CHAPTER 9
MANAGING MARKETING OR CUSTOMER-FOCUSED MANAGEMENT

“Full-time marketing specialists are required to make promises and find customers, but without skilful part-time marketers promises will not be kept, and the total marketing process collapses.”

INTRODUCTION

This chapter will discuss the nature and content of the marketing process in a service business. As the chapter title indicates, the traditional view of marketing management may not apply where services are concerned. A relationship approach to marketing is suggested, and the scope and content of the total marketing process is discussed in detail. The concepts of part-time marketers, interactive marketing and the customer relationship lifecycle are discussed. Furthermore, a relationship marketing model is presented. Two types of marketing strategies, relationship marketing and transaction marketing, are analysed on a marketing strategy continuum, and their implications for management and marketing explored. Finally, it is concluded that for service, marketing is better characterized as market-oriented or customer-focused management than as marketing management in the traditional functionalistic sense. After having read the chapter the reader should understand the role and scope of marketing in a service context, and realize the importance of the interactive marketing process to the total marketing process of a service organization as well as understand the nature of a relationship marketing approach and the consequences of adapting a relationship marketing strategy for a firm.

THE ROLE AND SCOPE OF MARKETING

The marketing process includes four main parts:

1. Understanding the market and individual customers by market research and segmentation analysis as well as by using database information on individual customers.

2. So that market niches, segments and individual customers can be chosen.

3. For which marketing programmes and activities can be planned, implemented and followed up.

4. Also, to prepare the organization so that marketing programmes and activities are successfully implemented (internal marketing).

This approach is based on the so-called marketing concept, which describes marketing as a philosophy. This concept holds that the firm should base all its activities on the needs and desires of customers in selected target markets. At the same time, of course, societal restrictions (laws, norms, industry agreements, etc.) have to be recognized. This is also known as a market-oriented view, in contrast to a production-oriented view, where the firm’s activities are geared to existing technology, products or production processes.

The fourth part of the marketing function is traditionally not included. Normally, it is taken for granted that once marketing decisions are made they are executed as planned. However, this may be a dangerous assumption. Especially in service – both service firms and product manufacturers adopting a service logic – marketing programmes and activities have to be marketed internally to those who are expected to actively implement them externally.

Traditionally, marketing as a business activity is thought of as a separate function that is taken care of by specialists organized in a marketing department or marketing and sales departments. By and large, the rest of the organization, with few exceptions, has no responsibility for the customers or for marketing. Employees in other departments are not recruited or trained to take a customer focus and to think about marketing; nor are they supervised in a way that would make them feel any marketing responsibilities, or responsibility for customers. Such an approach demands that marketing specialists are the only people who have an impact on the customers’ views of the firm, on their preferencs and buying behaviour. In many consumer packaged goods contexts, where consumption can be characterized predominantly as outcome consumption, this has always been the case. If the product is a pre-produced item with no need for service or other significant contact between a firm and its customers, only marketing (and sales) specialists are needed. Good market research, packaging, advertising campaigns and pricing and distribution decisions by marketing specialists lead to good results.

Figure 9.1 demonstrates the traditional place of marketing according to most marketing textbooks. The arrow pointing up indicates that the marketing specialists acquire information about the market (such as demand and buying behaviour analyses) through market research. The downward arrow illustrates the planning and implementation of marketing activities. However, as soon as we leave the area of consumer packaged goods, new elements appear in the relationship between buyer and seller. Many durables need delivery, installation, complaints handling and service. As soon as this happens, the prerequisites of Figure 9.1 are not valid any more, because more and more process consumption characteristics can be seen in the consumption process (see Chapter 2 about process and outcome consumption).

In service, the interface between the firm and the customer grows. This was first pointed out in 1974 in a service marketing book by John Rathmell.¹ Moreover, the customer no longer acts passively, but takes an active part in the service production process. This is often the case in industrial or business-to-business marketing as well. The more services that are introduced or the more hidden services that are actively used as service (e.g. claims handling, billing procedures, etc.) in customer relationships, the more important it is for companies engaged in business-to-business marketing to understand service competition and service management and marketing.

FIGURE 9.1

The traditional role of marketing.

WHAT IS MARKETING?

Marketing as a phenomenon can be approached in many ways. Far too often marketing is considered to be only a set of tools and techniques and mostly in a marketing mix context. This is a dangerous way of introducing marketing into any organization, but especially into a service organization. If marketing is considered to be a set of tools, marketing remains the sole responsibility of a group of marketing specialists who are familiar with these tools and know how to handle them. The rest of the organization (for example, people involved in operations, deliveries, maintenance, the design and development of technology and systems) are not concerned with marketing, and with the firm’s customers, which means that, although they may have customer contacts, they are not focused on their customers, their desires and wishes.

Marketing has been described variously as a philosophy and a craft. Focusing on the tools and techniques of marketing is to concentrate on marketing as a craft. However, we have to view marketing in a much larger context. A well-designed and executed advertising campaign will not lead to good results if campaign promises are not fulfilled by operations staff or delivery personnel. If this happens, the tool (advertising) may have been used successfully, viewed in isolation from other activities of the organization, but the marketing objective still fails (in the next chapter this particular issue will be discussed in more detail).

Marketing exists on at least three levels:

• Marketing as a philosophy and an attitude of mind or way of thinking.

• Marketing as a way of organizing the various functions and processes of a firm.

• Marketing as a set of tools, techniques and activities to which customers are exposed.

Marketing as a way of thinking. Marketing is first and foremost a philosophy or a mindset and a way of thinking in an organization. This philosophy, the marketing concept, has to guide all people, processes, functions and departments of an organization. It has to be understood and accepted by everyone, from top management to the most junior staff alike. Hence, marketing should, first of all, be an attitude of mind. This is the foundation of successful marketing and should be a basis of all decision-making.

However, it should be noted that customer perspective is not the only perspective to take into account in decision-making. For example, the economic realities and demands of other groups of stakeholders are aspects that cannot be forgotten. Also, technological development and what is sometimes labelled ‘product or production orientation’ must not be neglected. Normally, product orientation is not good for a firm. However, in some cases this perspective is more important than the customer perspective, because customers cannot always foresee the likely future developments of products and services based on technological advances. For example in the mobile phone business smartphones were not asked for by customers. Market research does not always give enough input to product development. This is of course most important in situations where rapid or complicated technological advances are taking place. For example, based on marketing research only, microwave ovens and text messaging (sms) had not been introduced. No one identified this as a need area. Instead, the skills and innovation of engineers and other specialists gave us these new means of cooking and communicating. Of course, in the final analysis, the customers decide whether an innovation is successful or not.

Marketing as a way of organizing. Second, successful marketing requires an appropriate way of organizing the firm. Various departments involved in making and fulfilling promises have to be able to compare notes and co-ordinate plans, and they have to be willing to do this. Traditional disputes and lack of willingness to collaborate between departments are examples of situations in which firms are not organized for optimal marketing. In firms where such turf fights exist, the marketing attitude of mind throughout the organization does not exist, and from the customers’ point of view successful marketing will probably not be implemented.

Parts of customer relationships, normally traditional marketing and sales efforts, will be taken care of in a customer-oriented way. Other parts of the relationships, normally those related to interactions with customers, will be less well handled, and hence the total marketing effect, or how well customer relationships are managed over time, will be worse, often critically worse. For example, in a study of the relationship between the pulping industry and suppliers of service and components to firms in that industry, the customers talked about a ‘tail-light or rear light syndrome’. They said that as long as negotiations on a deal continued, the supplier, and particularly the sales representative, showed an interest in the customers and their needs and requirements. However, as soon as the deal was closed the customers felt that they only saw the ‘tail-lights’ or ‘rear lights’ of the salesperson and the supplier as they left. After that they were dealt with by departments such as deliveries, invoicing and claims handling who apparently did not have a customer focus and consequently did not seem to consider the customers very important.

In today’s competitive situation, firms cannot afford to maintain barriers between departments and organizational silos. The marketing philosophy has to be spread throughout the organization, and organizational solutions will have to support the acceptance of this philosophy. Marketing is a set of ideas which must be integrated throughout the entire organization and overseen by top management. This makes marketing a top management responsibility.²

In many situations a firm may be dependent on a network of partners to solve the problems of its customers. In such situations the management of this marketing attitude of mind often becomes even more complicated. With the growth of virtual or network organizations, new challenges to instil this marketing mindset emerge.

Marketing as a set of tools and activities. Finally, marketing is a set of tools, techniques and activities. This is, of course, an important aspect of marketing, because it is the one to which customers are exposed. But this is also the reason for much of the misunderstanding in many practical situations, where marketing as a phenomenon is predominantly or only thought of as these tools, and predominantly as marketing mix tools planned and implemented by marketing specialists. In reality, the activities performed by many business functions have marketing effects.

OBJECTIVES OF MARKETING AND LEVELS OF CUSTOMER COMMITMENT

Traditionally, acquiring customers and achieving sales are considered the main objectives of marketing. This has been labelled transaction marketing. For more than 40 years, research into relationship marketing has pointed out the importance of retaining customers. As service, with its often continuous interactions between the service provider and its customers, is inherently relational, in most cases an approach other than a transactional one should be taken by service organizations. Marketing activities should aim not only at acquiring customers but also, and in most cases probably more so, at keeping and further developing the customer contacts that have been established. Hence, three levels of marketing objectives can be identified:

1. Acquire customers.

2. Keep customers.

3. Grow customers into customer relationships.

The objectives of marketing on these three levels and the commitment of customers sought are summarized in Table 9.1.

TABLE 9.1

Marketing objectives and levels of customer commitment.

Level	Marketing objective	Customer commitment
Level 1: Acquire customers	To make customers choose the firm’s offerings (goods, services) over those of the competitors.	Trial purchase.
Level 2: Keep customers	To make customers satisfied with what they have bought so that they decide to buy again.	A share of the ‘customer’s wallet’.
Level 3: Grow customers	Create a trusting relationship and an emotional connection with the customers, so that they feel committed to the firm and continuously patronize it.	In addition, a share of the ‘customer’s heart and mind’.

Transactional marketing aims at achieving the first level. Even if customers have bought from the same provider previously, they are approached by activities aiming at customer acquisition, such as advertising campaigns, price offers or sales calls. Each new purchase is like a new trial purchase. In situations where the firm and its customers interact on a regular basis, the firm can attempt to develop its customer contacts during service processes in a way that impacts the customers favourably and influences them to continuous purchasing. This requires that a customer focus is extended to all employees with whom the customers interact. This is called interactive marketing and will be discussed further in a later section of this chapter. In this way the firm can capture a continuous share of these customers’ purchases in a certain category (‘a share of the customer’s wallet’).

Here it is important to realize that although these customers seem to be in a relational mode, a real relationship does not necessarily exist. Due to their continuous purchasing behaviour, these customers look relational, but in fact they may only be bonded to the firm in a non-committing way (customer bonds were discussed in Chapter 5).³ The reason for their behaviour may be a lack of alternatives. A retailer may be the only one that for the time being is conveniently located or a supplier of equipment may be the only one that for the time being has the required technology to offer. As soon as an alternative with a better or equal location, or offering a better price or an improved technology enters the scene, the customer may be gone.

