i.e. documents, artifacts, interviews and observations beyond what might be available in a conventional historical study. Some of the common methods used in case studies by qualitative researchers are observation, textual analysis, interviews, surveys, ethnographies, site visits, etc (Silverman, 2000) The use of one or more of these methods or a combination of a number of these techniques will allow data to be gathered through verbal and recorded occurrences, written reports and documentation.

In this case study, it was deemed necessary to undertake multi-methods as it enables triangulation to take place. Triangulation refers to the use of different data collection methods within one study in order to get to the depth of the research (Saunders et al., 2003) Some of the methods of data collection used in this study are Interviews, Participant Observation, Industry databases and Internal documents.

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4.5 Data Collection Process

Secondary data is very important in research as its utilisation helps the researcher to avoid repeating work that may already have been carried out by others. This would also save the researcher time and cost of conducting the repeat research. By conducting secondary research before primary research, the researcher can assess the availability of information and use it as a basis to design the methods for collecting primary data (Parasuraman, 1986).

In this thesis, secondary data was collected using the internet, accessing academic journals, text books, reports and surveys conducted by L & H, Industry reports, databases, etc. Re-analysis of a segmented industry database was very beneficial in understand market trends and buyer-seller relationships. Data from academic journals and books were particularly useful in reviewing the existing literature on RM in business-tobusiness markets. Industry publications provided key insights about the standard marketing and management practices prevalent while the report shed light on some key strengths and weaknesses of the firm, future business avenues as well as the customers perception of the firm.

For the purpose of collecting primary data, the type of qualitative method that has been chosen is interviews and participant observation. Interviews enable the accumulation of data that can be obtained from listening and from asking build-up questions to develop a conversation. This feature is unique to interviews and is not available when conducting surveys (Saunders et al, 1997). Interviews can be conducted using various techniques i.e. telephone interviews, face-to-face interviews, focus group interviews.

The face to face interview consisting of open ended questions was selected as it allows interviewees to describe their perceptions in detail. It is a qualitative research approach where researchers have a list of themes and questions to be covered and these may vary from interview to interview (Saunders et al, 1997). Such form of interviewing provides

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the researchers with the opportunity to explore answers, where the researchers want their interviewees to explain or build on responses. It has been found that open-ended questions are designed to encourage the interviewees to offer extensive and developmental answers and can be used to reveal the interviewees attitudes or obtain facts (Grummitt, 1980). Kumar et al. (1999) also point out that open-ended questions facilitate the interviewer to acquire unpredictable viewpoints from the interviewees easily.

Most of the questions were based on themes generated from the literature review, which required additional research. One of the themes was that of Reputation on which the question framed was, To what extent do you think, reputation of an architect influences new client acquisition? Existing literature on corporate reputation in relationship formation is scarce hence detailed responses from experienced architects can help add to the literature. Another question framed was, What are the key criteria that clients look for while selecting an architect? It was framed in order to test whether the interviewees were aware of the selection criteria in the architectural market. Research conducted by Day et al (1992) has shown that selection criteria can be influenced by professional firms hence its awareness is important in order to employ acquisition strategies. (Please refer APPENDIX-C for the complete list of questions put to the interviewees).

The rest of the primary data was collected through participant observation (site visits). Participant observation allows the researcher to study the organisation in detail and aim to achieve deep insights, which can describe the complexity and contrasts of the phenomena under study. There are different degrees of involvement or immersion for the participant observer role (Carson et al, 2001). In this research, I have visited the research setting (L& H Nottingham office) regularly, to be precise, almost twice a week for three months. An observation log (research diary) was maintained in which essential inputs and occurrences required for the study were noted. Meetings were held regularly with the marketing manager, who not only supplied me with valuable information but also recounted some of the firms marketing attempts done till date and the ones in progress.

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Such frequent interaction with the firm, enabled collection of rich qualitative data to base the case study upon which facilitates an inductive analysis to obtain a clear understanding of what actually is happening in the firm as well as industry.

4.6 Interview Process

The qualitative data was obtained from face-to-face interviews with seven personnel of Lewis & Hickey Architects Ltd. These interviews were conducted with four Associates, a Marketing Manager, a Marketing Assistant (Senior Secretary) and a Residential Team Leader. All the interviews were recorded on tape and the average length of each was half an hour. (Some data based on interview questions pertaining to marketing activities was collected from the Director during one of the site visits.)

It was deemed unnecessary to conduct a census study of the population (entire L&H personnel) and instead non-probability sampling was considered more appropriate to arrive at a representative sample of the population. The sample that was subjected to interviews was selected using judgment sampling technique i.e. in order to get different perspectives on the same questions, it was decided to pick key personnel from various departments having different job positions (Chisnall, 2005). In judgment sampling, the researcher or some other "expert" uses his/her judgment in selecting the units from the population for study based on the populations parameters. This type of sampling technique might be the most appropriate if some members of the population are thought to be better (more knowledgeable, more willing, etc.) than others to interview, which so happened in this case (Malhotra, 2003). The functional departments chosen were, Marketing, senior management, and the Residential architect team. Subsequently, the interviewees were chosen from the departments on the basis of their experience in the industry and their willingness to participate in the interview.

Authorisation to conduct interviews of existing L&H clients was not granted; hence a vital source of primary data had to be forgone. An attempt was made to conduct

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interviews with prospective clients (house builders, developers) of L&H to get a view of their understanding of client-architect relationships. In-depth questions relating to business-to business relationships as well as architect choice were formulated. However the response for participation was very poor. Out of 15 builders contacted by email and telephone, only one agreed. The interview was conducted over the telephone and the builder evaded answering certain key questions such as Does location of the architect have any bearing on his/her selection? Since the client data collected is limited and insignificant, it will not be used in the findings of this case study.

4.7 Analytical Approach

There is no standardised approach to analyse qualitative data with some approaches highly formalised whereas some others rely a lot on the researchers interpretation. Since the research paradigm is phenomenological in nature, the latter approach of analysis will be undertaken as it will try to seek depth and meaning of the data analysed (EasterbySmith et al., 2002). Further more, data can be analysed deductively using codes and categories derived from theory as well as inductively without the use of predetermined codes to direct the analysis. The analysis in this dissertation combines a deductive and an inductive approach in the sense that codes will be predetermined and then amended or added to as data is collected and analysed (Saunders et al., 2003). This form of analysis begins with categorisation which involves the use of codes to rearrange the data. This provides an emergent structure that is relevant to the research, to organise and analyse the data further. The next activity of unitisation follows which involves attaching relevant chunks of the data to the appropriate category that has been devised. This will be done by labeling the relevant words/ sentences/paragraphs with the appropriate category in the margin of the transcript.

