Relationship Marketing: Theory and Implementation

GEORGE M. ZINKHAN gzinkhan@terry.uga.edu

University of Georgia, Marketing Department, 138 Brooks Hall, Athens, GA 30602

Received August 8, 2001

Abstract

The field of relationship marketing can be viewed as a sub-area of ‘‘market focused

management.’’ In this issue, we present some cutting edge work on relationship marketing

(RM). At the most simple level, RM strategy prescribes that it is more effective to invest in

long-term customer interactions than to rely on a series of potentially unrelated, one-time

exchanges. In practice, however, RM is not that simple to implement. There are multiple

stakeholders to consider, and organizations must make certain that value is provided for all

members of a potential partnership. Here, we consider several strands of relationship

marketing, including the concepts of: customer relationship management, stakeholder

theory, affinity marketing, promotional incentives, strategy, and leadership.

Introduction

Relationship Marketing (RM) can be defined as an approach to establish, maintain, and

enhance long-term associations with customers and other stakeholders (Koiranen, 1995).

A key assumption is that all parties will be able to meet their objectives through the

relationship. Another key aspect is that the strategic implications vary depending on the

stage of the relationship – establishing, maintaining, or enhancing. That is, the organiza-

tion must concentrate on different issues depending on the stage of development. Perhaps

a larger, but related concept, is customer relationship management (CRM), with CRM

being defined as the process that identifies customers, creates customer knowledge, builds

customer relationships, and shapes customers’ perception of the organization and its

solutions (Srivastava, Shervani, and Fahey, 1999). Following the CRM perspective,

relationship marketing is the stage that comes in between creating customer knowledge

and shaping customer perceptions.

Relationship marketing is an attractive concept because it links together many seemingly

unrelated strands of marketing thought. Some of these strands include: customer

relationship management, sales management, strategic thinking, legal relationships,

promotional strategy (e.g., coupons, customer rewards), data base marketing, business-

to-consumer marketing, business-to-business marketing, and affinity marketing. Each of

these approaches has the potential to offer valuable benefits to both buyers and sellers.

However, relationship marketing can be difficult to implement, in practice.

Journal of Market-Focused Management, 5, 83–89 (2002)# 2002 Kluwer Academic Publishers. Manufactured in The Netherlands.

Advantages and Challenges Associated with Relationship Marketing

On the one hand, relationship marketing makes a lot sense. It seems much more efficient to

establish a long-term relationship with a customer than to pursue individual, potentially

unrelated exchanges. Relationship marketing takes the ‘‘marketing concept’’ one step

further, by adding the time dimension to the notion that the ‘‘customer is king.’’

Relationship marketing certainly seems like a promising way to create a competitive

advantage. By exchanging information and forging a partnership with the customer, the

seller has an opportunity to form a close bond with the customer. This close bond can be

potentially advantageous to both parties, and the strategy works best when both buyers and

sellers are interested in achieving benefits over the long-run (Ganesan, 1994). In the 21st

century, sellers can harness information technology to mine large data bases and gain keen

insights about customer behavior and customer preferences.

On the other hand, relationship marketing can be a difficult concept to implement.

Pursuing close relationships with customers is not always desirable or possible (Webster,

1992). Such relationships can be costly to build, both in terms of time and in terms of

resources. For a variety of reasons, customers may resist the seller’s overture to create a

‘‘relationship.’’ For instance, the customer may be better off if there are a group of sellers,

all vying to win a contract. Following economic theory, the more sellers that there are, the

more likely it is that the buyer will be able to obtain a favorable price.

There are important differences between business-to-business (B2B) and business-to-

consumer (B2C) marketing (Zinkhan and Cheng, 1992). By nature, business customers

have more motivations to create a partnership with a seller. It is more difficult for an

individual consumer to forge a true partnership with the seller. The individual consumer

can offer money, positive word of mouth, and loyalty over time (Arnould et al., 2002). In

addition to these aspects, a business organization can offer such items as profit sharing

and, in return, can expect a truly customized service.

Since B2B marketing often involves purchase volumes that are quite large, it is feasible

for the seller to invest considerable resources to customize the product and service. In

exchange for this customization, the customer is willing to cooperate in forging a true

relationship. In contrast, what does an individual consumer in a B2C setting have to gain

in creating a ‘‘relationship’’ with a business? Certainly, such a relationship will be different

than a true human relationship. It is true that, in some industries, customers can gain

tangible benefits (e.g., frequent flyer miles and free trips) in exchange for their loyalty. In

other industries, there seem to be deep human emotions invested in the brand (e.g., the

loyalty displayed by Apple users or lovers of Coke Classic). Nonetheless, businesses

sometimes struggle to identify the true benefit that customers will derive from committing

to a long-term relationship.