To develop a true relationship with a customer the firm has to strive to reach the third level, where the customer feels emotionally committed to the firm, which then also has managed to capture ‘a share of the heart and mind’ of such a customer.⁴ Here a real customer relationship has emerged, where a customer feels a trusting relationship and some level of an emotional connectedness with the firm. This does not mean that this customer could not stop patronizing a given firm at some stage, but it makes the customer less prone to shop around. To achieve this third level the firm has to take a relational approach in its marketing. In a subsequent section, the differences between a transactional and relational approach to marketing is discussed in detail.

THE CUSTOMER RELATIONSHIP LIFECYCLE

Far too often customers are viewed and treated as an anonymous mass. Customers are seen in terms of numbers. When someone stops being a customer, there are always new to take their place. From the customers’ point of view, however, every single customer forms a latent relationship with the seller, which the firm should develop and maintain. However, customer relationships do not just happen by magic; they have to be earned. The same goes for relationships with distributors, suppliers and other partners.

It may be useful to view the development of a customer relationship as a lifecycle.⁵ The concept of the customer relationship lifecycle is illustrated in Figure 9.2. The lifecycle consists of three basic phases:

• Initial phase.

• Purchasing phase.

• Consumption (or usage) phase.

A potential customer who is unaware of a firm and its offerings is in the initial stage of the lifecycle. If this individual, or an industrial customer, has a need which he feels that the firm may be able to satisfy, the customer may become aware of the firm’s service and move into the second stage of the lifecycle, the purchasing process.

FIGURE 9.2

The customer relationship lifecycle.
Source: Grönroos, C., Strategic Management and Marketing in the Service Sector. Cambridge, MA: Marketing Science Institute, 1983, p. 70. Reproduced by permission of the Marketing Science Institute.

During the purchasing process the potential customer evaluates the service in relation to what he is looking for and is prepared to pay for. If the outcome of this process is positive, the customer decides to try the service, so he makes a first purchase. This takes the customer into the third stage of the lifecycle, the consumption process (or usage stage, which may be a more appropriate term in a business-to-business context). During this process the customer may observe the firm’s ability to take care of his problems and to provide service, which the customer perceives have a level of outcome-related technical and process-related functional quality. If the customer is satisfied with the perceived quality and considers the value it enables to be good enough, it is more probable that the customer relationship will continue, and a new or prolonged consumption or usage process will follow than would otherwise be the case.

The customer may leave the circle at any stage, or may stay within the circle and progress to the following stage. After the consumption or usage process the customer may either leave or decide or to continue using the service provider. Obviously, the marketing efforts of the firm will have an impact on the decision the customer makes. The objectives of the firm’s marketing programme and the marketing activities to be used depend on which phase of the customer relationship lifecycle the customer is in. The firm should therefore recognize (1) where in the customer relationship lifecycle a given customer is or its various groups of target customers are, and (2) which resources and activities are effective from a marketing point of view at the different stages of the lifecycle, so that the relationship with a given customer is managed as effectively as possible.

The position of a customer in the lifecycle has substantial marketing consequences. At each stage the marketing objective and the nature of marketing – the marketing resources and activities that are effective – will be different (see Figure 9.3). At the initial stage the marketing objective is to create interest in the firm and its service. At the second stage, the purchasing process, the general interest should be turned to sales by making promises which are accepted by the potential customer. The potential customer (an individual customer or an industrial buyer) should realize that accepting the promises concerning the future problem-solving offering of the firm is a good option. During the consumption (usage) process the customer should receive positive experiences of the firm’s ability to take care of his problems. At this stage the promises that the customer has accepted should be fulfilled. Thus, resales, cross-sales and enduring customer relationships should be achieved.

MANAGING THE CUSTOMER RELATIONSHIP LIFECYCLE: AN EXAMPLE

As an illustration of long-range management of customer relationships, let us consider the efforts of a transportation company offering transportation service by sea. The firm operates in a consumer market as well as in a business-to-business market, offering both transportation service and conference arrangements for businesses and other organizations. This example describes how customer relationships are managed for conference service. This is illustrated schematically in Figure 9.3.

Through advertising and various promotional activities and its website, and occasional personal selling, the company attempts to make potential customers interested in it as a possible conference operator. In addition, the company relies heavily on word of mouth and social media to influence potential customers and on references promoting the idea of using its ships as conference sites. In this initial stage, marketing activities are mostly traditional, supported by indirect promotion drawing on the firm’s reputation and word-of-mouth communication in various channels.

When a potential customer contacts the transportation company, activities are more specifically directed towards the unique processes and needs of that customer. The purchasing process starts. At this stage a conference service that corresponds to the customer’s needs and to the customer’s conference budget must be designed. Here the output of the process, accepted promises and a first purchase, is to a great extent the result of personal selling efforts. The salesperson will have clarified the customer’s conference-related processes and needs to find out what the customer really wants. His ability to negotiate is considered critical to success at this point. The customer should be offered a conference design that will satisfy him both during and after the conference, rather than simply a minimum budget design that may seem to correspond to the customer’s initial needs but which in the long term will turn out to be a disappointment.

FIGURE 9.3

The customer relationship lifecycle of a transportation company.
Source: Grönroos, C., Strategic Management and Marketing in the Service Sector. Cambridge, MA: Marketing Science Institute, 1983, p. 75. Reproduced by permission of the Marketing Science Institute.

If the purchasing process is successful, the potential customer will accept the promises made by the transportation firm and buy a conference service. The firm cannot, however, stop considering the customer as soon as the purchase decision is made. The customer relationship has to be managed with equal care throughout the consumption or usage process. During the consumption process, when the conference service is consumed and experienced and at the same time produced, a number of moments of truth, or moments of opportunity, occur. If the moments of truth go unmanaged, the quality of the service probably deteriorates and the customer may be lost, as well as opportunities to create more business.

The company attempts to produce a service that corresponds to the expectations of the customer. The conference facilities, arrangements for meals and accommodation, and the appearance and performance of the personnel on board are of the utmost importance to the success or failure of the company as a conference operator in the mind of the customer.

By appropriately designing the conference facilities as well as other aspects of the servicescape⁶ – for example, cabin design, access to the Internet, telephones and computer equipment – and by conducting internal training programmes to improve the customer-oriented performance and service-mindedness of its employees, the firm tries to guarantee that the customer, the conference participants and other passengers leave the ship in a state of satisfaction and with a favourable image of the transportation company and its service in mind. This increases the likelihood that the customer and the conference participants will return. It is also expected that they will have a considerable impact on potential customers through word of mouth, social media, resulting in increased interest in the firm and its service.

DEFINING MARKETING: TWO BASIC RULES

Before discussing various approaches to marketing, two basic assumptions about marketing have to be established. These are basic guidelines for the development of marketing that are almost axiomatic:⁷

1. Regardless of which organizational process or department they belong to, resources and activities of a firm that influence a customer’s preferences and behaviours are marketing resources and activities.

2. The customers of a firm, not the firm nor its marketers, decide which of the firm’s resources and activities are marketing resources and activities.

These assumptions seem self-evident, but nevertheless they are seldom, if ever, explicitly pointed out in the marketing literature. And in marketing planning they are most often violated. They are somehow disguised behind the much more abstract marketing concept, according to which the needs and wants of customers should be the starting point for a firm’s decision-making. The basic idea of marketing is to relate a firm to its current and potential customers and make it meaningful for its customers. What pursues these objectives is marketing, regardless of existing planning or organizational and budgeting structures. In the final analysis, only customers can decide what has an impact on them and which of a firm’s resources and activities influence their preferences. What has an impact on customers will vary from industry to industry, firm to firm, situation to situation, customer to customer, from culture to culture and even from time to time. Therefore, a marketing approach cannot be based on a set of predetermined decision-making areas. Such a list will not fit all customers or customer groups in all situations, and moreover, as the circumstances change it will become obsolete.

Before we discuss and compare a conventional and a service-oriented marketing approach – the marketing mix and relationship marketing – in the following sections, generic views of what marketing is and how it can be defined will be presented. They are based on the view of marketing as a value-supporting process, which in contemporary discussion is considered the reason d’être for marketing.⁸

As a philosophy marketing can be described as follows:

Marketing is a set of ideas which must be integrated throughout the entire organization and overseen by top management.

Marketing is an attitude of mind which must be spread throughout an organization, wherever contacts with external customers or internal customers occur. Because marketing, therefore, exists outside the group of marketing specialists of the marketing department, only top management can take responsibility for the creation and maintenance of such a customer-focused attitude.

On the most general level:

The ultimate meaning of marketing is to make the firm meaningful for its customers.⁹

This, of course, goes for all kinds of organizatons and all stakeholder groups. By its actions, the firm should make its customers realize that it is indeed supporting their everyday processes, and ultimately their life or business, in a value-creating way. This is achieved by a customer focus throughout the firm which makes the whole organization function in a customer-centric, service-providing fashion. In this way the firm becomes meaningful for its customers.

On a somewhat more explicit level, from the meaning of marketing expressed above the following goal for marketing can be derived:

The goal for marketing is to engage the firm with its customers’ processes with an aim to support value creation in those processes, and ultimately in the customers’ life processes (business-to-consumer) and business processes (business-to-business), thus enabling value capture for the firm.¹⁰

Engaging with the customers’ processes means that the firm understands these processes well enough to be able to support them in a way that is meaningful for the customers. How the firm can engage with its customers to support their value creation is further captured in the following, even more explicit definition, based on a promise management view of marketing:

Marketing is a customer focus that permeates organizational functions and processes and is geared towards making promises through value propositions, enabling the fulfilment of individual expectations created by such promises, and fulfilling such expectations through assistance to customers’ value-creating processes, thereby supporting value creation in the firm’s as well as its customers’ and other stakeholders’ processes.¹¹

A value proposition is a promise made by a firm, suggesting what benefits or what value a customer can expect if buying and using this firm’s offering. Basically, value proposition is a synonym of value promise. The value proposition term was originally introduced by the McKinsey Corporation as a concept which should guide and support all actions of a firm when communicating and providing value to customers.¹² It is important to realize that a value proposition is just that, a proposition, not realized value. Lately the value proposition term has been used extensively in the service and marketing literature.¹³

For example, the customer relationship lifecycle model demonstrates the importance of keeping promises made in the initial and purchasing stage – i.e. fulfilling value propositions – through value-supporting actions in the consumption stage. If promises made are not kept, customers will perceive a lower level of service quality, become unsatisfied, and perhaps leave. Because the implementation of marketing depends on the context at hand, the promise management definition does not say anything about how promises are made, enabled, and kept through the fulfilment of expectations created by promise making. Decisions on the resources and actions are contextually bound. However, schematically it works in the following way:

• Making promises: traditional external marketing activities, such as marketing communication and promotional campaigns, pricing and price offers, product design and packaging, and sales, are the main tools to make promises.

• Keeping promises through fulfilment of expectations: the way the resources and processes customers use and interact with, such as products and service processes, as well as hidden services (such as invoicing, service recovery and complaints handling), service employees, technologies and systems, function and support the customers’ processes, and how they facilitate value creation in those processes, and in life and business processes, determine how well promises are kept.

