Chapter 6

Developing and implementing a relationship strategy

INTRODUCTION

Throughout this book, we have emphasised the central role that delivering and creating value play in business success. In this final chapter we look at how to develop and implement a relationship strategy based on this approach to value. In addressing the subject we examine a number of issues. First, we discuss how relationships with multiple stakeholders create value, and describe two models – the relationship value management framework and the service profit chain – that can help a business understand just how relationships in key market domains contribute towards value. Second, we discuss how a business should go about choosing appropriate relationship marketing strategies for different types of customer. Third, we examine how to do detailed planning within the six markets. And fourth, we explore in detail how a firm can use the relationship management chain, introduced in Chapter 1, as a framework for developing and implementing a relationship marketing strategy.

We then turn our attention to the critical role of organisational change and implementation issues. We advocate a pan-company cross-functional approach to relationship marketing, but this requires most organisations to make a considerable investment in organisational change. We explore five paradoxes of change management and then address the way businesses can generate knowledge through dialogue. Finally, we make some observations on the future of relationship marketing.

A pan-company cross-functional approach … requires most organisations to make a considerable investment in organisational change.

Relationships as a source of value

Creating value, and, more specifically, customer value, is increasingly seen as the next source of competitive advantage. There are several reasons for emphasising value in the broader context of relationship marketing. First, value has traditionally been concerned with ‘the value customers create for a firm’ rather than the ‘value the firm creates for the customer’ – and even then there has been too much focus on a narrow transactional perspective.¹ Second, value in marketing has mainly focused on the transaction or exchange and has not taken sufficient account of the value of ongoing relationships after the sale. Third, until recently, the role of value in the context of the multiple stakeholder view of relationship marketing has been largely ignored.

Recent developments in value research

Academic research into value has started to reflect more explicitly the role other stakeholders play in the value process.

Practitioners and academics have grown increasingly interested in shareholder value. However, we believe that a lot of what has been written about shareholder value to date emphasises maximising shareholder value, while largely ignoring the issue of customer value. Management's main goal is generally agreed to be to increase shareholder value. But maximising shareholder value may come at the expense of other stakeholders, leaving in its wake diminished job security, higher unemployment, poorer products and services and, ultimately, reduced shareholder value. As an example, in the short term a business could enhance shareholder value by reducing customer value through, for instance, cutting customer service budgets.

Firms need to consider customer value and shareholder value together. Placing too much emphasis on either one of them at the expense of the other could have an adverse long-term impact. Some organisations might deliver high customer value with poor shareholder value, for instance, while others might maximise shareholder value while reducing customer value. What is more, firms also need to take into account the role employees and internal processes play in creating value.

Companies can no longer view value as deriving from an individual transaction. Creating value involves acknowledging the ongoing interactions over time between a company and its customers. Value is created over time and is subject to changes and external influences such as other stakeholders.

A framework for relationship value management

A framework for relationship value management is shown in Figure 6.1.² This framework represents a strategic approach to managing an organisation in order to maximise value to customers and the organisation through the integrated management of relevant stakeholders. There are two main elements to the framework: the central value process and the surrounding stakeholder interaction processes. The aim of the central value process is to determine a value proposition for the organisation, and involves four sequential value-based activities: value determination, value creation, value delivery and value assessment.

The framework also illustrates linkages between the value process and specific stakeholders. All stakeholders in the six markets model potentially play a role. These stakeholders are represented in the three circular stakeholder groupings: customers, employees and external stakeholders. Shareholders are a particularly important group of stakeholders in public companies.

Each of the six market domains is represented within the three circular groups. These are: customer markets and referral markets (within the customer group); internal markets and recruitment markets (within the employee group); and influence markets – including shareholders and supplier and alliance markets (within the external stakeholder group). Each of the three major stakeholder groups represents opportunities to create and deliver value.

In each of the three stakeholder groups represented in Figure 6.1 there are a number of key value activities that are illustrated as three circular sub-processes. Within the customer group these key activities are customer attraction, customer satisfaction and customer retention. Within the employee group the key activities are employee recruitment, employee satisfaction and employee retention. The external stakeholder activities involve stakeholder engagement (engaging the right stakeholders, such as investors and suppliers), stakeholder satisfaction and stakeholder retention (retaining them by ensuring that their needs are satisfied). Most organisations place much of their emphasis on shareholders within the external stakeholder group, but they must also manage other stakeholders. For example, influence markets might be particularly important for the not-for-profit sector. But supplier and alliance markets must be managed too to ensure they are also part of the whole value process.

The four activities of the central value process have their roots in the value literature we discussed earlier in this book. In particular, the value process builds on the McKinsey value delivery sequence described in Chapter 1. We consider that there are subtle but important distinctions between the McKinsey approach and the four-step process represented in our framework. First, the value delivery sequence places more emphasis on the value to the company than the value to the customer. Second, we argue that value determination, as shown in our framework, involves a much more rigorous understanding of both what the customer values and the customer's lifetime value to the firm than the McKinsey value delivery sequence allows for. Third, there is no value assessment activity within the value delivery sequence but we consider this to be a critical step in providing measurement and feedback on customer-perceived value. The value process in our own framework emphasises the broader perspective of relationship value as it relates to employees and other external stakeholders as well as to customers.

Value determination is equally important for employees and external stakeholders. For external stakeholders, such as shareholders, value determination involves identifying factors such as what will make them invest, what will make them continue to invest and what returns they expect. Understanding what value determination means for shareholders is especially important – not least in cases where companies struggle to keep shareholders.

The value creation activity involves developing and aligning the company's products and services – including its processes and employees to meet the requirements it identified at the value determination stage. To determine what value creating activities it should undertake, the organisation will probably need to assess the customer's value to the firm (see Chapter 2). This involves understanding which customers are profitable and/or have a significant lifetime value. The firm could then target bespoke value offerings at these groups. But this strategy should aim to retain existing customers as well as attract new ones. Companies also need to consider the role of employees and external stakeholders in creating value. Value creation for employees needs to be viewed from two perspectives – the value employees create for the organisation, and the value the organisation creates for employees.

For the value delivery activity, the value chain literature also provides a framework for considering the connection between the organisation and the customer. In particular, considering the interaction between the organisation's value chain and the customer's value chain helps inform decisions about the value delivery process, as we outlined in Chapter 5.

Chapter 5 also highlighted a number of tools and models such as customer satisfaction surveys and service quality monitors that companies can use to help them in the value assessment process.

But firms must assess the value of their employees as well as their customers. Employees tend to perceive behaviour-based evaluation as a reliable indicator of the value they deliver.³ Assessing the value of employees is closely linked to employee retention. Long-standing employees are more likely than relative newcomers to know their jobs and the goals of the organisation and thus be more productive.

