3. i
INTRODUCTION
In this highly turbulent business world, survival of business organisations is heavily
depending on the degree to which they satisfy their customers. Relationship Marketing
(RM) has become a competitive tool and strategy for organisations to win and retain
their customers. Developing mutually satisfying relationship with customers has a
significant impact on the performance of an organization. Therefore modern
organizations have become customer-centric and focus on customer satisfaction.
Globalisation and technological developments affects for organisations to fight for the
market share and profitability due to the increased competition. The aim of this
manuscript is to study the impact of Relationship Marketing and customer care for
organisational success.
Author could identify that, the RM is a combination of customer care, marketing and
effective CRM strategies. In order to implement a solid RM practise, commitment of all
parties of an organisation is highly important. Especially management direction and
commitment to cultivate customer-centric culture, and develop mind-set that everyone
within the business serves a customer is highly contributing for the success of RM.
Further the author could identified through the literature research and a field study
undertaken, that there is a higher correlation, of the factors, customer retention,
satisfaction, service recovery, service quality, customer loyalty and profitability.
Building-up trust is the foundation of a business relationship and it is a challenging task
for today’s organisations, due to highly competitive marketplace. In order to build-up
trust, organisations should deliver the promises through an ethical business, excellent
service, enhanced product and service quality. Effectiveness of these practises is leading
for higher retention rate, enhance satisfaction, higher loyalty and eventually enhancing
customer lifetime value which enhancing the profitability.
The author recommends for today’s organisations to understand their customer desires
well in order to deliver excellent service with enhance satisfaction under ethical
business culture. Implement effective service recovery, quality and CRM strategies in
order to retain and increase customer loyalty. Further real commitment of top
management to cultivate customer-centric organisational culture, effective processes,
5. iii
TABLE OF CONTENTS
Introduction ................................................................................................................i
Table of Contents......................................................................................................iii
List of Figures............................................................................................................v
Acknowledgments.....................................................................................................vi
1. Introduction....................................................................................................1
2. Define Relationship Marketing and Customer Care .........................................3
2.1. Customer Care..........................................................................................3
2.2. Difference in between Customer Care and Customer Service .....................3
2.3. Marketing.................................................................................................4
2.4. Relationship Marketing.............................................................................6
2.5. Relationship Marketing and Customer Relationship Management..............7
3. Relationship Marketing, Customer Care and Modern Business Organizations ..9
3.1. Role of Customer Care..............................................................................9
3.1.1. Customer Satisfaction..........................................................................10
3.1.2. Service Quality and Recovery.............................................................. 13
3.1.3. Customer Loyalty................................................................................14
3.1.4. Customer Lifetime Value (CLV) .........................................................16
3.2. Role of Relationship Marketing............................................................... 16
3.2.1. Building Trust and Relationship........................................................... 17
3.2.2. Creating Value for Customer and Organisation ....................................18
3.2.3. Integration of Quality, Customer Service, and Marketing for Enhanced
Customer Lifetime Value..............................................................................18
3.3. Observation............................................................................................ 19
3.4. Limitations and Obstacles .......................................................................21
4. Conclusion...................................................................................................22
5. Recommendations ........................................................................................24
References...............................................................................................................25
Bibliography............................................................................................................30
Appendix - A...........................................................................................................35
Appendix - B .............................................................. Error! Bookmark not defined.
Appendix - C .............................................................. Error! Bookmark not defined.
Appendix - D.............................................................. Error! Bookmark not defined.
7. v
LIST OF FIGURES
Figure 1: The move from product-focus to customer-centric organisations................. 10
Figure 2: Word-of-Mouth (WOM)............................................................................ 11
Figure 3: Word-of-Moth and Social Networking....................................................... 12
Figure 4: The Service/Value chain............................................................................ 14
Figure 5: The Relationship Marketing Loyalty Ladder .............................................. 15
Figure 6: Relationship Marketing and CRM – A Hierarchy. ...................................... 17
Figure 7: Four Pillars Model of Relationship Marketing............................................ 20
Figure 8: The transformation of business organisations.............................................. 20
Figure 9: Customer Value Generation....................................................................... 22
8. vi
ACKNOWLEDGMENTS
The author wishes to express sincere appreciation to My parents for their guidance and
Amila my wife and Thenuja my son for the understanding and their commitment. And
special thanks to Professors Terry Johnson and Anand Walser at London School of
Commerce, UK for their assistance and guidance in the preparation of this manuscript.
Last but not least Dr. Riyad Eid, Editor in Chief at International Journal of Customer
Relationship Marketing and Management (IJCRMM) for the support and guidance
given on publishing of this manuscript.
Tharanga Gunawardena
13th
March 2013
9. 1
1. INTRODUCTION
Today in this highly turbulent business world survival of any business is heavily
depending on their customers (Cook, 2011). Customer has become the key aspect of
each and every business. As Tsai and Su (2009), correctly suggested customers have
more demanding power and, they seek an excellent service, superior quality products,
enhanced value for their money and value for time from any business organisation
(Cook, 2011). Therefore each and every organisation tends to pay more attention on
customers and put more effort on understanding exact customer requirements
(Puwanenthiren, 2011). Further as a result of the gradual development of the
technology, World Wide Web, new inventions, innovation, competition and
globalisation, customer expectations on services and products have been increased over
the years (Cook, 2011; Lovelock and Wright, 2002). In order to survive in such a
competitive market, organisations must be able to win customers by understanding and
fulfilling their requirements (Drucker, 1954 cited by Cook, 2011).
In the early stages organisations were more Product-Focused and the emerging trend in
modern world of organisations has become more Customer-Focused (Cook, 2011). In
this highly competitive marketplace transforming of organisations towards more
customer-focused and customer-centric have become a more challenging task (Kim,
Suh and Hwang, 2003). According to Reed ‘Effective customer service is a competitive
advantage in the marketplace,…’ (2011: p.31). Therefore in order to make products and
services distinctive from other competitors and in order to gain the competitive
advantage, many organisations have incorporated strategies for an excellent Customer
Care philosophy, and Marketing practices into their organisational plans and procedures
(Cook, 2011; Lancaster and Massingham, 2011).
