Introduction
A generation after the term relationship marketing was defined by Berry(1983, p.25) as a process of "attracting, maintaining, and enhancing customer relationships" we seem to be none the wiser as what this concept really means'. From an academic perspective, the knowledge on relationship marketing remains fragmented, often contradictory and dominated by isolated and unreplicated theoretical frameworks and findings. Indeed, Bejou (1997) supported this view suggesting that there was little or no consensus as to what relationship marketing was, which in essence, is what is still troubling the paradigm today. The current academic debate about the nature of relationship marketing as either being focused on a holistic and diverse range of organisational relationships, or focused on the customer-supplier dyad (Egan, 2003) only serves to highlight the point that we are none the wiser in terms of understanding this paradigm now than we were over 20 years ago. For the practitioner, relationship marketing is equally perplexing. Whilst this community appreciates the obvious bottom line advantages of higher levels of customer retention they raise a myriad of pertinent questions; how do we know that our customers want a relationship with us? How do we build relationships? How do we implement a relationship marketing strategy? How much is it going to cost? Surely it is all about CRM systems management-isn't it? And if academics and marketing practitioners are debating the true nature of the paradigm, then there is obviously no formula for success!
Egan's (2003, p.146) observation about there being a "significant rift" between the holistic organisational school' and the customer-supplier dyad school' serves to illustrate the point that the paradigm is plagued with fragmentation, and one wonders whether the source of these polarised perspectives is the self serving attitude of academics eager to protect ensconced positions. Gummesson (1997) posed the question about this paradigm as perhaps being an illusion, drawing parallels to the story of the Emperor's New Clothes. This question, unfortunately, is still pertinent when considering the contemporary nature of debate today and should act as a warning about the future efficacy and possible demise of this paradigm
If the relationship marketing paradigm is to survive well into its second generation, it would be better served by focusing on theoretical convergence and implementable validity in an attempt to produce a more rigorous and practical paradigm than that which exists at present. I suggest that the future for relationship marketing as an academic discipline lies in convergence of its theoretical base, not further fragmentation. The conflict between the holistic organisational approach and the focused customer-supplier approach can effectively be resolved by considering that these two schools of thought need to co-exist within the organisation at strategic and operational levels respectively. The future of relationship marketing for the practitioner, on the other hand, lies in successful and cost efficient implementation. The academic community has a role to play in implementation as discussed by Argyris (2003) who presents a strong, and often acerbic case, for the implementabl e validity of (social) research, arguing that researchers should practice what they preach. Academic research should not, therefore, be content with understanding and explaining organisational phenomena in a way that has internal and external validity, but should also seek to create an environment for action and change in order to assess enacted theory in use.
The purpose of this reflective paper is to articulate the way in which relationship marketing can converge theoretically and be implemented successfully in practice. I suggest that in order to re-invigorate the paradigm we need to seek convergence in theory where diversity previously existed. I propose that if we conceptualise relationship marketing as three key strategic organisational components that when successfully integrated and operationalised by organisations, will converge to produce an effective relationship marketing paradigm in both theory and in practice.
This paper reflects on the implementation of a relationship marketing consultancy programme with a national service provider in theUKhealth and fitness industry, and how this programme was informed by the academic literature from the relationship marketing paradigm.
Developing a relationship marketing strategy in practice: the contextual setting
The research was undertaken with one of the UKs top providers in the health and fitness industry. Whilst the host organisation had a national chain of clubs, the research was conducted at their premier club, located on the South Coast of England, with the view of rolling out a successful programme in the future. At the time the research was conducted, the club was in an enviable position in the local market place with a state of the art sports facility and with membership numbers at 98% of capacity. However, whilst the club had been successful in generating new business, the industry had started to become an increasingly turbulent and competitive environment. The industry growth of the late 1990's had attracted a flood of new entrants and resulted in a saturated market place where service providers were exposed to falling profit margins, deteriorating share prices, acquisition and merger activity, and for some providers, falling into administration during the period of thi s research. In this case, the researcher acted as a peer consultant (Vince, 2002), who gathered data, provided analysis, recommendations for change initiatives and reflected on the success or failure of these initiatives with the Chief Executive and his management team. A programme of action research lasting two years was devised, in conjunction with the Chief Executive of the company, who wanted to ensure that he and his management team did not become complacent with their recent success. The central theme of this programme was focussed on their service provision and devising a strategy aimed at building robust customer relationships and subsequent retention.