• Enabling promises: promise making and keeping are enabled by preparing appropriate resources for the value-creating support to the customers’ processes, such as service and product development, resource and systems development, and internal marketing. Internal marketing aims at ensuring that employees in customer contacts know how to successfully keep promises, and are motivated and have the required skills and knowledge to perform in a customer-focused way (internal marketing is further discussed in Chapter 14).

In Table 9.2, the levels of marketing are summarized.

TABLE 9.2

A hierarchy of marketing definitions.

Marketing as a philosophy: Marketing is a set of ideas which must be integrated throughout the entire organization and overseen by top management. The meaning of marketing: The ultimate meaning of marketing is to make the firm (or any organization) relevant for its customers (and other stakeholders). The goal for marketing: The goal for marketing is to engage the firm with its customers’ processes with an aim to support value creation in those processes, and ultimately in the customers’ life processes (business-to-consumer) and business processes (business-to-business). Implementing this goal as promise management: Marketing is a customer focus that permeates organizational functions and processes and is geared towards making promises through value propositions, enabling the fulfilment of individual expectations created by such promises, and fulfilling such expectations through assistance to customers’ value-creating processes, thereby supporting value creation in the firm’s as well as its customers’ and other stakeholders’ processes.

DEFINING MARKETING: THE MARKETING MIX APPROACH

In this and subsequent sections we will discuss how marketing in practice can be managed in service competition. The marketing concept is transformed into marketing in practice in the standard literature on marketing management, which is essentially geared towards consumer goods contexts. There are dozens of textbooks covering this topic. In this approach to marketing, the core of marketing is overwhelmingly the marketing mix. The marketer plans various means of competition and blends them into a ‘marketing mix’,¹⁴ so that a profit function, based on the goods profit logic (see Chapter 3), is optimized. When Neil Borden first introduced the idea of the marketing mix in the 1950s, he offered a list of 12 variables as a guideline and said that they would probably have to be reconsidered in any given situation. The marketing mix was soon reformulated as the ‘4Ps’, with four standardized categories of marketing variables.¹⁵

Traditionally, the 4Ps are product, place, price and promotion. In a later definition from 1985 marketing, according to the marketing mix approach, is described as follows: ‘Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges and satisfy individual and organizational objectives [emphasis by this author].’¹⁶ During the last two decades, marketing researchers have increasingly found that the list of 4Ps is too restrictive and more categories of marketing variables have been suggested, most often in the form of additional ‘Ps’, such as people, processes and physical evidence¹⁷ as well as public relations and politics.¹⁸ As a consequence, in the 2000s the American Marketing Association made two attempts to renew this definition. The importance of value creation and marketing as a process is recognized, but other than that the resulting definitions are still overshadowed by a marketing mix toolbox.¹⁹

Defining marketing according to the marketing mix approach is like using a list of tools, or categories of tools, as a definition. Such a way of defining a phenomenon can never be considered the most valid. A list can never include all relevant items, it will not fit all situations, and it becomes obsolete. Increasing the number of Ps does not offer a fundamental improvement to the definition The need to add new categories of marketing variables or Ps is a symptom of the weakness of the marketing mix approach, and demonstrates that, as a general marketing model, the marketing mix approach has failed.²⁰ Moreover, the marketing mix approach is an inside-out oriented model, where managing marketing mix variables easily becomes more important than understanding the customers’ everyday activities and processes.²¹ Customers become objects for the marketer to whom something is done, instead of being subjects, with whom and for whom solutions are developed.²² Still, it may well be helpful in many contexts, such as for consumer packaged goods where the products are standardized. In the competitive situation after World War II, with increasing demand and growing markets, the marketing mix and its 4Ps formed an effective marketing approach. In a relationship-oriented approach to marketing, many elements of the marketing mix toolbox are still highly necessary, because it includes variables, for example promotion and pricing, that are clearly important in service competition.²³ However, as a general marketing approach, and especially outside the consumer goods area, the marketing mix method hardly makes a firm meaningful for its customers anymore, and as all other stakeholders are depending on the firm’s customers, this does not make the firm relevant for them either.

In a situation where service competition dominates, markets are more and more mature and competition more intense, the shortcomings of marketing mix management and its 4Ps are becoming evident. As the starting point of this approach, in practice, is marketing as a predetermined set of decision-making areas; other decision-making areas are outside the scope of marketing. The process nature of marketing as illustrated, for example, by the customer relationship lifecycle model is largely neglected. Marketing activities may be seen as processes, for example when executing a promotional campaign, but the firm’s relationship with its customers is not viewed in that way.

Moreover, although it is not inherent in traditional models, marketing has become a function that sits alongside other business functions, delegated to a separate group of marketing specialists and frequently organized in the form of a marketing department. It is symptomatic that in the marketing literature, ‘marketing’ and ‘marketing department’ are often used interchangeably. Frequently, the customer relationship is managed with a marketing approach only or mainly to the extent that the marketing specialists (and salespeople) are involved.²⁴

It is ironic that the people who by definition have a marketing attitude of mind, the full-time marketing specialists of the marketing departments, are the people who frequently have limited or no customer contact. Those who interact with customers during the consumption or usage stage of the customer relationship lifecycle (in service processes, deliveries, repair and maintenance, customer training, complaints handling, billing, etc.) normally do not have marketing training or a genuine interest in the customer.

As a consequence of these deficiencies of the marketing mix management approach, the following conclusions can be drawn:

1. Marketing has become a function for marketing specialists, and therefore a marketing attitude of mind is not easily instilled throughout the organization.

2. Because of the lack of marketing training throughout large parts of the organization, the customer’s interests are given high priority only in some parts of the customer relationship lifecycle (mainly the initial and purchasing phases), whereas during the consumption or usage process the relationship is managed by staff without a customer focus and without taking customer considerations properly into account.

3. Furthermore, because of the decision variable orientation of the marketing mix, marketing and marketing planning have become preoccupied with making and refining decisions which, according to the marketing mix, are considered marketing decisions. At the same time the process of taking customers through the relationship lifecycle and ensuring that customers stay in the life-cycle, which may require that other decision-making areas are included in marketing planning as well, is neglected.

4. Finally, as a consequence of the three previous points, both ‘ground rules’ of marketing put forward above are violated. In service competition, particularly for service firms and in business-to business markets, the marketing mix approach frequently does not cover all resources and activities of the stages of the customer relationship lifecycle. As can be seen in Figure 9.3, during the consumption process especially there is a range of contacts between the service firm and its customer which are outside the traditional marketing function as defined by the 4Ps of the marketing mix. Managing and operating these contacts (for example, the conference facilities, the cabins, the restaurants, and managing the employees on board) are the responsibility of operations and other non-marketing departments. Nevertheless, these contacts – buyer–seller interactions or service encounters – have an immense impact on the future buying behaviour of the customers as well as on comments on social media and word of mouth; that is, they have marketing implications, and should therefore be considered as marketing resources and activities and managed as such.

DEFINING MARKETING: A RELATIONSHIP APPROACH

In Chapter 1 we discussed the relationship perspective on marketing and the management of customer relationships as marketing. It was noted that this marketing perspective fits service competition well. The marketing concept as the basic philosophy guiding marketing in practice still holds, although the customer perspective has to be focused on in a much more customer value-oriented way.²⁵ To make firms relevant for their customers and enable them to engage with their customers’ processes to support their value creation, marketing should be defined in a service-based, relationship-oriented way.

A relationship definition of marketing can be formulated as follows:

The purpose of marketing is to identify and establish, maintain and enhance, and when necessary terminate relationships with customers (and other parties) so that the objectives regarding economic and other variables of all parties are met. This is achieved through a mutual making and fulfilment of promises.²⁶

Such relationships are usually long term, but they do not necessarily always have to be. In this context we are mainly discussing customer relationships, but the same approach can also be used when dealing with other parties, such as suppliers, distributors, co-producers of customer solutions, financial institutions and political decision-makers. It may be necessary for a firm to establish relationships with such parties to supply its customers with appropriate solutions.²⁷

In the relationship marketing literature there are several definitions similar to the one presented here.²⁸ Parvatiyar and Sheth²⁹ present an excellent overview of the discussion in the literature of relationship marketing definitions as well as in the domain of relationship marketing. Evert Gummesson has presented a definition which is somewhat different, but nevertheless has the same process orientation: relationship marketing is marketing seen as relationships, networks and interactions.³⁰

This definition points out the central phenomena in marketing according to the relationship perspective (the relationship itself) and the key processes in the relationship (the interactions) as well as the fact that relationship marketing often takes place in networks of co-operating partners. The view that exchange is the focal phenomenon in marketing³¹ is not included in these definitions. Although exchange still takes place, focusing on exchange makes marketing transaction-oriented and draws the marketer’s attention away from what is essential, namely the interactions with customers that form relationships in which exchanges from time to time take place.³²

Long-term customer relationships mean that the main objective of marketing is to seek enduring relationships with customers. Of course, in some situations short-term sales based on transaction marketing may be profitable. Generally, however, retaining customers in the long term is vital to profitable business. In a relationship, transactions concerning goods, services, knowledge, information or any other asset of value to the customer must take place. Profitability cannot be measured immediately as a result of the first transaction. Profitability is a long-term measurement, which should develop from an ongoing and enduring relationship. However, the link between longer customer relationships and profitability is not automatic. In some cases costs of retaining customers may be high and long-standing customers may over time demand more attention and service followed by increasing costs of serving such customers.³³ Hence, firms must attempt to follow up the profitability of their customers over time, so that they are not surprised by customer relationships that gradually turn unprofitable.

Identifying and establishing, maintaining and enhancing customer relationships implies, respectively, that the process of marketing includes the following:

1. Market research to identify potentially interesting and profitable customers to contact.

2. Establishing the first contact with a customer so that a relationship starts to emerge.

3. Maintaining an existing relationship so that the customer is satisfied with the perceived quality and the value created and is willing to continue to do business with the other party in the relationship (getting a ‘share of the customer’s wallet’).

4. Enhancement of an ongoing relationship so that a trusting relationship and an emotional connection between the customer and the provider is emerging, and the customer decides to expand the content of the relationship by, for example, purchasing larger quantities or new types of goods and services from the same seller (getting a ‘share of the customer’s heart and mind’ and expanding the ‘share of the customer’s wallet’).

5. Terminating a relationship; sometimes a firm will have to cope with the situation when a customer decides to discontinue the relationship or the firm may find it necessary to discontinue a relationship with a customer. Both these situations should be managed so that the relationship can be reestablished in the future. We will, however, not discuss this fifth situation here.³⁴

These situations are all different from a marketing point of view. In short, establishing the first contact demands good communication and sales skills. Favourable word of mouth and a well-known image help. Maintaining and enhancing customer relationships requires other types of tools and activities. To maintain a relationship the perceived quality of goods, service activities, information, personal contacts and all other types of service elements present in a given customer relationship have to be good. In addition, good selling skills may be required to enhance a relationship. Good selling does not only, or even mainly, mean good sales performance by professional salespeople, but also good sales and communication skills by customer contact employees interacting with customers as part of the service process. From the supplier’s or service provider’s point of view:

• Establishing a relationship involves making promises.