Firms must also assess their own value to external stakeholders and external stakeholders’ value to them. Academic literature places a lot of attention on shareholders in this context, which, given their high profile and significant influence on an organisation's activities, is understandable. But as we have already mentioned, the shareholder value literature focuses on methods for assessing the value the organisation delivers to shareholders and places relatively little emphasis on the value shareholders deliver to the organisation.

But other external stakeholders are important too. For example, the interaction between a company and its suppliers may be critical. The IMP research that we discussed in Chapter 4 is particularly relevant here in terms of an organisation's relationship with its suppliers and other key alliance partners.

A company can feed back the results from its value assessment – which should also involve assessing the value of the customer to the firm after the value delivery activity – into the initial stage in order to reassess value determination. Thus the value process is dynamic and iterative.

The services marketing literature suggests that three key stakeholders are closely linked. Research on what is now known as the ‘service profit chain model’ focuses on the relationship between employee satisfaction, customer loyalty and profitability and shareholder value.

From customer value to stakeholder value

Employees, customers and shareholders are particularly important in creating value.

Employees, customers and shareholders are particularly important in creating value. Figure 6.2 shows the ‘employee-customer-profit chain’ or ‘linkage model’, which is a form of the service profit chain developed by researchers at the Harvard Business School.⁴ This diagram depicts the sequential roles employees and customers play in creating shareholder value.

Reichheld, author of The Loyalty Effect, argues that the three key stakeholders – employees, customers and shareholders – are the ‘forces of loyalty’.⁵ So while other stakeholders can play a major role, these three are central to achieving success. This reflects the practice of many leading service organisations. For example, Bill Marriott Jr, chairman of Marriott Hotels, is a strong exponent of the need for the business to satisfy the three key groups of customers, employees and shareholders. Many service experts believe that employee satisfaction should be ranked first among these, because employee satisfaction impacts customer and ultimately shareholder satisfaction.

The logic in this diagram argues that improving leadership and management behaviour positively affects employee attitudes and satisfaction. The more satisfied and motivated an employee, the longer they are likely to stay with an organisation and the better they will do their job. This positively affects customer satisfaction, so customers will stay longer and generate higher sales for the company. The result is strong profitability and increasing shareholder value.

But it is not clear, for any given organisation, how much one variable needs to improve to achieve a given level of improvement in another variable. For example, if employee attitudes and satisfaction increase by a measurable amount, what impact will this have on customer satisfaction and resulting profitability?

Sears, Roebuck & Company, the leading US department store, is an outstanding exemplar of the use of metrics within the service profit chain. Sears, one of the great turnaround success stories of the 1990s, underwent a radical transformation.⁶ Much of its success was attributed to rigorous measurement systems that tracked employee attitudes and their impact on customer satisfaction and profitability. Critically, management is aligned around the metrics and there is widespread understanding throughout Sears of how their model works.

Not every organisation will be able to be as sophisticated as Sears, Roebuck, but all business leaders should aspire to improve their companies’ performance through developing appropriate metrics to measure value.

Choice of relationship strategy

A company will probably need different types of relationship strategy for different types of customer. Factors affecting the choice of relationship strategy might include an uncertain and volatile marketing environment,⁷ the degree of commoditisation and hence price sensitivity of the market and the size of transaction costs. In particular the firm's overarching business strategy will influence the kind of relationships it chooses. In this ‘contingency’ approach to relationship marketing strategy companies will find the three ‘generic’ business strategies identified by Treacy and Wiersema⁸ very useful:

  operational excellence

  product leadership

  customer intimacy

Treacy and Wiersema called these three routes to success ‘value disciplines’. Based on their research they suggested that marketplace success was usually built on ‘what kind of value proposition the companies pursued – best total cost, best product, or best total solution’. They continued:⁸

by operational excellence, we mean providing customers with reliable products or services at competitive prices, delivered with minimal difficulty or inconvenience. By product leadership, we mean providing products that continually redefine the state of the art. And by customer intimacy, we mean selling the customer a total solution not just a product or service.

While these three ‘disciplines’ or ‘generic’ strategies are not mutually exclusive, companies tend to have different strengths – or weaknesses in each of the three. Therefore we believe that companies need to support each of these three generic strategies with an appropriate relational strategy in each of the six key market domains.

There is a connection between Treacy and Wiersema's three value disciplines and the six markets model that we discussed in Chapter 3. In order to become a leader through one or other of these generic strategies a company will need to vary the emphasis it places on each of the six markets in the overall marketing strategy of the business.

So, for example, organisations seeking to follow the discipline of ‘operational excellence’ will need an internal culture that is based on efficiency. In other words, the focus of the internal marketing effort should be on continuous improvement, multi-skilling and activities such as quality circles that lead to greater internal efficiency. The organisation should also place significant emphasis on the supplier market domain since materials and supplies account for a major proportion of many organisations’ total cost. By working more closely with suppliers the organisation will identify many opportunities to reduce cost and improve quality. Likewise, the firm will also need to manage closely the interface with downstream intermediaries such as distributors and retailers. Using electronic data interchange (EDI) and other forms of electronic commerce, for example, firms can often significantly enhance the responsiveness and cost-effectiveness of the supply chain.

Those firms seeking to base their strategic focus on ‘product leadership’ will need to construct a six-market strategy that places different weight on each domain. For example, they might choose to invest in creating an internal culture that encourages innovation, risk-taking and entrepreneurship. As such they will want to recruit people who can contribute to the innovation process, people with skills and experience that indicate their creativity or in-depth knowledge of technologies or markets. Microsoft, an acknowledged world leader in its field, has declared its sole recruitment criterion to be ‘intelligence’.

Businesses seeking product leadership will also need to focus on their relationship with suppliers. In many industries today suppliers drive a significant proportion of innovation. Bringing suppliers into the product development process can often lead to breakthroughs in design and functionality. Most of the innovative features that we now take for granted in motor cars, for example, originated with the suppliers.

Companies seeking product leadership will also benefit from developing alliances with other organisations to gain access to their specific skills, knowledge bases and market understanding.

Many studies now confirm the impact of employee motivation and commitment on customer satisfaction.

Companies choosing to pursue a strategy of ‘customer intimacy’, meanwhile, will need to put their emphasis on developing ever closer, more customised – even personalised – relationships with customers. As such the ‘internal’ market is critically important to them. Many studies now confirm the impact of employee motivation and commitment on customer satisfaction. Developing customer intimacy also depends on identifying those customers or segments who are more likely to seek this type of relationship. Certain types of products and services and certain buying occasions are more likely to lend themselves to this kind of strategy than others. So customer-intimate companies tend to focus on building relationships with existing customers with the greatest potential for growth and profitability.