The practical problems of having a fragmented paradigm
As mentioned earlier, relationship marketing theory is fragmented with literature dominated by a plethora of conceptual frameworks and theories that Egan (2003) described as being essentially held together by faith. In his review of relationship marketing literature Harker (1999) found twenty-six different definitions of relationship marketing, from which we can conclude, that this diversity in explanation and lack of theoretical replication, is indicative of a subject area in a pre-paradigm stage of development. Unfortunately, this conclusion helps neither academics nor practitioners in understanding the nature of relational strategies and certainly did not provide me with much confidence when discussing the implementation of a coherent relationship marketing strategy with the Chief Executive of a national health and fitness provider.
However, in my review of relationship marketing literature certain themes started to emerge which did provide me with the confidence to enter into a consulting arrangement on the subject. For example, Howlett and Rogers (2000) provided a useful context suggesting that organisations consider customer relationships as part of their overall business philosophy and that their corporate strategy should place the customer at the very centre of organisational culture, processes and operational activities. Whilst this context was useful, it did make me reconsider the project. My original idea that a relationship marketing strategy would be self contained and perhaps restricted to customer service and marketing operations would now have to become the centre piece of organisational strategy, and as such, was going to be a far bigger job than first anticipated.
Over an extended period of time reading literature, conducting primary research within the organisation, implementing operational, marketing, service and other change management initiatives, I began to get a real sense of the true nature of relationship marketing. Key themes in literature and practice emerged that enabled me to conceptualise relationship marketing at a strategic, operational and tactical level. Relationship marketing cannot be explained by a single theory, which is why the paradigm is so fragmented, but it can be made coherent when conceptualised as bodies of knowledge converging' to produce a way of enhancing and maintaining the longevity of exchange relationships. These bodies of knowledge and their convergence forms the basis of this paper. When this convergence in theory and practice is successfully integrated and implemented by an organisation, this could lead to an effective relationship marketing strategy that increases customer retention.
In essence, an effective relationship marketing strategy has three fundamental components that are discussed under the terms; Organisational Customer Focus, Customer Management Focus and Customer Knowledge Focus (see Diagram 1 below).
Apart from being informed by the work of Howlett and Rogers (2000) and their customer centric approach to business philosophy, this new conceptual framework draws inspiration from the service orientated view of marketing promulgated by the Nordic School in so far as it considers any relational programme as being central to, rather than being distinct from, other organisational decisions, functions and processes. The position ofNordicSchoolconcerning the importance and development of context orientated theory was equally important to the premise of this empirical research in so far as any theoretical development had to be considered in the light of theory in use' in an attempt to make theory implementable and practice reflective in an attempt to develop learning and theory.
Diagram 1 : Convergence in relationship marketing
Customer
Management
Focus
Organisational Customer Focus
Customer
Knowledge
Focus
Effective Relationship
Marketing Strategy
Organisational Customer Focus
This part of the conceptual framework acknowledges the importance of the holistic organisational view of relationship marketing and its diversity. At its core, this school of thought essentially places the relationship' at the centre of organisational philosophy and activity.
At a strategic level, the importance of customer retention and its significance to corporate profitability has been well documented by many authors including; Rosenburg and Czepiel (1983), Reichheld and Sasser (1990), Buttle (1996), and Payne (2000) who found a significant relationship between customer retention and company profitability. This causal relationship has, however, been disputed by the likes of Reinartz and Kumar (2002) who found that greater returns in profitability are not necessarily achieved through longevity in the relationship, but can be derived from effective cost and price management.
Creating an organisational climate that is customer focused has been extensively covered in marketing literature under the notion of market orientation. This premise suggests that an understanding of customers will enable organisations to identify future competitive advantages and the degree of organisational change required to realise these opportunities. Vargo and Lusch (2004) argue that marketing has evolved and converged into a paradigm where service provision, and not goods, are the unit of economic exchange and that organisations increasingly focus their mission and value proposition on customer centricity and relationship building. Payne, Christopher, Clark and Peck (1998) support the customer centric proposition and argue that culture was a fundamental determinant of an organisations ability to deliver a superior service to its customers. This view has been a consistent theme in literature (Schneider, 1980; Ogbonna and Wilkinson, 1990; Bowen and Lawler,1992) and is particularly relevant in the service marketing arena where this type of customer orientation is fundamental to the long term success of the organisation. Jenkins (1997) also argues that organisations with a customer-based strategy can obtain a sustainable competitive advantage by learning from customers and subsequently meeting their needs and solving their problems.
