Value concept and relationship marketing

The Value Concept and Relationship Marketing - Haris - Research Portal

value concept and relationship marketing

The value concept and relationship marketing. Ravald, Annika; Gronroos, Christian. European Journal of Marketing; ; 30, 2; ABI/INFORM Global pg. customer, the relationship-marketing paradigm The concept of customer value' is of major and increasing how relationship marketing is related to value. Ravald, A. and Grönroos, C. () The Value Concept and Relationship Marketing. European Journal of Marketing, 30,

The Key Mediating Variables [ 17 ]. Discussion To what extent can public sector organisations design their activities based on needs and wants of consumers while satisfying their ethos of social justice and equity?

Public sector organisations can be said to have society-friendly values. While this may not guarantee that all their consumers would share those values due to the protection of individual selfish interests and the inability to see beyond short term goals and desires it can be argued that effective honest communication would instil integrity in the public service; and in turn earn the trust, patronage, and loyalty of consumers.

Fountain [ 18 ] noted that identification and clarification of individual preferences and trade-offs point to difficulties.

Individual preferences must be aggregated if customer expectations are to inform government service design and operations meaningfully. Political bureaucrats have an obligation to do more than satisfy customers. Surveys of consumer needs and wants can only be gotten from consumers who are accessible in possession of the technological gadgets which facilitate that and willing to answer.

Potentials for Relationship Marketing Practice in the Public Sector: A Literature Analysis

The inability of public sector organisations to achieve a representative sampling of the general population could lead to an amplification of social inequities, which would in turn increase consumer apathy, and propensity to terminate the relational market behaviour.

Consumer behaviour theories indicate that consumers have a natural tendency to reduce choices and actually like to reduce their choices to a manageable set. The role of public sector organisations is the building of an image which represents the consumers adequately, and the maintenance of their ethos of social justice and equality.

The literature however does not present models for public sector organisations, stakeholders of which are too diverse to be bound by simplified variables offered in the commitment-trust relationship. Conclusions Relationship marketing seems in theory to be very close to public sector marketing.

It does seem to propose a paradigm by which public sector management can compete favourably with private sector organisations as it is dependent on ethos which place the consumer at the heart of value-creation and offerings. It would however seem that a blanket model of public sector relationship marketing is not advisable; as to do that would be an oversimplification of the task environment of public servants, and the role of culture in institutional behaviour.

Research conducted to developing relationship marketing suggests that firms can best do this through having one of the three value strategies; best price, best product, or best service.

Firms can relay their relationship marketing message through value statements. For example, an automobile manufacturer maintaining a database of when and how repeat customers buy their products, the options they choose, the way they finance the purchase etc. In web applications, the consumer shopping profile can be built as the person shops on the website.

Relationship marketing - Wikipedia

This information is then used to compute what can be his or her likely preferences in other categories. These predicted offerings can then be shown to the customer through cross-sell, email recommendation and other channels. Relationship marketing has also migrated back into direct mail, allowing marketers to take advantage of the technological capabilities of digital, toner-based printing presses to produce unique, personalized pieces for each recipient through a technique called " variable data printing ".

Marketers can personalize documents by any information contained in their databases, including name, address, demographics, purchase history, and dozens or even hundreds of other variables. The result is a printed piece that ideally reflects the individual needs and preferences of each recipient, increasing the relevance of the piece and increasing the response rate.

Scope[ edit ] Relationship marketing has also been strongly influenced by reengineering. According to process reengineering theory, organizations should be structured according to complete tasks and processes rather than functions.

That is, cross-functional teams should be responsible for a whole process, from beginning to end, rather than having the work go from one functional department to another. Traditional marketing is said to use the functional or 'silo' department approach. The legacy of this can still be seen in the traditional four P's of the marketing mix. Pricingproduct managementpromotionand placement.

Relationship marketing

According to Gordonthe marketing mix approach is too limited to provide a usable framework for assessing and developing customer relationships in many industries and should be replaced by the relationship marketing alternative model where the focus is on customers, relationships and interaction over time, rather than markets and products. In contrast, relationship marketing is cross-functional marketing.

