Relationship marketing strategies and business applications

Holistic Relationship Marketing

Relationship Marketing

Relationship marketing is one of the fastest growing research topics in business and marketing today. The premise of relationship marketing is very broad and includes or should include external and internal relationship building as a reciprocal factor for firm success. Successful relationship marketing, according to the literature, results in high productivity, high employee and customer satisfaction, low employee and customer attrition and ultimately high profitability and success. According to businessdictionary.com relationship marketing is defined as: Marketing activities that are aimed at developing and managing trusting and long-term relationships with larger customers. In relationship marketing, customer profile, buying patterns, and history of contacts are maintained in a sales database, and an account executive is assigned to one or more major customers to fulfill their needs and maintain the relationship (n.d.) Yet, fundamentally, this definition of relationship marketing (RM) demonstrates only one aspect of its purpose, which is ultimately for the firm to develop both internal (employee) and external (customer) relationships by building and maintaining professional and possibly even personal relationships with all members of the firm community. The defining desire of relationship marketing is to make each participating member, be it a large or even in some cases small customers, firm employees and even suppliers all feel as if they are valued and respected. The goal of relationship marketing being to make each feel important to the firm and supported in whatever way possible. This work will discuss RM in these terms, as both an internal and external tool to support firm success arguing the thesis that relationship marketing is both an external and internal component of success as well as a vital component for successful marketing of firms. To perform this analysis the work will first look at a base of literature that supports either internal or external relationship marketing or both and then use this information to investigate an existing firm which states a mission focused on both internal and external relationship marketing and reports success. The firm analyzed will report factors of success in this process using a holistic relationship marketing mission and will; report high customer and employee satisfaction, low levels of employee and customer attrition, higher productivity and higher profitability as compared to a previous mission structure.

Table of Contents

Executive Summary 2

Table of Contents 3

Introduction 4

Applying Holistic Relationship Marketing Theory 5

Relationship Marketing Theory 5

Relationship Marketing External 7

Relationship Marketing Internal 8

Holistic Relationship Marketing 9

Market and Firm History and Background 10

Historical Mission 11

Implementation of Holistic RM 11

Firm Outcomes Analysis 12

Discussion of Outcomes 12

Conclusion 13

References 15

Introduction

Relationship marketing is one of the fastest growing research topics in business and marketing today. The premise of relationship marketing is very broad and includes or should include external and internal relationship building as a reciprocal factor for firm success. Successful relationship marketing, according to the literature, results in high productivity, high employee and customer satisfaction, low employee and customer attrition and ultimately high profitability and success (Ballantyne, 1997, pp. 343-366; Ballantyne, 2000, pp. 274-286; Herington, Johnson & Scott, 2006, pp. 364-381). According to businessdictionary.com relationship marketing is defined as: Marketing activities that are aimed at developing and managing trusting and long-term relationships with larger customers. In relationship marketing, customer profile, buying patterns, and history of contacts are maintained in a sales database, and an account executive is assigned to one or more major customers to fulfill their needs and maintain the relationship (n.d.) Yet, fundamentally, this definition of relationship marketing (RM) demonstrates only one aspect of its purpose, which is ultimately for the firm to develop both internal (employee) and external (customer) relationships by building and maintaining professional and possibly even personal relationships with all members of the firm community.

The defining desire of relationship marketing is to make each participating member, be it a large or even in some cases small customers, firm employees and even suppliers all feel as if they are valued and respected. The goal of relationship marketing being to make each feel important to the firm and supported in whatever way possible. This work will discuss RM in these terms, as both an internal and external tool to support firm success arguing the thesis that relationship marketing is both an external and internal component of success as well as a vital component for successful marketing of firms. To perform this analysis the work will first look at a base of literature that supports either internal or external relationship marketing or both and then use this information to investigate an existing firm which states a mission focused on both internal and external relationship marketing and reports success. The firm analyzed will report factors of success in this process using a holistic relationship marketing mission and will; report high customer and employee satisfaction, low levels of employee and customer attrition, higher productivity and higher profitability as compared to a previous mission structure.

