Chapter 3

Building marketing relationships: the six markets model

INTRODUCTION

In the last two chapters we examined the role of value from the perspective of both the customer and the organisation. Value is a dynamic concept that is created and changed over time as a result of an ongoing series of interactions and relationships with key stakeholders. In this chapter we consider the role of multiple stakeholders in relationship marketing.

The mainstream marketing literature has neglected the important issue of understanding and building long-term relationships with both customers and other stakeholder groups. But managing the organisation's internal and external relationships with key stakeholders is now acknowledged as critical to economic profitability and, as such, needs to become a more central activity. Traditional marketing approaches have not placed sufficient emphasis on careful stakeholder management. An exception is the approach to stakeholder management advocated within public relations (PR), and referred to as ‘publics’ by PR practitioners. However, some have argued that this approach is often insufficiently rigorous and lacks relational emphasis.¹

Traditional marketing approaches have not place d sufficient emphasis on careful stakeholder management.

Considerable work has been done in the business strategy field on stakeholder management, and insights from the strategy literature have influenced the development of multiple stakeholder approaches in relationship marketing. But relationship marketing literature on stakeholders has developed categorisation schemes to help companies consider value specifically in the marketing context.

The role of multiple stakeholders

All organisations have a large and diverse range of stakeholders. These include suppliers, the financial community, employees, customers, the government, trade unions, environmentalists, alliance partners and so on. The top managers of the organisation play a key role in managing these relationships in order to maximise customer and shareholder value. But all too often top management do not manage these stakeholders in an integrated manner.

Stakeholder management is frequently not integrated because, in practice, stakeholders are typically managed on a day-to-day basis within different parts of the organisation. For example, the marketing department is responsible for managing relationships with customers, the purchasing department with suppliers and the finance department with the financial community. The human resources department, together with line management, manages relationships with internal staff, potential recruits, unions and so on, and it falls to the public relations and corporate affairs departments to manage many of the other external stakeholders. As so many different parts of the organisation are involved, the various stakeholder groups are frequently managed in an unco-ordinated, disparate manner.

Over the past decade companies have used multiple stakeholder approaches in relationship marketing towards managing these stakeholder relationships. Two key concepts underpin the use of relationship marketing in this context. First, you can only optimise relationships with customers if you understand and manage relationships with other relevant stakeholders. Most businesses appreciate the critical role their employees play in delivering superior customer value, but other stakeholders also play an important role. Second, the tools and techniques used in marketing to customers, such as marketing planning and market segmentation, can also be used effectively to manage non-customer relationships.

Implementing relationship marketing strategies requires managers to go beyond their traditional functional roles. They need to take a broader perspective of the role of stakeholders in order to develop much closer relationships between suppliers, internal staff, customers and other relevant markets. Reorienting thinking and actions towards building a more customer-focused organisation through addressing multiple stakeholders represents a significant challenge for senior managers.

Some companies adopt a strong integrated relationship approach to managing their stakeholders, but they are in the minority. However, a growing number of companies are beginning to apply relationship marketing principles to non-customer markets.

Philip Kotler has proposed a new view of organisational performance and success, based on relationships, whereby the traditional marketing approach – based on the marketing mix – is not replaced, but repositioned as the toolbox for understanding and responding to all the significant stakeholders in the company's environment. He outlines the importance of the relationship approach to stakeholders:²

if… companies are to compete successfully in domestic and global markets, they must engineer stronger bonds with their stakeholders, including customers, distributors, suppliers, employees, unions, governments, and other critical players in the environment. Common practices such as whipsawing suppliers for better prices, dictating terms to distributors, and treating employees as a cost rather than an asset, must end. Companies must move from a short-term transaction-orientated goal to a long-term relationship-building goal.

Kotler's comments emphasise the need for an integrated framework for understanding the key stakeholder relationships. In many large industrial organisations, marketing is still viewed as a set of related but compartmentalised activities that are separate from the rest of the company. Relationship marketing seeks to change this perspective by managing the competing interests of customers, staff, shareholders and other stakeholders. It redefines the concept of ‘a market’ more broadly as being one in which the competing interests are made visible and therefore more likely to be managed.

A number of researchers working in the relationship marketing field have developed models which propose the broadening of marketing to include relationships with a number of stakeholders or market domains.

The six markets relationship marketing framework is a useful and well-tested tool for reviewing the role of an extended set of stakeholders in creating total organisational value in both business-to-consumer (b2c) and business-to-business (b2b) markets. This framework proposes six key market domains, representing groups that can contribute to an organisation's marketplace effectiveness.³ While customers are viewed in this framework as a major stakeholder, five other stakeholder groups, or market domains, are also identified: influence (including shareholder) markets, recruitment markets, referral markets, internal markets and supplier/alliance markets. The six markets framework is shown in Figure 3.1.

This framework was developed in 1991. With some minor terminology changes, it has proved to be a robust analytical framework and has been used in relationship marketing projects with more than 200 organisations. Similar approaches were advocated by Kotler in 1992 and by Morgan and Hunt in 1994.⁴ Gummesson has provided a comparison of four of the approaches to classifying multiple stakeholders, including his own ‘30R approach’.⁵ Gummesson's 30R approach goes considerably beyond the scope of our work in that it identifies relationships (such as the criminal network relationship) that go beyond the stakeholder relationships that are of central interest to us here.

Relationship marketing emphasises building stronger relationships between the organisation and all its stakeholder markets. In this new millennium, organisations need to place greater emphasis on fundamental issues such as understanding the dynamics of these markets and identifying the critical features which not only influence and drive a company's strategy but also affect its competitive position.

The six markets framework, shown in Figure 3.1, illustrates the key stakeholder ‘markets’ or market domains where business leaders need to review their companies’ performance. While these market domains are interdependent, they vary in importance. For most organisations three groups – customers, employees (internal markets) and shareholders (the dominant group within the influence market) – are especially critical. As a result of this review, companies need to determine which market domains are most relevant to them. We will address the importance of and interrelationships between these three groups later in this chapter.

Any one group may be involved in a number of these markets. For example, customers may play a role within the customer market (where the interaction is between a firm and its customers) and in the referral market (where the interaction is between an existing customer and a prospective customer).

Many organisations have used this framework to consider the multiple markets they must address. Coutts Bank is one example (see Case Study).

The six markets model enables any business to undertake a diagnostic review of the key market domains that may be important to them. As a result of this diagnosis, they will be able to identify a number of key groups within the market domains that are particularly important. But the number of domains a business will need to focus on will vary from organisation to organisation. Let us now consider each of these market domains in turn.

