Bus ML 4201 Chapter 19 Relationship Marketing Two different perspectives for marketing to be seen 1 The Transaction Marketing Approach 2 The Relationship Marketing Approach Transaction Marketing revenues are the lifeblood of any firm o Causes us to focus on a single transaction o The sale is the END of the process Relationship Marketing o The focus of marketing should be the sale This is because sales o The focus of marketing should be more on the customer than on the sale o The sale is the BEGINNING of the process o Firm must strive for continuing exchanges of value Relationship Marketing and Key Accounts o Relationship marketing is much more EXPENSIVE than transaction both in expenses and personally o Some exchanges do not lend themselves to consumer commitment and repeat purchase e g inexpensive low risk products o Conversely relationship marketing which focuses on the life time value of the customer is well designed for key account relationships both professional and personal Technology and Relationship Marketing o Focus on relationship marketing has occurred during the modern technological age Two major reasons i The availability of modern customer databases These databases allow marketers to access enormous amounts of information on any of their customers Ex Marketers keep track of their customers birthdays and send them a card or small gift on the appropriate day ii Second is the internet Ex marketers who list relationship marketing efforts This allows for an interactive information exchange that is directed by the consumer and is low cost to the marketer Types of Commercial Relationships o Serial transactions Occur when a customer patronizes a business but not for relationship reasons Ex The business may be conveniently located on the customer s drive home If the consumer moves though then the relationship is terminated o Periodic relationships Those that do not have strong ties between the consumer an marketer but tend to be temporary Ex A consumer may decide to restore an old sports car and develop a relationship with a parts supplier During those 6 months of restoring the car there will probably be a serious relationship between the company and the consumer because automobiles often reflect our self identity o The key element in defining a commercial relationship is the level of personal commitment and involvement shown by both parties to the exchange o The key element that differentiates continuing exchanges that benefit from relationship marketing from short term exchanges that benefit from transaction marketing is the time frame involved In relationship marketing we seek customers for life In many ways this is like a commercial marriage between the firm and its customers A major reason for this is that customer defections are extremely expensive to the first o Dissatisfaction with a product causes a customer to not want to Dissatisfaction purchase it again Change and Growth Over time o When customer and company s exchanges grow in different directions it can place great stress on the relationship Increased Opportunity for Competition o Have t be very sensitive to any efforts by competitors to create disloyalty in our customers and be ready to counter them effectively Automation of Exchange o High involvement leads to familiarity which in turn can lead to automation of the exchange and a decline in value over time Frustration and Use of Defense Structures o Frustration can lead to eroding the basis of an exchange of value o Selfishness is perhaps the greatest of all threats to continuing o One of the best predictors of how long a relationship will last is the amount of conflict that occurs and how it is or is not resolved o Severity Minor Major Minor conflict is something like what restaurant to eat at which TV program to watch etc and these are relatively easy to resolve Strong held or central to the individual s self concept is the degree of conflict that becomes serious o Frequency Seldom Often Conflict can occur frequently or rarely Thus when conflict is rare and minor the relationship can be considered strong because some conflict is inevitable Conflict and Argumentation o When people realize that conflict exists an argument often occurs o If arguments become common people often begin to use defensive structures to cope e g sarcasm silent treatment avoidance etc o Argumentation is rarely a successful way to resolve conflicts but instead signals that the relationship is losing value over time Avoiding Conflict Self Importance exchanges Conflict Degree of Conflict o Avoiding the issue means we have to avoid the other person which increases psychological distance and lessens the value of the relationship Resolving Conflict o We must find a way to resolve if avoidance isn t working One Person Solutions Acquiescence One of the two people does not change the target value but lets the other person have his her way This may happen when one person has a weak value and does not care as much as the other Creativity Another way to resolve conflict is for one party to use creativity to change the situation Ex If you are angry that your room mate does not take out the trash you will become frustrated until you surpass your threshold and then vent or cope Growth Experiments Usually require you to see things from another s point of view or expand your level of tolerance for people who are not like you Two Person Solutions Negotiation and Compromise Here the two parties explain their views without trying to change the other person s values Ultimately one or both parties will have to make a compromise if the negotiation process is to be successful The motivation to make a compromise is equal to Expected Value Expected Costs so we can expect people to make more compromises at the beginning of a relationship when benefits are high and costs are low Three Person Solution Mediation of Adjudication A third party is called in to provide an objective perspective on the conflict The mediator can make recommendations to ease or resolve the conflict e g a married couple seek counseling to resolve recurring conflict Also legal resolution is a common example and this is known as adjudication Living With Conflict Agree to Disagree Here the two parties work to understand and respect the other person s values Neither party has to change his her values in this resolution technique but both must accept the other s view Terminate The Relationship If the above techniques cannot be used to resolve