Relationship Marketing

RELATIONSHIP MARKETING
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Learning Outcomes
2

Explain the concept of perceived value and the main characteristics of the value chain. Understand the differences between the 4Ps and the relationship approach to marketing. Describe the different stages of the Customer Relationship Lifecycle. Explain the principles and economics of customer retention and consider the merits of loyalty programmes. Understand the principles of trust, commitment and customer satisfaction and explain how they are interlinked. Describe ways in which organisations try to provide customer service and support.
Relationship Marketing Chapter 15

Customer Value
3

Doyle (2000) suggests that customer value should be developed on three principles. These are: Customers will choose between alternative offerings and select the one that (they perceive) will offer them the best value. Customers do not want product or service features, they want their needs met. It is more profitable to have a long-term relationship between a customer and a company rather than a one off transaction.

Relationship Marketing

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Customer Value
4

Value is the customers estimate of the extent to which a product or service can satisfy their needs. Customers determine a products value by considering alternative solutions and the costs associated with satisfying their need. Therefore, value is relative to a customers needs, expectations and experience of competitive offerings within a category.

Relationship Marketing

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Customer Value
5

Value can be derived from sources other than products and prices. For example, value can be generated through the provision of additional services, such as;
training or support facilities, for example those normally provided by Cisco for their distributor networks. through association with a highly regarded brand, for example the cobranding arrangement between McDonalds and Innocent Drinks. legal or insurance provision for example the financial support provided by government and some regional councils for start up entrepreneurs and small businesses. joint working relationships between government and building/finance schemes such as those associated with the Private Finance Initiative.
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Relationship Marketing

Relationships and Customer Value

6

Above all else it is the relationships between buyers and sellers that are considered to represent real value if only because it is longer lasting and difficult for competitors to copy or destroy.

Relationship Marketing

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Simpson, Sigauw and Baker, (2001)

Value Chain
7

Selling organizations compete for business by trying to offer enhanced value, and they do this through a coordinated chain of activities. These include product design, production, marketing, delivery and support. Porter (1985) referred these activities as the Value Chain.
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A Continuum of Value
8

The value that organizations offer each other can be visualized as a continuum.
Relationship Marketing Chapter 15

Characteristics of Market and Collaborative Exchanges

9

Table 15.1

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Four Core Value Strategies

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Commodity -Value:

Transactional relationships based on an exchange of resources. Value is created by the buyer. Products and price based transactions become supplemented with services and add-on facilities which gradually serve to create a relationship, which becomes of value to the buyer. Value is now created by both parties working together for mutual benefit. Characterised by both parties working collaboratively to co-produce value. Value is no longer traded from seller to buyer.

Added-Value :

Performance -Value: Co-Creation Value:

Relationship Marketing

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Ribeiro et al (2009)

The Customer Relationship Life Cycle

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Relationship Marketing

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Customer Loyalty
12

Table 15.3

Relationship Marketing

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Trust, Commitment and Satisfaction

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Trust is based on two main dimensions; credibility and benevolence.

Credibility concerns the extent to which one party believes (is confident) that another organization will undertake and complete its agreed roles and tasks.

Benevolence is concerned with goodwill, that the other party will not act opportunistically, even if the conditions for exploitation should arise.
(Pavlou, 2002).

Relationship Marketing

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Trust, Commitment and Satisfaction

14

Commitment is important because it implies a desire that a relationship continues and is strengthened because it is of value. Morgan and Hunt (1994) proposed that commitment and trust are the key mediating variables between five antecedents and five outcomes.

Relationship Marketing

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Trust, Commitment and Satisfaction

15

A natural outcome from building trust and developing commitment is the establishment of customer satisfaction. Satisfaction is thought to be positively related to customer retention which in turn leads to an improved return-oninvestment and hence profitability. Many organizations seek to improve levels of customer satisfaction, with the intention of strengthening customer relationships and driving higher levels of retention and loyalty.
(Ravald and Gronroos, 1996)

Relationship Marketing

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Customer Service and Relationship Management

16

Managing trust and reputation, reducing risk and providing high levels of customer satisfaction is now regarded as an expectation that all suppliers need to meet. In addition, organizations attempt to manage their customers using two main approaches: Customer Contact Centres customers contact them. customer contact centre.
many organizations try to help their This can be achieved via a call centre or

Customer Relationship Management (CRM)

the aim of using these systems is to provide relationships with superior value by enabling suppliers access to real time customer information. This helps suppliers to anticipate and satisfy customers needs effectively, efficiently and in a timely manner.

Relationship Marketing

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