The customer market

The customer market domain is the central market within the six markets model.

The customer market domain is the central market within the six markets model. While customers are the prime focus of marketing activity, companies should direct their marketing activities less at transactional marketing, with its emphasis on the single sale, and more at building long-term customer relationships. The customer market domain addresses three broad groups: direct buyers, intermediaries, and final consumers. These groups are shown in Figure 3.2.

To illustrate these groups, we will use the example of a manufacturer of domestic appliances such as dishwashers. This manufacturer sells to a number of approved wholesalers, who in turn sell the products to retail outlets, who in turn sell the appliances to individual consumers.

In this example, the wholesaler is the buyer, the retailer the intermediary and the individual who purchases the appliance from the retailer is the consumer. We will use the term ‘customer’ generally to apply to all these groups.

In this example, the three groups in the customer market domain are:

  buyer – the direct customer of the manufacturer, that is, the wholesaler;

  intermediary – the retailer to whom the wholesaler sells the appliances;

  consumer – the individual at the end of the channel who purchases the appliance from the retailer.

However, in some industries there may be further intermediaries, which create additional steps within the distribution channel shown in this figure.

Many organisations adopt multiple channels to serve the final consumer, while others use only one channel. For example, some insurance companies, such as Direct Line, market directly to the final consumer. Other insurance companies sell both through the traditional broker channel as well as direct. For example, Zurich Financial Services, a large insurance company, markets indirectly to final consumers through a large network of insurance brokers. It also has a separate division, Zurich Direct, which markets directly to final consumers.

A company may choose from a wide range of distribution options to serve its final consumer. It should base its choice on the value proposition it has identified as being relevant to the final consumers in the segments it wishes to serve. It should regularly scrutinise its distribution options as circumstances change and new opportunities present themselves. It is increasingly being acknowledged that a firm needs to create a supply chain that is more effective than that of its competitors if it is to be successful. So it is supply chains or market networks that compete, rather than just companies. We will discuss market networks in more detail in Chapter 4.

Advances in information technology and computing have spawned new channels to market, including electronic commerce and mobile commerce. These channels will grow dramatically over the next decade. Ultimately it will be the desire of companies to build channel relationships with selected customers to maximise their lifetime value that will drive the use of both new and existing channels.

Companies considering a relationship marketing programme must undertake a detailed market analysis at each level in their value delivery network and identify the type of marketing activity they need to direct at each of the various channel members including direct buyers, intermediaries and final consumers. They then need to do further analysis, in terms of segmenting and understanding the decision-making units of different levels, before determining what level of marketing expenditure and effort to direct at each level. Constructing a market map, as we outlined in Chapter 2, will help the company analyse its value delivery network.

A company needs to evaluate regularly and change, when appropriate, the amount of marketing effort it directs at different channel members. In some industries, for example, intermediaries may be a valuable channel member, while in others the value of intermediaries is being challenged. Unless the intermediary is adding value to the customer relationship, it may prove to be an unnecessary cost and may be bypassed. Many organisations are now finding that in order to build stronger relationships with final consumers they need to change the emphasis and expenditure at different channel levels or, alternatively, refocus the existing expenditure in ways that build deeper and more sustained relationships. We will illustrate this point with some examples.

A manufacturer of domestic dishwashing machines may have traditionally spent a large proportion of its marketing efforts and marketing budget on trade marketing aimed at getting the dishwashers into large retail outlets such as department stores. It may have directed much of its marketing expenditure at developing strong key account management; providing appropriate promotional activity; undertaking in-store point-of-sale merchandising; creating a discount structure based on volume; and establishing training programmes for sales staff in the retailers. It may have supplemented this with a considerable amount of trade advertising and trade promotion, aiming only a limited amount of advertising at final individual consumers. The manufacturer may, however, decide to review its marketing approach and implement an alternative marketing strategy that focuses more closely on the needs of the consumer. It may seek to identify the needs of final consumers through warranty cards or some form of direct promotional activity; send them a questionnaire to help identify their interest in a range of products and services; set up a major telephone call centre; create a customer club, and so on. It could consider these and other options as a means of building relationships with the final consumers.

Building relationships with final consumers

General Electric's (GE) Appliance Division in the United States is a good example of an organisation that has built a closer relationship with its final consumers through establishing a major call centre. GE's Answer Centre is widely regarded as one of the best in the world. In setting up its call centre GE sought to ‘personalise GE to the consumer and to personalise the consumer to GE’. Unlike most manufacturers, who avoided any contact with the final consumer, GE took the unusual step of giving its phone number to customers. The Answer Centre has evolved over sixteen years into an increasingly important relationship marketing capability, and the current network of five call centres receives several million calls each year. Wayland and Cole have outlined how GE's Answer Centre has contributed to increased customer relationship value in three key areas:⁷

First, resolving immediate problems results in a probability-of-repurchase rate of 80 per cent for the previously dissatisfied customer, as compared to ten per cent for the dissatisfied but uncomplaining customer and 27 per cent for an average customer. In other words, by making it easier to reach the company and by responding effectively, GE gets more opportunities to convert dissatisfied customers and to strengthen relationships. Second, contact with the centre significantly increases customers’ awareness of the GE appliance line and their consideration level. Finally, the knowledge that is generated through customer interactions provides valuable input to the sales, marketing, and new product development processes.

Many manufacturers fail to develop relationships with their final consumers. Most readers will no doubt have had disappointing experiences when purchasing a range of consumer durable products, including motor cars. They might have been motivated to buy a car as a result of promotional activity by the car manufacturer, only to be highly disappointed by the subsequent lack of interest by the dealer in maintaining the car and satisfactorily rectifying faults that occurred within the warranty period. The consumer may be further upset when they seek to obtain redress directly from the manufacturer and find the manufacturer is totally uninterested in having any dialogue with them. But within the motor car sector radical changes in both distribution and other marketing practices – not least the approach being adopted by Daewoo – are prompting other car manufacturers to find ways of developing closer relationships with their final consumers.

Other companies are also rethinking their marketing strategy and are developing direct relationships with consumers. Procter & Gamble, for instance, is now focusing on developing direct relationships with consumers through direct response promotion. For example, it is offering people who buy its Pampers brand of nappies the opportunity to obtain discounts by completing a coupon which provides valuable data including name, address, telephone number, and number and ages of children. This data allows P & G to track consumer needs more closely and make appropriate and timely offers to them. Many other manufacturers within the retail sector are looking at these activities with enormous interest.