• Maintaining a relationship is based on fulfilment of promises, and finally,

• Developing or enhancing a relationship means that a new set of promises is made with the fulfilment of earlier promises as a prerequisite.

THE DARK SIDE OF RELATIONSHIPS

Although long-term relationships can normally be considered favourable for both the supplier or service provider and the customer, over time negative consequences of stable relationships may occur for both parties. This may be especially important in business-to-business relationships. The customer may become lazy and neglect developments in the marketplace. A competing supplier may have developed a new and better technological solution, but this has gone unnoticed by the customer who is engaged in a stable relationship with another supplier. On the other hand, the supplier may be satisfied with having customers buying existing solutions and as a consequence neglect to invest in developing new and improved technologies and solutions. For both parties this type of neglect can turn out to be fatal.

The above-mentioned negative consequence of stable relationships is only one of several possible unfavourable long-term effects that can occur. Possible negative effects include:³⁵

• Either party or both neglect developments in the marketplace.

• The customer’s choices are restricted by a long-term relationship.

• Suppliers may be excluded from serving other customers that compete with the one in the relationship.

• The customer may become connected to unwanted business partners who belong to the supplier’s network of relationships.

• The trust in one party in a relationship may be misused by the other party, especially when problems occur.

These ‘dark sides’ of relationships³⁶ must be observed, otherwise what starts as a win–win situation may eventually turn into a burden for one of the parties, or sometimes even for both.

PROMISE THEORY

An integral element of the relationship marketing definition is the promise concept based on promise theory.³⁷ According to this, the responsibilities of marketing do not only include making promises and thus persuading customers to act in a given way. A firm that is preoccupied with making promises may attract new customers and build new relationships to begin with. However, if promises are not fulfilled, the evolving relationship cannot be maintained or enhanced. Keeping promises is equally important as a means of achieving customer satisfaction, retention of the customer base, and long-term profitability. It is also important to notice that promises are made, and should be fulfilled, mutually. Finally, the firm has to take action to make sure that it, either by itself or together with network partners, has the resources, knowledge, skills and motivation to keep promises. Sufficient efforts to enable promises have to be made.³⁸ This will be discussed in Chapter 14 in the context of internal marketing.

MARKETING RESOURCES AND ACTIVITIES ACCORDING TO THE RELATIONSHIP DEFINITION

The relationship definition of marketing does not state that the traditional means of competition of the marketing mix, such as advertising using new or old media, personal selling, pricing and conceptualizing of the product are any less important than earlier. However, it does demonstrate that there is much more to marketing. What is important is that it represents a fundamental shift in the way of looking at marketing as a phenomenon as compared with the marketing mix. The relationship approach to marketing is based on a service logic and therefore truly process-oriented. It views marketing as a process of taking the customer through the customer relationship lifecycle and keeping the customer there in order to reach the mutual objectives of the firm and the customer. The exchange of promises indicated in the relationship definition may be of any kind and may concern any type of activities. The resources to which the customer is exposed and interacts with may also be of any type, and they may vary from customer to customer depending on whether the relationship is in the establishment, maintenance or enhancement phase. They cannot be predetermined or categorized, as marketing resources and decision-making areas are according to the marketing mix.

In practical situations, for teaching in classroom settings as well as for marketing planning in organizations, the relationship definition is not as easy to use as the marketing mix. This is natural, because the main virtue of the marketing mix is its simplicity, not its proven capability to capture certain marketing situations. The relationship definition does not provide users with an easy-to-implement list of categories of marketing variables or means of competition. Instead, it forces users to think for themselves and to analyse the marketing situation at hand, as well as develop an understanding of the resources and activities required to establish, maintain or enhance – and of course, when necessary, terminate – a relationship with a specific customer or group of customers.

To sum up, according to the relationship approach, marketing is a process rather than a function³⁹ and it is the concern of every function and department in an organization. A marketing mindset is required by everyone with a direct or indirect impact on how customers perceive the firm, its goods and services and its way of taking care of its customers, regardless of what responsibilities a person may have within the organization. The relationship perspective is, of course, not the only market-oriented way of honouring the marketing concept. It is, though, an approach well suited for understanding, as well as planning and implementing, marketing in service contexts and in service competition.⁴⁰

Relationship marketing is a newer paradigm and school of thought in marketing, alongside the traditionally dominating marketing management school. In his analysis of relationship marketing, Adel El-Ansary goes as far as to postulate that it will ‘continue to be a dominant school of thought in marketing, thus replacing the traditional marketing management school of thought’.⁴¹

Relationship marketing cannot be implemented by a marketing department alone. An understanding of customer relationships and relationship marketing should permeate the whole organization and employees from departments other than marketing are responsible for serving customers and thus for making customers either willing to continue buying from the same supplier or service provider or not willing to do so. In a subsequent section such employees are termed part-time marketers. If this is not the case, marketing will not succeed. Hence, a relationship perspective on a firm’s customer management includes three levels:

1. Relationship perspective as a culture and an attitude.

2. Relationship perspective as a strategy.

3. Tactical consequences on the operational level of the relationship perspective.

A relationship-based view of how to take care of customers involves the whole company. Therefore, an attitude among employees on all levels including top management that honours a relationship approach to customer management is essential to successful planning and implementation. A culture that appreciates relationship marketing is required.⁴² In Chapter 15 the development of a service culture, based on a relationship approach to marketing, will be discussed.

Secondly, a relationship approach to customer management has to influence the strategic decision-making in the firm, and not only on a separate marketing strategy level. Because one way or the other the whole organization is responsible for the implementation of a relationship approach to managing customers, the firm’s business strategy has to be relationship-focused. Otherwise problems will occur on the third and final level. A firm with a non-relational strategy will never be able to practise a relational approach in its customer management. In essence, its marketing will remain transactional. The traditional marketing efforts may become more relational, such as an extended use of direct response activities and loyalty programmes and customer clubs, but other than that customers will not be treated in a relational manner. Relationship marketing requires that a customer is managed in a relationship-based fashion throughout the customer relationship lifecycle. It requires a focus on customers and on service in every corner of the organization.

Finally, tactical consequences on an operational level follow from taking a relationship perspective. All processes and functions where customer contacts occur, either directly or indirectly, have to be geared towards the development, maintenance and enhancement of relationships with customers and other stakeholders such as distributors and retailers. This probably requires changes in operational plans, policies and procedures in organizations that are used to a situation where customer management is the responsibility of marketing and sales departments only.

In Figure 9.4 a relationship marketing model is illustrated. The two outer circles represent processes, which the firm controls, except for word of mouth and social media on the outermost circle. The circle in the middle represents the customer’s processes and, due to the firm’s actions on the two outer circles, how value emerges for the customer.

The two outer circles demonstrate the two different processes that build up the relationship. The communication process includes communication messages which are planned and where separate and distinct planned communication media are used. Sales and all types of communication media are effective in this context (for example, TV commercials, newspaper ads, brochures, direct mail, Internet sites and adverts, sales calls, exhibition stands and sales promotions; in Figure 9.4 a limited number of examples are indicated as illustrations only). In addition, word of mouth and discussions on social media also influence the customer. Basically, here promises are made about how the customer’s processes will be supported and what perceived quality and value this support should lead to.

The interaction process is a real process in the sense that through interactions promises made are kept and the customers perceive how the firm supports their value creation in reality. The customers’ real interactions with physical products, service processes, hidden services, customer contact employees, systems and technology, e-commerce processes, administrative and financial routines, etc. occur in this process. Of course, an episode in this process includes also an element of communication. And word of mouth and social media comments are triggered by what customers experience in various episodes.

FIGURE 9.4

A relationship marketing process model.
Source: Grönroos, C., Relationship marketing: the Nordic School perspective. In Sheth, J.N. & Parvatiyar, A. (eds), Handbook of Relationship Marketing. Thousand Oaks, CA: SAGE, 2000, p. 107. Reproduced by permission of SAGE Publications Inc.

Successful relationship marketing requires that both the communication and interaction processes are properly planned and executed. Only focusing on relationship-oriented communication activities, such as direct marketing, and customer loyalty programmes creates expectations, but how such expectations are fulfilled remains unplanned. According to promise theory and the promise management view of marketing, expectations must be fulfilled by keeping promises made. In a straightforward consumer goods marketing situation, a standardized product will keep promises made and fulfil expectations created by such promises. However, in situations where the customer interface is broader and may continue over a longer period of time, such as in service and relationship marketing, there is no one standardized item which takes care of this. All the episodes on the interaction circle and the flow of these episodes equals the standardized product in the marketing mix of consumer goods.

The double-headed arrows between the two outer circles in Figure 9.4 indicate that to avoid overpromising and the creation of the wrong expectations, communication activities on the communication circle must be geared to the various episodes on the interaction circle.

MARKETING FUNCTIONS AND PROCESSES

As demonstrated by the customer relationship lifecycle model and also the relationship marketing model, in a service context marketing is by no means only an intermediate function building a bridge between production and consumption or usage, as it is supposed to be in conventional marketing. Marketing is an integral part of producing and delivering service, especially during the consumption (usage) process. In other words, managing the moments of truth in the service encounters is a marketing task as well as a responsibility for operations, personnel, human resources management and other departments which have contact with customers or influence such contacts. The separation of marketing, production, human resource management and other processes may well be logical in traditional manufacturing, where customers order and use the products far away from the place of production. It is not appropriate for service systems where the production of service, delivery and consumption is simultaneous.⁴³

There is, however, a distinct difference between handling the interactions of the moments of truth as a marketing task and executing traditional marketing activities such as advertising, personal selling and sales promotion. Normally the latter are planned and implemented by marketing and sales specialists, whereas the former are implemented by specialists in other areas. Moreover, they are frequently planned and managed by non-marketing managers and supervisors; people who are neither aware of their marketing responsibilities nor interested in customers or marketing.

The employees involved in marketing, who are not marketing specialists, are part-time marketers as opposed to full-time marketers, to use a term introduced by Evert Gummesson.⁴⁴ They are, of course, specialists in their own areas. At the same time, they must learn to perform their tasks in such a way that customers will want to return, thus strengthening the customer relationship. Hence, they will have to learn to act in a customer-focused and marketing-oriented fashion, and their managers and supervisors will have to learn to think in terms of marketing and customer impact as well.

To sum up, the marketing process can be divided into two separate functions or sub-processes: a specialist function, taking care of many traditional marketing mix activities and market research; and a marketing function, related to the buyer–seller interactions of the simultaneous service production and consumption processes, where marketing tasks are performed by part-time marketers, supported by, and sometimes (as in telecommunications or Internet banking) replaced by, customer-oriented physical resources, technology and systems. The two functions or sub-processes of marketing are the traditional external marketing process and the interactive marketing process.

In Figure 9.5 the two marketing functions of service organizations are schematically illustrated. The shaded areas represent the marketing functions. The traditional marketing function is separate from other functions. It involves market research, advertising, Internet and mobile communication, pricing, sales promotions and other activities traditionally considered to be part of marketing. This traditional marketing function is also frequently labelled external marketing. For consumer service, the traditional marketing function is a mass marketing function. However, in business-to-business relationships personal sales contacts by salespeople are also involved and most often dominate this function.