In order to build up a strong customer centric culture, organisation should understand
their customers, their behaviour and their desires well, and this will not be a success
unless they build up a strong relationship with their customers (Kotler et al., 2009;
Lovelock and Wright, 2002). Development of Relationship Marketing (RM) and
Customer Care as interrelated concepts have affected for many changes in whole
10. 2
marketing process (Lancaster and Massingham, 2011) and a strong relationship and
effective service will increase the customer loyalty, which will enhance the profitability
and stability of the organisation (Lovelock and Wright, 2002). Therefore building-up
relationship with customers form the point of acquisition and building-up a strong
Customer Care philosophy have become more challenging management tasks for
today’s business organisations (Christopher, Payne and Ballantyne, 2002).
In this manuscript author is investigating the concepts Relationship Marketing (RM)
and Customer Care in the marketing framework in order to understand the impact of
these concepts into (1) Customer Loyalty and Life Time Value, (2) Profitability, (3)
Organizational Reputation and Stability. In the first section author will focus on the
definitions of the core concepts Relationship Marketing, Customer Care and other
interrelated concepts. The next section describes the application of these concepts in the
general marketing framework. And then author will deeply analyse these concepts in
the marketing framework and then the advantages and difficulties of the application of
these concepts. Finally author will summarise the research findings and will provide
insights for future researches and organisations.
11. 3
2. DEFINE RELATIONSHIP MARKETING AND CUSTOMER CARE
Globalisation and development of the technology has made many changes in customer
lifestyles and hence in the marketplace which has become more complex and has gone
through many changes by this 21st
century. Therefore due to the complexity of the
market place many theories and practises have been developed over the period of time.
Relationship Marketing and Customer Care are two such concepts emerged in the
modern marketing management. In this section author illustrates the definitions of those
concepts from the literature.
2.1. Customer Care
Author could search only for few definitions on customer care on the literature.
According to Lancaster and Massingham (2011), customer care;
‘involves planning all the activities involved in the customer–supplier
relationship including pre-, during- and post-transaction stages to ensure that
customer expectations are met or exceeded’ (p.304).
This illustrates that the customer care is a management function since it is involving
planning of activities in order to build and maintain relationship in between customer
and supplier at all stages of the customer lifecycle in a way that the customer
requirements are fulfilled up to or above the expectations.
As defined in Marketing Management Course Manual (London School of Commerce,
2010), customer care is ‘Having the best total solutions for customers’ (p.364). Even
though this is a short definition this reflects that customer care is about all activities
intended to provide solutions for customer requirements, concerns and complaints at all
the transaction stages.
2.2. Difference in between Customer Care and Customer Service
Christopher, Payne and Ballantyne (2002) has defined customer service as ‘[t]he
ongoing process of managing the buyer/seller interface to ensure continued customer
satisfaction’ (p.151). This defines that the customer service as a processes and which is
12. 4
to manage the relationship and interactions in-between customer and marketers in order
to make sure the customer satisfaction exists throughout the customer lifecycle.
Lovelock and Wright, (2002) explains customer service as; ‘the provision of
supplementary service elements by employees who are not specifically engaged in
selling activities’(p.200). This explains that providing customers services through a
specially trained and dedicated staff for servicing in order to cater after sales customer
requirements such as information requests, issues or problem solving, cross selling etc.
According to Baker (1996) the concept customer care is emerged as a fundamental
process of marketing. Donaldson (1995) as cited by (Baker, 1996) and some scholars
use the words Customer Service and Customer Care interchangeably and consider as
one concept. But according to the views of few other authors such as Lancaster and
Massingham (2011), Baker (1996), Carson (1995), and Christopher, Payne and
Ballantyne (2002) there is a difference in between Customer Care and Customer
Service. According to Carson (1995) as cited by (Baker, 1996) customer service is one
of the important activities of customer care. Lancaster and Massingham (2011) also has
proved Carson’s view and they argued that the ‘Customer service is an important facet
of overall customer care’ (p.305).
2.3. Marketing
There are many definitions can be found for Marketing in the literature. Among them
marketing has been defined in a shortest way as ‘meeting needs profitably’ (Kotler et
al., 2009: p.6). This definition emphasises the fulfilment of customer requirements
through processes and activities, which generate profits for the organisation.
The Institute of Marketing, USA as cited by Chatterjee (2009) has defined marketing
as;
‘The management function which organizes and directs all those business
activities involved in assessing and converting customer purchasing power into
effective demand for a specific product or service, and in moving the product or
13. 5
service to the final customer or user so as to achieve the profit target or other
objectives set by a company’(p.2).
This definition discovered the marketing as a management function which is to achieve
organisational objectives and profits through the distribution of products and services to
the end user or customer, meeting and maximising market demand for the company
products and services by managing business activities efficiently.
As defined by American Marketing Association (1995) cited by (Czinkota and Kotabe,
2001) marketing is;
‘the process of planning and executing the conception, pricing, promotion and
distribution of ideas, goods and services to create exchange that satisfy
individual and organizational goals’(p.2).
According to this definition marketing is an exchange process which is satisfying
individual requirements as well as organisational objectives through planned activities
such as pricing, marketing promotions and distribution of products and services. Further
this definition has been revised in 2004 by American Marketing Association and which
defines marketing as;
‘an organizational function and a set of processes for creating, communicating,
and delivering value to customers and for managing customer relationships in
ways that benefit the organization and its stakeholders’ (Kotler et al., 2009: p.6 ;
Palmatier, 2008: p.1).
This definition identifies that overall focus of marketing is to managing relationship
with customer in order to enhance value for stakeholders as well as for the organisation
through the organisational functions and processes.
Author could identify four key aspects of marketing which are common to all these
definitions; (1) building relationship, (2) create value for customer and organisation, (3)
an effective exchange process, (4) managing marketing activities and resources
efficiently and effectively. Therefore according to the authors view marketing is
building strong relationship with customer by managing marketing activities and
14. 6
organisational resources for efficient and effective exchange process which creates
value for both organisation and customer.
