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Relationship Marketing Practices in Hospitality Industry

A project report submitted in partial fulfilment of the requirements for

Thesis project


Divyank Shekhar Singh(2010IPG-034)


Relationships are as old as mankind. It has been studied by sociologists, social psychologists,
anthropologists, philosophers, theologians and many other people. For that matter even the
traders and businessmen of yesteryears relied on relationships for their success. However
the modern marketers started taking a fancy to the same only recently.
In the early 90s the concept of relationship marketing was formally introduced into the field
of services marketing. Financial service institutions, airlines and other service providers
found it profitable to retain and reward the existing customers than running after new
customers. It was established that building closer relationship with customers resulted in
better returns to companies through the following means:
Increased use of company services by loyal customers.
Charging of price premiums for customized services.
Referrals by satisfied customers that brought new customers.
This was the motivation behind taking this research topic under study.

Relationship marketing (RM) is widely acknowledged as a useful tool in gaining customer
loyalty in various sectors. In the world of business, the concept of relationship marketing
(RM) is widely understood, both academically and professionally. Its goal is to maintain
strong relationships and convert indifferent customers into loyal ones (Berry
&Parasurarnan, 1991). It involves a process of attracting, maintaining and enhancing
relationships with customers and stakeholders (and, when necessary, terminating them) at
a profit, so that the objectives of the parties involved are achieved through mutual
exchange and the fulfilment of promises (Zineldin&Philipson, 2007; Das, 2009; Adamson et
al., 2003; Gronroos, 1994, 2004; Kotler & Armstrong, 1999; Berry, 1995). In business, RM
brings stability and decreased uncertainty to a company by acting as a barrier to competitor
entry and maintaining a stable andsolid base of customers (Alexander & Colgate, 2000). For
customers, RM provides closer and longer-term relationships that yield three types of
benefits: 1) social (familiarity, friendship and information-sharing), 2) economic (discounts
or other money-saving benefits) and 3) customization (tailor made services/products), as
noted by Sheth and Parvatiyar (1995), Berry (1995), Gwinmer et al. (1998), and Peterson
(1995).Relationship marketing attempts to involve and integrate customers, suppliers and
other infrastructural partners into a firm's developmental and marketing activities
(McKenna, 1991; Shani and Chalasani, 1991). Such involvement results in close interactive
relationships with suppliers, customers or other value chain partners of the firm. Interactive
relationships between marketing actors are inherent as compared to the arm's length
relationships implied under the transactional orientation (Parvatiyar et al., 1992).

Berry (1983) first proposed the concept of relationship marketing in the service context, and defined
it as attracting, maintaining, and enhancing customer relationships (p. 25). However, the RM
literature reveals a great many more definitions of RM. Harker (1999) conducted a content analysis
that produced 26 definitions from the RM literature, and classified seven fundamental concept
categories: (1) birth; (2) development; (3) maintenance; (4) temporality; (5) interaction; (6) outputs;
(7) emotional content. He indicated, for example, that Berry emphasizes the beginnings of
marketing relationships, focusing on the importance of RMs customer keeping orientation
(Christopher et al., 1991). Moreover, Grnroos (1991) defined the term of relationship marketing as
establishing relationships with customers and other parties at a profit, by mutual exchange and
fulfilment of promises. Gummesson (1994a) stated that RM emphasizes a long-term interactive
relationship between the provider and the customer, as well as long- term profitability. Morgan and
Hunt (1994) studied internal marketing and proposed the following: Relationship marketing refers
to all marketing activities directed toward establishing, developing, and maintaining successful
relational exchanges (p. 22). Buttle (1996) proposed that RM is concerned with the development
and maintenance of mutually beneficial relationships with strategically significant markets. However,
according Harker, the best in terms of the underlying conceptualizations of relationship marketing
is Grnroos (1994), if the validity of the research methodology is accepted. Relationship marketing is
to identify and establish, maintain and enhance and when necessary also to terminate relationships
with customers and other stakeholders, at a profit, so that the objectives of all parties are met, and
that this is done by a mutual exchange and fulfilment of promises. (Grnroos, in Harker, 1999, p.16).

A new paradigm of relationship marketing
After the 1980s, relationship marketing emerged as a popular new paradigm in marketing
(see Sheth, 2000, 2002). As a paradigm, relationship marketing is a recent phenomenon
(Palmer, Lindgreen, &Vanhamme, 2005). It has been proposed as the "newest" mainstream
school of thought in marketing, beyond the twelve commonly accepted schools: commodity,
functional, regional, institutional, functionalist, managerial, buyer behaviour, activist, macro
marketing, organizational dynamics, systems, and social exchange (see Sheth, Gardner, &
Garrett, 1988). Kotler (1992) pointed out that companies must move from short-term
transaction- oriented goals to long-term relationship-building goals. Relationship marketing,
however, just offers firms the opportunities to archive this goal and to build long term
relationships with their stakeholders (e.g., customers, suppliers). These relationships are
also regarded as a key marketing asset (Hunt, 1997). Both academics and practitioners
indicated that RM is obviously good for business and yields improved business performance
(e.g. Berry, 1983; Fuhrman, 1991; Gummesson, 1994a; Morgan & Hunt, 1994; Izquierdo,
Cilln, & Gutirrez, 2005)
Eight factors that influence Relationship Marketing based strategy
1) Relational factors (e.g. trust and commitment).
2) Resource factors (e.g. complementary and idiosyncratic resources).
3) Competence factors (e.g. alliance competences and market-relating capabilities).
4) Internal marketing factors (e.g. internal market orientation and part-time marketers).
5) Information technology factors (e.g. inter-organizational information systems and CRM).
6) Market offering factors (e.g. quality and innovativeness).
7) Historical factors (e.g. opportunistic behavior and termination costs).
8) Public policy factors (e.g. property rights and contract law). (Shelby D. Hunt, Dennis B.
Arnett and Sreedhar Madhavaram Journal of Business & Industrial Marketing Volume 21
Number 2 2006 7287)

Paradigm shift in marketing to arriving at relationship marketing
Year Evolution of marketing to arriving at relationship marketing
1960s Direct mail becomes an increasingly part of marketing mix. Many new direct
mail association were born to provide mail order and direct mail to customer.
1970s Direct response advertising is used in order to create sales leads. It used
direct mail, Tele-marketing and one marketing techniques for better
Late 1970s Direct marketing was done in order to blend the above two transactional
Database marketing-at this phase marketers began to use computer
technology for information gathering and systematic processing of such data
for marketing the activity directed to satisfy customers.
Late 1980s One to one marketing-Marketers began to use more affordable technology to
communicate with customers individually.
Loyalty Marketing-here marketers realized that by keeping the faith or trust
they could retain theyre existing customers and extend their life as a
Late1990s Relationship Marketing- it help marketer to recognized that a person was a
customer, they were not necessarily loyal. It shows a transitory relationship
among them.

The objective of this article is to analyze the nature and content of relationship
marketing, seen as a process.
Behaviour dimensions impact in relationship.
Adoption of relationship marketing and changes in structure and attitude.

1. Shelby D. Hunt and Dennis B. Arnett(2002). The explanatory foundations of relationship
marketing theory.
2. Ashish Gupta and G.P.Sahu(2000). A Literature Review and Classification of
Relationship Marketing Research.
3. Jagdish N. Sheth and Atul Parvatiyar(2004). The Evolution of Relationship
4. Injazz J. Chen and Karen Popovich(1994). Understanding customer relationship
management(CRM) People, process and technology