Planning for the six markets

Relationship marketing, as we see it, does not lend itself to a highly prescriptive approach to developing marketing plans. There is no ‘proper’ way of developing marketing strategy; companies need to make choices, avoiding both overly prescriptive models and non-actionable descriptive formulations. Mintzberg has pointed out that the strategic planning literature has confused decision-making with strategy-making by assuming that strategy making must involve selecting a single course of action at one point in time.⁹

It is now widely acknowledged that making marketing decisions based on the ‘4Ps’ of product, price, promotion and place can be too restrictive. In essence, the 4Ps is an organising principle for decisions about the way financial resources are allocated. As we pointed out in Chapter 5, in practice the range of resource decisions is limited by the scope of the marketing budget, which is the province of the marketing function. This encourages an overemphasis on those kinds of decisions that concern discrete marketing services activities like advertising and research, which can be funded without the collaboration and commitment of people outside the marketing function. Therefore it is often difficult for marketing to actually implement marketing strategies.

To focus and integrate strategies for each of the six markets into a cohesive whole is a challenging task (see Figure 6.3). Marketing has long sought to structure plans around market-based objectives, whatever the organisational climate for change may be. But in the era of relationship marketing, organisations need to take more interest in the prevailing employee ‘climate’, and we will return to this point later. Certainly there needs to be a more collaborative approach to planning in order that firms can align activities that traditionally fall within marketing's domain and those that fall outside it. The objective of the periodic planning exercise is to ensure there is a cohesive and pan-company approach to determining and implementing a market-oriented strategy.

Some markets may not always need detailed plans, although organisations may find it useful to develop them. However, firms should develop some form of relationship marketing objectives for each of the market domains, together with value propositions that support these objectives. Otherwise, strategies will not be aligned and organisations will not change.

In Chapter 3 we examined in depth the concept of building relationships with market domains using the ‘six markets model’. We suggested that while all businesses should aim to build a strong position in each of these markets, the emphasis they place on each market should reflect their chosen underlying generic strategy. A six markets strategy can be conveniently summarised in the relationship marketing network diagram, which shows the company's present and desired emphasis for each of the six markets. Each market domain can be divided into a series of further sub-groups or segments. Figure 6.4 illustrates this idea with the example of the referral market for an accounting firm.

A firm can augment the information it draws from the relationship marketing network diagram by looking at the affect of positive or negative performance in each of the six market domains on success or failure in the final customer market. Firms may find it useful to summarise the key aspects of such analysis along the lines of the Euro Disney example we provide below. Euro Disney opened in 1992 and struggled for several years to build a significant customer base. Figure 6.5 highlights a number of failings across the company's six markets that may have contributed to its difficulties.

Once a business has identified critical issues within its six market domains it needs to put key metrics in place to monitor performance in each of those markets. Figure 6.6 illustrates some of the potential metrics that could be used within each market domain.

The relationship management chain

Transactional marketing is often more product focused than customer-focused.

Transactional marketing is often more product focused than customer focused. Companies have tended to see the customer as someone to whom an offer is made, that offer having been predicated by the organisation's own capabilities and competencies. But while companies clearly have to focus their offer around their own skills and strengths, true relationship strategies begin not with the concept of a bundle of features or even a brand, but with a clear understanding of what constitutes value in the eyes of the customer.

The goal of relationship marketing is to create and deliver superior customer value on a continuing basis. To help companies develop an integrated approach to achieving this goal we propose a planning template known as the relationship management chain, shown in Figure 6.7.

The relationship management chain seeks to operationalise the six markets model by getting everyone to focus on creating customer value. There are four distinct – but linked – elements in the chain:

1 Defining the value proposition.

2 Identifying appropriate customer value segments.

3 Designing value delivery systems.

4 Managing and maintaining delivered satisfaction.

Defining the value proposition

Every customer has a different idea of what represents value, and what is valuable to one customer may be less valuable to another. At its most fundamental, value represents customers’ perceptions of the benefits they believe they will receive from owning or consuming a product or service relative to the total costs of owning it. Customer value is best defined as ‘the impact the supplier's offer has on the customers’ own value chain’. If the offer enhances performance, increases perceived benefits or reduces the customer's costs, then customers will see it as clearly adding value to them.

So the starting point of any relationship marketing programme should be to define and specify the precise nature of the value to be delivered, market segment by market segment – or even customer by customer. This is the ‘value proposition’ or, to express it more simply: ‘how do we intend to create value for our customers?’

Identifying appropriate customer value segments

Customers’ different perceptions and requirements of value give marketers a powerful means of segmenting their markets. In-depth customer research will help reveal the salient dimensions of value, and techniques such as ‘trade-off analysis’ can identify groups of customers who share common value preferences. In other words, companies can segment markets on the basis of groups of customers who share common value preferences. The resulting segments might well cut across the more traditional bases for segmentation such as demographic or socio-economic variables, but marketing strategies based on customer value preferences are more likely to succeed.

Designing value delivery systems

The means by which a company ‘delivers’ value to customers is in itself a key element of the relationship. When we talk of delivery systems we do not mean just the physical delivery of products or the way services are presented, but also the marketing channels a company uses, the flexibility of its response, the way it links buyer and supplier logistics and information systems, and so on. In other words, we view the design of the value delivery system as a critical way of forging stronger linkages between the customer's value chain and the supplier's value chain. Increasing fragmentation of many industries’ markets has led customers to demand greater variety in products or services, which means suppliers need to make their delivery systems more flexible – in other words, to tailor products and services to the precise needs of individual customers or segments.

To build such flexibility into their delivery systems companies will frequently have to radically review the conventional wisdom on manufacturing and distribution. For example, they may need to focus on reducing batch quantities in production and distribution and move to a just-in-time delivery environment that involves delaying the final configuration of the finished product.

Managing and maintaining delivered satisfaction

Companies must regularly monitor the processes that deliver satisfaction.

Because the quality and strength of customer relationships is so critical to the survival and profitability of any business, companies must regularly monitor the processes that deliver satisfaction, as well as the customers’ perceptions of performance. In the same way in which the quality of physical products depends on how well companies control the process that manufactures them, so too the quality of customer service depends on how well companies control the way it is delivered.

In Chapter 5 we stressed how important it is to align quality, customer service and marketing. But most companies manage these key ingredients of relationship marketing as discrete activities, with insufficient overlap. The example in Figure 6.8 depicts a manufacturing company that puts too much emphasis on quality and has an isolated and impoverished marketing function.

Firms should monitor their service process continuously, ensuring that they identify all potential ‘fail points’ and, if they can not make these fail-safe, carefully control them. As we pointed out in Chapter 5, the way a company manages its ‘moments of truth’ with customers dictates whether customers are satisfied or disappointed with any element of service.

Employee satisfaction studies and customer satisfaction studies should form an integral part of the way companies manage their service delivery. Many companies already conduct such studies but only on an ad hoc basis. Paradoxically, companies that monitor brand awareness or attitudes and usage every month often pay much less attention to vital performance indicators such as employee and customer satisfaction.