2.4. Relationship Marketing
Many scholars have defined Relationship Marketing in many ways. Gronroos (1997) as
cited by Shajahan (2004) defines relationship marketing as;
‘…to establish, maintain, and enhance relationship with customers and other
partners, at a profit, so that the objectives of the parties involved are met. This is
achieved by a mutual exchange and fulfilment of promises’ (p.30).
This definition identifies the relationship marketing as building strong relationship with
all stakeholders of a business as the objectives of each and every party are fulfilled and
which generate profits for the organisation.
Sheth and Parvatiyar (2000) define relationship marketing as;
‘the ongoing process of engaging in cooperative and collaborative activities and
programs with immediate and end-user customers to create or enhance mutual
economic value at a reduced cost’(p.9).
According to the above definition relationship marketing is a corporative and
collaborative relationship in-between organisation and customers, and it is an on-going
process, which will minimise the cost involve and therefore it is benefited for all
stakeholders.
According to Stone, Woodcock and Machtynger (2000), relationship marketing is;
‘[t]he use of a wide range of marketing, sales, communication, service and
customer care approaches to, identify a company’s named individual
customers; create a relationship between the company and its customers that
stretches over many transactions; manage that relationship to the benefit of the
customers and the company’ (p.1-2).
15. 7
This definition emphasises that understand or identify customer since the better
understanding cement for a long-lasting relationship (Palmatier, 2008), further the
collaboration of all divisions and functions hence the commitment of the company, in
order to sustain the relationship, and turn the relationship as to benefit for the
organisation and customer.
According to the view of the author even though there are numerous definitions in the
literature, almost all the definitions contain common concepts on relationship
marketing. Most of the definitions emphasises (1) the commitment of the organisation
to understand and fulfil the customer requirements; (2) corporation and collaboration of
organizational functions to provide an excellent service; (3) long lasting relationship
enhance profit for organisation and value for customer; (4) sustaining the relationship
on the base of trust.
2.5. Relationship Marketing and Customer Relationship Management
Many researches have defined Customer Relationship Management (CRM) in many
different ways. According to Kim, Suh and Hwang (2003) CRM is;
‘managerial efforts to manage business interactions with customers by
combining business processes and technologies that seek to understand a
company’s customers’ (p.6).
Among many definitions found in the literature, author identifies the definition
provided by Christopher, Payne and Ballantyne (2002) as a most comprehensive
definition for CRM.
‘CRM is a strategic approach to improving shareholder value through the
development of appropriate relationships with key customers and customer
segments. CRM unites the potential of IT and relationship marketing strategies
to deliver profitable, long-term relationships. Importantly, CRM provides
enhanced opportunities to use data and information both to understand
customers and implement relationship marketing strategies better. This requires
16. 8
a cross-functional integration of people, operations and marketing capabilities
enabled through information technology and applications’ (p.16).
Customer Relationship Management (CRM) is the tool used by modern business
organisations to create and maintain customer-centric business culture (Kim, Suh and
Hwang, 2003). CRM is used in Business-to-Consumer (B2C) and Business-to-Business
(B2B) marketing concepts, in order to create lasting relationship with customers
(Christopher, Payne and Ballantyne, 2002). According to Lovelock and Wright (2002)
‘Mutual recognition and knowledge between the parties is required for a relationship to
exist’ (p.99). Buttle (2008) as cited by (Lancaster and Massingham, 2011) suggests that
an organisation should understand and identify their customers by creating and
maintaining a comprehensive customer database. CRM is a most effective way to align
Information Technology and Human Resources of an organisation to understand
customer behaviour, desires, and needs and satisfy them in order to create customer
value (Wahab and Ali, 2010). Creating and maintaining a strong relationship with
customer and other stakeholders is the fundamental aspect of relationship marketing
(Palmatier, 2008). Therefore CRM is a tool used to implement a successful Relationship
Marketing strategy within a business organisation and Relationship Marketing must be
implemented on top of an effective CRM process (Christopher, Payne and Ballantyne,
2002).
17. 9
3. RELATIONSHIP MARKETING, CUSTOMER CARE AND MODERN
BUSINESS ORGANIZATIONS
In thin section author identifies the key areas related to the RM and Customer Care.
And discuss the application of those concepts in the marketing framework and finally
the limitations and obstacles of those concepts.
3.1. Role of Customer Care
Globalisation and internationalization has created a boundary less global business era.
And with the developments in new technological and innovative concepts, tools,
products and services, have been increased the competition in marketplace and have
become more complex than ever (Cook, 2011; Lovelock and Wright, 2002). Today
customers have the possibility to search for better products and services which can in
turn give them best value for money and the preeminent satisfaction (Cook, 2011; Ma,
Ding and Hong, 2010; Kotler et al., 2009; Meyer and Schwager, 2007). Therefore many
researches argued that only the organisations who can win customers hearts and minds
can be survived in this highly competitive marketplace (Cook, 2011).
Today customers are more educated and knowledgeable therefore they have become
more powerful and their expectations on products and services are high (Lancaster and
Massingham, 2011; Cook, 2011; Kotler et al., 2009). In order to win and retain
customers, organizations put more emphasis on providing an excellent service with
greatest satisfaction to their customers. As illustrated in Figure 1; many organisations
have transformed their focus from product-focus to customer-focus and resulted in
emergence of customer-centric business organisations (Cook, 2011; Kim, Suh and
Hwang, 2003). Therefore Customer Care as a philosophy has been cultivated in almost
all organisations and many concepts have been developed and implemented over the
years (Lancaster and Massingham, 2011).
As stated in a CBSNEWS article by Gillespie (2009) Amazon is a well-known online
bookseller which launches its e-commerce business in 1995. Amazon was ranked at the
top internet retailers in 2004 and it has reported nearly $7 billion sales in 2008.
18. 10
According to a new article at Technorati, Inc, Amazon expected to be the net sales for
the first quarter in 2013 to be between $15 billion and $16.6 billion when compared to
the first quarter performance in 2012 (Gaskell, 2013). Many industry analysts confirm
that the reason behind this great success is Amazon has always valued their customer’s
views; they have build-up trust and an extremely loyal customer base through an
excellent service and by continuously finding innovative ways to enhance the customer
satisfaction.
Figure 1: The move from product-focus to customer-centric
organisations.