Customer markets – a summary

Marketing has traditionally focused on winning customers and emphasised the value of the individual sale. But this transactional approach is gradually being replaced by a relationship marketing approach that emphasises the value of long-term relationships and repeat purchases. In Chapter 2 we outlined the benefits of customer retention, but noted that despite managers’ growing awareness of the need to strike the right balance between acquiring and retaining customers, few companies have achieved that in practice. Focusing too heavily on marketing activities directed at new customers is dangerous. A company may spend too much on acquiring them, only to lose them later because it puts too little effort into keeping them. If customer service does not meet customer expectations, customers are likely to defect and damage the company's reputation by adverse word-of-mouth publicity.

Strategies aimed at retaining customers can be expensive as they often involve increasing customer service levels and tailoring the product or service to suit individual customers or customer groups. Successful retention programmes segment customers according to their potential lifetime profitability and then determine the type and frequency of marketing activity relevant for each group in order to exploit and increase this potential.

The referral market

An organisation's existing customers are often its best marketers.

There are two main categories within the referral market domain – customer and non-customer referral sources. An organisation's existing customers are often its best marketers, which is why creating positive word-of-mouth referral, through delivering outstanding service quality, is so important. A variety of non-customers recommend organisations to prospective customers, including networks, multipliers, connectors, third party introducers and agencies.

The first category, existing (and former) customers, is usually very important for most organisations. The importance of the second category depends on the organisation concerned. The role of the different constituent groups varies both between companies in different industry sectors, and within different business units, divisions or product/service areas of a single company. Organisations can significantly increase their revenue and profits by using the principles of relationship marketing to manage relationships systematically with both these broad groups.

The main categories of the referral market domain are shown in Figure 3.3.

Customer referrals

There are two sub-categories in the existing and former customers’ category of the referral market domain: advocacy referrals (oradvocate-initiated customer referrals) and customer-base development ( or company-initiated customer referrals). We discussed the first sub-category in Chapter 2 when explaining the relationship marketing ladder of customer loyalty and briefly described the role of advocates in assisting a company's marketing efforts. The second sub-category of customer-base development relates to an organisation's explicit attempts to use its existing customers, as part of its marketing activities, to gain new customers.

1. Advocacy referrals (advocate-initiated customer referrals)

Customers become advocates when they are totally satisfied with a company's products or services. A relatively small number of organisations benefit greatly from their proactive efforts to turn their customers into advocates and getting them to refer other customers to them.

Advocacy referrals have contributed greatly to the success of UK bank First Direct, which became the world's first all-telephone bank. By 2000, it had attracted around 1 million high-net-worth individuals. A significant part of First Direct's growth has been through referral from its very satisfied customers. Research conducted by First Direct shows that around 85 per cent of its customers have referred new customers to the bank, compared to an average of 15 per cent for the other five major banks.

2. Customer-base development (company-initiated customer referrals)

Advocacy referrals involve the customers initiating the referral. But for company-initiated customer referrals the company directs a set of activities or a programme at existing customers that are designed to lead to customer referrals. They may simply ask customers to refer other potential customers to them, or offer them some form of inducement to do so. Advocates on the relationship marketing ladder often actively initiate referrals, but ‘supporters’ – the next rung down the ladder – though positive about the organisation tend to be more passive. Asking supporters for a referral can be a very good way of generating business from them. For example, a study into referrals by lawyers’ clients,¹⁰ found that only 49 per cent of the clients said that law firms had asked them for a referral. But of those who were asked 95 per cent provided at least one referral, compared with just 8 per cent of those who were not asked. Few organisations with whom we have discussed this issue have any formal process for requesting referrals.

Membership organisations are one sector that is putting considerable effort into using the membership base to reach further members. American Express, the Institute of Directors, wine clubs and many similar organisations run regular promotions aimed at generating new customers through their existing customer base. These ‘member get a member’ marketing efforts are frequently accompanied by some form of incentive, inducement or reward.

Non-customer referrals (third party and staff referrals)

In addition to an organisation's customers, many other parties can be a great source of referrals for a business. Referrals may be made informally when an individual's experiences of an organisation and its general reputation cause them to recommend that organisation to others. But some companies have more formal systems of referrals.

The wide range of non-customer referrals can be divided into a number of groups:

1 general referrals

2 reciprocal referrals

3 incentive-based referrals

4 staff referrals

1. General referrals

General referrals cover a broad range of referrals that result in business being generated for an organisation. These can be further divided into four sub-groups:

  Professional referrals are those where one professional recommends the services of another. For example, a GP may refer a patient to a specialist consultant, or a solicitor may refer a client to a barrister.

  Customers may seek expertise referrals because of the referrer's specialist expertise or knowledge. These referrals are typically made on an irregular or ad hoc basis.

  Specification referrals are those where an organisation or person specifies or strongly recommends that a particular product or service is used. For example, architects building upmarket homes may mandate, within their specification, that a specific brand of electrical appliances such as washing machines and ovens are used within every kitchen.

  Substitute and complementary referrals occur in circumstances where organisations which are at over-capacity, have long lead times to undertake work, or cannot fulfil a specific need, may refer a customer to one of their competitors.

2. Reciprocal referrals

Historically, ethics in professions such as law and accounting have precluded advertising and aggressive competition. Up until the 1980s most of the professions’ marketing activities were highly restricted by their professional bodies and they had to rely extensively on referrals from third parties. As a consequence, referrals have often been the main source of work for professional services firms.

Some referrals, especially those between professional firms, are interdependent and under this system referrals may be made backwards and forwards between those in different professions. For example, an accounting firm may recommend a law firm or bank, and vice versa.

3. Incentive-based referrals

Incentive-based referrals are appropriate in a number of circumstances. First, where members of the referral channel are mutually dependent it may be to their advantage to create a formal arrangement that helps reinforce this dependence. Second, if a business is receiving many referrals but giving back relatively few, and there is little potential to change this, it may seek to redress the balance by providing some incentive-based method of compensating its source of referrals.

The potential for using incentives varies considerably across industries. A company that incorporates financial incentives in its referral system must ensure it is managed ethically. Indeed, in some industry sectors incentives are considered unethical or may even be prohibited under the rules of a professional or regulatory body.

4. Staff referrals (from existing and former staff)

Staff are an important source of referrals within a number of industry sectors. Staff referrals are most common within service businesses, but there are many other examples of organisations where referrals can be generated between a number of different divisions or products aimed at similar customer segments.

Former staff may be a useful source of business referral in certain types of organisation. Again, professional service firms provide a good example. Consultants like McKinsey & Co and the large accounting firms place considerable emphasis on these ‘alumni’ and run a number of regular activities to keep them involved with their old firm.

