Development of a ‘Relationship’ approach

The evolution of mutuality and other relationship components

When Professor Leonard L. Berry introduced the term relationship marketing in 1993 he recognised that a small body of associated literature had already started to develop.  He describes the work of Levitt (1981), Ryans & Wittink (1977) and Grönroos (1981).  Many of these writers had identified that retention, loyalty, or even “re-selling” are important aspects of marketing.  These early works clearly identify some of the accrued benefits of customer retention such as reduced recruitment costs and lower servicing costs.  But these views lacked an obvious component of true relationship marketing – mutuality.

Parvatiyar & Sheth (1998) also recognised that although Berry formally introduced the term relationship marketing into the literature, several ideas of relationship marketing had emerged much earlier.  They cite the work of McGarry (1950, 1951, 1953 and 1958) who was working on formalising the marketing function.  He proposed that marketing consisted of six functions:

  1. Contactual function
  2. Propaganda function
  3. Merchandising function
  4. Physical distribution function
  5. Pricing function
  6. Termination function.

The language and ideas presented may be a little awkward more than half a century later, but within McGarry’s “contactual” function he clearly recognises the need to build “structures for co-operative action”, focussing on continuous business relationships and “developing an attitude of mutual interdependence”.

Parvatiyar & Seth continue to talk about the modern foundation of relationship marketing.  They argue that the concept has its roots in the industrial and business to business arena and particularly in the way these organisations co-operate.  They cite the work of Alderson (1965) who focussed on the inter and intra–channel co-operation exhibited by some manufacturers, and they also comment on business to business studies by Adler (1966).  This author observed that some firms exhibited ‘symbiotic relationships’ that were not characterised by traditional marketer-intermediate relationships.  It appears that a number of writers have been interested in the way firms form relationships with suppliers, key customers, and even other none competing firms.  Modern examples of this sort of relationship are common.  Software vendors recommending a preferred hardware platform, hardware vendors linking with a finance provider, or even washing machine manufacturers linking with detergent producers.  Parvatiyar & Seth go on to cite the work of Arndt (1979) who gave the subject a second impetus.  Arndt’s work focussed on the way many business to business companies developed strong long lasting relationships with their key suppliers rather than focussing on discrete exchanges.  Arndt called this phenomenon ‘domesticated markets’.  Identifying the enduring nature of these types of relationship is an interesting observation. It highlights one of the prime reasons why so many business to business organisations (and now business to consumer organisations) are so interested in relationship marketing.  An ‘enduring relationship’ by definition mean keeping customers longer – thus reducing acquisition costs, locking out competitors, and building lifetime value.

No discussion of the development of relationship marketing can be complete without introducing the work of two distinct schools of thought.  The first is the IMP group (Industrial Marketing and Purchasing).  This collection of writers focussed on what is called the ‘network’ approach to industrial marketing.  Gummesson (1996)  explains that the network approach develops when business to business organisations form ‘relationships’ with suppliers, key accounts or distribution channels, and then in turn these relationships become part of wider ‘networks’ of relationships.  It is easy to see how this thrust of research could have developed.  We have seen from the history of relationship marketing that the industrial and/or business arena has played a massive role in its evolution, and that mutuality, co-operation, and working towards shared goals are significant tenants of a relationship based approach.  Gummesson goes on to introduce the second of the schools of thought.  The ‘Nordic School’ has its origins in Sweden and Finland, but in later years other writers from northern Europe have contributed to the body of literature.  The Nordic school focuses on services marketing.  Up until this school developed it’s idea’s, the area of ‘services’ had largely been ignored.

We have seen that business to business (and industrial environments) have been instrumental in the evolution of relationship marketing, but ‘services’ are different.  Martin (1999) gives a good explanation of the basis of service marketing, and why it is different to traditional product marketing. With service marketing playing such an important role in the evolution of relationship theory it is worth taking a closer look.  Martin explains that the term ‘service’ has to do with three things:

  1.           An augmentation of manufactured goods
  2.           The assistance provided to top customers to speed and ease their decision making process
  3.           How interactions with customers are handled

These items may be true in some situations, but they do not help define a service in every instance.  Martin points out that a true service has the following characteristics:

  1.           Intangibility
  2.           Heterogeneity
  3.           Perishability
  4.           Inseparability

If services are truly intangible they can’t be seen, touched, tasted or “dropped on ones foot”, this obviously makes explaining to customers what they are getting for their money extremely difficult. The quality of service tends to vary from one location to another, from one employee to another, or even from hour to hour. Services are also produced and consumed simultaneously; they cannot be stocked, which places large demands on planning and timing their supply (perishability), and because services are produced and consumed at the same time customers may not be able to adequately evaluate their services purchased until after their have received them and have committed to pay for them (inseparability)

A relationship based approach to service marketing is inevitable.  We only have to look at the components identified by Martin to see that services rely on close contact between service provider and service consumer. Indeed, the selection of one service provider over another must be based on a few core relationship constructs – trust, confidence, mutuality, respect, and a lack of surprises.

As charity marketers we need to understand the nature of services marketing and the core tenants of real relationships if we are going to form lasting bonds with our supporters

 

Bibliography

Levitt T (1981), Cited by Berry L (1983), Emerging perspectives on service marketing, Proceedings of American Marketing Association conference 1983

Ryans & Wittink (1977), Cited by Berry L (1983), Emerging perspectives on service marketing, Proceedings of American Marketing Association conference 1983

Grönroos C (1981), Cited by Berry L (1983), Emerging perspectives on service marketing, Proceedings of American Marketing Association conference 1983

Parvatiyar & Seth (1998),  The Domain and Conceptual Foundations of relationship marketing, Handbook of relationship marketing, Sage Publications, Thousand Oaks CA, USA

McGarry (1950/51/53), cited by Parvatiyar & Seth (1998),  The Domain and Conceptual Foundations of relationship marketing, Handbook of relationship marketing, Sage Publications, Thousand Oaks  CA, USA

Alderson (1965), Cited by Parvatiyar & Seth (1998), The Domain and Conceptual Foundations of relationship marketing, Handbook of relationship marketing, Sage Publications, Thousand Oaks CA, USA

Adler (1966), Cited by Parvatiyar & Seth (1998), The Domain and Conceptual Foundations of relationship marketing, Handbook of relationship marketing, Sage Publications, Thousand Oaks CA, USA

Arndt (1979), Cited by Parvatiyar & Seth (1998),  The Domain and Conceptual Foundations of relationship marketing, Handbook of relationship marketing, Sage Publications, Thousand  Oaks CA, USA

Gummesson E (1996), Relationship Marketing and Imaginary Organisations: A Synthesis, European Journal of Marketing, Vol 30 No 2, pp 31 – 44

Martin C (1999), The history, evolution and principles of services marketing: poised for the new millennium, Marketing Intelligence & Planning,  Vol 17 No 6, pp 324 – 328

 

Shaun Williams

I am Head of Data & Insight for a major UK Charity having worked in the non-profit sector for nearly twenty years. I have a real interest in marketing strategy, innovation, data analysis, customer insight, and behavioural science.

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