Source: Adapted from Cook (2011)
3.1.1. Customer Satisfaction
Many researches argued that the customer satisfaction is the mission and key to success
of any business organisation (Mohr and Sarin, 2008). Survival of customer-centric
business is heavily depending on customer satisfaction (Silva and Yapa, 2009).
According to Lovelock and Wright (2002) customer satisfaction is the ‘short-term
emotional reaction to a specific service performance’ (p.87). With the development of
internet and other telecommunication media customers are more educated and up-to-
date. They expect that business entities will listen to them and understand their exact
requirements (Kotler et al., 2009). Many researches have argued that better
understanding of customer requirements will lead to provide an excellent service with
strong customer satisfaction (Ma, Ding and Hong, 2010). When an organisation
provides a better service which is beyond the expectation of the customer then customer
19. 11
consider it as an excellent service and customer will be delighted (Cook, 2011; Kotler et
al., 2009). Each and every customer is expecting an excellent service from business
entities.
Some researches viewed customer satisfaction as a key to customer retention and
customer loyalty (Lovelock and Wright, 2002; Cannon and Sheth, 2000) also many
argued that, there is a strategic interconnection in between customer satisfaction and
organisational performance. According to a research done by University of Michigan 1
per cent increase in satisfaction is increasing the organisation’s ROI from 2.37 per cent
(Kotler et al., 2009; Lovelock and Wright, 2002). Satisfied customers will spread
positive word-of-mouth and dissatisfied customers will spread negative word-of-mouth.
Word-of-mouth is simply a personal one-to-one, oral, written or electronic
communication (Lancaster and Massingham, 2011; Kotler et al., 2009; Lovelock and
Wright, 2002). Previous surveys shows that people tend to trust recommendations on
products and services from the people they know (Chengxi Yang's Blog, 2012). Below
Figure 2 shows the power of word-of-mouth.
Figure 2: Word-of-Mouth (WOM)
Source : Chengxi Yang's Blog (2012)
One of the famous actresses in Sri Lanka recently expressed during a media interview
her bad experience encountered with a famous bookshop located at Rathmalana, Sri
Lanka, (Senanayake, Eliya, Sirasa TV, 2013). According to the author’s view this is a
20. 12
good example for negative word-of-mouth and power of customer with multimedia and
social network channels. Facebook, LinkedIn, Twitter etc. are few of the internet based
social networking tools which customers can use to spread word-of-mouth over the
world in few minutes. These sites have become a part of lives of many people and
hence the growth of social networking emerge an impact on reputational risks for
organisations (Cook, 2011).
As many researchers confirmed
organisations will benefit when
their customers are more satisfied
and eventually they will create a
good reputation through these
social networking channels. In the
same way they are powerful to
tear-down an organisational
image when they encounter
dissatisfaction on a product or
service, they may spread the news
among millions around the world within few minutes (Cook, 2011; Lancaster and
Massingham, 2011; Lovelock and Wright, 2002). Figure 3 illustrates contribution of
social networks on sharing of word-of-mouth around the world.
In order to survive and protect the brand or organisational image, organisations should
provide an excellent service to their customers (Cook, 2011). Management
commitment, better identification of customers, their behaviour, purchase pattern and
understanding of real customer desires are highly important to establish excellent
service culture in customer-centric organisations (Lancaster and Massingham, 2011).
Fulfilment of promises is important when delivering customer satisfaction (Cook, 2011;
Shajahan, 2004). Satisfied customers eventually bring business to organisation through
repurchase and new customers via positive word-of-mouth referrals, and there is a
higher tendency to become a more loyal customer to the organisation in the long run
(Lancaster and Massingham, 2011; Kotler et al., 2009; Shajahan, 2004). Therefore
higher satisfaction will enhance market share and profit benefits for the organisation.
Figure 3: Word-of-Moth and Social Networking
Source: Chengxi Yang's Blog (2012)
21. 13
3.1.2. Service Quality and Recovery
Service quality is a customer-centric concept and according to American Society for
Quality Control, quality is ‘totality of features and characteristics of a product or service
that bear on its ability to satisfy stated or implied needs’ (Kotler et al., 2009: p.124).
Many researches have proved that, there is a close interconnection in between customer
satisfaction and service quality (Lovelock and Wright, 2002) also improved quality is
enhancing customer loyalty (Berry, 2000). Many researchers argued that higher level of
quality deliver greater value for customer, higher satisfaction and build-up trust on
organisation and its services. Therefore it is evident that service quality, customer
satisfaction and organizational profitability are interconnected and interdepended
concepts (Puwanenthiren, 2011; Kotler et al., 2009; Lovelock and Wright, 2002; Webb
and Jagun, 1997).
Researchers found that there is a close dependability on employee satisfaction and
customer satisfaction. Satisfied employees tend to provide a quality and excellent
service to their customers and hence the customer will be more satisfied and delighted
(Fornell et al., 2006; Bulgarella, 2005; Christopher, Payne and Ballantyne, 2002;
Bernhardt, Donthu and Kennett, 2000). Therefore organizations should focus to hire
and develop quality employees and make sure they are treated well and satisfied
(Christopher, Payne and Ballantyne, 2002). As illustrated in Figure 4, Heskett et al. as
cited by Cook (2011) demonstrated an interconnection in-between service quality,
employee satisfaction, customer satisfaction and profitability.
22. 14
Figure 4: The Service/Value chain
Source: Adapted from Cook (2011)
Customer complaints are a great opportunity for organisations to evaluate and take
necessary corrective actions on service and product failures. Not all customers
complaining about bad experiences therefore complaints received are more likely a tip
of an iceberg (Cook, 2011; Lancaster and Massingham, 2011). Hence an effective
service recovery is highly important in restoring customer satisfaction (Lovelock and
Wright, 2002). Therefore organisations should focus for effective and efficient
complaint and requests handling processes and that will enable to maintain positive
word-of-mouth recommendations. Further top management commitment towards a high
quality service framework is essential in order to deliver enhanced value for customers
(Cook, 2011; Lovelock and Wright, 2002).