Applying Holistic Relationship Marketing Theory

Relationship Marketing Theory

Relationship marketing has a relatively short history in the business and marketing world, and has been and will likely continue to be defined as the manner in which firms develop and maintain lasting relationships with existing customers in an attempt to retain and reengage these same customers. There is a clear sense that external relationship marketing demonstrates a more effective business strategy than attempting to gain new customers, dollar per dollar as existing customers already have a relationship with the firm and to some degree understand the workings of the firm. Companies that retain existing customers while creating new ones experience much more rapid growth. (Seroka, Feb 2000, p. 43). The reasons for success associated with the narrow definition of RM is associated with lower cost of contact, meaning that it costs less in time and resources to communicate with existing customers than it does to seek novel customers via various marketing means. RM has also been traditionally focused on larger customers, where the firm places most of its resources on keeping the big customers close and happy so that when they seek to utilize services again. Kindling and rekindling these relationships can vary a great deal by business and industry but as is noted in businessdictionary.com this often means the one on one relationship development with large customers. Historically speaking the RM trend began in the mid 1970s in Europe with a small group of firms in the industrial marketing and purchasing group (IMP) and was then introduced to the services industry and lastly to consumer markets (Veloutsou, Saren & Tzokas, 2002, p. 433). The RM trend as a business strategy then has expanded to nearly every area of business, with the first proponents working in relatively small number relationship markets, where suppliers and consumers dealt with large quantities of products in big numbers and has grown to be included as part of companies that deal with direct consumer purchasing where each customer is seeking to purchase and/or utilize only a small percentage of business share. The necessity of retaining customers is high as just a single customer could potentially make a huge impact if he or she were to seek out and purchase those same materials from another supplier. Business models that might utilize this later RM strategy are firms like banks or travel agencies where there are examples of both large and small customers and the firm attempts to make each encounter with each as easy, pleasant and memorable as possible.

Relationship Marketing External

As has been stated previously external RM is the first conception of the practice, with the longest tradition and the most infrastructural development. The services and standards associated with building customer relationships have been around for a long time and RM as a marketing strategy gave it a name and a structure for both business and research development. The goal of many firms then became one that attempted to make a customer and customer for life (Seroka, Feb 2000, p. 43). Increased pressure from demanding customers is a mark of the business world today and companies must respond to that effectively to gain competitive advantage. (Herington, Johnson & Scott, 2006, p. 364) This emphasis has led to trends that focus on customer relationships as the most important aspect of keeping and gaining market share in a mass market sense. Early purveyors of the expanded conception of RM as a tool that can be used by business with large customer bases, where single customers only represent alone small transactions but together represent large business percentages began to recognize the need to emphasize positive customer relations as crucial and foundational to success. These firms then began to place great emphasis on building huge multi-access point databases that contained customer information to aide in the process of employee recognition of customer history and were an attempt to create relationships even when the customer might be accessing a different employee contact point at every encounter. (Lee & Trim, 2007) Some firms even stepped towards creating strategic alliances with other compatible firms to build customer and information networks (Rich, 2003). In doing and creating all these systems to better support customer relations and external relationship marketing these same businesses began to notice a missing link in the process, which was that employees who were not happy and invested found it far more difficult than those who were to be positive in every customer relations encounter. From this recognition came a new urgency of customer relations quality development and also a new demand for relationship marketing that turned inward to build employee and even supplier relationships to greater levels, hence internal RM (Lee & Trim, 2007; Herington, Johnson & Scott, 2006, p. 364).

Relationship Marketing Internal

The natural outgrowth of this new recognition that relationships are important for external (customer) based RM and internal (employee/supplier) RM came an new emphasis on quality customer interactions that has clearly changed the face of business especially in the service sector in the last 30 years but also toward a new emphasis on employee retention and more importantly employee satisfaction. Businesses of varied types can and do often, now more than ever rely more on strategic plans to support internal RM, by building team and corporate cultures on every level of the business. Some are successful and gain outstanding recognition for being among a top few of places voted the best to work while others struggle daily to uphold both internal and external RM strategies (Herington, Johnson & Scott, 2006). To provide an example some companies have even begun to stress internal RM to such a degree that they publically recognize internal RM as they singular key to business success. These companies focus on internal RM over almost everything else and claim it is their holy grail because when their employees are happy their customers are happy. (Herington, Johnson & Scott, 2006, pp. 364-365) Herington, Johnson & Scott,( 2006) provided several examples of such firms and stress that these firms indicate that, across the board, the biggest and most effective change made that has improved productivity, growth and profitability is internal RM. These firm executives stress that happy employees make happy customers, reflecting their own feelings and belief in the firm out into the market to serve as the standard bearer for customer retention in nearly every encounter, of which there are millions a year. Firms use team building, personal focus and even many terms that are often associated with family rather than business to build the positive aspects of the internal corporate climate as well as strong and transparent pay and benefits packages that have been shown to be effective motivators for positive corporate opinions among employees (Herington, Johnson & Scott, 2006; Shore, Tashchian & Jourdan, 2006) all of which serve to build the customer focus and relationship by proxy through employee satisfaction.