The interface between production and consumption represents the buyer–seller interactions or service encounters, where the moments of truth or moments of opportunity occur. Because the marketing impact of these interactions occurs in interactive processes, this part of marketing has been called the interactive marketing function⁴⁵ in the service marketing literature since the late 1970s. Interactive marketing, or marketing outside the marketing department, occurs at the moment when the customer and service provider interact. The service is actually delivered and the foundation laid for resales through activities in the buyer–seller interactions of the service encounters.

FIGURE 9.5

Two marketing processes.
Source: Grönroos, C., Strategic Management and Marketing in the Service Sector. Cambridge, MA: Marketing Science Institute, 1983, p. 62. Reproduced by permission of the Marketing Science Institute.

The customer’s opinion of a service is influenced both by the means of production (i.e. the production facilities, human and other production resources and the servicescape) and by the service production process (i.e. the behaviour of the employees, the manner in which the production facilities are used, and the way physical resources, technology and systems support the production and consumption of the service in a customer-oriented fashion). The interactive marketing function recognizes that every component – human and non-human – in producing a service, every production resource used, and every stage in the service production and delivery process should be handled as a marketing issue, and not considered as merely an operations or administrative issue. In addition, customers are not only consumers or users of a service but also co-producers of that service. In this respect customers are also a resource in the interactive marketing process. The marketing consequences of every resource and activity involved in interactive marketing situations have to be acknowledged in the planning process, so that the production resources and operations support and enhance the organization’s attempts to develop and maintain long-term relationships with its customers.

The co-production willingness of customers cannot be taken for granted. When necessary, customers have to be educated and advised about how to best co-operate in the service process in a way that supports their perception of service quality. In addition, especially when new technology for customer self-service is introduced, considerable efforts to not only educate customers, but also to motivate them to make use of the new technology may be required.⁴⁶

To sum up, the marketing resources used in the interactive marketing process are totally different from those used in the traditional external marketing function. While the latter are ‘full-time marketing resources’, the resources of interactive marketing are only ‘part-time marketing resources’. The dual role of the part-time marketers has already been discussed, but the same applies to other resources as well. Physical resources, technology and systems used in the service process and to build up the servicescape should function well to produce the service in a technical sense and should also keep internal efficiency at an optimal level. However, when planning how such resources should be used, a customer-focused approach has to be taken simultaneously. Resources in the service process should function in interactions with customers in a way that creates good process-related functional quality, and thereby has a good interactive marketing effect. When investing in these resources, both internal efficiency (the cost-effective use of resources) and external effectiveness (impact on perceived service quality) must be taken into account at the same time by the service provider. Customers have dual roles, too. They consume the service, but they also contribute to how the service process proceeds.

WHAT IS MORE IMPORTANT – TRADITIONAL EXTERNAL MARKETING OR INTERACTIVE MARKETING?

Interactive marketing can be characterized as the heart of marketing in service competition. Regardless of how customer-focused and well-planned and implemented traditional marketing activities such as advertising campaigns are, if interactive marketing fails, marketing fails. Moreover, because it is the way normal operational and administrative efforts are implemented, interactive marketing always exists. In the minds of the customers, interactive marketing may be good or bad, but it is always present.

In situations where the service provider has a stable customer base with satisfied customers who continuously patronize the firm and through positive word-of-mouth referrals bring in new customers, in principle nothing else than pricing is needed. Because of a customer-focused service process and consequently a successful interactive marketing process, the customers patronizing the firm are satisfied enough to return and to bring in new business. This is typically the case for a small pub or restaurant or a street corner retailer, but also large service firms can perform successfully without much traditional external marketing support. For example, in 2004 in Sweden the advertising expenditure of Handelsbanken, one of the four large nationwide operating banks in the country, was only 7% of that of the competitor that spent the most, and only slightly more than one-tenth of what the two other banks in that category spent. Still, this bank managed to outperform the others in terms of market share growth.⁴⁷ Ten years later the percentage is still clearly under 10%. On top of this, customer satisfaction ratings and profitability for this bank have, over the years, constantly been the highest or among the highest in the industry.

However, in most situations service organizations need both interactive marketing and traditional external marketing. Especially in situations where a firm launches new service or wants to enter a new market or customer segment, traditional marketing campaigns are needed. Furthermore, sometimes a competitor’s campaign has to be matched by traditional marketing efforts. However, the better the interactive marketing functions, the less need for that. To assess the effectiveness of a service firm’s total marketing in a stable market situation, the following ground rule can be used as a first indicator of how customer-focused the firm is: the higher the advertising expenditures, the less service-focused the firm is likely to be and the less customer-focused its interactive marketing performance probably is. Of course, this does not have to be the case in all situations, and further analyses should always be done. In a highly competitive market environment even a very customer-focused service provider with a good interactive marketing performance may have to invest more in traditional external marketing campaigns. However, it is typical that less customer-focused service firms compensate a lack of service orientation in their operations with higher advertising budgets. To replace the unsatisfied customers who have left, new customers are lured to take their place. In the long run this is not an effective strategy.

THE INTERNET AND MARKETING

The Internet, and to a growing extent also mobile technologies, have become more frequently used in marketing. The Internet is, for example, used for selling, communication, market research and making payments. These are all ways of using it to perform traditional marketing activities. However, the Internet is also an interactive marketing vehicle, because a variety of service interactions can be initiated and also performed over the Internet. For example, by providing e-mail connections to helpdesks or other functions of a firm, the Internet becomes part of the service process. The way it functions influences the interactive marketing impact of the firm. This of course requires that the firm manages to assume its role as an interactive partner in the virtual environment. Finally, digital service is developing, for example in games, where the service is produced digitally as well.

The Internet is a service- and relationship-oriented medium, even though it is often only used as a communications and sales tool. It is important to keep in mind, though, that normally it is not the firm that makes the first contact with a customer over the Internet; it is the customer or potential customer who initiates the contact. If this contact can be developed into a service process with interactions between the firm and the customer, a relationship may emerge. Because it is so easy to jump from one website to another, creating a relationship-oriented service interaction with a given customer may be an effective way of maintaining a given customer’s interest in the firm and creating ongoing business.

In conclusion, the Internet does not only offer a means of carrying out traditional marketing activities, it is also an interactive process instrument which has an important role in the interactive marketing function. Mobile technologies and cellular phones can be used both for communicating with customers and making offers and as an interactive marketing tool. However, increasingly they also function as a platform for service consumption, for example for playing games.

THE THREE-STAGE MODEL

Marketing is a dynamic process, where traditional external marketing activities and interactive marketing resources and activities co-operate so that profitable long-term customer relationships may be developed and maintained. The customer relationship lifecycle model illustrated how enduring customer relationships are created through a three-stage process. The three-stage model demonstrates this long-term marketing approach, as illustrated by Figure 9.6. At each stage the objective of marketing and the nature of marketing – the marketing function to be used – will be different.

At the initial stage, when potential customers have no clear view, or perhaps old-fashioned or out-of-date views, of the firm and its service, the objective of marketing is to create interest in the organization and its offerings. This is best achieved by the traditional marketing function. Advertising, websites, sales promotions and public relations are appropriate means of competition. Sometimes sales is also needed, especially in business-to-business markets. One should also not overlook the potential power of favourable word-of-mouth communication.

FIGURE 9.6

The three-stage model.
Source: Grönroos, C., Strategic Management and Marketing in the Service Sector. Cambridge, MA: Marketing Science Institute, 1983. Reproduced by permission of the Marketing Science Institute.

At the second stage, the purchasing process, general interest should be turned into sales. More specifically, promises about future commitments on the part of the seller are made and should, one hopes, be accepted. Here again the traditional marketing activities, including sales, can be used. However, interactive marketing activities can also be applied whenever the customer contacts with the firm’s production resources before he has made a final purchase decision.

During the consumption (usage) process, resales, cross-sales and enduring customer relationships should be achieved. At this stage, promises have to be kept, so that customers realize that the firm can satisfy their needs and that it can be trusted. At this final stage in the lifecycle the traditional marketing activities have only a slight chance, if any, of influencing the preferences of the customers towards the service. Here the interactive marketing process is responsible for success or failure. The marketing orientation and service-mindedness of the service process and the resources in the production process are of vital importance if customers are not to be lost at this stage.

Often the firm may be excellent at making promises, but these promises may be kept in a much less marketing-oriented way, and low perceived quality follows. Marketing may be managed successfully during the first two phases of the customer relationship lifecycle, but in the third phase, the consumption or usage process, nobody seems to be responsible for marketing and customers any more.

Marketing has to be planned and implemented throughout the lifecycle as a continuous process, otherwise too many customer relationships are broken, which leads to bad word of mouth. Moreover, lost customers have to be replaced by new customers, which requires an increased budget for traditional marketing.

THE MARKETING STRATEGY CONTINUUM

As we have seen, relationship marketing means that the firm uses a marketing strategy that aims at maintaining and enhancing ongoing customer relationships. Although getting new customers is still important, the main strategic interest is to market to existing customers. In a relationship marketing strategy, interactive marketing becomes essential. If the moments of truth of the buyer–seller interactions are badly taken care of, thus literally wasting moments of opportunity, no traditional marketing efforts can ensure that the customers will stay with the firm. A relationship marketing approach and excellent interactive marketing capabilities are essential in service competition. Without these elements a service strategy often collapses.

Of course, relationship marketing is not the only marketing strategy option in service competition, although the importance of such a strategy is increasing all the time. It can be useful to think about possible marketing approaches or strategies along a marketing strategy continuum.⁴⁸ As a strategy, relationship marketing can be considered one end of such a continuum. At the other end of the continuum, the strategy would be to concentrate on one transaction at a time with any given customer, without deliberately trying to develop any enduring relationship with that customer. This type of marketing strategy is often called transaction marketing. As marketing strategies can be placed on a continuum, where these two types of strategies are the extremes, there are, clearly, situations where firms can combine elements of the two strategies. A relationship type of strategy or a transaction type of strategy may dominate. The marketing strategy continuum and its consequences for a number of marketing issues are illustrated in Figure 9.7.

Marketers of consumer packaged goods will probably benefit most from a transaction-type strategy, although this is not necessarily the case. Service firms and product manufacturers adopting a service logic, on the other hand, would normally be better off by applying a relationship-type strategy. Manufacturers of consumer packaged goods have mass markets but no immediate contact with their ultimate customers, while service firms almost always have such contacts, sometimes on a regular basis, sometimes only at discrete points of time. Therefore, the interface between the service firm and its customers is expanded far outside the departments of marketing and sales specialists. However, the development of information technology has made it possible for marketers of consumer packaged goods to create databases which enable them, too, if they find this effective and justified from an economic standpoint, to treat each and every customer as an individual.

FIGURE 9.7

The marketing strategy continuum.
Source: Adapted from Grönroos, C., From marketing mix to relationship marketing: towards a paradigm shift in marketing. Management Decision, 32(2); 1994: p. 11. Reproduced by permission of Emerald Insight.