3.1.3. Customer Loyalty
Creating loyal customers is one of the key aspects of business organisations (Kotler et
al., 2009) because (1) loyal customers tend to buy more and less cost to serve, (2) loyal
customers are less price sensitive and tend to pay a premium, (3) loyal customers are
tend to spread positive word-of-mouth recommendations and may bring new customers,
(4) customer defection will be reduced and therefore prevent competitors from gaining
market share (Cook, 2011; Shajahan, 2004). Therefore many organisations adopt to
develop customer loyalty with various approaches and programs (Cook, 2011).
Frequency programs such as frequent flier programs and Club marketing programs such
as loyalty cards are some examples for such loyalty programs (Kotler et al., 2009).
23. 15
Many researchers argued that organisations must target right customers and right
methodologies to develop customer loyalty.
For example TESCO supermarket chain in UK, which is the third largest retailer in the
world, initiated “Tesco Clubcard” frequent-shopper program in order to build loyalty
and lasting relationship with customers. This was a loyalty card which offer discounts
and special offers tailored to individual shoppers. Customers can collect points for
every £1 they spent in a Tesco store. Clubcard was also a data gathering tool for Tesco
and those data were used to analyse and understand shopping patterns and customer
preferences. Tesco created a profile called “DNA profile” for each customer. These
data were helpful for Tesco to run the business efficiently. They used these data to
determine the range of products and the nature of merchandising for each store and
even the locations of new stores. Tesco partnership with Virgin Atlantic made
customers the possibility to convert Clubcard points into frequent flyer miles. Also on
12th
February 2013 Tesco announced that they will launch their own Tesco
ClubcardTV, which is on demand TV and film service. This service will be offer on
free of charge for Tesco customers. The Tesco loyalty program was a very successful as
they used correct approach with correct methodologies and right customers (Wikipedia,
the free encyclopedia, 2013; Kotler et al., 2009).
Figure 5: The Relationship Marketing Loyalty Ladder
Source: Adapted from Christopher, Payne and Ballantyne (2002)
24. 16
Many researchers confirmed that retaining existing customers are more profitable and
easier to enhance revenue through cross-sell and up-sell as they become more loyal to
the organisation. Further studies found that the cost of acquiring new customer is five
times higher than satisfying and keeping an existing customer (Cook, 2011; Kotler et
al., 2009; Christopher, Payne and Ballantyne, 2002). Therefore retaining existing
customers and develop their loyalty is an important aspect of RM. The concept RM
loyalty ladder as illustrated in Figure 5 shows the different stages of customer
loyalty/relationship (Cook, 2011; Christopher, Payne and Ballantyne, 2002). Effective,
efficient and quality customer service will generate satisfaction and deliver value to
customer and will build loyal customers in the long run and loyalty in return will
enhance growth and profitability of the organization (Lancaster and Massingham, 2011;
Shajahan, 2004).
3.1.4. Customer Lifetime Value (CLV)
The value generated for an organisation throughout the lifecycle of a customer is
considered as CLV (Shajahan, 2004). To maximise CLV organisation must be build-up
a strong long-term relationship with the customer (Kotler et al., 2009; Christopher,
Payne and Ballantyne, 2002). In order to build-up long-lasting relationship
organisations must create and deliver superior customer value (Christopher, Payne and
Ballantyne, 2002) and they must be provided with strong satisfaction on all the
transactions (Ma, Ding and Hong, 2010). Further organisation must be able to identify
profitable customers since some of the customers may be too much cost to retain and
service. And therefore many researchers argued that unprofitable customers will reduce
the company profit and will take a long time even to break-even (Kotler et al., 2009;
Shajahan, 2004; Christopher, Payne and Ballantyne, 2002).
3.2. Role of Relationship Marketing
Purpose of relationship marketing is to maximise customer lifetime value and enhance
profitability of the organisation (Christopher, Payne and Ballantyne, 2002). Since
sellers focusing to build-up long-term relationship with customers for increased sales
and revenue, customer care practises have become more important. Therefore customer
25. 17
care is mutually interconnected with RM (Baker, 1996). As illustrated in Figure 6, RM
practises must be implemented on top of effective customer care philosophy and CRM
strategy. Further service excellence, quality, and marketing strategies need to be aligned
in a way which creates customer satisfaction and loyalty (Kotler et al., 2009;
Christopher, Payne and Ballantyne, 2002). In order to implement a solid RM process,
organisations must focus on attaining below goals.
Figure 6: Relationship Marketing and CRM – A Hierarchy.
Source: Adapted from Christopher, Payne and Ballantyne, (2002)
3.2.1. Building Trust and Relationship
Trust is the foundation of a relationship in between two or more parties (Lancaster and
Massingham, 2011). In order to build-up a strong RM practise organisations must be
able to build-up trust by exceeding customer expectations through mutual exchange of
products and services on an ethical business environment (Lancaster and Massingham,
2011; Kim, Suh and Hwang, 2003; Lovelock and Wright, 2002). Now customers are
more concerning on human rights violations and environmental abuse (Cook, 2011).
As reported by CCTV news channel there is huge drop in fireworks sales in china
during the Lunar New Year. According to Meng Fan a researcher at China Research
Academy, main reason is people more concern about air pollution (CCTV News, 2013).
Tata group India could achieve success throughout its 145 years of long journey
because of the “Trust” they build-up on TATA among the Indian nation. When people
come across with brand TATA on any product they strongly believe that TATA is in
ethical business and they believe that the product will not contain any harmful contents
(Witzel, 2010). Therefore TATA has created a strong reputation and brand image in
India as well as beyond India, and in 2009 Reputation Institute through its annual
survey, rated TATA as the 11th
most reputable company in the world (Wikipedia, the
RELATIONSHIP
MARKETING
CUSTOMER
RELATONSHIP
MANAGEMENT
CUSTOMER MANAGEMENT
26. 18
free encyclopedia, 2013). When the trust is build-up organisations will be able to create
long-lasting relationships with customers and other stakeholders more easily.