Implementation and organisational issues

Because relationship marketing is a pan-company concept, companies will often need to change substantially in order to implement it. Conventional organisations are ‘vertical’ – that is, designed around functions. But market-facing companies must be ‘horizontal’ – that is, focused on processes. As we have already observed, process management requires cross-functional working and a major transition from the classic ‘silo’ mentality to a ‘customer-centric’ view of the world.

The role of marketing in the firm, under the new paradigm of relationship marketing, is more challenging than ever before. Now marketing has to take responsibility for initiating specific plans for each of the six markets. Once the organisation as a whole has decided how it wants to compete and what value propositions it wants to deliver, marketing has to identify and link the key process strategies together to achieve corporate goals.

Such a pan-company plan might appear eminently attractive, but in most cases it will not be achieved without significant organisational and cultural change. For instance, working across functions using multi-disciplinary teams will have to become the norm.

The types of skills and breadth of knowledge required to make this philosophy succeed are quite different from those inherent in the traditional functional management model. Continuous management development in areas such as cross-functional process management and leadership skills, for example, will be critical. The McKinsey ‘Seven S’ model shown in Figure 6.9 shows the many dimensions of organisational change that are involved in moving to a process-oriented relationship marketing strategy.

The traditional view of organisation is that strategy is the starting point for implementing change and that the type of organisational structure required will be clear from this strategy. Likewise, the types of systems needed to carry out the strategy will follow logically from the strategy and structure. The ‘Seven S’ model, by contrast, suggests that companies need to consider four additional elements –style, staff, skills and shared values. While the average and poorer-performing companies tend to place most emphasis on strategy, structure and systems, the top performing companies place emphasis on all seven elements in the McKinsey framework.

The starting point in the Seven S framework is shared values. These should reflect the positive key aspects of the organisation's culture. In a sense, the shared values are the ‘glue’ that holds the organisation together. The Seven S model suggests that organisations become effective and implement change successfully by carefully orchestrating the seven elements. McKinsey & Co use the metaphor of a compass to describe how each of these elements should be lined up, like compass needles pointing in the same direction, so that they support each other. The Seven S framework was originally developed as a way of thinking broadly about the problem of effective organisation, but it has also proved to be an excellent tool to judge how easy it would be to implement a new strategy. Strategy implementation is not only a matter of getting the strategy and structure right, but also involves all the other elements in the Seven S model. If the needles of the compasses are aligned the company is purposefully organised to carry out the task. If the needles are not aligned, then the company needs to look at each of the elements to see if it can alter it or realign it to integrate the organisation round a common task or purpose. As such the Seven S framework is an excellent way to check the strategic fit between the different elements in an organisation.

Let us consider the strategic change a company will need to make if it wants to shift from a transactional orientation to a relationship orientation. Figure 6.10 provides a summary of the key changes the company will need to make the transition.

The changes involved in making the transition to relationship marketing management are clearly profound. There are a number of potential obstacles to this transition, not least the entrenched interest in preserving the status quo.

Organisational change

So now we are left with an inescapable conclusion. Somebody has to start the wheel turning. Managing change is strategic. Getting support from senior management as a sponsor of change is critical. What is really at stake is an ‘organisational transition’ to collaborative management that will help align the major company-wide processes of innovation, demand/supply chain and customer relationship management.

Committing to a precise goal at an early stage could be misguided, given that the move to relationship marketing management is a qualitative goal. Having said that, a company will need to take a number of definite steps, each of which will involve doing things differently – a process of ‘learning by doing’ in effect. A company needs to plan these steps, set up and complete individual projects to achieve them and put in place motivational and organisational structures.

James Quinn introduced the concept of ‘logical incrementalism’ to corporate strategic planning in the late 1970s. Following Quinn,¹²we recognise that companies can achieve goals in each of the six markets through many means, and that they may be politically unwise to proscribe unilaterally a particular set of means too early in the process. Incremental changes generate new knowledge and applying that knowledge leads to new incremental change processes. Logical incrementalism is not ‘muddling through’ but a way of staying open to new information and reaching for sources of information up and down the organisation.

People and process

In relationship marketing there is a recursive (that is, backwards and forwards) relationship between people (who are involved in work processes) and processes (which involve people). Each is the key to the effectiveness of the other. But to leverage this relationship companies need to invite people to support and participate in improving the way processes are designed and organised. As such, the people-process relationship within the organisation becomes the internal driving force for change. But achieving change through people-process drivers poses a potential challenge to marketing managers’ influence and authority.

As any manager knows, doing things differently is unlikely to be applauded unless the project succeeds – and sometimes not even then. So we would recommend that the CEO endorses any change plan by getting actively involved. If this endorsement is not forthcoming, then marketing might limit the programme to a ‘pilot’. It is easier to launch a pilot project when faced with organisational or cultural resistance to change than it is to ‘hit the wall’ head on. Without top-level support, marketing innovators can only stretch the cultural ‘elastic’ so far, and it is counter-productive and politically misguided to attempt to challenge and overturn the company's system of beliefs and assumptions. There are other ways for marketing to achieve its ends.

One solution might be to suggest a pilot programme to another department or division where collaboration between it and marketing seems likely to succeed. For example, marketing might collaborate with logistics to improve supply relationships, or with human resources to foster talent. Although this approach lacks the legitimacy of a company-wide proposal, the power base is shared between two or more organisational units. Not only does such an approach protect marketing against becoming isolated within the company through its pursuit of counter-cultural activities, it also provides different perspectives on a project and further opportunities to co-operate and collaborate.

Many company-wide changes are triggered by a crisis, whether real or imaginary.

Many company-wide changes are triggered by a crisis, whether real or imaginary. When marketing can take the lead or support another department's initiative, its market orientation and strategic vision often lend meaning and purpose to what might appear to be unconventional organisational thinking. An outbreak of excellence in one department or in a group of collaborating departments sends powerful signals through the organisation about new ways and means of achieving better results. But organisational change requires both social skills and technical skills – or, in other words, both people and processes.

Resistance points in any organisation-wide change process

Implementing relationship marketing across the six markets involves a radical shift, over time, in the way people work with each other and the responsibility they take for that work. We have identified four phases of organisational commitment to change that represent a collaborative change process to realign work activity across functional borders within the internal market (see Figure 6.11).

The process starts with those people who are already committed and therefore most active. They derive their legitimacy and support from the senior executive in charge of the change process. As we have already mentioned, if this person is not the CEO, then the ambitions and scale of the change process should be confined within the corporate culture, at least for the pilot phase.

This vanguard group should be identified early as change agents for the whole process. After all, there is a political component to change and those people most committed to the process – including managers – will need to be supported and trained in persuasion and influencing skills.