In consumer durables the customer interface is broader than for consumer packaged goods, and a pure transaction-type strategy is not the only available option. The durables have to be delivered to customers and often also installed. Industrial goods, ranging from mass-produced components to complex machines and projects, would probably fit best between consumer durables and services. However, in many business-to-business marketing situations the customer relationships are similar to many service contexts, and here no distinctions between business-to-business marketing and service marketing can be made on the continuum.

CONSEQUENCES FOR MARKETING OF THE STRATEGY CONTINUUM

In this section nine different consequences of a relationship marketing strategy and a transaction marketing strategy will be discussed (see Figure 9.7):

1. Unit of analysis.

2. Time perspective.

3. Dominating marketing function.

4. Price elasticity.

5. Dominating quality dimension.

6. Measurement of customer satisfaction.

7. Customer information system

8. Interdepartmental collaboration.

9. Role of internal marketing.

The unit of analysis and the time perspective. The time perspective of marketing differs depending on where on the continuum a firm is. As transaction marketing means that the firm focuses on single exchanges or transactions at a time, the time perspective is rather short. The unit of analysis is a single market transaction or exchange. Profits are expected to follow from today’s exchanges. In relationship marketing the time perspective is much longer. The marketer does not plan primarily for short-term results. His objective is to create results in the long term through enduring and profitable relationships with customers. In some cases, single transactions that take place in the relationship may even be unprofitable as such. Thus, relationships and how they develop through continuous interactions to facilitate transactions which create satisfaction for both parties are the units of analysis.

Dominating marketing function. Because of the lack of personal contact with their customers and their focus on mass markets, firms pursuing a transaction-type strategy will probably benefit most from a traditional marketing mix approach. The 4Ps model will give guidance in most cases; this model was originally developed for consumer-packaged goods marketing where transaction marketing is most appropriate.

For a firm applying a relationship strategy the marketing mix is often too restrictive. The most important customer contacts from a marketing success point of view are those outside the realm of the marketing mix and the full-time marketers. The performance of the part-time marketers, the customer orientation of information technology, operating systems, industrialized service routines, such as vending machines, ATMs and home banking systems, and the willingness of customers to perform as co-producers in the service process, are critical ingredients in a relationship-oriented strategy. The marketing impact of the customer’s contacts with people, technology and systems and other non-marketing functions determines whether he (or the organizational buyer) will continue doing business with a given firm or not. All these customer contacts are interactive to a certain extent. These resources form the interactive marketing function. This marketing function can also be described as all the marketing activities outside the marketing mix and outside a marketing (and sales) department. In relationship marketing interactive marketing becomes the dominating part of the marketing process. Of course, variables in the marketing mix, such as traditional external marketing activities, are important here as well, but to a much lesser degree and they merely support interactive marketing activities. In other situations the support of salespeople is needed, for example to close a new deal or to provide continuous attention during the consumption (usage) phase.

Price elasticity. In transaction marketing there is not much more than the core product (goods or services) and sometimes the image of the firm or its brands, to keep the customer attached to the seller. When a competitor introduces a similar product, advertising and image may help to keep customers, at least for some time, but price usually becomes an issue. A firm that offers a lower price or better terms is a dangerous competitor, because in transaction marketing the price sensitivity of customers is often high. A firm pursuing a relationship marketing strategy, on the other hand, may have created more value for its customers than what is provided by the core solution alone. Such a firm develops tighter ties over time with its customers. If, say, a financial service arrangement is complicated, an Internet grocery store provides its customers with easy-to-use ordering systems, consistent quality of goods, information and deliveries, or a supplier provides its customers with a complex solution, the buyer and seller grow together due to the various ties that have been established over time. Such ties or bonds may, for example, be variously technological, knowledge-related or information-related, geographical or social in nature. If they are well handled they provide customers with value; something that is not provided by the core solution itself. Of course, price is not unimportant but is often much less of an issue here. Thus, relationship marketing makes customers less price-sensitive.

Dominating quality dimension. The way quality is perceived by customers will typically differ, depending on the strategy used by a firm. In transaction marketing the customers’ contact with the firm is limited to the product and exposure to other traditional marketing mix variables. The benefits sought by customers are imbedded in the technical solution provided by the product. The customer will not receive much else that will create value in his processes. Hence, the technical quality of the product, or what the customer gets as an outcome, is the dominating quality-creating source in transaction marketing.

The situation is different in relationship marketing. The customer interface is broader, and the firm has opportunities to provide its customers with value of various types (technological, information, knowledge, social, etc.). When several firms can provide a similar technical quality, managing the interactions of the service processes also becomes imperative from a quality perception perspective. Thus, in relationship marketing the functional quality dimension grows in importance and often dominates. Of course, this does not mean that technical quality can be neglected. It is a prerequisite for good total quality, but it is no longer the only quality dimension to be considered.

Measurement of customer satisfaction and customer information systems. A normal way of monitoring customer satisfaction and success is to look at market share and to do ad hoc customer satisfaction surveys. For a consumer-packaged goods marketing firm, which would typically apply a transaction marketing strategy, there is no way of continuously measuring market success other than by ad hoc customer satisfaction studies. A service firm and many business-to-business marketers, on the other hand, who could more easily pursue a relationship marketing strategy, have at least some kind of interaction with almost every single customer, even if they serve mass markets. Thus, customer satisfaction can be directly monitored. A firm that applies a relationship-type strategy can study customer satisfaction by directly monitoring its customer base.

Managing the customer base means that the firm has at least some kind of direct knowledge of its customer satisfaction levels. Instead of thinking of numbers, or of market share only, management thinks in terms of individuals with personal reactions and opinions. Instead of getting information about marketing success from customer satisfaction studies, the marketer judges success by information direct from customers. This requires a means of gathering the various types of customer feedback that are constantly obtained by a large number of employees in large numbers of customer contacts. In combination with market share statistics, such an intelligence system focusing on customer satisfaction, needs and desires forms a valuable source of information for decision-making. Of course, traditional customer satisfaction studies can be made from time to time to complement the data gathered from daily customer contacts.

Consequently, in a relationship marketing situation the firm can build up an on-line, real-time information system. This system will provide management with a continuously updated database of its customers and information about the degree of satisfaction or dissatisfaction among customers. This can serve as a powerful management tool. In a transaction marketing situation it is more difficult to build up such a database, although thanks to available information technology this is not impossible any more.

The strategic importance of interdepartmental collaboration. The level of interdependency between processes and departments in an organization depends on whether the firm has chosen a transaction-type strategy or a relationship-type strategy. In transaction marketing, most or all of the firm’s customer contacts are related to the product itself and to traditional marketing mix activities. Marketing and sales specialists are responsible for total marketing; no part-time marketers are involved. Thus, from a marketing point of view the internal interface between functions has no, or very limited, strategic importance to the firm.

In relationship marketing the situation is different. The customer interface is much broader, often involving a large number of part-time marketers in several different departments. This is the case, for example, in most services marketing and business-to-business marketing situations. A successfully implemented interactive marketing performance requires that all parts of the firm involved in taking care of customers can collaborate, co-operate and support each other in order to provide customers with good total perceived quality. Thus, for a firm pursuing a relationship marketing strategy the internal interface between marketing, operations, human resource management and other departments is of strategic importance to success.

The role of internal marketing. Part-time marketers have to be prepared for their marketing tasks. Internal marketing is needed to ensure the support of traditional non-marketing staff. They have to be committed, prepared and informed, and motivated to perform as part-time marketers. This does not apply only to customer contact employees and back-office employees. It is, of course, equally important that supervisors, middle-level and top-level managers are equally committed and prepared.

Internal marketing as a process has to be integrated with the total marketing process. The traditional marketing and interactive marketing performance starts from within the organization. A thorough and ongoing internal marketing process is required to make relationship marketing successful. If internal marketing is neglected, interactive marketing in particular will suffer or fail.

MARKETING MANAGEMENT OR MARKET-ORIENTED/CUSTOMER-FOCUSED MANAGEMENT?

In conventional marketing literature, which is mainly based on the context of consumer packaged goods, the concept of marketing management is used to describe the practical applications of the marketing concept. In a consumer goods context this is perfectly appropriate. However, in situations where the typical customer relationship is extended far beyond the straightforward and impersonal relationship between a marketer and a buyer of consumer breakfast cereals, toothpaste or soap, this straightforward view of how to manage marketing does not hold any more. When marketing is geared to the management of customer relationships, the situation changes.

In business-to-business marketing contexts the marketing management approach becomes awkward. Many customer relationship issues are the concerns of departments other than the marketing department. The interrelationships between departments make planning, co-ordination and implementation much more complicated than a traditional marketing and sales department can handle. In a service context the situation is often even more complex. Marketing activities – traditional and interactive marketing activities – are spread throughout the organization; therefore, the whole organizational structure has to be supportive of marketing. Because of the extreme interdependence between the various departments of a service firm and marketing, a marketing attitude of mind is needed throughout the organization. Furthermore, as George Day⁴⁹ observes, the hearts and minds of the entire organization have to be engaged.

Customers have to be considered in planning and implementing most activities in a firm, regardless of whether those activities are labelled production and operations, human resource management, finance or any other traditional function. In other words, marketing considerations are one aspect, among others, to be observed in decision-making throughout an organization. For the full-time marketers, marketing is the main or only consideration to bear in mind, but for other functions and processes marketing is only one of many aspects to take into account. However, in the final analysis it is a firm’s success in the marketplace which is crucial. Hence, market-oriented management and customer-focused performance throughout the organization is needed rather than marketing management being the responsibility of one department only.

Top management alone has the necessary overview of the organization, and the authority to manage the total marketing process; therefore, ultimate marketing responsibility has to be held sufficiently high up in the organization. A marketing department can plan and implement some marketing tasks, but total management of the marketing process has to be an integral part of overall company management. Hence, even for psychological reasons, market-oriented or customer-focused management is what it is all about, not marketing in the traditional functionalistic sense. Marketing, therefore, becomes an integral part of service management. This is also the reason why the title of this book is Service Management and Marketing. In fact, because in service contexts it is more a question of market-oriented, customer-focused management than just marketing management, the term ‘service management’ was originally introduced as a synonym for service marketing.

NOTES

1.  Rathmell, J.M. (1974) Marketing in the Service Sector. Cambridge, MA: Winthrop.

2.  See Strandvik, T., Holmlund, M. & Grönroos, C., The mental footprint of marketing in the boardroom. Journal of Service Management, 25(2), 2014, 241–252. See also Klaus, P. & Edvardsson, B., The road back to relevance – how to put marketing back on the CEO’s agenda. Journal of Service Management, 25(2), 2014, 166–170, and this whole issue of the Journal of Service Management, which is devoted to how to put marketing back as the firm’s core strategy. If marketing is not considered a strategic issue, customer-based metrics about the market performance of the firm do not reach the boardroom, and remain unused in strategic decision-making. See Ambler, T., Marketing and the Bottom Line. The Marketing Metrics to Pump Up Cash Flow. London: Prentice-Hall, 2003, where this problem is discussed at length.

3.  For an extensive study of positive, neutral and negative bonds in commercial relationships see Arantola, H., Relationship Drivers in Provider–Consumer Relationships. Empirical Studies of Customer Loyalty Programs. Helsinki: Hanken Swedish School of Economics, Finland, 2002.