Referral markets – a summary

Most organisations fail to exploit the opportunity to maximise referrals from their own customers, from third parties, and, where appropriate, from their own staff. What is more, many organisations still do not realise the power of customer delight and the benefits that accrue from significantly exceeding customer expectations.

However, there is a small, but increasing, number of companies that do significantly exceed customer expectations. These organisations have been able to grow through word-of-mouth referrals from highly satisfied customers (and other groups) and include First Direct and Nordstrom. Nordstrom has achieved its market position with relatively low levels of advertising while First Direct has achieved a strong market position despite television advertising that was not considered to be particularly effective.

Most organisations need to consider both existing customers and intermediaries as sources of future business. Therefore, they should identify both present and prospective referral sources and develop a plan for allocating marketing resources to them. They also need to make efforts to monitor the cost-benefit, while recognising that the benefits of increased referral marketing may take some time to come to fruition.

The supplier and alliance market

In the original version of this book, we used the term ‘supplier market’ to describe this market domain. In the past, when we have used the six markets framework and an alliance was considered important, we grouped it within the supplier market, on the grounds that alliances potentially provide new management skills, access to capital, market position, global coverage, technological skills and so forth. So the term ‘supplier market’ reflects a broader spectrum of supply. But because the number of strategic alliances has grown, we have now explicitly included ‘alliances’ within the supplier and alliance market domain.

Supplier and alliance relationships both need to be viewed as partnerships.

Supplier and alliance relationships both need to be viewed as partnerships, but there is a subtle distinction between the contribution each can make to a successful relationship marketing strategy. We define them as follows:–

  Supplier markets – Suppliers (or vendors) provide physical resources to the business. Sometimes these resources are augmented by services, but typically suppliers are characterised as the upstream source of raw materials, components, products or other tangible items that flow on a continuing basis into and through the customer's business.

  Alliance markets –In a real sense alliance partners are suppliers too. The difference is that typically they supply competencies and capabilities that are knowledge based rather than product based. Alliance partners may well provide services too, and alliances are often created in response to the company's perceived need to outsource an activity within its value chain.

In the mid–1980s, the British Leyland car manufacturing company had well over 1000 suppliers with which it had arm's-length, often adversarial, relationships. The company – now called the Rover Group has been transformed and enjoys close relationships with fewer than 500 preferred suppliers. Similarly, the UK high street retailer Bhs used to buy clothing products from 1000 suppliers at the beginning of the 1990s. By the end of the decade it was working closely with only 50 strategic suppliers. These two examples reflect a significant change in the way companies view their supplier base. Other organisations have engaged in alliances to import resources, capabilities and expertise into the business instead of trying to keep everything ‘in-house’ as they used to.

These new style relationships are a radical departure from companies’ traditional focus on vertical integration, whereby they sought to bring as much of the value-added in the final product as possible under the same legal ownership. In its early days in North America, Ford used to own the steel mills that made the steel for its cars, as well as most of the factories that made the components. Courtaulds established a vast, vertically-integrated business in textiles with the capability to control the value chain from synthetic fibres to finished garments. Now, the emphasis is on ‘virtual’ integration – that is, a confederation of organisations combining their capabilities and competencies in a closely integrated network with shared goals and objectives.

Figure 3.4 brings together the concept of vertical supply relationships and horizontal alliance partnerships as a closely coupled network within the six markets model.

It is perhaps helpful to think of alliances as ‘horizontal’ partnerships –in the sense that an alliance partner plays a value-creating role within the firm's value chain – and suppliers as ‘vertical’ partnerships – in the sense that suppliers are an extension of the firm. In this approach, sometimes termed ‘the extended enterprise’, suppliers and alliance partners link with the core organisation to help present more cost-effective, timely and innovative offers to customers. Virtual integration seeks to reap the benefits that accrue to companies which focus on core competencies, while at the same time delivering the advantages of co-ordination and integration that can flow from vertical integration.

It is beginning to be recognised that managing these interlocking networks of organisations – and, in particular, the relationships between them – is vital to competitive success. We argue that the way supplier and alliance ‘markets’ are proactively managed is one of the central elements of a relationship marketing strategy. We go on to examine the topic of alliances and managing relationships in networks in much greater detail in Chapter 4.

Supplier and alliance markets – a summary

As we have suggested, it is useful to think of supply chain partnerships as ‘vertical’ relationships and alliances as ‘horizontal’ relationships. Alliances bring new skills or competencies into the business or strengthen existing skills and competencies. The move to outsource activities that are judged ‘non-core’ to the business has gathered pace in recent years, giving further impetus to the search for appropriate alliance partners. Increasingly, value creation is no longer confined to a single firm, but instead is rooted in a confederation of firms that contribute specialist skill and capabilities. The value chain, in effect, now spans several organisations that work as partners in creating and bringing products to market.

Such relationships need to be managed quite differently from more traditional ‘subcontract’ relationships. Top management in these ‘network’ or ‘virtual’ organisations needs to create a ‘boundary-less’ business with joint decision-making, complete transparency on costs and the sharing of risks and rewards.

The influence market

The influence market domain usually has the most diverse range of constituent groups.

The influence market domain usually has the most diverse range of constituent groups. Among these are shareholders, financial analysts, stockbrokers, the business press and other media, user and consumer groups, environmentalists and unions. Each of these constituent groups can potentially exert significant influence over the organisation. The organisation can manage its relationships with them through applying a strategic marketing approach.

The relative importance of specific groups within the influence market will vary considerably according to industry sector. For example, companies selling infrastructure services such as telecommunications or utilities will place governments and regulatory bodies high on their list of important constituents within their influence market domain. Highly visible public listed companies may focus much of their attention on shareholders, financial analysts and the financial and business press. Manufacturing companies and the petrochemical sector may be especially concerned with environmentalists and government. Figure 3.5 illustrates several of the major groups within the influence market domain.

The relative importance of different groups within the influence market domain will also vary at different points in time. For example, a bank faced with fraud or insider trading may suddenly find the press, regulatory bodies and the central bank at the top of its influence market agenda. Similarly, actions by Greenpeace and other environmentalists over Shell's Brent Spar platform brought environmentalist to the top of Shell's agenda.

Understanding influence markets

While the influence market domain may comprise a considerable number of potential groups, a firm may need to address only a relatively few important ones at any given point. Several categories are of special interest because they are common to many organisations. These include:

1 financial and investor influence markets;

2 environmental influence markets;

3 competitor influence markets;

4 political and regulatory influence markets.

1. Financial and investor influence markets

Many organisations need to win the support and loyalty of a wide range of financial markets. Financial and investor influence markets are especially critical for organisations listed or planning to list on a stock market. But they are important to other organisations too, such as ‘mutuals’ – organisations owned by subscribers, depositors or customers – including non-listed insurance companies and building societies.