The vanguard's job is to create a ‘ferment’ – or stimulate the involvement of those people who intuitively understand the marketing message and are sufficiently influential to help spread it. These are opinion leaders certainly, but they might come from any level in the organisation and be quite different from those people we normally associate with leading opinion. Moving around the circle clockwise, ‘followers’ of course follow, and ‘stabilisers’ often provide very necessary analytical skills that help institutionalise proposed changes. There is no fixed point at which you could say ‘critical mass’ has been achieved and the organisation has changed. This is partly because innovation and improvement are continuous activities.

Project teams as internal networks

The key to managing organisation-wide change is to create structural supports or ‘safety nets’ that allow staff to move from what they know, based on past experience, to what is unknowable – the future.

We recommend that small teams should work on internal market issues. The role of leader for a small team of, say, three to five people, can easily be shared between members of the team, according to the talents of the individuals and the changing maintenance needs of the team. This avoids the common problem of finding great numbers of ‘suitable’ leaders. The issue then is not so much how to train leaders, but how to create a climate for change where people can grow into leaders quickly, with as much mature insight as possible. Internal facilitators might oversee a number of small teams, and their role will connect more to overall strategic objectives than to the specific tasks of particular teams.

Small teams established in the internal market to solve problems or improve quality tend to operate as networks that cross functional and hierarchical lines. Because they exist outside the organisational system as well as within it, while they have no special freedoms in terms of decision-making authority they do have freedom in the way they generate ideas and knowledge. It is this pluralistic relationship, outside and within the organisation, which provides most opportunity to challenge the way things are done. In practice, using teams in this way does not visibly ‘change the culture’ overnight, but empowers pre-existing sub-cultures within the organisation. Freeing up these network channels contributes to creating a climate for change and innovation.

Five paradoxes of change management

Most of what needs to be done in terms of managing change is hidden from sight. It is easy – but wrong – to interpret the visible part as the only thing that needs addressing. This is the big paradox of change management. Below we set out five common traps that companies should steer clear of when implementing change.

Paradox one

We will cascade our commitment down to the troops. That should fix it.

Employees may reject marketing messages unless they are communicated logically and coherently in a way that equates with their own past experience. As with advertising, internal marketing communications work best when they ‘preach to the converted’. Messages that try to persuade people to change their minds are often doomed to failure; they work best when they reinforce how people already feel and think. Two-way messages are better, while dialogue – a process of joint reasoning – works best of all.

People do not so much resist change, they resist being changed, especially when they can not grasp the reasons for the change. Internal marketing communications that try to change people's minds can work as signals of strategic intent. People are willing to suspend disbelief while they wait for some demonstrable action that confirms the truth of the message. Their attitude is ‘you've told me but show me’.

This is particularly so at middle-management level. Middle managers need to know that there is substance behind the organisation's ‘commitment’ before they can effectively cascade the message down. Middle management will want to know what effect the change programme will have on their roles and responsibilities. Unless top management demonstrate commitment, middle management may well go through the motions and then make sure that nothing happens.

Communication has to be backed up with evidence – both real and symbolic – of change.

Senior management often fail to recognise what an ambiguous effect their apparently direct and clear communications can have, particularly where they seem at odds with established decision-making processes and organisational power bases. Communication has to be backed up with evidence – both real and symbolic – of change, or it will be seen as empty rhetoric.

Paradox two

We must invest in more training.

The most common mistake is to jump directly into intensive training. In marketing terms the questions that should be asked (and often are not) are:

  Who is my target audience?

  What are their expectations?

  What knowledge do they need now?

  What skills do they need now?

  How can we monitor the learning process?

The investment in training is wasted if too much training is provided for too many people too soon. It is a matter of scale. On the other hand, training in skills is necessary so that people can adjust to changing work contexts. This kind of learning has been called ‘single loop learning’, especially where the intention is to keep organisational performance stable within organisational norms. But where more fundamental and widespread training is required – in new organisational processes, for example – training becomes strategic because the change that triggers it challenges the patterns of operations and the assumptions that previously defined effective performance. This second kind of learning is called ‘double loop learning’.¹³

What is needed is effectively a process that allows line managers and specialists to get information from all over the company in order to solve problems without the constraints of the usual departmental blocks. The knowledge gathered in this way needs to be codified over time, and retained in the organisation. Knowledge management technology and data capture is a step in the right direction. But if the organisation cannot teach itself to learn – which is the intention of ‘double loop learning’ – it will find itself pouring money into a bottomless pit. Companies would be well advised to invest in learning how people might best learn in their organisation, and then develop the training based on their findings.

Paradox three

We intend to build a strong culture as a priority.

Corporate cultures are shaped and sustained by deeply-held values and beliefs just as the cultures of nations are. But to change the culture of a particular company successfully demands great subtlety. You can, for example, change the cosmetics such as logo, signage, mission statements, ‘corporate wardrobe’ and the design of the stationery without changing the culture at all. Changing a company's superficial identity may signal a change of direction, but it will have no significant or lasting cultural impact.

Yet corporate cultures do change. To change its culture successfully a business needs to back up its intentions with actions. Culture change starts with a company's vision of what it wants to be – or, as we prefer to say, its strategic intent. But you cannot talk a culture into changing. The company needs to confirm its strategic intent with a series of coherent actions such as doing things in new ways, communicating the effects and using some events symbolically to shine light on the meaning of those new ways.¹⁴

The leaders of organisations have a major impact on corporate culture because they alter the way companies initiate and respond to opportunities and threats. Just as brand values must be congruent with brand image, corporate values must be congruent with corporate aspirations. A company needs the kind of culture that suits its purpose, competencies and market opportunities.

Paradox four

We want to get everybody involved.

Getting everybody involved sounds fine in theory, but in practice it comes down to the question of time-scale. Many companies give the impression of wanting to get change over and done with. But staff tend to be so focused on solving day-to-day problems that they end up shutting out messages that signal opportunities and possibilities all around them.

Starting small can be a very good idea. It allows the company to build commitment based on action programmes and broadcasting the results across the organisation. These actions signal to others that the commitment has integrity. More and more people become involved in each recurring cycle of activity. We described the employee ‘buy-in’ phases of vanguard, ferment, followers and stabilisers earlier in this chapter. It is futile to try to involve everyone at once if the company cannot support them with committed people and training.

Paradox five

Our bottom line tells us when we are succeeding.

There is no single way of measuring the score, and a company will find a range of external and internal feedback mechanisms that enable a ‘fix’ on performance more useful. We outlined one example of a suite of performance feedback mechanisms in Chapter 5.

Financial accounts rarely reveal much about the activities that costs are based around. Investing in quality improvement, for example, can actually reduce the cost of quality by cutting out waste and cutting down process time without reducing the value delivered to the customer.