There is also more recent evidence (Stum, 1999; Dessler, 1999; Lineberry and Trumble, 2000) to suggest that an appropriate organisational culture has an essential role in gaining employee commitment, which in turn acts as a means to delivering superior customer satisfaction and ultimately customer loyalty. The customer-centric concept suggested by Payne et al (1998) proposes that relationship marketing should be an organisational issue whereby all functions, processes and activities, at the end of the day, connect, meet and hopefully exceed customer expectations. Hartline and De Witt (2004) take this debate further, moving from the sometimes esoteric notion of organisational culture to consider the operational considerations of creating a customer centric service culture. They proposed a number of key characteristics for the successful recruitment, selection and retention of effective service staff which could then lead on to creating an appropriate organisational culture.
Gronroos (2004) argues that relationship marketing has the ability to become relevant at a corporate level as long as companies focus on the customer and their requirements. Developing an Organisational Customer Focus' should aim to produce an organisation whose mission, strategy, structure, management and staff are co-ordinated and controlled in a manner that fosters their commitment to deliver high standards of service quality in a customer centric environment. Company-wide processes also need to be linked with customer needs in order to increase customer retention levels that are significantly higher than those of their competitors.
Customer Management Focus
This part of the conceptual framework draws upon the customer-supplier school of thought in so far as it concentrates on the dyadic nature of relational exchange between these partners. The emphasis of this line of thinking has been concentrated on organisations ongoing relationship with their customers and their attempts to maximise profits. As mentioned earlier, the varied definitions of relationship marketing offer diverse perspectives of relational exchange, yet all have longevity of the buyer-seller relationship at their core. For example, Ganesan (1994) and Evans and Laskin (1994) suggested that any relationship marketing strategy should focus on developing long-term relational exchange and repeat purchase. But how do you achieve this objective? The answer to this question, again, raises a myriad of responses in literature, however, several strands of thinking can be considered. Morgan and Hunt (1994); Coulson (1998) and Lindgreen (2003) suggest that trust between ex change partners is fundamental to relationship longevity, whilst Moorman, Zaltman and Desphande (1992); Amine (1998) and Kolesar and Galbraith (2000) believe that a commitment between buyer and seller is the key to maintaining long-term relationships. A more operational perspective is provided by a range of authors such as Christopher, Payne and Ballantyne (1991); Anderson and Sullivan (1993); Hallowell (1996); White and Schneider (2000) who propose that an organisation wanting to cultivate a relationship marketing orientation should aim to deliver consistent customer satisfaction. Bitner (1995); Bejou and Palmer (1998) and Edvardsson and Strandvick (2000) follow this theme by arguing that in a service context, the effective management of critical incidents is central to longevity in relational exchange.
There can be no doubt that these authors have made an invaluable contribution to a developing relationship marketing paradigm, particularly in underpinning the view that any relationship marketing strategy should seek longevity in the buyer-seller relationship in an attempt to maximise corporate profitability. Yet the fundamental tenet of relational longevity was, in part, at odds with the work I did with the health and fitness company. The organisation had undertaken a strategic review of its corporate strategy eighteen months previous and had decided to move from being an elitist tennis club to a mid market health and fitness club that incorporated a tennis facility. The results of this strategic market repositioning were deemed significant in terms of increasing the organisations membership numbers and market share but had lead to unforeseen consequences in terms of the members of the club who had been there for decades in some instances. These members complained bitter ly about the influx of new members, limited access to tennis facilities and the direction the organisation was taking. Having put up with a stream of continual complaints and disruption from these members for months on end, the Chief Executive terminated some members' annual membership contracts and provided other members with a financial incentive to leave the club. So much for buyer-seller longevity and profit maximisation! The problem with early relationship marketing literature is that it has promulgated the view that relational longevity is not only a fundamental principle of the paradigm, but an overriding one that should be sought at all costs.
The principle of Customer Management Focus Chief Chief is that organisations need to consider the buyer-seller relationship not only in terms of the tangible economic returns in the form of revenues and profits, but also, in intangible terms such as complaint activity. The problem with relationship marketing literature is that it is unbalanced in so far as it focuses more on relational longevity and hasn't effectively contributed to a debate about the circumstances when an organisation should terminate a relationship. Yet in practice many organisations employ strategies to identify and remove problematic customers, or those who are not providing adequate returns, or where maintaining the relationship doesn't make economic sense. Over the past few years the press have had a field day with British Telecom, Yorkshire Bank, Barclays Bank, Northern Rock and the Post Office for closing small provincial services because the costs outweigh the returns. If we look below these headl ines we will see that an array of organisations proactively identify and terminate customer relationships that are, or will soon become, incrementally less attractive in financial terms. For example, in the financial services industry, return on customer investment' and customer life-time value' are buzz words which enable; mortgage lenders to discharge customers who consistently default on payments; insurance companies to refuse renewal of policies for high risk and frequent claim customers; banks to review customer accounts in an attempt to off-load those customers who are regarded as a drain on resources in relation to the return on customer investment. The reality of relationship marketing, in this sense, differs from the academic discipline where the emphasis is on building and maintaining relationships compared to relationship termination. O'Connor and Galvin (1997) asked us to differentiate between customers making different levels of returns, the implication being th at we need to consider terminating the relationship of customers providing low returns.