This process has the effect of reducing and rearranging data into a more organised form. The final step in the analysis is to search for key themes and patterns in the rearranged data. This inductive method leads to subjective findings which is a key feature of an interpretivist research philosophy. This stage involves looking beyond categorisation 48

and attempting to discover regularities, inconsistencies in data, comprehending the meaning of text or action and most importantly, reflection of the researcher (Saunders et al., 2003).

4.8 Summary
The interpretivist case study methodology used in this thesis allows a subjective observation and analysis of the activities and findings Data was collected systematically by means of interviews, participant observation, database, and reports for a deductive and inductive analysis. Interviewees were asked open-ended questions that were recorded on tape. Occurrences and important data were recorded in a researchers diary, and some internal documents and an industry database were chosen for a critical re-analysis.

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Chapter 5 Analyses

This section includes detailed analyses of the data collected at Lewis &Hickey Architects Ltd. The data was accumulated primarily through personnel interviews, participant observation, internal documents and industry databases. These were analysed deductively and inductively to find meaning in the data using categorisation and coding (Saunders et al 2003). The chapter begins with an interview analysis of Lewis & Hickey (L&H) personnel, which unearthed some experiential thoughts and ideas, followed by findings from the researchers diary used during visits to the research setting i.e. L&H. A brief critical analysis of some important issues found within L&H internal documents is then conducted. To sum up, a builder-architect database using Microsoft Access (database software) is re-analysed in order to create potential segments of clients for L&H to target.

5.1 Interview Analysis

Some key arguments have evolved from the interview data and have been categorised into key themes that will be useful in providing recommendations to L&H. 5.1.1 Job Role & Communication Im an Architectural Technologist and basically look after the running of architectural projects at L&H (Associate 3).

An architect by profession. I manage the running of the team and deal with clients regularly on technical issues such as design and delivery of projects.(Associate 2)

It was evident from such precise answers that most of the interviewees had technical job descriptions. Initiating relationships with clients was not a part of the job and excluding

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the marketing manager, none of the other personnel were officially required to undertake any marketing responsibilities.

However, all of them were involved in some degree of relational contact with clients in carrying out routine technical tasks. Especially with regards to clients, some interviewees were tacitly engaged in relationships whether they were at firm or individual level. In the words of an interviewee,

Key communications skills are absolutely valuable. I think it is important to keep communication at a level where you have got two sides of the fence that are extremely clear about what their roles and responsibilities are. An architect and a client both have responsibilities for a project and its important that both are clear on what they actually have to do to satisfy each other (Associate 3).

Most interviewees identified communication to be a key prerequisite to commence relationships with clients. Not simply communication but ensuring it is interactive in nature where both parties understand each correctly. Literature on RM clearly indicates that relationships are unlikely to form without mutual communication of wants, issues, inputs and priorities (Dwyer et al, 1987), hence the implicit communication flowing between employees and clients can be a foundation to employ RM approaches at L&H.

After a relationship had just been initiated, interviewees felt it was imperative to work closely with clients. According to the senior management, understanding clients key drivers and awareness of clients business was also considered essential if such relationships had to prosper. Literature confirms that knowledge of clients work can be highly advantageous as it can be a decisive factor in professional service firm selection (Day et al, 1992).

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5.1.2 Recognition of Business-to-Business Relationships It was discovered that L&H had a number of business-to-business relationships; not just within the confines of the markets they operated in but also across industries that were closely associated with design professions, such as 3D visualisation firms, etc. An important point raised was that by developing relationships with various entities such as graphic designers, the quality of the service vastly improved, which clients were keen on seeing.

Another important point raised was that pertaining to new sector involvement:

5-6 years ago, we mainly dealt with retailers but now moving into new sectors such as education, health. So in next 6 months, its nice to see these sectors as well (Residential Team Leader).

This excerpt

is an indication of what future business avenues were being explored and

this interesting aspect signifies improved level of internal communication and staff enthusiasm in understanding the business.

The general opinion was that business relationships were critical to L&Hs future and a lot depended on long-term relations with clients.

Relationships in our business are absolutely vital. To continue our success, growth and development we rely on relationships. If they are strong that lengthens our longevity and improves our survival chances in the long run. We do rely on repeat business and long term relationships because its not about just surviving today but whether we can survive in the future(Marketing Manager)

The marketing managers high regard for business-to-business relationships is conveyed through his response. This is mainly due to reliance on repeat work, which forms the

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argest source of revenue for the firm. It was also implied that existing clients were sources of referrals hence fostering such relationships was imperative.

5.1.3 Individual Marketing Role The question on initiating client relationships was quite puzzling for some interviewees who took time to answer it. Some of them directly moved on to speaking about other issues with existing clients as they had never participated in a role of initiating relationship with prospective clients.

Except the senior management and the secretary, none of the others were actively involved in initiating or developing relationships. Their role in marketing is minimal however there has been indication of the interviewees showing enthusiasm in taking on the job of a part-time marketer if given the responsibility:

Given a chance, I would like to be involved with L&H in developing client relationships as I think its really important (Associate 2)

Similar responses from other interviewees indicate that there is awareness of the marketing function and most have unanimously expressed their desire to get involved.

5.1.4 Reputation & Other Selection Criteria The interviewees were questioned about which were the most important selection criteria used by clients while hiring an architect? The responses received were varied but the criteria repeatedly mentioned were Experience, track record, reputation and value for money.

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All the interviewees agreed that reputation was a BIG factor in this business. They were indicative of the fact that reputation is the first criteria clients consider when they have no experience or knowledge of the architect:

If you are a small firm then it is important to be well-known in the area in which you operate. Reputation goes a long way especially to generate new business (Associate 4).

However, it was also mentioned frequently that though reputation is important, it is neither the sole criterion in selection nor is it the only area for professional service firms to concentrate on.

If you are well known it does attract people to you but once you are there it depends on how you deliver the project. Its up to a certain point of time only that reputation works. If you design a building which falls down, no amount of reputation will bring clients back to you (Senior Secretary)

If you went to Boots chemist and say we are Norman Foster Architects and would like to check your shop out, Boots would say, I dont think you are the type of client we are looking for. They are not interested in prestigious design led architects but rather looking for hands-on connection (Residential Team Leader).

These comments illustrate that not all clients look at big reputation and some may have other factors in mind while selecting an architect. A good reputation might be enough to win the contract but not enough to continue the relationships if other critical success factors are ignored.

Most of the interviewees recognized that L&H doesnt have an ideal reputation in the business and have lost out on bagging contracts in competitions due to the same, even though some of their schemes were excellent.