The final score in terms of shareholder value is traditionally profits or surplus expressed in numbers and set in a historical cost-accounting framework. This is an important convention, but it is only one dimension. We are now in the era of the Balanced Scorecard,¹⁵ which recognises the importance of non-financial performance indicators alongside the more traditional financial measures. Relationship-oriented metrics should be key elements in this new multi-dimensional concept of performance measurement. For example, measures such as customer retention, customer satisfaction, perfect order achievement, complaints, customer referrals and ‘share of wallet’ must stand alongside the more traditional performance measures such as achievement against budget. Where possible these measures should be process based, such as ‘time-to-market’, ‘time-to-serve’ and ‘cost-to-serve’. Equally they should be widely communicated and, ideally, incorporated into incentive schemes such as quarterly bonuses and employee recognition awards.

Generating knowledge through dialogue

We have referred several times to the value delivery sequence of ‘choose the value’, ‘provide the value’ and ‘communicate the value’. When developing effective relationship marketing strategies companies need to ensure that they use the third element to ‘close the loop’. But communication has to become more of a two-way process or dialogue within a relationship.

Directing effective and efficient communications at external markets is a fundamental marketing responsibility. But, despite the potential afforded by direct marketing, the Internet and customer relationship management (CRM) systems, this communication is too often oneway. Relationship marketing also recognises that developing relationships in the six markets can provide a solid platform for generating new knowledge about business conditions, opportunities and constraints. Companies gain this new knowledge through purposefully interacting with their stakeholders – as well as formal market research.

Marketers face the even more immediate challenge of ensuring that the firm can deliver on the explicit or implicit promises that are embedded in marketing messages. If the firm cannot meet customers’ expectations, it will lose their custom, which is a form of lost value.

When satisfied customers become voluntary advocates for their favourite products, services and suppliers, they make ‘word-of-mouth’ recommendations, as we discussed in Chapter 3, specifically in relation to the referral market. But word-of-mouth can be negative too, and do untold damage to a firm's reputation and future prospects as the ‘word’ gets around. But word-of-mouth occurs outside marketers’ realm of direct control.

By focusing on integrating outgoing marketing communications, marketers are curtailing the long-term potential to develop value exchanges with customers. Instead, they should be listening to customers and learning what they consider to be valuable, so shifting the marketing communication strategy from one-way messaging to two-way communication, with the emphasis on interaction and the potential for dialogue. This in turn supports the development of ongoing value exchanges between the various parties.

The nature of dialogue

The words we use to communicate, no matter how carefully we choose them, rarely explain our experiences adequately. But the notion of dialogue implies that we should continue to grapple with the problems inherent in everyday language, to persist and go deeper in communicating and listening to get to the bottom of any misunderstanding we may have with another party. Dialogue aims to reconcile what seems contrary, making meaning possible between people. One way of expressing this idea is to say that dialogue is about reasoning together to build shared meanings.¹⁶

Not all actions initiated by either a supplier, a customer or an employee necessarily lead to two-way communications, and certainly not all two-way communications justify the depth of listening and learning associated with dialogue. Nevertheless, dialogue is valuable because of its spontaneity and creative potential, both within the internal market and in any other market where there is an opportunity to work through problems or opportunities together.

A view of the marketing communication process as a whole is shown in Figure 6.12 with some key parallel processes made visible between the firm and its customers. According to Grönroos¹⁷ these multiple processes set up the conditions for a relationship-based dialogue.

First, the episodes in the interaction process are shown. Second, a planned communication process may initiate the interaction process. Thus one-way (planned) communication and two-way (interactive) communication connect at some point. Grönroos argues that when both planned and interactive processes work in parallel, the customer relationship is likely to be further enhanced.

A successful relationship requires that two or more parties learn from each other.

A successful relationship requires that two or more parties learn from each other in order to sustain or improve value exchanges between them. This involves a deepening dialogue based on an understanding of mutual needs, values and habits.

Ongoing dialogue supports the learning relationship and the learning relationship supports the dialogue and this may lead to a common knowledge base developing. If all parties can trust each other (or at least suspend distrust) in this dialogue of reasoning together, then relationship bonds will grow stronger. This may lead to new business opportunities and more creative solutions to problems than would otherwise have been found.

Of course, at some point the relationship may be broken or terminated if needs change, if there are better offers elsewhere, or if the customer and supplier's experience of each other falls short of their expectations. The relationship will become stressed if the needs of both customer and supplier are not met. When all goes well, despite occasional defects, the relationship is likely to be maintained, which creates the right environment for continuing dialogue.

Internal marketing as dialogue

We have already discussed some of the prerequisites for, and pitfalls of, successful organisational change. But we think internal marketing can contribute to organisational change too, specifically through creating and circulating knowledge in the firm.

More than twenty years after Berry¹⁸ first advocated treating employees as ‘internal customers’ there is renewed interest about what internal marketing means.

Berry believed that internal marketing starts by viewing jobs as if they were ‘internal products’ offered to employees. The logic is that organisations need employees who are satisfied with their jobs (as products) in order to have satisfied customers. The internal marketing task is to improve the job ‘products’ using marketing thinking to gain new insights and deliver new benefits to employees. Grönroos,¹⁹ writing around the same time, emphasised making staff at all levels more motivated and customer conscious through better two-way communications and by co-ordinating tasks between front-line and support staff. His approach to internal marketing focused on enhancing the work employees did in order to meet the needs of external customers more capably.

Later, Berry and Parasuraman²⁰ cautioned that a company's performance is adversely affected when its various parts act ‘without cohesion or a unified spirit’, thus constraining front-line customer contact employees. They emphasised the value of treating staff the way you would want them to treat customers, in the belief that this would provide an ideal climate for changing marketing behaviour. This approach has merit, but it runs the risk of being overgeneralised into a ‘happy staff equals happy customers’ logic.

These formative concepts have endured, but there is still no general agreement on whether internal marketing should have a singular or multiple intent, nor is there a common conceptual framework. You could argue that Berry's ‘internal customer’ concept was flawed because it did not emphasise the critical link between internal customers and internal suppliers in creating value for the external market. This cross-functional perspective has, in many ways, been a sub-theme of this book.

There are, arguably, three major perspectives on internal marketing, and their associated knowledge exchanges operate in different ways.

Internal customer approach

This means one-way communication to employees, supported by marketing intelligence. This is the most common form of internal marketing and is suitable for circulating simple policy statements, procedural explanations, new product information and so on. This internal customer approach uses ‘top-down’ communication to build a climate for changing marketing behaviour. However, all but the simplest of enforced organisational changes run the risk of attracting the suspicion, resistance and hostility of employees and decision-makers alike.

Internal customer and supplier approach

This means two-way communication between internal customers and internal suppliers, supported by market intelligence. This approach requires working with non-marketers to access and re-interpret the rich experience of staff and their ‘on-the-job’ knowledge and experience. However, internal marketing of this kind may also bring with it some surprises and conflicts of interest. This is because long-cherished assumptions embedded in the policies and procedures being studied may need to be challenged in order to find new and better ways of creating customer value.

