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Finally, concrete examples of relationship marketing activities Gummerson ( ) lists 32 different types of relationships that need to be taken in account. That comes to questions of what the benefits of relationship marketing are understood better and served better (Gummerson, , cited by Kanagal, ). Relationship marketing Since the early s marketing practitioners and academics The leading marketing academic Evert Gummerson (Gummerson, ).
Ulrich compounded this thought when stating: An aspect of commitment is needed to bring the loyal customers into a relationship plan. Morgan and Hunt argue that trust is the cornerstone of relationship commitment, without it commitment flounders.
Research by Geyskens and Steenkamp showed that trust brings about a feeling of security, reduces uncertainty and creates a supportive environment. An objective of marketing strategies is to change customer behaviour so that loyalty replaces the threat of defection to the increasing competitive products.
This loyalty will come about through trust, which creates satisfaction and long-term association over and beyond any normal buyer-seller relationship. Another way of increasing loyalty and trust is for both parties to make investments in the relationships.
These investments can be intangible e. Investments serve as exit barriers Naude Commitment is the ability to maintain a relationship and it consists of three different components; sacrifice of some value, willingness to act in certain ways, and efforts to secure consistency and continuity in the relationship Rott Commitment is important as it saves time and effort in looking for new partners.
In addition to trust, commitment is the second most important component of a relationship Johansson et al. A study by Tax et al. This research concludes that increased trust and commitment has a direct impact on the likelihood of further collaborations, good relationships are based on the model of high trust and commitment between the involved parties.
Successful implementation of the relationship strategy can be brought about by a commitment by the key functions that support the delivery of value to the relationship. In the case of Greenheart this is the owners of the company, Management has to allocate resources between different relationships in order to make sure each is successful.
Existing customers should be maintained, new ones should be added, and unprofitable ones should be fired, whilst assessing its customer portfolio in order to understand what customers are contributing and what they will contribute in the future. It will then be easier for the company to see which are valuable relationships, and which are unprofitable Ford As Rich stated: Therefore to date, there is a poor understanding of any role of relationships in garden nurseries.
A lack of uptake of relationship marketing in the garden nursery market gives the case company a chance of taking a first mover advantage. This can be defined as when the initial occupant of a strategic position or niche gains access to resources and capabilities that a follower cannot match Rott A company can attain a first mover advantage by acquiring resources and capabilities in a new market before competitors do Grant That axiom is challenged by relationship marketers who suggest that is mutual cooperation that delivers this value Shet and Parvatiyar, However, the illusion that RM is unconcerned about profitability because of its above mentioned cooperative tenor is false.
A paramount objective behind companies adopting an integrative relational strategy must, at least ultimately, be sustainable profitability.
Even though in a relational exchange the focus is more concerned with the longer-term economic benefits profits remain important to all parties Morgan, Conventionally, the focus of traditional marketing has been on creating new customers.
Although the acquisition of customers is important, it is only an intermediate step in the process of value creation. The first line of defence is its existing consumers Kotler, The logic behind this integrated approach can be illustrated using the metaphor of the leaky bucket Figure 1.
This stresses the importance of keeping customers while recognising that acquiring customers is, of course, the basis for having any customers to keep. In order to succeed, an enterprise must both have a constant flow of new customers and prevent consumer exit. To achieve sustainable profitability both strategies of acquisition and retention must be pursued in the framework of an integrative management process.
Any decrease in the overall number of customers has profitability implications. As mentioned earlier, companies in the past concentrated on the consumer acquisition process.
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However, against the background of forecasted low or even negative population growth in many mature markets, intensified competi- 1. Fundamentals of Relationship Marketing10 tive pressures and macro-economic crises customer acquisition in relative terms will become more difficult.Advantages And Disadvantages Of Relationship Marketing
Although RM requires a dual focus on both acquisition and retention strategies, it is the latter that is often given paramount prominence. In fact, it has become one of the underpinning convictions that RM fuels retention marketing first and acquisition marketing second. This view is generally supported by academics, many of whom further promote the concept by suggesting that customer acquisition is between five and ten times more expensive than customer retention Gummesson, Although this widely accepted marketing maxim is a simplification, it has become widely accepted by an increasing number of enterprises that it is instrumental to keep existing customers satisfied rather than devote high levels of marketing effort to new customer acquisition Barnes, To put it in a nutshell, a major impetus for the development of RM has been a growing awareness of these potential long-term benefits.
Total customer retention is never attainable as customers may switch to another product or service on the basis of criteria that may not be within the control of the enterprise. In addition to that, it may also be unprofitable to attempt to achieve a near total retention as the costs involved are likely to be prohibitive.
Retention strategies should therefore not be aimed at keeping customers at any cost. Whereas in many industries it can be stated that the cost of acquisition exceeds that of retention, it is by no means a universal truth as it depends on company-specific factors and industries.
Leaky bucket theory 1. Consequently, the economics of costly relational techniques must, in circumstances where acquisition and retention cost ratios are small, be closely examined. This is especially evident in the case of many costly loyalty schemes in which incentives to retention are costs that if profitability is to be maintained may lead to higher prices. The evidence that exists suggests that, in industries where recognizable high front-end costs i.
Retention economics are also promoted as a time-based type of competitive advantage through the suggestion that investment in long-term relationships brings long-term advantages Egan, Relationship investment in this respect refers to the time, effort and resources that the supplier invests in building stronger investments Palmatier et al.
The long-term orientation is often emphasized as it is believed that loyalty is cumulative as stated above. Long-term benefits may be considered from two perspectives: Relationship Stages The definition of RM anticipates that, once a company begins thinking about individual customers, it must recognize that different customers are at different stages of relational development.
Most importantly, it also suggests that each customer type e. The appreciation of different relational stages in RM also includes the assumption that the higher the stage of development the greater the profitability to the business. These are the following Figure 1. Partners consider obligations, benefits and burdens of the exchange. Other models suggest relational stages of customer development. Kotler also proposes a stages model.