Investor loyalty is critically important in the financial and investor influence market. Reichheld¹¹ highlighted this in recent work that showed that investor churn in the average public company in the United States is more than 50 per cent a year. He concludes that managers find it nearly impossible to pursue long-term value-creating strategies without the support of loyal, knowledgeable investors. Reichheld's work is among a body of research that has begun to focus on financial and investor influence markets in recognition of their importance in relationship marketing.

2. Environmental influence markets

Environmental influence markets are a key group for organisations involved in industries such as petrochemicals, mining and manufacturing. Environmental bodies and pressure groups are becoming increasingly active and even militant, and can wreak serious damage on organisations that they target as being environmentally unfriendly.

The events following Shell's decision to dispose of its Brent Spar platform in the North Sea provide a stark illustration of the importance of this market domain. Greenpeace occupied the Brent Spar platform, activists in Germany and other countries fire-bombed petrol stations, and these and other events – including probable behind-the-scenes involvement by the British Government – led Shell to reverse its decision regarding the disposal of the Brent Spar platform. Shell clearly failed both to develop appropriate relational strategies and to communicate effectively with these key environmental groups.

By contrast, The Body Shop is an excellent example of an organisation that has managed its relationships with environmentalists and other influence market groups very well. For example, it has formed alliances with Greenpeace and Friends of the Earth and developed close relationships with other influence market groups, such as local communities, by ensuring that every one of its shops develops local community projects.

3. Competitor influence markets

Large organisations, especially those that are high profile or dominate their industry sector, need to consider carefully the relationships they have with their competitors. Adopting the stance of industry statesman can be a good strategy.

British Airways’ industry statesmanship was eroded for a period during the mid–1990s amid fierce competition between BA and Virgin Atlantic. BA attracted negative publicity over its so-called ‘dirty tricks’ campaign and Virgin Atlantic's position in the marketplace was enhanced as a consequence. Virgin got lots of free positive publicity and its popularity and familiarity grew among the public at large.

4. Political and regulatory influence markets

The political category within the influence market domain covers a number of groups including members of parliament, government ministers, central and local government departments and other government and quasi-government bodies. These groups may affect organisations within a given country, within an economic region such as the European Union, or on a global basis.

Companies may need to direct marketing activity at government and regulatory bodies. Gummesson¹² has pointed out that these two groups are particularly relevant for companies that sell infrastructure equipment such as nuclear reactors, telephone systems and defence products. Such products may affect the country's economic performance, employment levels or financial status, or may be politically important.

Influence markets – a summary

The penalties of failing to manage influence markets properly is illustrated by the jewellery retailer Ratners. In 1992, chief executive Gerald Ratner made a speech at the Institute of Directors in which he described his jewellery products as ‘total crap’. The general press picked up the story, which was reported widely. Ratners failed to manage strategic credibility during and after this event, which, together with an inappropriate and incomplete recovery programme, caused the group's fortunes to nosedive.

Companies involved with influence groups may not have formulated detailed and coherent relationship marketing strategies and plans to gain maximum advantage from managing these relationships. By adopting a marketing approach based on a closely defined set of specific objectives with a detailed marketing plan and an appropriate monitoring system to measure results, they can improve their chances of forging a constructive relationship with any given influence market.

The recruitment market

Increasingly, organisations are recognising that people are the most important resource in business. To attract and retain the highest quality recruits – those who share the organisation's values and will contribute significantly to its future success – firms have to market themselves to potential employees, or the recruitment market. This involves creating an appropriate organisational climate, and then communicating the benefits of that organisation to potential employees. Marketing to recruitment markets is particularly important for companies where staff are a key element of competitive advantage – service businesses for example – in order to secure a constant supply of high quality recruits.

The scarcest resource for most organisations is no longer capital or raw materials, but skilled people.

The scarcest resource for most organisations is no longer capital or raw materials, but skilled people. A trained and experienced workforce is perhaps the most vital element in delivering customer service. Global economics and the changing nature of employment have not helped to enlarge the recruitment pool, even when unemployment is climbing to historic levels. In times of higher employment, demographic trends explain the lack of many skilled workers, but in the United States and many Western countries the number of people entering the workforce has dropped. If attracting the best quality recruits is important to business success then the recruitment market will become a priority for most companies.

The recruitment market comprises all potential employees together with the third parties that serve as access channels. Figure 3.6 shows the main access channels for the recruitment market domain.

Potential employees may join a business through a number of these third parties. They may respond to advertisements placed by the employer or their recruitment agency. For senior appointments, they may be approached by executive search consultants. Where there is a dearth of high calibre recruits, some firms are turning to their own staff to suggest potential applicants, offering substantial payments as inducements. Accenture, the consulting firm, and Cisco, for example, have both successfully used staff recommendations as part of their recruitment process. Companies may also recruit staff via placement departments in universities and colleges, direct approaches and, increasingly, through the Internet.

Large companies competing in a competitive job market need to manage a wide range of recruitment market channels. A department in human resources (HR) frequently manages this complex marketing task, but HR does not always have the marketing skills and competencies to manage this complex set of relationships in a sophisticated way. The following example demonstrates how companies could improve their recruitment.

A large and well-known accountancy practice was having difficulty attracting newly qualified recruits. It was not difficult to find out why. The firm's recruitment literature was old-fashioned and lacked visual impact. On visits to university campuses – a traditional source of recruits – the firm was represented by an old and uninspiring partner and disinterested administrative staff. The firm then instituted a marketing plan to try to improve the situation. This involved redesigning recruitment literature (with the help of recent graduates), sending the brightest partners on university visits accompanied by managers who had interesting experiences to recount, and sponsoring awards and prizes at target universities. As a result of the recruitment marketing campaign, the firm dramatically increased its ‘offers to acceptances’ ratio.

A number of studies have highlighted the impact of recruitment practices on company performance. Organisations need to market themselves in a way that attracts the calibre of person that matches the image of the firm they want to project to customers. More companies are now identifying a psychometric profile of the type of employee most likely to be successful in achieving customer-driven goals. The recruitment process itself is also an opportunity for the company to build a positive image with new recruits.