Indeed, Gronroos (1994a; 2000) revised his thinking (Gronroos 1990, 1994b) on the precise nature of relationship marketing by (re)defining the paradigm as not only being about enhancing and maintaining relationships, but when necessary, terminating them; and lately Helm (2004) develops the previous work of O'Connor and Galvin (1997) by providing more explicit direction in the management of buyer-seller relationships, proposing that organisations need to consider customer equity and profitability when considering whether or not to terminate the relationship. Whilst there is literature to support relationship termination there could usefully be more empirical research and debate about managing customers in a way that considers the circumstances when buyer-seller relationships should be developed or terminated by an organisation.
The central thrust of this part of the conceptual framework presented in this paper is that an organisation having a Customer Management Focus should aim to implement a relationship marketing strategy at an operational level, in order to build, maintain, and terminate when appropriate, customer relationships. The implications for having a Customer Management Focus is that customers are not solely there to be marketed to, but, need to be managed in an effective and economic way. Whilst this approach should aim to place the customer at the centre of organisational activities, it should also ensure that customers are managed' and that any conflict is either resolved to mutual satisfaction or terminated. As Molm 1997 states, relational exchange partners enter a relationship to increase mutual gain, however, all relationships are subject to decreasing returns and will ultimately die.
Customer Knowledge Focus
There is a plethora of literature within the domains of relationship marketing, services marketing, interactive marketing and database marketing that promotes the use of customer data in marketing to and managing customers. This body of literature concludes that buyer-seller relationships can be effectively managed and maintained using a range of customer relationship management technologies. However, the emphasis of this debate has mainly centred on technology and the cost efficiencies obtained by introducing such systems.
The focus on the operational activities in an organisation has often meant that the strategic consideration of implementing a knowledge management strategy and becoming a knowledge-based company hasn't fully been considered. Binney (2001) and Vargo and Lusch (2004) made a good point when proposing that the differential use of information and subsequent management of customer knowledge will be a fundamental driver for success as organisations enter the era of the knowledge economy.
The essence of the term Customer Knowledge Focus is reflected in the work of Naude and Holland (1996); and O'Malley, Patterson and Evans, (1999) who extol the virtues of building and maintaining customer information systems to produce relevant customer knowledge to aid strategic and operational management of the organisation and its customers. Indeed, the move for many organisations during the late 1990s was to introduce IT based CRM technologies as a means to effectively organise and integrate fragmented organisational systems and databases which is a reflection the need to know more about customers and how they contribute to organisational profitability. However, many of these organisations collected large amounts of customer data in order to derive trends and patterns in behaviour without particular consideration of how this fits into the overall strategy of the organisation and how this data could help manage customers.
One of the areas that struck me most during the consultancy programme was the presumption by advocates of these technologies that organisations needed to have these often expensive and elaborate CRM systems, and they had the resources available to invest in them. In reality this may not be the case. The number of small businesses surviving on limited investment and cash flow implies that expensive CRM technologies are out of reach for many of them. Yet, these small organisations still have the ability to learn, and gain knowledge about their customers by other softer systems'.
Certainly CRM technology was used successfully by the health club chain, but, there was often a myriad of other customer data that either wasn't captured or wasn't used efficiently. My impression was that the soft system method of data collection and customer management in the form of staff interactions, complaints and comment boxes, tended to remain at an operational level in an attempt to deliver customer service to an individual, and that this knowledge wasn't used in the collective management of customers.
The importance of collecting and using contemporary CRM technology to collect customer data is not in dispute. But the emphasis on technology has left the softer and interactive method of managing and developing customer relationships, particularly in service industries, far behind. Egan (2004) points out that in an era of rapid technological change many organisations have been blinded by the cost reduction benefits that information technology can deliver in the management of customers. He further argues that these systems do not always increase value or convenience for the customer and that, in many ways, organisations have lost sight of the personal aspects embedded in relational exchange.
