Relationship

Marketing
 Case:
RM thinking helps turn around SAS

• When Jan Carlzon took on the role of President at Scandinavian

Air Services (SAS) in 1980, the business was in trouble. Airline
companies were struggling with excess capacity in a stagnant
market….most airlines were responding by cutting costs. But
Curlzon argued that cost-cutting ultimately ended up hurting
customers and demoralizing employees. Instead, he proposed
that spending be increased in customer service initiatives. His
strategy was simple – in a stagnant market he set out to
increase revenue by becoming „the best airline in the world for
the frequent business traveler………………………….

Everything that Carlzon did was aimed at improving the customer

experience. Carlzon‟s policies not only turned around SAS, they
ushered a in a whole new way of thinking about the way in which
businesses developed their marketing
 An iterative learning
process…..

Companies
interact with
their customers
and learn who
they are, what do
they want, how
much they buy
and how much it
costs to serve
these customers
 Example: Cellular
Phones
• Stage 1:
– Preliminary information collected during
the first purchase to make
recommendations
• Stage 2:
– Based on the calling patterns and bills
make refined recommendations and offer
better deals that the customer cannot
refuse.
 An iterative learning
process…..

Companies learn to tailor their offerings to

suit the requirements of profitable
customers
Rise of Relationship Marketing

• It was the result of the development

of a number of separate management
areas that were the subject of
interest to marketing academics
– Marketing of Services
– Customer Service Quality
– Customer Retention studies
– Industrial Marketing
– Supply chain management
– Total Quality Management
The Nordic School

• Among those who were

instrumental in
developing the concept
of RM were

– Evert Gummesson at
Stockholm University,
and

– Christian Gronroos at
the Swedish School of
Economics
Transactional Marketing

• The focus of this approach is on individual

transaction and does not concern
continuous relationship with customers

• Does not contain a strategic long-term

perspective

• The thrust is on gaining more and more

new customers rather than retaining
existing customers
 Relationship Marketing

• Focuses on continuous multiple

transactions rather than isolated individual
transactions

• Focuses of this approach centers around

developing hard core loyal customers with
the idea of retaining them forever

• A high degree of customer contact,

commitment and services are maintained
 ELEMENTS OF RELATIONSHIP
MARKETING

• Firms build long-term relationships by gathering information about their

customers, analyzing and using the data to modify the marketing mix,
monitoring interactions with customers, and using knowledge of customers
and their preferences to orient every part of the organization.

INTERNAL MARKETING
• Internal customers—employees or departments within the organization
whose success depends on the work of other employees or departments.
• Internal marketing —managerial actions that enable all organizational
members to understand, accept, and fulfill their respective roles in
implementing a marketing strategy.
• Effective internal marketing also increases employee satisfaction.
 In essence….

• Transaction-based marketing - Buyer

and seller exchanges characterized by
limited communications and little or no
ongoing relationship between the
parties

• Relationship Marketing - Development,

growth, and maintenance of long-term,
cost-effective relationships with
individual customers, suppliers,
employees, and other partners for
mutual benefit
11
 Why is RM important?

• It costs five times as much to attract a new

customer as it does to keep a current one
satisfied.

• It is claimed that a 5% improvement in

customer retention can cause an increase
in profitability of between 25 and 85
percent depending on the industry.

• Likewise, it is easier to deliver additional

products and services to an existing
customer than to a first-time “buyer.”
 Select views on RM
• “Relationship Marketing is to identify and establish,
maintain, and enhance relationships with customers and
other stakeholders, at a profit, so that the objectives of
all parties are met” (Grönroos, 1990).

• “RM attracts, maintains and enhances customer

relationships ……..(Leonard Berry, 1983).

• “……a tool to turn current and new customers into

regularly purchasing clients and then progressively move
hem through being strong supporters of the company and
its products to finally being acive and vocal advocates for
the company” (Christopher et al., 1990)

• “ RM is marketing based on interaction within networks of

relationships” (Gummesson, 2002).
 Thus….

• Relationship Marketing has emerged

as a new approach enabling
marketers with brand new tools and
techniques to reach, acquire, retain
and expand their customer base

• Marketing designed to create,

maintain, and enhance strong
relationships with customers and
other stakeholders
 Relationships ….

• Should be based on trust.

• Should be mutually beneficial.

• Develop over time and should be

managed accordingly.