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We hardly seem to get any taste of it, even when it comes to competitions. We entered a competition recently. It was a great scheme, but again our name didnt get short listed. Maybe we need a few more sectors so that more people are aware of us We should get to a position where we are not taken lightly for our designs (Residential Team Leader).

Reputation is HUGE. When clients come to us for implementation work, its due to the safe pair of hands that we have. L&H has no reputation as designers and clients do not consider us for new design work due to the lack of awareness (Associate1)

One variable repeatedly mentioned in some of the excerpts above on the Reputation issue is that of Awareness. Lack of awareness in the minds of prospective clients bothers professional service firms like L&H across various sectors; this needs immediate attention. A good reputation creates awareness, which in turn allows clients to form initial judgments and opinions that might ultimately lead to client patronisation.

Some of the interviewees views especially on reputation were contradictory. While some felt that L&H had an excellent reputation in the market, some felt they had a poor reputation that had resulted in losing competitions. Again, there was confusion whether L&H has reputation as implementation architects only or on all-round factors. Some terms like company image (Senior Secretary; Associate1), firm reputation (Senior Secretary; Marketing Manager) and firm identity (Marketing Manager; Associate1) were used synonymously by some interviewees, which shows some degree of misunderstanding about what reputation actually means.

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5.1.5 Identifying Business Opportunities The interviews disclosed that whatever little business opportunities identified were through personal networking and word of mouth only. Some views on approaches and client selection were also declared:

People are expected to approach L&H rather than vice versa. We never monitored business sectors or observed market trends (Associate 2)

I dont think we are selective enough in choosing clients which have resulted in idle relationships and financial losses (Marketing Manager).

This seems to be attributed to the lack of market orientation within the firm and due to the existence of ad hoc procedures in selecting clients to work with. Thus initiating relationships with few key clients rather than many is critical to a firms success. Proper market segmentation needs to be undertaken before any marketing approaches are designed.

5.1.6 Approaching Prospective Clients

As far as marketing techniques or approaches were concerned, there seemed to be quite interesting and conflicting views between the marketing manager and architects:

We need a focused approach to standardise the way we initiate relationships with prospective clients. At the moment, it is a mess with no marketing strategies in place (Marketing Manager)

We never had any customer approaches at L&H. I dont agree that there should be a standard approach. If you are meeting a blue-chip retail company, then you

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should have a crisp, corporate, professional approach, but if youre meeting some university persons then a softer approach is required(Associate 1)

The interviewees mentioned that no marketing techniques or approaches were in place at L&H. The general consensus was that proceedings were haphazard, ad hoc and no organised approach existed to initiate a dialogue between L&H and prospective clients. While the marketing manager firmly advocated the use of a systematic/planned order to proceedings, some staff were skeptical about a canned approach. A few positive suggestions were provided:

the use of single flexible approach but malleable enough to be adjusted to different sectors of L&H (Associate 4).

a standard technique could be used for researching, profiling, and categorizing clients but adopt different approaches while selling. Horses for courses are what we should be doing (Associate 2).

Thus the idea of adopting a professional and corporate approach for large firms and a softer approach for smaller clients allows flexibility. Such experiential input could be crucial in recommending a marketing approach that is not too rigid and suits the profile of clients in various sectors.

5.1.7 Ownership of Relationships When asked about ownerships of client relationships, a statement from one of the interviews raised an interesting issue:

Despite having a team, 80% of the time clients will be interested in coordinating with me. I dont know whether at a personal level, I get along with people that I deal with and that is why they come to me or whether it is because they see me as

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a Lewis & Hickey architect. I am unaware whether it is one way or the other (Associate 1).

Similar responses revealed some degree of confusion, with the majority of interviewees uncertain about who owned client relationships. There were unsure whether clients would contact them due to personal relations or because they consider them to be representatives of L&H (the firm). This goes to show the management deficiency in designating job roles and creating a team culture within the organisation. Furthermore some noteworthy examples were cited by interviewees:

Too frequently weve been left in the mire with people disappearing, with L&H not knowing what that person was up to, with whom he was talking to, what he was talking about and how the client operates. Sadly, we lose all that information! (Marketing Manager)

Its something which has happened before with staff leaving and taking clients with them (Residential Team Leader).

Hence, most interviewees strongly understand the dangers of critical relationships in the hands of few individuals. The examples of personnel leaving the firm and taking away existing clients with them is a major problem afflicting most professional service firms where loss of a valuable client can mean a loss of revenue as well as increasing recruiting and training costs on new personnel. This is a very important issue yet to be addressed by L&H management.

5.1.8 Tracking Prospective Relationships This an interesting issue, especially in customer acquisition within the professional services industry, which suffers from buyers inertia (Ford, 1980). In architecture firms, selection of architects takes time due to the complexity of the partnership and high

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contract price involved. Hence some of the following responses by interviews can prove useful for recommendation:

There is no clear direction how relationships are to be managedIt happens often that we tell clients, see you next week and we forget about it and often prospective clients feel L&H is not bad but we dont have something going on with them. When the opportunity does come to strike a deal, the relationship has already drifted and changed to a large extent. (Associate 2)

The firm never tracks prospective clients. With existing clients it is the team leader who is in constant touch and the director maintains the existing relationships but nobody thinks about maintaining contact with prospects(Senior Secretary)

These comments by the interviewees point out that the firm allows relationships to drift with no real rescue efforts until there is a crisis. Meetings after meetings, duplication of efforts, etc were some problems afflicting the firm. Some degree of tracking was done by senior management only if they felt it was required. Lots of opportunities were missed due to lack of regular interaction with prospects, and several relationships changed in due course of time; this was never noticed until it was too late.

5.2 Analysis of the Research Diary

A research diary was maintained to note down key insights and observations while visiting the research setting i.e. L&H. In total, there were ten visits made to the firm out of which transcripts of six visits are briefly analysed. The analysis will give an indication of the extent to which the research has evolved in the months since inception. At the same time, key discussions and occurrences generated at meetings will prove to be valuable for recommendations. The findings are displayed in a chronological order as follows:

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Meeting 1 An introductory meeting took place with the L&H senior management and the marketing manager at the L&H Nottingham office. It was an initial ice breaker allowing the firm to know what to expect from the research as well as the researcher to understand key issues within the firm.

The meeting, which began with self-introductions, lasted for about one and a half hour. The most important observation was when the senior management was asked, What system is in place for establishing and maintaining relationships? there were blank looks exchanged and no concrete answer was given. Finally it was the marketing manager who intervened by stressing that, no system was ever in place but there was something in the pipeline.