Networked approach

This also means two-way communication between internal customers and suppliers, supported by market intelligence. However, this approach taps into the know-how of a broader range of employees. This approach is ongoing, based on collaboration and relationship development through networks of voluntary participants. It is acted out through dialogue and its purpose is to renew organisational knowledge continuously. We believe this approach is needed during economic periods of rapidly changing market requirements, or when internal responses to external market requirements are a tangle of complex of issues.

The future of relationship marketing

As we approach the end of this book, we will pause to reflect on the future of relationship marketing. This ostensibly new discipline has taken off over the past ten years or so with enormous vigour, and yet marketing has always been embedded in relationships. Have relationships been staring us in the face and have we been too preoccupied to see them? Theodore Levitt certainly thought so when he said that the purpose of business is to create and keep a customer. Len Berry thought so too. He said that relationship marketing is not a new but more a ‘new-old’ idea in the sense that creating value and loyalty in business dealings is as old as merchant trade itself. What is new is the examination of how this might be achieved.

Why the growing interest in the relationship marketing concept, and why now? First, in our global deregulated open markets, there are no certain prescriptions for success based on our past experience in relatively stable markets. Supply chain management, the deployment of new technology, service quality management and product development cycles remain, of course, ongoing concerns. But there will always be turbulence and risk in open markets. Second, establishing more open relationships with key customers, suppliers and other stakeholders is a strategy for minimising risk, by staying open to opportunities within more trusting, collaborative relationships. But open market conditions create more complexity within organisational boundaries too. Mainstream marketing's toolbox is not up to this internal challenge, and what is needed are new and more diversified internal marketing skills.

Looking to the future, we expect the idea of value exchange as the foundation stone of relationship marketing to be developed further still. There are a number of perspectives on value in this relationship context:

1  Value is created as an offering and delivered through recurrent transactions within a managed relationship.

2  Value is created through mutually interactive processes and shared through negotiated agreement within the life of a relationship.

3  Value is created and shared by interactions that emerge from within networks of relationships.

The first of these is closest to mainstream marketing management, but is a more enlightened form in the sense that it involves both meeting customer requirements and a longer-term management view. The second perspective is based on interaction and seen as a social process with economic outcomes, where value is created and shared collaboratively between the parties involved. The third is a strategic perspective where the firm is seen to be embedded in a network – a ‘supra-organisation’ that is nonetheless real in the sense that the firm's position within it determines what value emerges. In this perspective the firm creates value jointly with customers and other stakeholders, transcending normal organisational boundaries.

These value perspectives, in order, might be called:

1 Managed value

2 Interactive value

3 Emergent value

Aligned to these three value perspectives are three major knowledge-generating pathways that can be applied within firms. They are:

1 Hierarchical knowledge

2 Cross-functional knowledge

3 Network knowledge

In the first case, expert knowledge is exchanged and legitimised through formal hierarchical channels. In the second, knowledge is generated and exchanged between internal customers and internal suppliers, along the value chain, end to end. In the third case, knowledge is generated by internal networks – that is, spontaneous communities of employees who collaborate in project teams or diagnostic problem-solving groups. No single knowledge-generating pathway can be successful on its own, but if any one pathway is inoperative, it will limit the effectiveness of the value perspective to which it is most closely aligned.

Combining value perspectives with their dominant knowledge-generating pathways, we get the following propositions:

1  Given hierarchical knowledge, value can best be created as an offering and delivered through recurrent transactions within a managed relationship.

2  Given cross-functional knowledge, value can best be created through mutually interactive processes and shared through negotiated agreement within the life of a relationship.

3  Given networked knowledge, value can be created and shared by interactions that emerge from within networks of relationships.

The relationship marketing approach that we advocate in this book emphasises that collaboration is as important as competition, and that keeping valuable customers is as important as getting them in the first place. The first of these tenets requires a managerial shift in perspective from the singularity of the economic transaction to the fuzzier boundaries of socio-economic exchange. The second tenet requires a reframing of marketing time horizons to include not just the immediacy of the transaction but the long-term implications of the relationship.

Much of what we call progress occurs through people changing their views to recognise a new pattern of ideas and to see things differently. Establishing and supporting a cross-functional process or network orientation for knowledge management challenges the control structure or silo mentality, as we have emphasised. In the work we do, we see more companies adopting the interactive and emergent value perspectives, with the role of managed value diminishing.

This value-based approach to relationship marketing recognises the need for planning and organising, but more in the sense of recurrent phases of reflection and action. While organisations will probably continue to need a hierarchical control function, rigid hierarchical control is less effective in getting things done than leadership and the willing commitment of employees to organisational goals that will extend the life time value of the customer. Some academics and practitioners might say this is marketing as it should be, or as it used to be, in which case relationship marketing is getting back to some Arcadian ideal. This seems unlikely – although it really depends upon the starting point you choose to build a historical perspective.

In this book, we have advocated exchanges of mutual value within a ‘six markets’ network of relationships. Using the ‘six markets’ framework for strategy-making, an action taken in one domain, say the

customer market, can affect the supplier market and probably the internal (employee) market, with perhaps wider environmental impacts that require careful management and planning. This approach is not just a way to think about delivering value but about the value-creating possibilities of working within relationships. The six markets model encourages a systemic approach to planning.

But a bigger paradigm shift, in the sense of its implications for the future, is the idea that businesses from one end of a supply chain to the other are embedded in loose-knit stakeholder networks that are so subtle they might be better described as ‘value constellations’ of related interests.²¹ This world-view opens up the possibility that it is networks that compete, not firms. This is not just a shift in language but a shift in ideas about how value is created and an acknowledgment of new organisational forms.

Increasingly value will be created jointly between a firm and its customers and other stakeholders.

We think that increasingly value will be created jointly between a firm and its customers and other stakeholders, through a cross-functional approach to marketing and management. But there is also a ‘view from the edge’.

The view from the edge

Is relationship marketing a new paradigm for marketing? Though the ‘paradigm’ word is overused, we think the ‘paradigm challenge’ comes when we recognise the character of the new scientific world-view underpinning recent network thinking. That is, you can view marketing as a systemic, holistic, and, above all, a dynamically complex activity.

Increasingly we are seeing business situations as being constructed of dynamic complexity rather than the less challenging detailed complexity. The Internet is one of the more striking examples, demonstrating as it does that relationships can be social or technical, or both. So conventional business assumptions no longer apply. Peter Senge,²² for example, has popularised the idea that conventional forecasting, planning and analytical methods will not be agile enough to capture dynamic complexity, except in the very short term. In other words, business actions and reactions are no longer linear, mono-causal or exactly traceable back to their cause. Indeed, they never really were. Thinking has shifted to consider the whole rather than parts and to recognise new patterns of relationships, especially in a broader contextual framework, in order to begin again to understand the nature of those relationships and the organisational boundaries that they bridge.