The value employees add to business success is tied closely to the way they are selected, trained, motivated and led. Examples abound of businesses failing or succeeding as a consequence of the way they manage their people. The expression ‘our employees are our greatest asset’ is increasingly common – but more often than not it is a platitude. If CEOs and their boards were more proactive in recognising the contribution of employees in winning and keeping customers, they would substantially enhance their firms’ competitive performance. We will devote the rest of this section to discussing issues relating to recruiting and selecting employees within the recruitment market

Recruiting the best employees

Annual employee turnover is as high as 150 per cent in some service businesses. This represents a significant cost to the company in terms of advertising, interviewing time, administration, interview – and possibly relocation – expenses and training. There are also opportunity costs because of reduced productivity during the handover from an experienced employee to a new recruit or when a situation is vacant for a period of time. Estimates suggest that the cost of replacing an employee may be around 50 per cent of their annual salary.

With the costs of recruitment so high, it is becoming increasingly important to find employees who not only have the necessary skills and competencies and match the profile that the company wants to portray to its customers, but who are keen and likely to stay.

Potential employees need to be given realistic expectations of the job from the outset. Unless press advertisements, brochures and information supplied by third parties accurately reflect the job requirements and the company environment, the result will be disillusioned employees, low employee retention and poor word-of-mouth referrals.

McKinsey & Co argues that there is a ‘war for talent’ and that demographic and social changes are playing a growing role in this trend. In the United States and in most other developed countries the supply of workers in the 35 to 44 year-old age group is shrinking. Further, many of the best-trained people entering the workforce do not join traditional companies. A recent study found 30 per cent of MBAs in the United States preferred to work for a small business or start-up company.¹³

McKinsey found that 14 per cent of the managers in its 2000 survey (compared with 23 per cent in its 1997 survey) strongly agreed that their companies attract highly talented people. And only 3 per cent of the respondents to both surveys strongly agreed that their companies develop talent quickly and effectively.¹⁴ The study also found that companies doing the best job of managing their talent deliver far better results for shareholders. Companies scoring in the top quintile of talent-management practices outperform their industry's mean return to shareholders by a remarkable 22 percentage points. McKinsey concluded that while talent management is not the only driver of such performance it is clearly a powerful one.

Selecting employees

Companies must choose their recruits carefully if they are to be successful and gain competitive advantage. The values and motivations of potential employees must be in keeping with the organisation's service ethic, so companies should not necessarily base candidates’ suitability on their technical skills, which can be taught later, but on their psychological characteristics.

Selection techniques range from the traditional interview, through self-assessment, group methods and assessment centres, to the increasingly popular psychometric tests. Psychometric testing is an effective way of identifying the personality profile of people who are likely to be successful in delivering service quality and developing relationships with customers. Traditionally used more for management and graduate jobs, organisations are now using these techniques for a wider range of positions, including administrative, secretarial and manual. This reflects the importance that companies are now placing on the ‘emotional content’ of front-line positions.

Southwest Airlines in the United States is a good example of an organisation that understands the importance of emotional content among front-line employees. Southwest's selection strategy is based on finding individuals with a sense of humour and who genuinely enjoy serving people.¹⁵ Southwest's hiring process is unconventional. The process they use to screen prospective flight attendants is similar to a Hollywood casting call. Candidates are evaluated by a panel that includes flight attendants, ground personnel, managers and customers. Among other things, they are asked to recount the most embarrassing experience in their life in front of other potential staff. Southwest's customers hold the airline in such high regard that they willingly give up their time to help the airline select the best flight attendants. Following the interview, the panel compares notes on each of the candidates. The process is also competitive and highly selective. In one year the company received some 85,000 job applications and hired only 3 per cent of the applicants. Southwest uses a psychometric profile that it has developed as a result of studying its most successful and least successful job roles, to help it recruit, for example, flight attendants. It uses this to supplement the panel interviews and help find the people who best fit the profile for each job within Southwest.

Recruitment markets – a summary

Research has shown that employees who are unclear about the role they are supposed to perform become demotivated, which in turn can lead to customer dissatisfaction and defection. So new employees must be carefully prepared for the work ahead of them, as their early days in a company colour their attitudes and perceptions towards it.

The best service companies place considerable emphasis on both selection and development. First Direct, for example, selects front-line employees with good communications capabilities and excellent listening skills, in the belief that these skills are more important than banking experience.¹⁶ The recruiters seek confident people with a positive attitude who can project themselves well and convey a sense of energy. Successful applicants receive at least six weeks’ intensive training. This training includes technical training as well as personal skills to help them develop effective telephone techniques. Further, they learn customer development skills such as identifying opportunities to up-sell and cross-sell the bank's products. First Direct's employees are probably the best in the UK banking environment as a result of their careful selection and intensive ongoing employee development and training.

Those organisations lacking a strong service ethos may need to implement a major change management programme aimed at all employees. Development programmes aimed at instilling a customer consciousness and service orientation in employees are increasingly being referred to as internal marketing.

The internal market

Many organisations underestimate the important collaborative role marketing can play, in conjunction with operations and HR managers, in getting the internal market exchange processes working better. Internal marketing encompasses many management issues, but has two main aspects.

First, every employee and every department in an organisation is both an internal customer and/or an internal supplier. So organisations need to work as effectively as possible to ensure that every department and individual provides and receives high standards of internal service.

Internal marketing should ensure that all staff ‘live the brand’.

Second, all staff must work together in a way that is aligned to the organisation's mission, strategy and goals. Here internal marketing should ensure that all staff ‘live the brand’ by representing the organisation as well as possible, whether face to face, over the phone, by mail, or electronically.

The structure of the organisation can severely impede the development of customer relationships. Traditional vertical organisations with a hierarchical structure and functional orientation often favour individual functions at the expense of the whole business and the customer. Relationship marketing, with its emphasis on cross-functional marketing, focuses on the processes that deliver value for the customer. Building an organisation that is focused on the customer requires a strong emphasis on internal marketing.

The fundamental aims of internal marketing are to develop awareness among employees of both internal and external customers, and to remove functional barriers to organisational effectiveness. Figure 3.7 illustrates the structure of the internal market based on the organisational chart. However, this particular version of the organisational chart is inverted, following one used by Jan Carlzon, the former CEO of SAS (Scandinavian Airline System).

Segmenting the internal market on the basis of organisation levels is obvious. However, not so obvious is inverting the organisational chart to reflect the critical role of front-line employees. This inverted chart reflects Carlzon's view that the primary purpose of the whole organisation is to support all front-line employees and ensure all their interactions with customers, or ‘moments of truth’, result in a superior experience for the customer.

In the 1980s and 1990s, SAS Airlines used internal marketing to create competitive advantage. It recognised the importance of treating employees in a caring way that customers would, in turn, appreciate. It encouraged employees to get involved in decision-making to achieve the greatest level of customer satisfaction. Thus staff were empowered to make decisions appropriate to particular customer requirements. SAS employees were trained to develop a responsibility towards the customer that was apparent in the relationship between the company and its employees.