The management also identified that L&H had trouble listening to the customer in the past with most of the communication being one-way i.e. from L&H to client only with nobody monitoring any feedback. According to the Managing Director, L&H was also hampered by lack of internal communication, which further created problems in dealing with clients.

Meeting 2 The marketing manager revealed that when one of the architects went to Australia, nobody could take over his client relationships to continue work with them. This revealed the existence of a single point of contact characterizing relationships within L&H. This often causes hold-up problems in business transactions and in the architectural profession where service execution and delivery is so vital, such problems could even lead to loss of fees or even worse, the client defecting. This is an issue that has only recently identified by the management and a solution is yet to be generated.

During discussions, two of the existing clients in the residential sector were short listed to be interviewed for the research. However, the management found it sensitive to approach them and hence they had to be cancelled. These interviews could have thrown

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light on some important topics affecting business relationships from the clients viewpoint.

Meeting 4 A database of construction companies and their architects was provided by the manager for further research to be conducted (Extract). This list consisted of data in a raw format that had not been segregated or analysed in any manner. The manager had thought of geographical segmentation only and was considering targeting clients located in counties adjacent to Nottingham. No other ways of segmenting prospective clients were being considered and in the context of RM, which believes in initiating profitable relationships, just geographical segmentation can prove to be insufficient in acquiring clients in the long run.

Meeting 5 The educational sector brochure which was ready at this stage was observed. This was markedly different from the previous L&H brochures (Extract). The difference was not just in graphics and layout but also in the copy that was done by the marketing manager himself. The first page of text contained information related to L&Hs expertise as a solution provider, and was directed towards clients to take notice. Previous successful projects were visually displayed towards the end, which was very important in enticing clients to get interested in the firm. These insights would be very important for L&H in developing a marketing approach once the residential brochure is ready. Till a face to face meeting doesnt take place with the client, the brochure would bear the image of the firm and hence its significantly crucial to firms success. (Morgan 1991)

Meeting 7 Formation of a work brief aided by marketing manager (Extract). Tasks included devising ways to segment the potential client market in residential sector and developing a relational marketing approach using marketing tools. Initially, database marketing was also on the agenda for research as the previous objective was maintaining

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and developing relationships. Since the objective was changed to initiating profitable client relationships, database marketing had to be dropped as it was out of context.

Meeting 9 Interviews conducted with L&H staff over a weeks period and some key issues touched upon (Extract). The interviews gave a different perspective of issues within the firm as well as within the UK architecture market. Personnel were eager to be a part of the interview, which made asking questions easier. However, it was evident that the interviewees had no background in marketing and were mostly involved in technical tasks. In order for the firm to be market oriented, it is important for the staff to be trained adequately before any marketing plans are enforced upon them.

5.3 Critical Analysis of Internal Documents

Two internal documents were provided by the marketing manager i.e. Customer Survey Report (2005) and Residential Sector Report (2004). The analysis of these documents divulged some significant client reflections about L&H as well as some opportunities for the firm in the residential sector. Along with positive aspects, a few inconsistencies in the reports are discussed in brief. 5.3.1 Customer Survey Report (2005) A customer survey was conducted by L&H in 2005 by the marketing manager using a semi-structured questionnaire through mail. In total 125 clients were sent questionnaires out of which only 28 clients returned them representing a return rate of just 22%. The inherent deficiency in this report is that out of the total clients, who replied, 26 were existing clients and just 2 were prospective clients. This makes the sample highly biased as the report will be heavily influenced by existing clients who have already had some experience of L&H. The survey indicated that L&H are efficient in design capabilities and have a high quality of personnel. The personnel were adjudged to be good communicators, courteous and

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trustworthy, all prerequisites in developing long-term relations with clients. However the firm was ranked low as compared to competition in two categories reputation and delivery approach. L& Hs low profile is compounded by the fact that none of the clients sampled had first heard about the firm through local media, industry publications, brochures or signage on site. Most of the business is generated through word-of-mouth referrals, which it has been depending upon since inception. Over-reliance on this mode of business generation can prove to be L&Hs undoing in the wake of intensifying competition. Delivery approach is critical to the firm as majority of if the firms workload follows a referral-delivery-repeat cycle. Since personal recommendation depends on the delivery approach, ignoring it can be dangerous. A contributory factor to L&Hs reliance on the referral repeat delivery is the firms low profile. (Caldwell, 2005) Some major contradictions were observed between the data collected in the survey and the interviews conducted in this research. Interviews with L&H personnel have indicated that the firm is not known for design capabilities as it has very little experience in that category however the customer survey report ranks L&H as high on the design aspect as compared to competition. This could stem from the bias in data collection from existing clients who may have been satisfied with design work for that period. Interviewees at L&H have been quite forthright in proclaiming their weakness in design, which has been attributed to focusing attention in retail and due to the lack of experience in other sectors.

As seen in the literature and interviews, low reputation can prevent the firm to be hired even if it offers superior services than competitors. Customers perception of L&H as a low profile firm coupled by some inconsistencies in their design and delivery approach can prove to be hazardous to L&H. The management needs to take notice of it and devise a way to increase reputation steadily.

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5.3.2 Residential Sector Report (2004) This report provides a detailed look at the residential sector and discusses L&Hs opportunities in it. It exhibits a sense of fallacy that L&H is already well established in this sector and is attempting to acquire more projects through existing contacts. The management considers this sector as one in which L&H has experience and is rather more concerned about the education sector that it is yet to enter. However re-analysis of the report reveals that the residential sector is not very different from the education sector for L&H in terms of market penetration. This is clearly demonstrated by the lack of clients that L&H (Nottingham) has in its portfolio. The number of residential clients they have is only two and the income in the form of fees generated from this sector in 2004-2005 has just been 8% of the total net income.

The senior management initially wanted this research to look at maintaining and developing existing relationships in this sector but with a dearth of clients in the first place, it requires a change of focus. The firm needs to acquire new clients into the business and not rely on the handful existing clients. The modest experience gained from the existing two clients can be leveraged to some extent but it is important that energies are utilised in developing fresh acquisition strategies.

After having gone through this report in detail and discussions with the marketing manager, it was finally decided that L&H is in dire need of more clients in this sector rather than just maintaining relationships. Hence focus of research was altered with the research aim changed to Customer Acquisition.

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5.4 Re-analysis of Market Segmentation Carried out by L&H (A Secondary Source Re-analysis)
Before attempting to initiate any relationship with clients, it is necessary to understand the type of client the firm is dealing with. Hence it is important to analyse the prospective client market and segment the market before any target marketing strategies are employed. According Storbacka (1997), segmentation continues to be vital in a relationship marketing context. However RM has always been more interested in enhancing the existing customer relationships hence in the context of customer acquisition, there is a need for a better understanding of the prospective customer base.