The work of Christopher et al (1991); Henon and Gauches (1999); and Peppers and Rogers (2000) underpin the importance of an organisation having a Customer Knowledge Focus, proposing that contemporary customer data is essential in generating knowledge and learning for the purposes of underpinning a customer centric orientation within an organisation. How that knowledge is collected is of secondary concern to the importance of using such knowledge in an effective way. Having a Customer Knowledge Focus within an organisation means that one needs to consider the context in which information can help in the management of a customer and inform the development of an appropriate Organisational Customer Focus. In particular, it should ensure that current information is available to support a customer-centric orientation and that this knowledge is integrated throughout the organisation in a meaningful way (Palmquist and Ketola,1999).
Conclusion
The purpose of this paper was to present a new conceptual framework to make sense of a historically fragmented but increasingly bi-polar relationship marketing paradigm. In many ways, developing yet another' framework is exactly what the paradigm doesn't need, so we really need to consider what this new conceptual framework can add to such a contentious field.
To start, we need to consider some of the certainties that exist within the relationship marketing paradigm; it is fragmented and littered with isolated theories; it is controversial with academics and confusing for practitioners; it focuses on operational issues rather than how it can contribute to the future strategic direction of an organisation; it is often ridiculed for its lack of implementable validity; it is too focused on building and developing relationships and doesn't effectively present the case for relationship termination. So what does this new conceptual framework contribute?
Firstly, this new framework overcomes the key weakness in previous relationship marketing theory, that is, fragmented thinking with little or no empirical testing or theoretical validity. O'Malley and Tynan (2000) posed serious questions about the boundaries of relationship marketing, noting that it was almost impossible to demarcate as a discipline. Egan (2003, p.153) confirms this point and argues for "some agreement on the boundaries of relationship thinking" to prevent the paradigm from further polarisation. The conceptual framework presented in this paper has addressed this problem. It has been developed with due consideration given to previous debate on the holistic versus focused perspectives, but has sought to identify the fundamental areas of this debate to get a sense of the boundaries of relationship marketing. The key to maintaining momentum in the paradigm is to seek some form of common ground and convergence in the debate in order that future researc hers in this area can get a sense of focus and purpose. By considering the holistic organisational perspective and focused customer-supplier as both equally applicable, but operating at strategic and operational levels within the organisation, these two schools of thought can co-exist as partners rather than adversaries. The framework proposed in this paper seeks to provide a basis for discussion on agreed terminology (Payne 2000) by incorporating the terms organisational customer focus, customer management focus and customer knowledge focus. As a result of incorporating such a framework and terminology, we will have a paradigm that is less confusing, less contentious, delimited, more rigorous, more replicable and more theoretically valid.
Secondly, this framework benefits from the positioning of relationship marketing as being of both strategic and tactical importance to organisations. As such, it considers the holistic view of relationship marketing as primarily being a discussion of the philosophical, strategic and cultural direction of an organisation and its attempt to generate stable revenues and related profits. That is, having an Organisational Customer Focus where the customer remains at the heart of the company. This framework also embraces the customer-supplier view of relationship marketing arguing that understanding, learning from and managing individual relationships at an operational level can contribute to an understanding of aggregated customer relationships at an organisational level.
Thirdly, the major benefit of this framework is that it was conceived as a result of reflecting on academic theory and its implementation in practice. As previously stated, Argyris (2003) argues for academics to become more involved with practice in order to assess their often complex and intricately designed ideas in action' in order to assess its implementable validity. If relationship marketing is to prove useful to practitioners, it must make sense to them, it must be implementable and it must provide tangible results. The question of whether this framework has any degree of theoretical and implementable validity outside the confines of this research context is questionable. Further replication in different industries and contexts would be advisable and could, therefore, be of interest to future researchers in the relationship marketing arena. Certainly the fundamental building blocks of this framework are underpinned by the lines of inquiry in academic literature, tha t is; focus your organisational strategy and operations on the customer, seek to generate knowledge that focuses on the expectations and needs of the customer; focus on building individual customer relationships that, when aggregated, provide value to the organisation as a whole. This framework has been conceived and utilised in the melting pot that is real organisational life and, therefore, provided a valid contribution to the management of customer relationships for the host organisation involved in this research.
Lastly, this framework attempts to balance the debate about building and maintaining buyer-seller relationships and move it toward considering the conditions in which organisations should terminate customer relationships. This framework proposes that customers should be considered in the context of optimising' customer profitability by assessing their lifetime value and return on investment and not maximising it through the maintenance of a long-term relationship that will ultimately provide ever decreasing returns. This paper proposes that greater emphasis should be placed on identifying and developing profitable customer relationships, and, identifying those unprofitable customers who contribute least to an organisations bottom line or may be considered risky or troublesome.
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