This new challenging world-view connects with the new science of complexity in which interaction is characterised as a near chaotic state.²³ Because feedback from each interaction leads to more than one possible response, there will be a variety of consequences and the effects of these are amplified over time. Likewise, the effects of small changes to any plan may also be amplified, and fed back into dialogue, so that the consequences of any action become less certain.

Any one market interaction can affect any other interaction, so any relationship between a firm and the customer – even a single customer –will ‘interfere’ with other relationships. Surely this is a challenge to traditional marketing, as we know it?

Relationship marketing is both an optimistic agenda for the future and a defence against mental straitjackets and marketing myopia. Whenever boundaries are breached or shifted, marketing relationships help the organisation respond to the new challenge by acting as conduits to generate and circulate value.

SUMMARY AND CONCLUSION

Developing and implementing a relationship marketing strategy around six key market domains is a main theme of this book. The fundamental idea that underpins strategy setting in a six markets context is that marketing can no longer be seen as the responsibility of a single departmental function. Relationship marketing challenges organisations internally to support cross-functional change management and externally to support a shift to long-term relationships with a broader range of stakeholders, among which the customer is of central but not exclusive importance.

Though customers are central to relationship marketing, the term itself does not necessarily imply that the firm should seek intense interactive relationships with all its customers. Nor, indeed, do customers necessarily need or want that sort of relationship. Companies can foster a

number of different relationships with their customers. However, all customers do want the company to meet their needs and to deliver on the promises it makes them. If the organisation is to meet or exceed customers’ requirements, it needs to become customer facing.

To be truly customer facing it has to move from ‘vertical’ to ‘horizontal’ management structures and deal with the power shift that entails. Dealing with organisational change and associated cultural aspects is critical for successful relationship marketing. A corporate culture that recognises that delivering stakeholder value is the primary purpose of the business underpins any successful relationship market strategy. Performance measurement, culture change and behaviour are all closely intertwined. The success or failure of a relationship marketing strategy will be largely determined by how well companies manage these critical issues.

Ideas are still evolving around the convergence and integration of value concepts and relationship marketing into what we term ‘relationship value management’. But this area will become increasingly important. More work needs to be done in the whole area of measurement and developing metrics around the value process. Some measurement systems such as customer satisfaction and service quality already exist, but what is required is a comprehensive integrated set of measures across the whole value process. We believe this to be one of the most important areas for future research.

Relationship marketing has been one of the key developments of modern marketing science and has generated enormous research interest. This emphasis on relationships, as opposed to transaction-based exchanges, is likely to continue to redefine the marketing domain. It should lead to a new general theory of marketing, as its fundamental axioms explain marketing practice better than other theories.²⁴

References

1   Grönroos, C. (2000), Relationship Marketing: The Nordic School Perspective’ in Sheth, J.N. and Parvatiyar, A. (eds), Handbook of Relationship Marketing, Thousand Oaks, CA: Sage, 95–118.

2  Payne, A.F.T. and Holt, S, (2001). ‘Diagnosing Customer Value Creation in Relationship Marketing’, British Journal of Management, 12, 2, 159–82.

3   Anderson, E. and Oliver, R (1987), ‘Perspectives on Behaviour-Based Versus Outcome-Based Salesforce Control Systems’, Journal of Marketing, 51, October, 76–88.

4   Heskett, J.L., Jones, T.O., Loveman, G.W., Sasser, E.W. Jr and Schlesinger, L.A. (1994), ‘Putting the Service-Profit Chain to Work’, Harvard Business Review, March-April, 164–74.

5   Reichheld, F. F. (1996), The Loyalty Effect, Boston, MA: Harvard Business School Press.

6   Rucci, A. J., Kirn, S.P. and Quinn, R.T. (1998), ‘The Employee-Customer-Profit Chain at Sears’, Harvard Business Review, January-February, 83–97.

7   Cravens, D.W., Piercy, N.F. and Shipp, S.H. (1996), New Organisational Forms for Competing in Highly Dynamic Environments: The Network Paradigm, British Journal of Management, 7, 203–18.

8   Treacy, M. and Wiersema, F. (1995), The Discipline of Market Leaders, London: HarperCollins.

9   Mintzberg, H. (1994), The Rise and Fall of Strategic Planning, Hertfordshire: Prentice Hall.

10  Waterman, R.H., Peters, T.J. and Phillips, J.R. (1980), ‘Structure is Not Organisation’, Business Horizons, June, 14–16.

11  Child, P., Dennis, R.S., Gokey, T.C., McGuire, T., Sherman, M. and Singer, M. (1995), ‘Can Marketing Regain the Personal Touch?’, McKinsey Quarterly, No. 3, 112–125.

12  Quinn J. B. (1989), ‘Strategic Change: Logical Incrementalism’, Sloan Management Review, Summer, 55.

13  Argyris, C. and Schon, D. (1978), Organizational Learning: A Theory of Action Perspective, Reading, MA: Addison Wesley.

14  Schein, E. H. (1985), Organizational Culture and Leadership, San Francisco: Jossey Bass.

15  Kaplan, R.S. and Norton, D.P. (1993). ‘Putting the Balanced Scorecard to Work’, Harvard Business Review, September-October, 134–47.

16  Schein, E. H. (1994), ‘The Process of Dialogue: Creating Effective Communication’, The Systems Thinker, 5, 5, 1–4.

17  Grönroos, C. (2000), Service Management and Marketing: A Customer Relationship Management Approach, 2nd edn, Chichester: Wiley, p. 280.

18  Berry, L.L. (1981), ‘The Employee as Customer’, Journal of Retail Banking, 3, March, 25–8.

19  Grönroos, C. (1981), Internal Marketing-An Integral Part of Marketing Theory, in Donnelly, J.H. and George, W.R. (eds), Marketing of Services. Chicago, IL: American Marketing Association, 236–8.

20  Berry, L. L. and Parasuraman, A. (1991), Marketing Services: Competing through Quality, New York: The Free Press, p.152.

21  Value constellations is a term used by Normann, R. and Ramirez, R. (1993). ‘From Value Chain to Value Constellation: Designing Interactive Strategy’, Harvard Business Review, July-August, 65–77.

22  Senge, P. (1990), The Fifth Discipline, New York: Doubleday, 71–2.

23  Stacey, R. (1996), Complexity and Creativity in Organisations, San Francisco: Berrett-Koehler.

24  See: Sheth J.N., Gardner, D.M. and Garrett, D.E. (1988), Marketing Theory: Evolution and Evaluation, New York: John Wiley; and Sheth, J. N. and Parvatiyar, A. (2000), ‘The Evolution of Relationship Marketing’ In: Sheth, J.N. and Parvatiyar, A. (eds), Handbook of Relationship Marketing, Thousand Oaks, CA: Sage, 119–45.