Like any traditional professional firm, there was no identification of potential clients at L&H and no attempts had ever been made to document prospective customers. A raw database containing information pertaining to builders/developers and their architects was recently purchased from a research organisation. The only attempt carried out by the marketing manager to segment clients in that database was based on client location and the respective number of construction developments.

Geographical segmentation as advocated by the marketing manager of L&H used in isolation seems unlikely to work in the relational context. In the architectural industry, it is important to acquire those clients who show signs of engaging in long term relationships. It is not about a one-off assignment but about receiving a steady supply of work from clients. Hence in addition to geographical segmentation, it is necessary to observe certain trends, regularities and client behaviours from the prospective customer database, which would allow arriving at the most potentially suitable clients.

The first task was to target those clients who are within one hours traveling distance from Nottingham. This was done through geographical segmentation to arrive at list of clients in Derby, Leicester, Birmingham and Nottingham itself. Applying Storbackas (1997) ideology, segmentation of prospective clients in the residential market of L&H was carried out based on their relationships with architects, the town they belong to, the

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town their architect belongs to, town where site is located and the number of developments. This technique simultaneously tackles the tasks of identifying desirable market segments and evaluating among possible segments.

The re-analysis revealed that 56% of the clients were working with architects from the same town to which they belonged. This can be attributed to the fragmented and highly localized nature of the construction industry. Due to the local effect, most large architects were operating through regional offices scattered across UK in order to cater to the fragmented industry. Another reason for local preferences may be due to cultural similarity and working styles.

Few of the clients preferred using internal architect teams rather than hiring external architects. Due to vertical integration in the construction industry, many large builders have acquired architecture firms or established in-house architecture practices. Transaction costs are reduced when such an organisational structure is adopted, especially in industries like the construction sector, which is characterised by uncertainty and frequency of interaction among buyers and sellers. However examination of the database revealed the existence of some large firms who hired external architects despite having their own internal architect teams. This indicates the surplus amount of work in the industry, which is a positive sign for industrial growth.

An interested observation made was the existence of some builders who repeated the use of the same architect in all their construction developments. This repetition of architect may be due to buyers inertia i.e. Builder/ Developer may not necessarily be satisfied with existing relationship but due to the high costs of searching for a new one, he/she may continue with the same. In order to ascertain this proposition, further research will have to be conducted. However it is clear from the findings that such forms of recurring partnerships in the industry do exist due to its inherent nature to develop long-term relationships.

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5.5 Conclusion
All four analyses have shed light on important issues such as reputation, segmentation, marketing approaches, and selection criteria, which will be considered in providing recommendations to L&H. There have been some inconsistencies and contradictions in what the interviewees and reports have divulged but rather than being detrimental to the research, it actually enables to pin down where problems lie. The insights derived from the analyses are the basis for recommendations on the segmentation and marketing approach, which will be discussed in chapters to come.

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Chapter 6 Discussion & Conclusion

This chapter discusses adaptations to the relationship process models by Ford et al (1980) and Dwyer et al. (1987) with context to buyer-seller relationships in architectural firms. Based on the critical review in the literature review chapter and from the analyses conducted, some alterations grounded in theory are suggested which can have implications on professional service firms like Lewis & Hickey. The significance of reputation in buyer-seller relationships is also discussed with implications to professional service firms. To sum up the chapter, some research limitations and key directions for future research are presented.

6.1 Adapted Model of Buyer-Seller Relationships in Architectural Industry

The following buyer-seller relationship model is an integration of the relationship lifecycle models developed by Ford et al. (1980) and Dwyer et al. (1987). Based on some arguments discussed in the literature review chapter and the research findings, the pre-relationship (awareness) stage and the early (exploration) stage have been re-explored and discussed in the context of architect-client relationships in the construction industry.

Figure 6.1 indicates that the buyers (clients) of architectural services may be in a state of inertia and may continue with their existing seller (existing architect) due to a lack of knowledge of potential architects available. It is at this stage, where the prospective seller attempts to create awareness of his/her existence. Dwyer et al. (1987) model defines the awareness stage as Party As recognition that party B is a feasible exchange partner, however the partner search and selection stage is more active than is implied in the model (Sheth et al, 2000).

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Figure 6.1: Source: Adapted from Ford et al (1980) and Dwyer et al. (1987) According to Ford (1980), this stage is characterised by low interaction among both parties and believe that it is normally the client that evaluates potential sellers and selects the best candidate. Clients face a degree of uncertainty in dealing with new architects and are also concerned about the opportunity costs in continuing with the existing architect. If the architect is relatively unknown to the client, then the latter relies on the architects reputation to make an initial judgment. As the client has no way of finding out about the architects quality of work or delivery, it considers the reputation of the architect in the market. Thus a seller with an excellent reputation can have a slight advantage over his competitors when it comes to the selection stage. Ford (1980) emphasizes that the client then uses selection criteria used in previous relationships to acquire the services of the new architect.

However, it is not just the buyers that can consider various alternatives. Architects can also identify and evaluate prospective customers by monitoring market trends, observing client-architect relationships, client reputation and organised market segmentation 69

(Morgan 1991). Day et al. (1992) from their research findings emphasize that relationships with prospective clients should begin long before the professional firm is formally selected for a particular project. Thus using customer socialization strategies such as initial and subsequent contacts with the client, using brochures, presentations and telephone calls, architects can influence client expectations, which, in turn, are reflected in the criteria used to select and evaluate a provider (Morgan, 1991; Bruhn, 2003). The architect, therefore, can potentially influence selection and evaluation criteria by being proactive, whether the buyer is active or not.

Figure 6.2 Source: Adapted from Ford et al (1980) and Dwyer et al. (1987) Once the potential seller has been short listed by the client, the former has to be in contact with buyers to negotiate a contract. The level of commitment is low at this stage; however the communication needs to be flowing smoothly. Contrary to what Ford et al

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(1980) and Dwyer et al (1987) advocate, social relationships between the client-architect can develop even though both parties have minimal experience of each other.