3.2.2. Creating Value for Customer and Organisation
An effective CRM process enable organisations to identify, properly segment and retain
their customers and hence understand customer desires well in order to provide
customised excellent service by aligning marketing, quality and customer service
strategies with enhance customer satisfaction and loyalty. Further development of
customer-centric culture and customised products and services, up-selling and cross-
selling will enhance customer value. Innovation is important to gain the competitive
advantage and keep customer satisfied on products and services. Creating a superior
customer value is an important goal of RM. Enhanced customer lifetime value, and
improved customer retention in return increase the organisation’s profitability. (Witzel,
2010; Kotler et al., 2009; Christopher, Payne and Ballantyne, 2002).
3.2.3. Integration of Quality, Customer Service, and Marketing for Enhanced
Customer Lifetime Value
RM is a cross functional concept. Therefore customer lifetime value will be created
with the integration of marketing, quality, and customer service strategies (Christopher,
Payne and Ballantyne, 2002). Many researchers highlighted that, everyone in an
organisation plays a critical role in relationship marketing process. And collaboration
and corporation of all parts of an organisation is highly important in delivering superior
customer value (Lancaster and Massingham, 2011; Shajahan, 2004; Sheth and
Parvatiyar, 2000).
Apple iPhone satisfaction has been highest in the smartphone industry but one recent
survey done in USA from July -2012 to January-2013 revealed that iPhone 5 has been
fallen to the fifth place in terms of consumer satisfaction (Bedigian, 2013). Also
according to the Brand Keys’ 2013 Consumer Loyalty Engagement Index, released on
5th
February 2013, Samsung leads in consumer loyalty in most of the electronic
appliances beating Apple. Also Amazon has beat out Apple in tablets category
(Koetsier, 2013). According to Citi analysts Glen Yeung, Walter H Pritchard and Jim
Suva, Apple has reached the end of the line for tablet growth (Bedigian, 2013). Market
27. 19
share for Samsung Electronics, has shot up from 8.8 per cent in the third quarter of
2010 to 31.3 per cent in the third quarter of 2012 while Apple’s global share of the
smartphone market slipped from 23 per cent in the last quarter of 2011 and the first
quarter of 2012 to just 14.6 per cent in the third quarter (Zeiler, 2013). According to the
customer blog comments (refer Appendix-C) it is revealed that Apple was unable to
understand customer desires well and face the competition due to lack of innovation
compared to Samsung.
On the other hand “Autoglass” a leading vehicle glass repair and replacement company
in UK, has gain an amazing growth with their customer-centric servicing culture.
Autoglass is keen to deliver what they promised to customers. Employees in every level
live the customer servicing culture in everything they do. Higher commitment on top
management, service quality and innovation is the key factors for their success. This
reflects through the Autoglass customer blog comments (refer Appendix-D). Further
Autoglass has been admired for their excellent customer service, and innovation in
different awards in year 2012, Best Windscreen supplier at Business Car Magazine
Award, 185th place in top 500 brand ranking at UK Superbrand, Quality Service
Provider of the Year’ at the annual Customer Service awards at Institute of Customer
Service.
3.3. Observation
Based on the literature research and the analysis of factors author argued that the
customer care is the foundation of a solid relationship marketing practise. Based on
above findings author introduce the Four Pillars Model of Relationship Marketing
illustrated at Figure 7. According to this model organisations should plan their
marketing strategy based on their customer service, quality, service recovery and CRM
strategies.
28. 20
Further author suggests that the next era of business organisations will be “Customer-
Empowered” since development of technology, e-commerce and highly competitive
marketing environment will affect for organisations to gain the competitive advantage
through innovation and let the customer to decide what they want from the organisation,
quality, price, after sales services, and packaging etc. Below Figure 8 illustrates the
transformation of business organisations, which is an enhanced version of Figure 1,
which is introduced by Cook (2011).
Figure 8: The transformation of business organisations
Figure 7: Four Pillars Model of Relationship Marketing
29. 21
3.4. Limitations and Obstacles
In order to implement RM strategy conventional function specific organisational
structure must be changed and all employees must be customer-focused. But many
researchers have observed that top management commitment for such structural and
cultural change not sufficiently given in most situations. Further improvements in
process management on cross-functional working environment, leadership skills,
service quality and employee skills on effective customer service and service recovery
are critical (Palmatier, 2008; Christopher, Payne and Ballantyne, 2002). Also according
to the author’s industry experience lack of innovation and rapidly changing needs of
customers, failure to understand exact customer requirements and lack of organisational
emphasis on these areas have become barriers for successful RM implementation.
30. 22
4. CONCLUSION
Relationship Marketing and Customer Care are old-new concepts which were gradually
develop over the time based on studies done by many researchers. Literature research
revealed that many researches have argued that the RM and customer care interlinked
and interrelated. Further strategies such as customer satisfaction, service recovery,
service quality, customer loyalty, and customer retention are highly important to
enhance customer lifetime value and hence profitability and stability of the
organisation. Author wishes to summarise the customer value generation as illustrated
in Figure 9. Here effective service recovery, innovative products/services and high
quality service is resulted an enhance customer satisfaction and finally whole process
will enhance the customer lifetime value. In order to achieve this solid RM strategy is to
be implemented with a customer-centric organisational culture.
Figure 9: Customer Value Generation
Further author proved the above theoretical aspects through few previous but latest
empirical researches conducted by few researches. According to the latest research done
by Sultan (2011), it was found that an effective RM is essential to build-up strong
relationship and RM along cannot be contributed for the success in an organisation.
This research suggests the failure in RM is due to improper understanding of customers
and their changing desires.
Another research on Effect of Relationship Marketing on Customer Loyalty conducted
by Sweidan et al. (2012), conclude that communication, satisfaction and financial bonds
are highly important creating customer loyalty and research has found that the
31. 23
‘communication, trust, satisfaction, commitment, social bond and financial
bonds’(p.153), determines the attitude, behaviour and the degree of customer loyalty.
A research done on telecommunication industry in Sri Lanka by Silva and Yapa (2009)
revealed that the organisation’s ability of adding value to customer’s business is affect
for customer loyalty. Mutanen (2006), confirmed through his research, that the
customer retention is highly effect on customer lifetime value. Further the study of Ma,
Ding and Hong (2010) on Tesco, confirmed that an effective service process and
shopping experience affect to deliver superior customer value.