Other leading organisations have adopted a similar approach in their internal marketing activities. For example, Nordstrom, the leading US retailer that we referred to earlier in this chapter, adheres to the philosophy that the staff on the sales floor are the major contributors in the organisation. In Nordstrom's version of the ‘upside down’ organisational chart, the customer is included at the top of the chart and salespeople occupy the highest internal rung on the chart. Next are buyers, merchandisers and department and store managers. At the very bottom of the organisation chart are the joint presidents of the organisation.

Richard Pascale,⁸ a leading US consultant and academic, considers that Nordstrom ‘has a particular genius at defining a unique relationship with its internal customer – the salesperson’. Anyone wanting to join the organisation and progress to a managerial position must start in the sales role on the floor regardless of the seniority of the position they may have occupied in another organisation. Nordstrom believes everybody must demonstrate the ability to respond to customers and to sell effectively and it has developed a unique culture where everybody is promoted from within. Pascale quotes a senior executive as saying that it is ‘almost impossible’ to overstate the importance of this common career track to Nordstrom's ability to communicate within the company. ‘It's like we all speak a common language from top to bottom. It helps us avoid the we versus them mentality.’

If an organisation is to segment its internal market based on hierarchy, it must understand the most important levels of hierarchy and the type of staff at which internal marketing effort needs to be directed. For most organisations this will be front-line employees. In the case of SAS Airlines it was all staff that had any sort of interaction with the customer. That meant everyone from telephone sales, to check-in staff, to cabin crew and even baggage handlers. Nordstrom placed its internal marketing emphasis on the sales staff.

But in other organisations the main target for internal marketing activities may be different. In a large telecommunications company in Australia, for example, the principal focus of an internal marketing programme was middle management. Top management had decided the company must become more customer focused, but middle managers had become very technically oriented and were inhibiting the company's progress towards a customer orientation.

Segmentation of the internal market based on job role

Just as there are different ways of segmenting the customer market, there are alternative ways of segmenting the internal market. An essential aspect of internal market segmentation is to recognise the different marketing and customer contact roles within the business. Judd has developed a categorisation scheme based on the frequency of customer contact and the extent to which staff are involved with conventional marketing activities. This categorisation results in four groups: contactors, modifiers, influencers and isolateds.¹⁷

Contactors have frequent or regular customer contact and are typically heavily involved with conventional marketing activities. They hold a range of positions in service firms including selling and customer service roles. Whether or not they are involved in planning or executing marketing strategy, they need to be well versed in the firm's marketing strategies. They should be well trained, prepared and motivated to serve customers on a day-to-day basis in a responsive manner. They should be recruited, evaluated and rewarded based on their potential and actual responsiveness to customer needs.

Modifiers are people such as receptionists, the credit department and switchboard personnel, who, though not directly involved with conventional marketing activities, nevertheless have frequent contact with customers. These people need a clear view of the organisation's marketing strategy and the role they can play in being responsive to customers’ needs. They play a vital role particularly, but not exclusively, in service businesses. Modifiers need to develop high levels of customer relationship skills, and it is important to train them and monitor their performance.

Influencers are involved with the traditional elements of the marketing mix but have little or no customer contact. (Judd uses the word ‘influencer’ in a different context from the term ‘influence market’, which we described in the six markets framework above.) But these people play a big part in implementing the organisation's marketing strategy. Influencers work in roles such as product development, market research and so on. Companies recruiting influencers should seek people with the potential to develop a sense of customer responsiveness. They should evaluate and reward influencers according to customer-oriented performance standards, and programme opportunities to enhance the level of customer contact into their activities.

Isolateds are the various support functions that have neither frequent customer contact nor a great deal to do with conventional marketing activities. However, as support staff, their activities critically affect the organisation's performance. Staff falling within this category include the purchasing department, personnel and data processing. Such staff need to be sensitive to the fact that internal customers as well as external customers have needs which must be satisfied. They need to understand the company's overall marketing strategy and how their functions contribute to the quality of delivered value to the customer.

The adoption of internal marketing approaches by companies

Virgin Atlantic has long recognised the critical role internal marketing plays in its success. One of the secrets of the airline's success has been enthusiastic, empowered, motivated employees. Sir Richard Branson has said: ‘I want employees in the airline to feel that it is they who can make the difference, and influence what passengers get.’ Sir Richard explained:

We aren't interested in having just happy employees. We want employees who feel involved and prepared to express dissatisfaction when necessary. In fact, we think that the constructively dissatisfied employee is an asset we should encourage and we need an organisation that allows us to do this – and that encourages employees to take responsibility, since I don't believe it is enough for us simply to give it.

Virgin Atlantic's philosophy has been to stimulate the individual, to encourage staff to take initiatives and to empower them to do so.

The Walt Disney Company has practised sophisticated internal marketing since its inception. Employees are rigorously trained to understand that their job is to satisfy customers. Employees are part of the ‘cast’ at Disney and must at all times ensure that all visitors (‘guests’) to their theme parks have a highly enjoyable experience. Strict dress and conduct rules are maintained in order that employees conform to standards.

Many retailers give a high priority to internal marketing. High street retailer Woolworths has recognised the importance of engaging its employees and has invested in a number of internal marketing programmes over the past five years. These include a communications cascade, involving all UK employees, to promote the organisation's mission and core values, and a brand development programme which, together with customer research, used many of the company's front-line employees to formulate the new brand proposition. Woolworths recently embarked on a ‘brand engagement’ programme to communicate the new brand proposition and promote a deeper understanding of customer needs among key members of staff.

Internal markets – a summary

The current interest in internal marketing has been prompted by the renewed acknowledgement by organisations of the importance of their people. Internal marketing strategies involve recognising the importance of attracting, motivating, training and retaining quality employees through developing jobs to satisfy individual needs. Internal marketing aims to encourage staff to behave in a way that will attract customers to the firm. Further, the most talented people will want to work in those companies they regard as good employers.

People now recognise internal marketing as an important component of a customer-focused organisation, and it is starting to be treated as an important management topic. Many companies are taking a serious approach to internal marketing and Lewis and Varey¹⁸ have published a much-needed commentary on the current state of research and conceptual development in internal marketing.

Assessing performance in the six markets

All businesses should aim to build a strong position in each of the six markets.