This is the trial phase of the relationship hence due to the lack of tangible evidence of performance; potential clients are compelled to base their judgment of an architects attractiveness on its reputation, on referrals, credentials and discussions with their representatives. Attraction plays an important role when parties are initiating a business relationship and a certain level of attraction is a precondition for the commencement of interaction (Halinen 1997). Dwyer et al (1987) highlight that the attraction phase of the relationship determines the reward-cost outcome. In the context of client-architect relationships, besides functional rewards, architects can use their reputation, credentials and range of services to encourage favourable response from the client. Utilizing persuasion and customer socialization tools (Bruhn,2003) such as getting the right personnel to visit clients, making formal/informal presentations and coming across as a proactive architectural solutions provider rather than just a designer can go long way in creating a favourable impression in the minds of the clients. Even though reputation of the potential architect still plays a strong role in selection, regular interaction with the client can create a social identity bond between the two (Sheth et al, 2000). Such interaction can further influence the buyer to hire the architects services as the level of trust increases and most importantly, the architects willingness to communicate can in itself attract the client as he sees possible value of a relationship.

6.2 Reputation & Customer Acquisition

The analyses have complemented the literature on the subject of reputation of the professional service firm in client acquisition. In business-to-business professional service firms that deal in services that are complex and high risk, reputation is one of the main criteria used for evaluation and selection by prospective buyers (Day et al, 1992). If the firm has a good reputation, higher are the chances that it will be hired. Since, the firms image comes foremost in the minds of client during the early stages of a relationship, it is important that firms create awareness about its existence in the potential 71

market they plan to enter. This should be the first task to be undertaken before any market targeting is done. Awareness creation followed by marketing approaches (persuasion strategies & customer socialization) can be highly effective in converting potential buyers into long-term buyers (Morgan, 1991; Bruhn, 2003).

Reputation is extremely crucial, especially when competitions are held for winning contracts - a common feature in B2B professional services. Normally such competitions do not allow the use of elaborate marketing tools but rather rely on design, corporate image and credentials, hence having a respectable reputation can make all the difference between winning and losing large contracts (Day et al, 2003). However the essence of the analyses suggests that reputation does not dominate client relationships. Herbig et al (1995) make a point in the literature that a good reputation allows a company to get its salesman's foot in the door but has smaller effects in the final buying decision. Similarly the analyses reveal that reputation is significant but not the only factor influencing buyers decisions. Other selection factors such as years of experience, quality, performance, delivery, fees, referrals, etc also play a major role in firm selection. While reputation creates a favourable impression, it is the presence of the other factors that enables the client to keep returning. One can sum up that other selection criteria including reputation have their own importance in the relationship process lifecycles (Ford, 1980; Dwyer et al., 1987). While reputation plays an active role in the pre-relationship stage and early stage, other factors such as on-time performance, quality and delivery assume a dominant role in carrying the relationship further.

After having discussed the impact of reputation on client acquisition, relationship marketing calls for careful market segmentation and observation (Storbacka, 1997). Using segmentation approaches based on the market trends, client reputation, attitudes and their historical relationships, a shortlist of clients could be arrived at with whom the firm could potentially have long profitable relationships. Such high risk industries where wrong choice of customers lead to hold-up costs and phenomenal losses, careful segmentation is an essential requirement. While targeting the segments, a relational approach is necessary as the idea is to initiate a relationship and not just a one-off sale.

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Using personal selling methods coupled with social interaction, allows initiation of strong relationships (Sheth et al, 2000; Morgan, 1991; Bruhn, 2003). Such attempts at initiating relationships, can often influence selection criteria and many a times, become selection criteria itself (Day et al, 1992). Hence the focus of professional service firms should be to initiate a dialogue/ channel of interactive communication i.e. be seen and heard by prospective clients long before they are considered for selection. In order to acquire customers, relationship marketing used in the early stages of the relationship can create a sense of mutual affinity even before the relationship is formalized (Sheth et al., 2000). Thus, in industries characterized by buyer inertia and high switching costs, the RM approaches enables professional service firms to acquire clients in the long-run and draw a continuous supply of work that can maximize profitability.

6.3 Limitations & Directions for Further Research

In this study of relationship management in architectural services, a case study design focused on a single firm was adopted in order to test theoretical propositions (Yin 1994) specific to the context of architectural firms. However, in order to pursue literal replication further studies are required, and an embedded multiple-case research design (Yin, 1994) should be pursued, using two more professional services firms. Analysis across firms will allow re-testing of the initial theoretical proposition with another set of cases; and literal replication will allow the development of a rich, theoretical framework (Yin 1994, p.46).

Due to inaccessibility to L&Hs clients, interviews were conducted with the firms personnel only. Further research needs to be conducted with existing clients of professional service firms as well as their prospective clients on strategic issues such as role of reputation in buyer-seller relationships. A comparison of the findings from both sets of clients will indicate the role of reputation at different relationship stages i.e. Reputation effects at pre-relationship stage for prospective clients and at development or long-term stage for existing clients. Since literature on this topic is scarce, any in-depth research conducted will be useful in adding to existing literature.

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This study has contributed to the understanding of interactions and relationship formation in architectural services, an industry that has been relatively neglected by researchers. The appropriateness of RM as a strategic tool in professional services, as well as the effect of reputation on relationships has been explored. As far as managerial, marketing and professional implications are concerned, Karantinou et al., (2001) have already identified that there is considerable scope for professional service providers including architects to undertake RM strategies for customer acquisition. This study will contribute to the understanding of client-architect relationships at pre-relationship and early stages of relationships in the architecture sector. At a managerial level, professional service firms will benefit substantially from a clearer understanding of the processes and mechanisms of successful relationship initiation and management.

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Chapter 7 Recommendations

From the adapted relationship lifecycle model some thoughts on client acquisition are generated, chiefly, segmenting prospective clients and designing a marketing approach.. Based on the analyses and literature, a personal selling approach with the aid of marketing communication and customer socialisation tools, is recommended and discussed in detail. The recommendations are organised separately for L&H, other professional service firms and clients of such firms for clear understanding.

7.1 For Lewis & Hickey Architects Ltd.

7.1.1 Segmentation Approach
Before attempting to initiate any relationship with clients, it is necessary to understand the type of client the firm is dealing with. Hence it is important to segment prospective client markets and then choose suitable firms from a segment to target. Applying Storbackas (1997) ideology, in addition to geographic segmentation, further segmentation of prospective clients of L& H was carried out on the basis of relationships with their architects, the town they belong to, the town their architect belongs to, town where the construction site is located and the number of construction developments.

Some key suggestions after thorough analysis of the prospective customer database (builders & developers) are as follows:

The database was scanned for builders/developers who have internal architect teams for all their work. Some developers were found who never hired external architects as they had in-house teams. This information allows filtering and reducing the final prospects list as such builders are of no profitable use to L& H. It is not worthwhile for L&H to pursue such clients as there is no possibility of

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work being generated from them. Efforts could be channeled in other segments where there are opportunities for relationship formation.