In addition to the literature research, author conducted a qualitative research in order to
assess the impact of proper customer care strategy on customer loyalty and customer
relationship. Author selected sample of high end business customers those who
subscribed of telecommunication solutions from leading telecommunication service
providers in Sri Lanka for the field research and sample size had been comprised of five
subscribers in Colombo region from the selected customer segment. Face to face
interviews were conducted to obtain information on the telecommunication service
providers’ service strengths, qualities and how they are influenced by customer
relationship management policies set by the company. According to the research
findings 80 per cent of the respondents are not satisfied with the service quality,
processes and the overall service received from the service providers through account
servicing staff. This reflects that there is a great impact of customer satisfaction on
building relationship and hence for building customer loyalty.
32. 24
5. RECOMMENDATIONS
Based on the research findings author wishes to highlight the importance of; (1)
building-up trust in between organisation and other all stakeholders at the core of
implementation of Relationship Marketing strategies, (2) real commitment of
management to cultivate a customer-centric business culture, customer-oriented
employee mind-set, (3) use of word of mouth marketing through social networking
tools will reduce advertising cost for the organisation and will enchase the reputation in
the market, (4) continuous focus to introduce innovative products and services in order
to cater changing requirements of the customers, (5) implementation of effective service
recovery and service quality processes and procedures, (6) implementation of effective
CRM tools in order to have a better understanding and track on customer desires,
buying pattern, and changing behaviour, (7) provide all employees better awareness on
customer complaint handing and service recovery, in order to align customer care and
relationship marketing practises for enhance profitability and reputation.
33. 25
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London: Rotledge.
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challenge for marketers, 12 March, [Online], Available:
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Katz, B. (2004) How to Turn Customer Service into Customer Sales, Mumbai: Jaico
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35. 27
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0101-5.
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36. 28
Puwanenthiren, P. (2011) 'Service Quality and Customer Satisfaction in Sri Lanka
Telecom', Journal of Global Management Research, p. 45.
Rastogi, P. (2010) 'Improve customer service to improve business riesults', Paintindia,
September, pp. 105-107.
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Participation, January, pp. 30-32.
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Retail Market of Kuwait: A Thematic Analysis, Master's Thesis. University of
Gloucestershire, Gloucestershire.
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Relationship Marketing on Customer Loyalty in the Jordanian Pharmaceutical
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37. 29
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doi:10.1080/02642060902793599.
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December, pp. 88-96.
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and complaining behavior: validation in a UK university setting', Journal of
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38. 30
BIBLIOGRAPHY
Baker, M.J. (1996) Marketing an Introdutory Txt, 6th
edition, London: Macmillan
Business.
Bennett, R. and Blythe, J. (2010) International Marketing, 3rd
edition, New Delhi:
Kogan Page.
Bennett, R. and Blythe, J. (2010) International Marketing, 3rd
edition, New Delhi:
Kogan Page.
Bernhardt, K.L., Donthu, N. and Kennett, P.A. (2000) 'A Longitudinal Analysis of
Satisfaction and Profitability', Journal of Business Research, vol. 47.
Berry, L.L. (2000) 'Relationship Marketing of Services : Growing Interest, Emerging
Perspectives', in Sheth, J.N. and Parvatiyar, A. Handbook of Relationship
Marketing, London: Sage Publications.
Bulgarella, C.C. (2005) 'Employee Satisfaction & Customer Satisfaction: Is There a
Relationship?', GuideStar Research White Paper, February.
Buttle, F. (2008) Customer Relationship Management, 2nd
edition, London: Paul
Chapman.
Cannon, J.P. and Sheth, J.N. (2000) 'Developing a Curriculum to Enhance Teaching of
Relationship Marketing', in Sheth, J.N. and Parvatiyar, A. Handbook of
Relationship Marketing, London: Sage Publications.
Carson, D. (1995), in Baker, M.J. (ed.) Companion Encyclopedia of Marketing,
London: Rotledge.
Chatterjee, B.K. (2009) Marketing Management, 4th
edition, Mumbai: Jaico Publishing
House.
Chengxi Yang's Blog (2012) WOMM with the emergency of social media – A new
challenge for marketers, 12 March, [Online], Available:
http://blogs.ubc.ca/chengxiyang/2012/03/12/womm-with-the-emergency-of-social-
media-a-new-challenge-for-marketers/ [6 March 2013].
Christopher, M., Payne, A. and Ballantyne, D. (2002) Relationship Marketing, Oxford:
Butterworth-Heinemann.
39. 31
Cook, G. (2003) 'Customer Care Excellence: How to Create an Effective Customer
Focus', Training Journal, March, Available:
http://search.proquest.com/docview/202942815?accountid=132872.
Cook, S. (2011) Customer Care Excellence, 6th
edition, London: Kogan Page.
Czinkota, M.R. and Kotabe, M. (2001) Marketing Management, 2nd
edition, South-
Western College Publishing.
Donaldson, B. (1995) 'Customer Care', in Baker, M.J. (ed.) Marketing Theory and
Practise, 3rd
edition, London: Macmillan.
Drucker, P. (1954) The Practice of Management, London: Collins.
Drucker, P. (1973) Management: Tasks, Responsibilities, Practices, New York: Harper
& Row Publishers.
Fan Meng, (2013) China 24. (25 February 2013, 00:18AM), CCTV News.
Fornell, C., Mithas, S., Morgeson, F.V. and Krishnan, M.S. (2006) 'Customer
Satisfaction and Stock Prices: High Returns, Low Risk', Journal of Marketing, vol.
70, January.
Gaskell, A. (2013) Amazon Reports Sales of $21bn in 4th Quarter, 30 January,
[Online], Available: http://technorati.com/business/article/amazon-reports-sales-of-
21bn-in/ [5 March 2013].
Gillespie, M. (2009) Amazon: E-Commerce Success Story, 11 February, [Online],
Available: http://www.cbsnews.com/2100-205_162-706351.html?pageNum=2 [5
March 2013].
Gronroos, C. (1997) 'Value-driven relational marketing: From products to resources and
competencies', Journal of Marketing Management, vol. 13.
Katz, B. (2004) How to Turn Customer Service into Customer Sales, Mumbai: Jaico
Publishing House.
