Relationship Marketing (3)

1. Relationship Marketing (3) Chris Chapleo Relationship marketing in practice How can organisations implement relationship marketing

2. Commitment Partners Partners Members Members Advocates Advocates Expansion Clients Clients Repeat Cust Customers Exploration 1st Time Cust Awareness Prospects Prospects Suspects Remember Stages of Relationship (Dissolution) Relationship Marketing Traditional Marketing Dwyer et al 1987 Payne et al 1995 Kotler 1997 Source: Based on Dwyer, F.R., Schurr, P.H. and Oh, S. (1987) ‘Developing buyer-seller relationships’, Journal of Marketing, 51, 11–27; Adapted from Payne, A., Christopher, M. and Peck, H. (eds) (1995) Relationship Marketing for Competitive Advantage: Winning and Keeping Customers: Oxford: Butterworth Heinemann; Based on Kolter, P. (1997) ‘Method for the millenium’, Marketing Business, February, 26–7.

3. Higher relationships • How to we engender partnership? • What makes you an advocate in your personal/ business life? • How can organisations capitalise on this?

4. A reality check? • Important to separate reality from rhetoric! • No research to suggest that those involved in loyalty marketing actively pursue people ‘up the ladder’? • BA actively differentiate between levels of membership depending on commitment (NB expenditure) • Charities may associate higher level of membership with increased status • May not be a linear progression up ladder? – consumers may ‘demote’ themselves.

5. Lifetime value • Project the individual value of a customer over time • This may lead to ‘barriers to exit’ rather than a true relationship? • No guarantees – especially in sectors with low exit barriers e.g. retail • Gas and Electricity companies seek to ‘bribe’ switchers?

6. Loyalty? • Key for companies is a cost- benefit analysis of when it is worth seeking to induce customers to move to the next level? ( Kotler , 1992)

7. Amazon – reverse loyalty? • May –sep 2000 Amazon tried out dynamic pricing • Regular customers would pay more and should be charged more? • Differentiated ‘new’ and ‘existing’ customers. • Talk on forums was rife and confusion became outrage! • Amazon apologised and backtracked!

8. Nationwide Building Society • http://www.youtube.com/watch?v=qFZV3y-p_NY • Financial services may preach relationship marketing but may actually use differential pricing?

9. Your thoughts? • Consider a brand with which you feel you have a relationship? • Break down that ‘relationship’? – why do you feel it exits

10. Vauxhall – examples; campaign objectives • Primary objective: the programme had to demonstrate a genuine uplift in sales and an improved return on investment • Secondary objective: a strengthening of the relationship between customers and local Vauxhall dealers

11. Vauxhall’s RM

12. VauxhallOngoing ; ‘dialogue building’

13. 3 months prior to ‘switch’ ( new car buying date)

14. Brand Values – influence loyalty • The constituent elements of the overall brand • Brand comprises functional and emotional values • E.g. Brand values for Ryanair/ BA/ Virgin? • MacDonalds v Pret a Manger

15. Organix

16. Organix – a case study in brand loyalty? • Tightly focused segmentation • Clear brand values • A motivated consumer group • A good basis for real RM programmes?

17. RM in Organisational Markets • ‘Trading partnerships’ are not new • Bonds between B2B partners have a long history • During 1950s golden age of marketing it was brand owners who developed brands and dominated distribution • 70-80s saw change in power balance between suppliers and retailers in fmcg

18. RM in Organisational Markets • 1980s ‘vertical integration’ trend – often through acquisition • Later in 1990s companies realised it made sense to concentrate efforts on core competencies • This led to more outsourcing and partnering • E.g. MacDonalds and Coca Cola • Retailers and Transportation e.g. Ocado - Waitrose

19. RM in Organisational Markets; Benefits for organisations • In depth understanding of customer requirements • Familiar with customer’s ‘way of doing things’ • privileged access to future info? • Ability of both partners to focus on value added chain • Relationship termination costs

20. RM in Organisational Markets; Costs for organisations • Dulling of market ‘incentivisation’ • Complacency? • Over reliance on few customers • Lack of creativity or innovation over time? “ new blood” • Restrict true competition?

21. B2B partnerships’ Advertising Agencies • Classic example • Won by ‘pitch’ • Require close synergy • Alignment of organisational objectives • Tendency to cultural and size ‘fit’ • Often tend to rely on key individuals • Tendency to have finite lifespan due to changes in decision makers • Are these examples of RM?

22. RM in Consumer Markets • Modern IT allows some form of individual treatment ; “mass customisation” e.g. VW use mail shots to keep Golf buyers ‘warm’, Unis using SMS to ‘convert’ prospects • If we accept that loyalty schemes are examples of RM?…..do they build ‘ real’ relationships?

23. Loyalty Schemes • Eg Tesco’s Clubcard and Nectar card

24. RM in Consumer Markets; Tescos • Constant data capture - Clubcard • 28,000 targeted offers • Understanding and segmentation by ‘lifestyle’ • But is this real loyalty or convenience?

25. The service paradox; are the most loyal customers the most satisfied / profitable? • Gummesson (1999) introduced the ‘service paradox’ • Less profitable customers are, the more satisfied they are with service? • Eg SAS research – flights Europe to NY • Business class is $3000 but very demanding • Economy cheap but low price = satisfaction? • Ryanair is classic example • Lessons for practice? = no simple answers

26. Criticism of RM • Is RM management ‘fad’? • Is it new anyway? ( see Egan 2004 p 240) • One sided communication? – do we want relationships? ”voice of customer missing” ( Buttle 1996) • Selective research used to justify it? • Hardly rises above common sense?

27. The future.. • End of 1990s saw question fundamental assumptions behind RM theory: • That it focussed wholly on supplier- customer relationship • Approach was about attracting, maintaining and enhancing customer relationships • Customer service central to this philosophy • All had common factor – concerned with buyer-seller interface

28. The future.. • But later writers such as Gummesson sought to widen RM’s scope • Not just buyer – seller relationship but ‘whole series of relationships and networks are important’? • NB relationships with customers and other stakeholders are important • New theory was that organisations should compete through development of long term relationships with all it’s stakeholders ( Egan 2004)

29. The future; Implications • There has undoubtedly been an attempt to apply RM theory to areas where it is not suited as consumers want little relationship • Companies start to believe that there is more to their relationship than is the case • CRM approaches typical = call centres

30. The future; Implications • Companies must not assume that all Customer - supplier contacts are capable of closeness • 70-80% failure of CRM projects KMPG 2002 • RM had moved us away from functional and transactional approach • Can provide healthy and imaginative marketing environment • Genuine relationships can be built with brands we trust?

31. Your thoughts? • Brands you Trust? • In what circumstances, as a consumer, do you want a ‘relationship’?

32. Further Reading • MBR p 275-300 • Egan ( 2004) Relationship Marketing p248-258 • PS remember RM case study for next weeks seminars

33. The end