Holistic Relationship Marketing

Having discussed the evolution of RM theory and application the goal now is to stress the essential nature of marrying the internal and external RM models to one another in a holistic manner. With the recognition of a customer focused and an employee satisfaction focused relationship many firms will find greater success in the modern business climate. It goes without saying that as businesses grow they must pay more and more attention to those things which serve as the core of relationships, from an external perspective though it may seem important for the customer to see the firm as large and strong therefore reliable and capable it is also important that customers feel as if the personal is still the driving factor in customer interactions and one of the best ways to do this is to create a team or even "family" like corporate climate, where the employees reflect their truthful desire to include customers in the positive corporate climate by providing firm services to them in a positive manner (Ballantyne, 1997; 2000; Herington, Johnson & Scott, 2006). According to an article in Malaysian Business the nature of service industry business is often based on millions of very brief customer encounters and each one is a point of creation for the company and determines the company's success or failure. ("Moments of Truth," 1999, p.37)

Market and Firm History and Background

To demonstrate the positive development of holistic RM one must look to a firm type that has the most to gain and lose from employing or not employing holistic RM. The type of firm analyzed here will therefore be one that has a very large customer base as well as huge numbers of employees. This combination demonstrates an area in business where service delivery is likely to occur at multiple access points and those who deliver service must utilize all their fundamental strategies to make each delivery of service as positive as possible to demonstrate greater brand and customer loyalty in the market. For this purpose the type of firm will be in retail service, where customer loyalty and frustrating levels of employee anonymity is often seen, i.e. A returning customer encounters a different employee nearly every time he or she accesses service and there are millions of accesses to service on an annual basis (Herington, Johnson & Scott, 2006). Therefore this work will analyze a retail department store firm. The competitive market in the department store industry is astronomical as the products provided vary a great deal and each and every customer is essential to business success as profit margins are often very low and are seemingly in constant decline as product prices and competition between firms is extremely high. That being said, in a traditional chain department store employee turnover is also often exceedingly high as pay-scale, opportunities for advancement and other issues are often a challenge to retention and recruitment. The market demands certain parameters that do not offer a great deal of variation in wages and the services provided by employees are not usually advanced services, so the level of their work demonstrates their expendability and it is much harder to make them feel valued. Therefore the need for holistic RM is essential to ensuring a competitive advantage and customer loyalty and many tools must be used to do so. Having experienced a frustrating level of employee turnover as well as many customer complaints regarding customer encounters the store a chain with 12 large regional outlets decided to refocus its efforts on employee satisfaction as a factor for better customer service delivery.

Historical Mission

The previous mission statement "To provide the customer the highest quality products for the best value" seemed to underplay the importance of the employee in the link and many years of frustratingly trying to develop massive customer service initiatives in a forever ebbing and flowing workforce proved relentless.

Implementation of Holistic RM

The new mission statement "Our team of employees will strive to provide the customer the highest quality products for the best value," is inclusive of the employee culture and only a reflection of a broader attempt to redouble corporate efforts to be inclusive of the employees in nearly every aspect of the retail market business. The company set about to retain employees by revamping its pay practices to exceed industry standards, improve its compensation packages and offer them to more employees and to build a foundational employee-employee interaction process that involved stressing to employees at every level the importance of serving the customer as well as each other with kindness. The company also reduced mandates, increased group decision making for change processes and began to sponsor employee community building activities including sponsorship of local sports teams that the employees wished to participate in, biannual company meet and greet picnics and other social events where employees were encouraged to bring families and build rapport with one another at all levels from the CEO to stocking and inventory staff (Barry & Weinstein, 2009; Juscius & Grigaite, 2010).