4.  See Storbacka, K. & Lehtinen, J.R., Customer Relationship Management. Singapore: McGraw-Hill, 2001, where the authors discuss the role of getting a growing share of the customer’s ‘wallet’ as well as of their ‘heart and mind’ in relationship marketing.

5.  The customer relationship lifecycle concept was originally introduced in Grönroos, C., Strategic Management and Marketing in the Service Sector. Cambridge, MA: Marketing Science Institute, 1983.

6.  Bitner, M.J., Servicescapes: the impact of physical surroundings on customers and employees. Journal of Marketing, 56(Apr), 1992, 57–71.

7.  Compare Grönroos, C., What can a service logic offer marketing theory. In Lusch, R.F. & Vargo, S.L. (eds), The Service-Dominant Logic of Marketing. Dialog, Debate, and Directions. Armonk, NY: M.E. Sharpe, 2006, pp. 357–358.

8.  See Sheth, J.N. & Uslay, C., Implications of the revised definition of marketing: from exchange to value creation. Journal of Public Policy & Marketing, 26(2), 2007, 302–307, and many earlier sources, one of the most prominent being Alderson, W., Marketing behavior and executive action. Homewood, IL: Richard D. Irwin, 1957.

9.  Grönroos, C. & Gummerus, J., The service revolution and its marketing implications: service logic versus service dominant logic. Managing Service Quality, 2014, 24(3), 206–229.

10.  Grönroos, C., Promise management: regaining customer management for marketing. Journal of Business & Industrial Marketing, 13(5–6), 2009, 353. The value capture aspect has been added to the definition.

11.  Adopted from Grönroos, C., On defining marketing: finding a new roadmap for marketing. Marketing Theory, 6(4), 2006, 407.

12.  Lannings, M.J. & Michaels, G., A business as a value delivery system. New York: McKinsey Paper No. 4, 1988.

13.  See, for example, Payne, A. & Frow, P., Developing superior value propositions: a strategic marketing imperative. Journal of Service Management, 25(2), 2014, 213–227.

14.  The view of the marketer as a mixer of ingredients was first expressed by James Culliton in a study of marketing costs in 1948 and in the 1950s, based on this expression, Neil Borden created the notion of a marketing mix. See Borden, N.H., The concept of the marketing mix. Journal of Advertising Research, June, 1964.

15.  The 4P model was first introduced in a major marketing textbook by McCarthy in 1960 (see McCarthy, E.J., Basic Marketing. Homewood, IL: Irwin, 1960). Since then it seems as if marketing textbooks, especially in North America, have had to be organized around the 4Ps of the marketing mix.

16.  In a definition from 1985 marketing, according to the marketing mix approach, is described as ‘the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges and satisfy individual and organizational goals’, and in a definition from 2004 the following is offered: ‘Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders’ (definition by the American Marketing Association). For a critical discussion of this updated definition, see Grönroos, C., On defining marketing: finding a new roadmap for marketing. Marketing Theory, 6(4), 2006, 395–417.

17.  These are the three new service-oriented categories in a 7P marketing mix for services suggested Booms, B.H. & Bitner, M.J., Marketing strategies and organization structures for service firms. In Donnelly, J.H. & George, W.H. (eds), Marketing of Services. Chicago, IL: American Marketing Association, 1982.

18.  These two additional categories were suggested by Philip Kotler in the context of megamarketing. See Kotler, P., Megamarketing. Harvard Business Review, Mar–Apr, 1986.

19.  The newest marketing definition by the American Marketing Association, approved in 2013, reads: ‘Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.’ See https://archive.ama.org/Archive/AboutAMA/Pages/DefinitionofMarketing.aspx (6 March 2014). As a contrast the Chartered Institute of Marketing (CIM) in the UK defines marketing strictly as a process: ‘Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably.’ See http://www.getin2marketing.com/discover/what-is-marketing (6 March 2014).

20.  See also Constantinides, E., The marketing mix revisited: towards the 21st century marketing. Journal of Marketing Management, 22(3–4), 2006, 407–438, where the author offers a comprehensive critical analysis of the marketing mix approach, and also Möller, K., Comment on the marketing mix revisited: towards the 21st century marketing. Journal of Marketing Management, 22(3–4), 2006, 439–450, where the author points out positive aspects of the marketing mix.

21.  Because of the inside-oriented nature of the marketing mix approach we have metaphorically labelled it a ‘production-oriented’ approach to marketing. See Grönroos, C., Defining marketing: a market-oriented approach. European Journal of Marketing, 23(1), 1989, 54.

22.  Dixon, D.F. & Blois, K., Some Limitations of the 4Ps as a Paradigm for Marketing. Marketing Education Group Annual Conference. UK: Cranfield Institute of Technology, July, 1983.

23.  Gummesson, E., Total Relationship Marketing. Marketing Management, Relationship Strategy, CRM, and a New Dominant Logic for the Value Creating Network Economy. Oxford: Butterworth Heinemann, 2008, p. 325.

24.  Some authors go so far as to conclude that a traditional marketing perspective, with the management of the marketing mix and its 4Ps as the central part, had by the end of the 20th century deprived the marketing phenomenon of its importance and made decision-makers in business lose interest in the development of marketing in firms. Only marketers themselves may not have fully realized the need for a reorientation of their discipline. So, for example, says Ian Gordon: ‘Busy attending to the practice of marketing, marketers may not have noticed that marketing is, for all its practical purposes, dead . . . Today, marketing attracts neither interest nor patience from the investor community, except to the extent basic marketing skills must be demonstrated by the enterprise. Marketing rarely achieves its promise of differentiating and developing enduring, competitively superior value’ (p. 1). He sees a hope for a revitalization of marketing in the relationship marketing philosophy. See Gordon, I., Relationship Marketing. Toronto: John Wiley & Sons, 1998.

25.  Compare Hoekstra, J.C., Leeflang, P.H. & Wittink, D.R., The customer concept: the basis for a new marketing paradigm. Journal of Market-Focused Management, 4(1), 1999, 43–76. In this article the authors formulate a new marketing concept, which they label the customer concept, and ‘is mainly based on the realization of superior customer values where the individual customer is the starting point’ (p. 43). For a study of the importance of a customer value-based approach in interactive service relationships, see Chen, S.-C. & Quester, P.G., Developing a value-based measure of market orientation in an interactive service relationship. Journal of Marketing Management, 21(7–8), 2005, 779–808.

26.  This definition is further developed from definitions first presented in Grönroos, C., 1989, op. cit., p. 57 and further developed in, for example, Grönroos, C., Value-driven relational marketing: from products to resources and competencies. Journal of Marketing Management, 13(5), 1997b, 407–420.

27.  Evert Gummesson has, in a relationship marketing context, discussed a large number of relationships with various partners. See Gummesson, 2008, op. cit.

28.  In 1999 Harker published an analysis of the then existing definitions of relationship marketing and concluded that the one suggested in the present book seems to be the most commonly accepted. See Harker, M.J., Relationship marketing defined? An examination of current relationship marketing definitions. Marketing Intelligence & Planning, 17(1), 1999, 13–20. His analysis still seems to be valid.

29.  Parvatiyar, A. & Sheth, J.N., The domain and conceptual foundations of relationship marketing. In Sheth, J.N. & Parvatiyar, A. (eds), Handbook of Relationship Marketing. Thousand Oaks, CA: Sage Publications, 2000, pp. 3–38. See also Agariya, A.K. & Singh, D., What really defines relationship marketing? Review of definitions and general and sector-specific defining constructs. Journal of Relationship Marketing, 10(4), 2011, 203–237. See also the discussion of relationship marketing as a school of marketing thought in El-Ansary, A.I., Relationship marketing management: a school in the history of marketing thought. Journal of Relationship Marketing, 4(1–2), 2005, 43–56. The author concludes that ‘in a global and macro sense, Relationship Marketing is a culture. In a micro and managerial sense, it is a managerial practice’ (p. 51). Because of its managerial aspect he suggests that this marketing school of thought should be labelled ‘relationship market-ingmanagement’ and proposes that ‘...it will continue to be the dominant school of thought in marketing, thus replacing the traditional marketing management school of thought’ (p. 53). In O’Malley, L., Relational marketing: development, debates and directions. Journal of Marketing Management, 30(11–12), 2014, 1220–1238, a recent discussion of the relationship marketing paradigm is provided.

30.  Gummesson, op. cit., p. 5.

31.  See Bagozzi, R.P., Marketing as exchange. Journal of Marketing, 39(Oct), 1975, 32–39.

32.  Grönroos, C., Adopting a service logic for marketing. Marketing Theory, 6(3), 2006, 317–333. See also Sheth, J.N. & Parvatiyar. A., Relationship marketing in consumer markets: antecedents and consequences, in Sheth, J.N. & Parvatiyar, A. (eds), Handbook of Relationship Marketing. Thousand Oaks, CA: Sage Publications, 2000, pp. 171–208, where the authors conclude that exchange theory perhaps should be given up. Ballantyne and Varey state that ‘interactions over time may be the enactment of the exchange process’. See Ballantyne, D. & Varey, R.J., Introducing a dialogical orientation to the service-dominant logic of marketing. In Lusch, R.F. & Vargo, S.L. (eds), The Service-Dominant Logic of Marketing: Dialog, Debate, and Directions. Armonk, NY: M.E. Sharpe, 2006, pp. 224–235. Sheth & Uslay, op. cit. suggest that exchange should be replaced by value creation.

33.  Ryals, L., Making customer relationship management work: the measurement and profitable management of customer relationships. Journal of Marketing, 69(4), 2005, 252–261. See also Reinartz, W. & Kumar, V., The mismanagement of customer loyalty. Harvard Business Review, Jul, 2002, 86–94, who claim that ‘no company should ever take for granted the idea that managing customers for loyalty is the same as managing them for profits’ (94).

34.  Research into the issue of termination on dissolution of relationships is in its infancy. However, it seems to be a topic which will quickly grow. An early study in a business-to-business context is reported in Halinen, A. & Tåhtinen, J., Towards a Process Theory of Relationship Dissolution. Finland: Working Paper No. 9, Turku School of Economics and Business Administration, 1999.

35.  See, for example, Håkansson, H. & Snehota, I., The burden of relationships or who’s next? In Naudé, P. & Turnbull, P. (eds), Network Dynamics in International Marketing. Oxford, UK: Elsevier Science, 1998, pp. 16–25; Vigon, M. & Hertz, S., The burden of key customer relationships. Journal of Customer Behavior, 2(2), 2003, 269–287; Pressey, A. & Tzokas, N., Lighting up the ‘dark side’ of international export/import relationships: evidence from UK exporters. Management Decision, 42(5–6), 2004, 694–708; Anderson, E. & Jap, S.D., The dark side of relationships. Sloan Management Review, 46(Spring), 2005, 75–82; Holmlund-Rytkönen, M. & Strandvik, T., Stress in business relationships. Journal of Business & Industrial Marketing, 20(1), 2005, 12–22.