On examination, the database revealed that 56% of builders/developers chose architects from their own town. The location effect shows clients preference for local architects as they may associate with their working style, culture and identity. L&H should make attempts to network with these local clients and create social relationships with them. Hence it is highly important for L&H to acquire builders and developers located in Nottingham, as they could be valuable sources for regular work irrespective of where the construction site is located. Another advantage for L&H by working with local clients is the ability to have a high frequency of personal interaction due to geographical proximity. Such frequency facilitates relationships to progress and strengthen with increasing levels of trust and commitment.

Another notable fact observed was that several large developers already engaged with regular architects offered some additional work to external architects. This could be highly useful for a medium-sized firm such as L&H, which can take on proportionate amount of work at one time. This segment is quite large with no shortage of work offered; hence, targeting such clients in an organised manner can lead to steady flow of work.

Some clients were noticed who selected architects from the town where the building site was located. L&H can observe construction developments taking place in Nottingham and target those clients. L&Hs years of experience as Nottingham architects can be leveraged to induce clients to hire them for any development in the town.

Another method to segment is to observe recurring client - architect combinations and targeting the ones using the same architect repeatedly for all their assignments. This repetition of architect may be due to buyers inertia i.e. Client

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may not necessarily be satisfied with existing relationship but due to the high costs of searching for a new one, it may continue with the same. Approaching such developers with a cutting edge image and a refreshing approach might induce the formation of a new relationship that could turn out profitable in the long run.

With senior managements intentions to enter the student accommodation foray, the database displayed six developers who were into such business. It would be advisable to target all six in that niche as the number is not too large for L&H to manage. With the number of international students ever on the increase in UK (MBD, 2004), it is vital to enter before the market saturates so that L&H can become a big player in years to come.

7.1.2 Approaching Prospective Clients

This section involves creating an orderly marketing approach in order to acquire clients for L&H and similar firms in professional services. From the interview analysis it was apparent that there can be no one size fits all strategy for approaching clients, hence a flexible strategy is recommended with the crux remaining the same. After segmentation prospective clients, L&H can adopt two approaches; approaching clients who have never dealt with L&H before and approaching prospective clients by leveraging existing relationships.

Learning from past mistakes, it is imperative to involve the entire L&H staff in initiating relationships and have a multi-point contact for clients. Interviews had revealed personnel enthusiasm towards RM hence by gearing the entire organisation, not only does the firm get marketing oriented but at the same time no relationships are owned by a few people.

Using Morgan (1991) personal selling approach, all employees should be allocated specific roles and tasks in initiating relationships. These roles are of Initiators who

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qualify the client as worth pursuing or not. They are the first ones in contact with potential clients and commence the interaction process. Lead finders are the one who source new business opportunities and research methods to keep clients interested through mailings, newsletters etc. Courters are those who approach the clients directly or indirectly and are involved in negotiations and talks. This is an important role that should be carried out by senior members within L&H. It would require a high degree of industrial expertise and some level of proficiency in public speaking. The closers will undeniably be the senior management or senior architects as they would be required to engage in negotiations with clients not only over technical but financial issues as well.

Marketing Roles at L&H

INITIATORS Junior Associates

LEAD FINDERS- Junior Associates /Senior Associates

COURTERS- Senior Associates /Directors

CLOSERS- Directors

PREPARATION OF MARKETING TOOLS - Marketing Manager & OVERALL SUPERVISION

After designating various duties to personnel, it is required to select some customer socialization tools (Bruhn, 2003) in order to put the approach into practice. As discussed in the literature, some effective tools that can be considered for the RM approach are personal selling through telephone, brochures, internet/email, audio/visual presentations, mailing, referrals, and formal/informal meetings (Morgan, 1991; Bruhn, 2003). The following approach is recommended for L&H in customer acquisition:

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(a) Test Calling

Cold calling (unsolicited calls or visits made by sales representatives to potential customers) over the telephone by chosen junior associates and senior associates to those clients whom L&H doesnt intend to approach in reality (just for TRIAL purposes). Call approximately 3-4 clients, as the feedback received would indicate whether they are more receptive to senior personnel or otherwise. It will also aid L&H in the development of a call script which Initiators can make use of during the actual calls.

(b) Approaching a prospect who has never worked with L&H before
Step 1 Qualifying: This stage involves cold calling by Initiators where the client needs to be informed about L&Hs strength as a solution provider rather than just an architect. This aspect is crucial because there could be many architects offering similar services in the market so it is imperative to project a distinct image.

The qualifying stage enables the firm to discover the type of services clients generally require and whether they are worth having as clients. If the client seems unsuitable, then it should not be considered for the subsequent steps as L&H should not get tangled in the web of unprofitable, idle relationships as it has done in the past. If the client seems appropriate then it should be intimated to expect a brochure shortly. It is very important to engage in conversations &dialogue with clients rather than selling, as the firm should be looking to develop a relationship rather than just a sale.

Step 2 Courting: Courter contacts the client subsequently for an audio-visual presentation. Presentations should jargon free, extrinsic in nature (presenting L&Hs experience, key personnel, previous success stories, abilities as a solution provider)

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Step 3 Courting & Negotiating: A few days after the presentations are over, send customized emails with internet links to L&H website as well as links to various industry happenings which the prospective client may be interested in (Task to be handled L&Hs secretaries and administration personnel). This shows L&Hs interest in the industry in which both operate and can create identity bonds with clients.

Step 4 Negotiations & Closing: Directors or senior associates should follow-up by calling upon prospective clients and make attempts to arrange for meetings. Meeting can be formal i.e. at L&H, Nottingham or it could be a LGD (lunch, golf, dinner) meeting. However it is important at this stage, that intrinsic factors are discussed in depth (indicating a grasp of the clients problems or queries, further discussions, converting objections into selling points). It is equally imperative to listen to clients, as it will enable L&H to assess clients needs.

If unable to close the deal, it is important in continuing to send customized mailings/emails to prospective clients to keep them interested. This also indicates L&Hs seriousness to initiate a relationship and efforts to interact with them. Such concentrated efforts enable image building which is crucial to the firms success.

Not only does image of the firm improve but initial relationships formed over the phone and personal contact made can also be tracked. From the interviews, it was divulged that many contacts were not pursued and left idle. Hence it is important to keep interacting with potential clients even if there is no work available at that moment. Interaction also allows you to track any changes in relationships or most importantly changes in selection criteria employed by the client in choosing architects. It is important to note that in such industries, work flows intermittently in the form of term contracts hence tracking and pursuing relationships can lead to a sudden acquisition of large work assignment.