It is organized around processes that involve all aspects of the organization. In fact, some commentators prefer to call relationship marketing "relationship management" in recognition of the fact that it involves much more than that which is normally included in marketing. Because of its broad scope, relationship marketing can be effective in many contexts. As well as being relevant to 'for profit' businesses, research indicates that relationship marketing can be useful for organizations in the voluntary sector [7] and also in the public sector.

Satisfaction[ edit ] Relationship marketing relies upon the communication and acquisition of consumer requirements solely from existing customers in a mutually beneficial exchange usually involving permission for contact by the customer through an " opt-in " system. Although groups targeted through relationship marketing may be large, accuracy of communication and overall relevancy to the customer remains higher than that of direct marketing, but has less potential for generating new leads than direct marketing and is limited to Viral marketing for the acquisition of further customers.

value concept and relationship marketing

Research by John Fleming and Jim Asplund indicates that engaged customers generate 1. According to Buchanan and Gilles, [18] the increased profitability associated with customer retention efforts occurs because of several factors that occur once a relationship has been established with a customer. The cost of acquisition occurs only at the beginning of a relationship, so the longer the relationship, the lower the amortized cost.

Account maintenance costs decline as a percentage of total costs or as a percentage of revenue. Long-term customers tend to be less inclined to switch, and also tend to be less price sensitive. This can result in stable unit sales volume and increases in dollar-sales volume. Long-term customers may initiate free word of mouth promotions and referrals. Long-term customers are more likely to purchase ancillary products and high margin supplemental products.

Customers that stay with you tend to be satisfied with the relationship and are less likely to switch to competitors, making it difficult for competitors to enter the market or gain market share. Regular customers tend to be less expensive to service because they are familiar with the process, require less "education", and are consistent in their order placement.

Increased customer retention and loyalty makes the employees' jobs easier and more satisfying. In turn, happy employees feed back into better customer satisfaction in a virtuous circle. Relationship marketers speak of the "relationship ladder of customer loyalty ". It groups types of customers according to their level of loyalty. The ladder's first rung consists of "prospects", that is, people that have not purchased yet but are likely to in the future.

This is followed by the successive rungs of "customer", "client", "supporter", "advocate", and "partner". The relationship marketer's objective is to "help" customers get as high up the ladder as possible. This usually involves providing more personalized service and providing service quality that exceeds expectations at each step. Customer retention efforts involve considerations such as the following: Customer valuation — Gordon describes how to value customers and categorize them according to their financial and strategic value so that companies can decide where to invest for deeper relationships and which relationships need to be served differently or even terminated.

Customer retention measurement — Dawkins and Reichheld calculated a company's "customer retention rate". This is simply the percentage of customers at the beginning of the year that are still customers by the end of the year.

This ratio can be used to make comparisons between products, between market segments, and over time. Determine reasons for defection — Look for the root causes, not mere symptoms. This involves probing for details when talking to former customers. Other techniques include the analysis of customers' complaints and competitive benchmarking see competitor analysis.

Develop and implement a corrective plan — This could involve actions to improve employee practices, using benchmarking to determine best corrective practices, visible endorsement of top management, adjustments to the company's reward and recognition systems, and the use of "recovery teams" to eliminate the causes of defections.

A technique to calculate the value to a firm of a sustained customer relationship has been developed. This calculation is typically called customer lifetime value. Retention strategies may also include building barriers to customer switching.

This can be done by product bundling combining several products or services into one "package" and offering them at a single pricecross-selling selling related products to current customerscross promotions giving discounts or other promotional incentives to purchasers of related productsloyalty programs giving incentives for frequent purchasesincreasing switching costs adding termination costs, such as mortgage termination feesand integrating computer systems of multiple organizations primarily in industrial marketing.

Many relationship marketers use a team-based approach. The rationale is that the more points of contact between the organization and customer, the stronger will be the bond, and the more secure the relationship.

value concept and relationship marketing

Application[ edit ] Relationship marketing and traditional or transactional marketing are not mutually exclusive and there is no need for a conflict between them.