Kim, J., Suh, E. and Hwang, H. (2003) 'A Model for Evaluating the Effectiveness of
CRM Using the Balanced Scorecard', Journal of Interactive Marketing, vol. 17, no.
2, Available: DOI: 10.1002/dir.10051.
Kotler, P., Keller, K.L., Koshy, A. and Jha, M. (2009) Marketing Management, 13th
edition, USA: Pearson Education.
Lancaster, G. and Massingham, L. (2011) Essentials of Marketing Management, New
York: Routledge.
40. 32
Lancaster, G. and Reynolds, P. (2005) Management of Marketing, Oxford: Elsevier
Butterworth-Heinemann.
Liao, H. (2007) 'Do It Right This Time: The Role of Employee Service Recovery,
Performance in Customer-Perceived Justice and Customer Loyalty After Service
Failures', Journal of Applied Psychology, vol. 92, no. 2.
London School of Commerce (2010) Marketing Management Course Manual, London:
London School of Commerce.
Lovelock, and Wright, L. (2002) Principles of Service Marketing And Management, 2nd
edition, London: Pearson.
Lovlock, C.H. and Wirtz, J. (2006) Service Marketing, 5th
edition, London: Pearson
Education.
Ma, Y., Ding, J. and Hong, W. (2010) 'Delivering Customer Value Based on Service
Process:The Example of Tesco.com', International Business Research, vol. 3, no. 2,
April.
Meyer, C. and Schwager, A. (2007) 'Understanding Customer Experience', Harvard
Business Review, February, Available: http://hbr.org/product/understanding-
customer-experience/an/R0702G-PDF-ENG.
Mohr, J.J. and Sarin, S. (2008) 'Drucker’s insights on market orientation and
innovation: implications for emerging areas in high-technology marketing', Journal
of Academy of Marketing Science, p. 10, Available: DOI 10.1007/s11747-008-
0101-5.
Moller, K. and Halinen, A. (2000) 'Relationship Marketing Theory: Its Roots and
Direction', Journal of Marketing Management, vol. 16.
Morgan, R.M. and Hunt, S.D. (1994) 'The commitment-Trust Theory of Relationship
Marketing', Journal of Marketing, vol. 58, July.
Mutanen, T. (2006) 'Customer churn analysis – a case study', Research Report, March.
Muthuswamy, S., Nataraj, M. and Gunasekaran, N. (2010) 'Customer Care
Management Model for Service Industry', iBusiness 2.2.
Nehara Pieris , An Interviewed by: Senanayake, R. Eliya. (11 February 2013,
10:18AM), Sirasa TV.
Palmatier, R.W. (2008) Relationship Marketing, Cambridge: Marketing Science
Institute.
41. 33
Puwanenthiren, P. (2011) 'Service Quality and Customer Satisfaction in Sri Lanka
Telecom', Journal of Global Management Research.
Rastogi, P. (2010) 'Improve customer service to improve business riesults', Paintindia,
September.
Reed, J.F. (2011) 'Driving Customer Service Excellence', The Journal for Quality &
Participation, January.
Schiffman, L.G., Kanuk, L.L., Kumar, S.R. and Wisenblit, J. (2010) Consumer
Behavior, 10th
edition, London: Prentice Hall.
Schraft, C. and Micu, A.C. (2010) 'The Strategic Content Engagement Process',
Building Customer Equityin a Multichannel World.
Shajahan, S. (2004) Relationship Marketing, New Delhi: Tata McGraw-Hill.
Sheth, J.N. and Parvatiyar, A. (ed.) (2000) Handbook of Relationship Marketing,
London: Sage Publication.
Silva, K.A. and Yapa, S.T.W.S. (2009) 'Customer Retention: With Special Reference to
Telecommunication', International Conference on Business and Information, Kuala
Lumpur.
Stone, M., Woodcock, N. and Machtynger, L. (2000) Customer Relationship
Marketing, 2nd
edition, London: Kogan Page.
Storbacka, K. (2000) 'Customer Profitability', in Sheth, J.N. and Parvatiyar, A. (ed.)
Handbook of Relationship Marketing, London: Sage Publications.
Sultan, A.L. (2011) The Impact of Customer Relationship Marketing in the Luxury
Retail Market of Kuwait: A Thematic Analysis, Master's Thesis. University of
Gloucestershire, Gloucestershire.
Sweidan, G., Al-Dmour, H., Al-Zu’b, Z.M.F. and Al-Dmour, R. (2012) 'The Effect of
Relationship Marketing on Customer Loyalty in the Jordanian Pharmaceutical
Industry', European Journal of Economics, Finance and Administrative Sciences,
no. 53, September, Available: http://www.eurojournals.com/EJEFAS.htm.
Terho, H. (2009) 'A Measure for Companies’ Customer Portfolio Management',
Journal of Business-to-Business Marketing, Available: DOI:
10.1080/10517120902762542.
Tsai, C. and Su, C. (2009) 'Service failures and recovery strategies of chain restaurants
in Taiwan', The Service Industries Journal, vol. 29, Available:
doi:10.1080/02642060902793599.
42. 34
Wahab, S. and Ali, J. (2010) 'The Evolution of Relationship Marketing (RM) Towards
Customer Relationship Management (CRM): A Step towards Company
Sustainability', Information Management and Business Review, vol. 1, no. 2,
December.
Webb, D. and Jagun, A. (1997) 'Customer care, customer satisfaction, value, loyalty
and complaining behavior: validation in a UK university setting', Journal of
Consumer Satisfaction Dissatisfaction and Complaining Behavior, vol. 10.
Wellington, P. (1995) Kaizen Strategies for Customer Care, London: Pitman
Publishing.
Wellington, P. (2010), Effective Customer Care. India: Replika Press Pvt Ltd.
Wikipedia, the free encyclopedia (2013) Tata Group, 6 March, [Online], Available:
http://en.wikipedia.org/wiki/Tata_Group [7 March 2013].
Wikipedia, the free encyclopedia (2013) Tesco, 6 March, [Online], Available:
http://en.wikipedia.org/wiki/Tesco [7 March 2013].
Witzel, M. (2010) TATA - The Evolution of a Corporate Brand, London: Penguin
Group.