All businesses should aim to build a strong position in each of the six markets described above, but the precise emphasis they give to each needs to reflect their relative importance to any given firm. Companies can determine the appropriate level of attention and resources that should be directed at each through the following steps:

  identify key participants, or ‘market’ segments, in each of the markets;

  undertake research to identify the expectations and requirements of key participants;

  review the current and proposed level of emphasis in each market overall and for major participants in each market;

  formulate a desired relationship strategy and determine whether a formal market plan is necessary.

Identifying key groups or segments in each market domain is the first step in applying a multiple markets framework to an organisation. For example, Figure 3.8 lists the key markets and market segments for the property division of BAA (formerly British Airports Authority).

The next step is to identify the expectations and requirements of the key participants in each market. In some cases there will be sufficient information within the company; in others market research will be needed to gather information from outside.

Identifying emphasis on the six markets

Once the company has identified the broad groups and the segments within them for each market domain, it can assess what level of marketing emphasis it gives to each market domain currently, and what level it needs to give. It can use a relationship marketing network diagram (also known as a ‘spidergram’), shown in Figure 3.9, to help it decide on the right level of emphasis.

This diagram has seven axes – two for customers (existing and new) and one for each of the other five relationship markets discussed earlier. The scale of 1 (low) to 10 (high) reflects the degree of emphasis (cost and effect) placed on each relationship market. Dividing customers into ‘new’ and ‘existing’ reflects the two critical tasks within the customer domain, customer attraction and retention. A group of managers within a firm can assess their current and desired levels of emphasis on each market domain by means of a jury of executive opinion and plot the results on the relationship marketing network diagram.

We illustrate this approach to reviewing the six markets by reference to the relationship marketing network diagram for the Royal Society for the Protection of Birds (RSPB), a leading conservation charity, shown in Figure 3.10. This diagram is based on the views of a number of people, including former executives at RSPB, and represents an external assessment of developments in that organisation some years ago.

The RSPB might have considered a number of issues regarding the six markets, as shown in this figure, including:

  reducing its emphasis on acquiring members and increasing emphasis on retaining existing members;

  focusing more strongly on influence markets;

  reinforcing customer care and service quality issues with internal staff.

This analysis represents the first stage of the diagnostic process. The second stage examines the groups or segments within each market domain in terms of present and desired marketing emphasis. Further network diagrams can then be developed for each market domain. For example, Figure 3.11 shows a network diagram for the referral markets of an accounting firm.

The diagram illustrates five key referral markets identified by the firm: existing satisfied clients, the firm's audit practice, banks, joint venture candidates and offices of its international practice. The firm concluded that though it was doing a satisfactory job for its audit practice and banks, it could improve referrals by putting more emphasis on the other three areas.

Planning for the six markets

The two levels of analysis described above identify the key groups or segments in each market domain and provide an initial view of the existing and potential levels of marketing emphasis directed at them. The final step involves determining the appropriate relationship strategies for each market including which of them require a detailed marketing plan to be developed. We will examine these relationship strategies in more detail in Chapter 6.

SUMMARY

This chapter has stressed that marketing activities directed at customers are necessary, but do not in themselves constitute relationship marketing. Organisations must also address the other relevant market domains and the segments within them. Successful relationship marketing involves an informed and integrated approach to all these market domains in order to achieve competitive advantage.

This stakeholder approach to relationship marketing recognises a diversity of key markets or market domains that organisations need to consider. It identifies where organisations should direct their marketing activity and where they may need to develop detailed marketing strategies.

The six markets framework has been successfully applied in a range of organisations including those in the business-to-business, business-to-consumer and non-profit sectors. Since it was developed in 1991, more than 200 organisations have used the six markets model to develop plans for each of their market domains (and market segments within them) and to demonstrate the benefits of adopting a relationship marketing perspective. The approach has proved a robust tool to help organisations recognise and respond to their network of markets.

This chapter has focused on the stakeholder relationships a company must develop with its markets. Companies’ growing emphasis on developing relationships, partnerships and alliances with other companies is particularly important, and has given rise to the concept of the network organisation. We go on to explore this concept in Chapter 4.

References

1   Payne, A. (2000), Relationship Marketing: The UK Perspective, in Sheth, J.N. and Parvatiyar, A. (eds) Handbook of Relationship Marketing, Thousand Oaks, CA: Sage, 39–68.

2   Kotler, P. (1992), ‘It's Time for Total Marketing’, Business Week Advance Executive Brief, 2.

3   Parts of the discussion in this chapter draw on: Peck, H., Payne, A. F., Christopher, M. G. and Clark, M. K. (1999), Relationship Marketing: Strategy and Implementation, Text and Cases, Oxford: Butterworth-Heinemann.

4   See: Kotler, P. (1992), op. cit., and Morgan, R.M and S.D. Hunt, (1994), ‘The Commitment-Trust Theory of Relationship Marketing’, Journal of Marketing, 58 (July), 20–38.

5   Gummesson, E. (1999), Total Relationship Marketing, Oxford: Butterworth-Heinemann.

6   Shaw, N. (1997), ‘Unification Theory’, Customer Service Management, June, 26–29.

7   Wayland, R. E. and Cole, P. M. (1997), Customer Connections: New Strategies for Growth, Boston, MA: Harvard Business School Press.

8   Pascale, R. (1993), Nordstrom. (This case study is reproduced in Peck, H., Payne, A. F., Christopher, M. G. and Clark, M. K. (1999), Relationship Marketing: Strategy and Implementation, Text and Cases, Oxford: Butterworth-Heinemann.)

9   Heskett, J. L., Sasser, Jr, W. E. and Schlesinger, L. A. (1997), The Service Profit Chain, New York: Free Press.

10  File, H. M., Judd, B. B. and Prince, C. A. (1992), ‘Interactive Marketing: The Influence of Participation on Positive Word-of-Mouth and Referrals’, The Journal of Services Marketing, 6, 4, 5–14.

11  Reichheld, F. F. (1990), The Loyalty Effect, Boston: Harvard Business School Press.

12.  Gummesson, E. (1987), ‘The New Marketing-Developing Long-Term Interactive Relationships’, Long-Range Planning, 20, 4, 10–20.

13  The Universum Graduate Survey 2000, American Edition, Stockholm: Universum.

14  Axelrod, E.L., Handfield-Jones, H. and Welsh, T.A. (2000), ‘War for Talent: Part Two’, McKinsey Quarterly, No. 2.

15  This brief discussion is based in part on an interview on a video made by Harvard Business School.

16  Lovelock, C. (1994), Product Plus, McGraw Hill.

17  Judd, V.C. (1987): ‘Differentiate with the 5th P: People’, Industrial Marketing Management, 16, 241–7.

18  Lewis, B. and Varey, R.J. (2000), Internal Marketing, Taylor and Francis Book Ltd.