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(c) Approaching a prospect by leveraging other relationships

Step 1: Interview or conduct surveys with existing clients or other entities with which L&H have relationships.

Step 2: Try to get maximum number of leads and recommendations from them.

Step 3: Do some background research on the leads generated.

Step 4: Cold calling should be made to the prospects by any personnel associated with the old relationship and having in-depth knowledge about the prospect.

Step 5 and onwards: The rest of the steps are the same as the ones in the previous section (Steps 1-4 of the previous section (b) Approaching a prospect who has never worked with L&H before). However, it is important that the person initiating the relationship should be involved in courting as well. This is primarily because clients may look for familiarity especially when a common relationship has been leveraged.

(d) Ways to find leads or generate new business opportunities

(By Lead finders) News Articles & Publications: Information about clients is often carried in newspapers, journals or industry publications. It is important to go through those regularly as they may indicate what services a client might require. Such information can be used effectively during cold calling.

Referral Sources - It is very important to include referral sources in the internal database of L&H and track their movements regularly. Sources who provide referrals should be contacted periodically to check if they are aware of any potential work.

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7.2 For Professional Service Firms

The recommendations given so far with regards to segmentation techniques and customer approaches can be applied to business-to-business professional service firms such as management consultants, law firms, etc. In such firms personal or face-to-face contact is customary hence such relational strategies can be highly beneficial. However it is imperative that firms carry out careful segmentation in a relational context as well as continuously monitor segments as they are constantly changing. RM is a sustained effort and involves continuous deployment of resources. Since customer acquisition is only a part of the RM ideology, all new customers have to be retained in order to reap maximum productivity and profits. Hence it may not be worthwhile for professional service firms to invest in RM if their focus is not on retention after customers have been acquired.

In professional service firms, it seems quite essential to work with a marketing budget and a qualified marketing manager. Personnel should be recruited who have interest in developing business opportunities and a marketing role should be clearly indicated in an employees job description. Most of the marketing expenditure in such firms has been ad hoc which makes marketing strategies ineffective due to the inconsistency in funding. RM is a continuous process and for it to be effective, it is important that a sizeable marketing budget exists, especially in professional services that rely on long-term relationships. A well-allocated budget can be utilized towards observation of markets and acquiring knowledge of marketing tools and skills available.

Some of the best ways professional service firms can raise awareness is through Word of Mouth or referrals (Kotler et al, 1984). Participation in high-profile industry gatherings allows networking among peers. Making speeches or writing articles in popular industry publications can also make people take notice. Furthermore, collaborations with government associations or educational institutions can improve credibility and create awareness in the market. The Internet is also a powerful tool for raising awareness among industrial buyers (Melewar et al, 2001). Sponsored links of the firms websites in

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industry online portals or search engines such as Google.co.uk, provides yet another way to make the firm known. However it is important the websites are user-friendly with easy access to information. Besides creating awareness, monitoring website hits and providing a facility for online feedback allows the firms to generate leads which can be pursued further.

7.3 For Clients

Clients need to get rid of buyers inertia and undertake attempts to search for the best possible solutions available to them in the market. The relational segmentation technique, which has been recommended for professional service firms, can be used effectively by their clients as well to acquire services. Existing relationships between potential service providers and their clients can be scrutinized to obtain a prospective target list. Selecting providers on reputation alone can turn out to be costly as a wrong choice may delay the project indefinitely thereby incurring holdup costs.

Regular communication with service providers at early stages of relationships, can improve the knowledge base of the client. These interactions educate clients about the various aspects of the providers quality of service, delivery, quality of personnel, etc. If any key factors are discovered in the process, they can be added to the selection and evaluation criteria which clients use in selection.

All recommendations to the various parties involved in the B2B relationships are based on a common strategy i.e. Relationship Marketing. The complex nature of interactions in the B2B professional services industry involves variables such as reputation, experience, joint production and delivery of services, which makes conventional marketing approaches futile. In wake of intense competition, these services are subjected to market forces of demand and supply like any other firm and in order to stay ahead in the industry, adoption of relationship marketing strategies can play a pivotal role for future success.

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APPENDIX-A

Challenges

Challenges to Overcome Before Adopting an RM Orientation

Research conducted at Cardiff Business School (Morgan, 1991), indicated that in most professional firms, marketing was usually seen to be less important than finance to the management. A large number of law firms also felt that marketing research was an inappropriate marketing activity in the legal services context (De Brentani, 1996). Besides some old habits and myths, there are certain issues that professional service providers need to overcome in order to inculcate a relationship marketing orientation. (Bloom, 1984):

1. Strict ethical and legal constraints - Such professions are characterised by legal restrictions and codes of conduct that make it less dynamic in marketing efforts. For e.g. Doctors cannot advertise using conventional media.

2. Need to be perceived as having experience - Since most contracts are long-term and expensive, clients prefer an experienced firm as it is a source of credibility.

3. Limited differentiability - There could be many firms in the industry offering similar services.

4. Converting doers into sellers - Motivating and enabling the staff to think of themselves as part-time marketers and not just executers of the service.

5. Allocating time for marketing - Finding time from normal working hours to seriously think about marketing planning, segmentation, targeting, etc.

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APPENDIX B

Selection and Evaluation Criteria

Criteria Used in Professional Firm Selection and Evaluation (Day et al, 1992)
(1) Perceived experience and expertise: Reputation of firm Client oriented Originality Innovativeness based on previous projects Qualifications of personnel Technical ability of design team

(2) The providers understanding of the client's needs and interests:

Creativity Knowledge of project Understanding clients standards

(3) The provider's relationship and communication skills:

Good presentation Ability to work as a team Listening skills Chemistry Rapport Trust Integrity

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(4) The likelihood of the provider conforming to contractual and administrative requirements:

Workload Competitive fee Can meet schedule Efficiency

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APPENDIX C Interview Questions

Interview Questions
General

1. What is your job description?

Individual

2. What do you believe are the key features of a successful Client/Business-toBusiness relationship? What are the main elements involved in the relationship?

3. With whom does Lewis & Hickey have business relationships?

4. How important do you think client relationships are to Lewis & Hickey? Why?

5. What role do you play in initiating / establishing relationships with prospective customers?

Customer Based

6. From your experience, what are the key criteria that clients look for while selecting an architect?

7. To what extent do you think, reputation of an architect influences new client acquisition?

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Organisational

8. How does the organisation identify new business opportunities?

9. Does L&H have any standard techniques/approaches in dealing with prospective clients? What are the methods?

10. With who does the ownership of the business relationships reside? Is it at a personal level or at the organisational level?

11. Once a business relationship has been initiated, how does the organisation keep track of it?

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