36.  Anderson & Jap, op. cit. See also Villena, V.H., Revilla, E. & Choi, T.Y., The dark side of buyer-seller relationships: a social capital perspective. Journal of Operations Management, 29(6), 2011, 561–576, Fang, S-R., Chang, Y-S. & Peng, Y-C., Dark side of relationships: a tension-based view. Industrial Marketing Management, 40(5), 2011, 774–784, and Frow, P., Payne, A., Wilkinson, I.F. & Young L., Customer management and CRM: addressing the dark side. Journal of Services Marketing, 25(2), 2011, 79–89.

37.  Henrik Calonius was probably the first marketing researcher who argued for the explicit integration of promises in marketing models. See Calonius, H., A market behaviour framework. In Möller, K. & Paltschik, M. (eds), Contemporary Research in Marketing. Proceedings from the XV Annual Conference of the European Marketing Academy. Helsinki: Helsinki School of Economics and Hanken Swedish School of Economics, Finland, 1986, pp. 515–524; Calonius, H., A buying process model. In Blois, K. & Parkinson, S. (eds), Innovative Marketing – A European Perspective. Proceedings from the XVIIth Annual Conference of the European Marketing Academy. Bradford, UK: University of Bradford, 1988, pp. 86–103. The promise concept was probably first used in a relationship marketing definition in Grönroos, 1989, op. cit., 57. Calonius offered the following general promise-based definition: ‘Marketing is a set of human activities directed at facilitating and consummating exchanges of promises’ (1986, p. 522). Promise theory has not been adopted very much in management and marketing yet. However, see Price, R.F. & Schultz, D.E., Reliability Rules: How Promises Management Can Build Your Company Culture, Build Your Brand, and Build Your Bottom Line. Chicago, IL: Racom Communication, 2008.

38.  The expression ‘enabling promises’ was in this context introduced by Mary Jo Bitner (Building service relationships: it’s all about promises. Journal of the Academy of Marketing Science, 23(4), 1995, 246–251.

39.  As Moorman and Rust conclude in an analysis of the role of marketing: ‘Looking broadly at the marketing literature and practice, it appears that during the past ten years there has been a movement toward thinking of marketing less as a function and more as a set of values and processes that all functions are participating in implementing’ (180). See Moorman, C. & Rust, R.T., The role of marketing. Journal of Marketing, 63(Special Issue), 1999, 180–197.

40.  Service marketing textbooks are typically based on a customer relationship approach. See, for example, Zeithaml, V.A. & Bitner, M.J., Services Marketing. Integrating Customer Focus Across the Firm, 2nd edn. New York: McGraw-Hill, 2000. In general, it is interesting to note that full-scale textbooks on service marketing (not just text and reference volumes) now being published in English are more and more organized around a genuinely service-oriented perspective. See, for example, Zeithaml & Bitner, op. cit.; Bateson, J.E.G., Managing Services Marketing. New York: Dryden Press, 1995; Lovelock, C., Vandermerwe, S. & Lewis, B., Services Marketing: A European Perspective. London: Prentice-Hall Europe, 1996; Kasper, H., van Helsdingen, P. & de Vries Jr., W., Services Marketing Management: An International Perspective. New York: John Wiley & Sons, 1996; McGuire, L., Australian Services Marketing and Management. South Yarra, Australia: Macmillan Education Australia, 1999. The marketing mix approach no longer dominates the structures of these textbooks. An early textbook pioneering such an approach in English is Cowell, D., The Marketing of Services. London: Heinemann, 1985, which was organized around the 7P framework. In other languages such genuinely service-based textbooks have existed since the early 1980s.

41.  El-Ansary, op. cit., 53.

42.  Compare El-Ansary, op. cit.

43.  Lovelock, C., Functional integration in services. Understanding the links between marketing, operations, and human resources. In Swartz, T.A. & Iacobucci, D. (eds), Handbook in Services Marketing & Management. Thousand Oaks, CA: Sage Publications, 2000, pp. 421–437.

44.  Gummesson, E., The new marketing – developing long-term interactive relationships. Long Range Planning, 20(4), 1987, 10–20 and Marketing-orientation revisited: the crucial role of the part-time marketer. European Journal of Marketing, 25(2), 1991, 60–67.

45.  See, for example, Grönroos, C., Designing a long range marketing strategy for services. Long Range Planning, April, 1980.

46.  See, for example, Meuter, M.L., Bitner, M.J., Ostrom, A.L. & Brown, S.W., Choosing among alternative service delivery modes: an investigation of customer trial of self-service technologies. Journal of Marketing, 69(Apr), 2005, 61–83.

47.  Storbankernas reklamhaveri (The advertising flop of big banks). Resumé, May, 2006, 30–31. In Swedish.

48.  See Grönroos, C., From marketing mix to relationship marketing – towards a paradigm shift in marketing. Managing Decision, 35(4), 1997, 322–339. An earlier version was introduced in Grönroos, C., The marketing strategy continuum: a marketing concept for the 1990s. Management Decision, 29(1), 1991, 7–13.

49.  Day, G.S., Managing market relationships. Journal of the Academy of Marketing Science, 28(1), 2000, 24–30.

FURTHER READING

Agariya, A.K. & Singh, D. (2011) What really defines relationship marketing? Review of definitions and general and sector-specific defining constructs. Journal of Relationship Marketing, 10(4), 203–237.

Alderson, W. (1957) Marketing behavior and executive action. Homewood, IL: Richard D. Irwin.

Ambler, T. (2003) Marketing and the Bottom Line. The Marketing Metrics to Pump Up Cash Flow. London: Prentice-Hall.

Anderson, E. & Jap, S.D. (2005) The dark side of relationships. Sloan Management Review, 46(Spring), 75–82.

Arantola, H. (2002) Relationship Drivers in Provider–Consumer Relationships. Empirical Studies of Customer Loyalty Programs. Helsinki: Hanken Swedish School of Economics, Finland.

Bagozzi, R.P. (1975) Marketing as exchange. Journal of Marketing, 39(Oct), 32–39.

Ballantyne, D. & Varey, R.J. (2006) Introducing a dialogical orientation to the service-dominant logic of marketing. In Lusch, R.F. and Vargo, S.L. (eds), The Service-Dominant Logic of Marketing: Dialog, Debate, and Directions. Armonk, NY: M.E. Sharpe, pp. 224–235.

Bateson, J.E.G. (1995) Managing Services Marketing. New York: Dryden Press.

Bitner, M.J. (1992) Servicescapes: the impact of physical surroundings on customers and employees. Journal of Marketing, 56(Apr), 57–71.

Bitner, M.J. (1995) Building service relationships: it’s all about promises. Journal of the Academy of Marketing Science, 23(4), 246–251.

Booms, B.H. & Bitner, M.J. (1982) Marketing strategies and organization structures for service firms. In Donnelly, J.H. & George, W.H. (eds), Marketing of Services. Chicago, IL: American Marketing Association.

Borden, N.H. (1964) The concept of the marketing mix. Journal of Advertising Research, June.

Calonius, H. (1986) A market behaviour framework. In Möller, K. & Paltschik, M. (eds), Contemporary Research in Marketing. Proceedings from the XV Annual Conference of the European Marketing Academy, Helsinki: Helsinki School of Economics and Hanken Swedish School of Economics, Finland, pp. 515–524 also published as Calonius, H. (2006) A market behaviour framework. Marketing Theory, 6(4), 419–428.

Calonius, H. (1988) A buying process model. In Blois, K. & Parkinson, S. (eds), Innovative Marketing – A European Perspective. Proceedings from the XVIIth Annual Conference of the European Marketing Academy. Bradford, UK: University of Bradford, pp. 86–103.

Chen, S.-C. & Quester, P.G. (2005) Developing a value-based measure of market orientation in an interactive service relationship. Journal of Marketing Management, 21(7–8), 779–808.

Constantinides, E. (2006) The marketing mix revisited: towards the 21st century marketing. Journal of Marketing Management, 22(3–4), 407–438.

Cowell, D. (1985) The Marketing of Services. London: Heinemann.

Day, G.S. (2000) Managing market relationships. Journal of the Academy of Marketing Science, 28(1), 24–30.

Dixon, D.F. & Blois, K. (1983) Some Limitations of the 4Ps as a Paradigm for Marketing. Marketing Education Group Annual Conference, UK: Cranfield Institute of Technology, July.

El-Ansary, A.I. (2005) Relationship marketing management: a school in the history of marketing thought. Journal of Relationship Marketing, 4(1–2), 43–56.

Fang, S-R., Chang, Y-S. & Peng, Y-C. (2011) Dark side of relationships: a tension-based view. Industrial Marketing Management, 40(5), 774–784.

Frow, P., Payne, A., Wilkinson, I.F. & Young L. (2011) Customer management and CRM: addressing the dark side. Journal of Services Marketing, 25(2), 79–89.

Gordon, I. (1998) Relationship Marketing. Toronto: John Wiley & Sons.

Grönroos, C. (1980) Designing a long range marketing strategy for services. Long Range Planning, 13(Apr), 36–42.

Grönroos, C. (1989) Defining marketing: a market-oriented approach. European Journal of Marketing, 23(1), 52–60.

Grönroos, C. (1996) Relationship marketing logic. Asia-Australia Marketing Journal, 4(1), 7–18.

Grönroos, C. (1997a) From marketing mix to relationship marketing – towards a paradigm shift in marketing. Managing Decision, 35(4), 322–339.

Grönroos, C. (1997b) Value-driven relational marketing: from products to resources and competencies. Journal of Marketing Management, 13(5), 407–420.

Grönroos, C. (1999) Relationship Marketing: the Nordic School Approach. In Sheth, J.N. & Parvatiyar, A., eds. Handbook of Relationship Marketing. Thousand Oaks, CA: Sage, pp. 95–118.

Grönroos, C. (2006a) What can a service logic offer marketing theory? In Lusch, R.F. & Vargo, S.L. (eds), The Service-Dominant Logic of Marketing. Dialog, Debate, and Directions. Armonk, NY: M.E. Sharpe, pp. 354–364.

Grönroos, C. (2006b) Adopting a service logic for marketing. Marketing Theory, 6(3), 317–333.

Grönroos, C. (2006c) On defining marketing: finding a new roadmap for marketing. Marketing Theory, 6(4), 395–417.

Grönroos, C. (2009) Promise management: regaining customer management for marketing. Journal of Business & Industrial Marketing, 13(5–6), 351–359.

Gummesson, E. (1987) The new marketing – developing long-term interactive relationships. Long Range Planning, 20(4), 10–21.

Gummesson, E. (1991) Marketing revisited: the crucial role of the part-time marketer. European Journal of Marketing, 25(2), 60–67.

Gummesson, E. (2008) Total Relationship Marketing. Marketing Management, Relationship Strategy, CRM, and a New Dominant Logic for the Value Creating Network Economy. Oxford: Butterworth Heinemann.

Håkansson, H. & Snehota, I. (1998) The burden of relationships or who’s next? In Naudé, P. & Turnbull, P. (eds), Network Dynamics in International Marketing. Oxford, UK: Elsevier Science, pp. 16–25.

Halinen, A. & Tåhtinen, J. (1999) Towards a Process Theory of Relationship Dissolution. Working Paper No. 9, Turku School of Economics and Business Administration, Finland.

Harker, M.J. (1999) Relationship marketing defined? An examination of current relationship marketing definitions. Marketing Intelligence & Planning, 17(1), 13–20.

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