Consider the case of Mr. Beken, a software consultant, who bought a computer manual

at Computer City (Kerber, 1996). When the sales clerk asked him for personal information

(e.g., his address and phone number), Mr. Beken became suspicious. Computer City was

trying to gather information and establish a relationship with Mr. Beken (e.g., through data

base marketing). In this case, the customer does not see a relationship that has any benefit

for him. Instead, he foresees a seemingly endless stream of junk mail or nuisance phone

ZINKHAN84

calls. After providing the sales clerk with the requested information, Mr. Beken writes the

following statement on the back of the check that he uses to pay for his purchase:

Computer City agrees NOT to place Robert Beken on any mailing list or send him

any advertisements or mailings. Computer City agrees that breach of this

agreement by Computer City will damage Robert Beken and that these damages

may be pursued in court. Further, that these damages for the first breach are

$1,000. The deposit of this check for payment is agreement with these terms and

conditions.

Is it difficult to predict what happens next? Mr. Beken receives three pieces of (unwanted)

mail from Computer City. Angered, Mr. Beken takes Computer City to small claims court,

where he wins a judgment of $,1000 (Kerber, 1996).

As this situation illustrates, many customers are not especially eager to have a

‘‘relationship’’ with an organization (such as Computer City). Organizations have to think

carefully what benefits they can offer to consumers, so as to initiate and secure a

relationship over time. In some industries, it is difficult to identify actions that will be

truly valued by consumers (as distinct from actions that are perceived as naked self

promotion). In a B2B setting, where both parties have a profit motive, it is more apparent

how to motivate a lasting relationship. Thus, it is not surprising that partnerships and

cooperative efforts (e.g., within a channel, between competitors) are a key means of

creating competitive advantage in the 21st century.

The Five Articles in this Special Issue

The five remaining articles in this special issue explore relationship marketing from a variety

of perspectives and methods. Three papers are conceptual; one uses a case study approach;

and one uses a survey method to understand the behaviors and attitudes of the sales force.

The contribution and perspective of each article are discussed in the following sections.

Relationship Marketing in a B2B Setting

The first article, by Anderson, identifies the limitations of relationship marketing,

especially with respect to a B2B setting. One key limitation is that customers may be

unwilling to commit to a long-term relationship when they consider all of the potential

costs and disadvantages. As mentioned above, business customers may prefer to have the

option of soliciting bids from a group of qualified vendors. Once these limitations are

understood, Anderson uses a case study approach to explore the ways that suppliers

attempt to overcome customer unwillingness (i.e., to commit to a long-term relationship).

Specifically, the author studies the business customers of a supplier of fat- and oil-based

additives. Based on the findings of qualitative research, the author develops a set of

propositions. For instance, Anderson proposes that, in the early stage of establishing a

relationship, it is more effective for the supplier to pursue a marketing communications

RELATIONSHIP MARKETING 85

strategy that is ‘‘non-coercive.’’ That is, the customers don’t want to be locked into a long-

term relationship, initially. They do not want to be required to commit resources to the

relationship, at the early stages. Non-coercive strategies include efforts to change customer

beliefs or attitudes. In contrast, coercive strategies require the customer to make a

commitment of resources over time (e.g., by signing a contract).

At the relationship maintenance stage, the author proposes that the supplier has to be

willing to transfer knowledge both to the customer and to other competing suppliers. In this

way, Anderson emphasizes what the seller has to give up in order to gain the benefits of a

long-term relationship. This perspective is key. Too often (as in the Computer City example

described above), sellers merely assume that the customer will gain some benefit from the

relationship. Here, the author emphasizes that, at each step of the relationship process, the

seller must be willing to make some (potentially risky) one-sided investments and sacrifices.

Stakeholder Theory

The second paper, by Polonsky et al., applies stakeholder theory to the analysis of

marketing relationships. First, the authors point out that the marketing discipline is slowly

recognizing that relationships may be much broader than the traditional link between

buyer and seller. The creation of successful marketing strategy may also require that a

wide range of stakeholder groups (e.g., the government, suppliers, the public at large) be

considered. The authors make an important distinction between stakeholder catching and

stakeholder keeping. That is, one set of activities may be necessary to establish contact

with a potential partner. But, a different set of activities may be required to maintain that

relationship over time.

Learning is a key aspect of sustaining relationships. As a first step, organizations need to

learn which actions will have a positive effect on the partner. For instance, the

manufacturer may discover that sales and profits can be increased by offering specific

incentives (e.g., trips to Hawaii) to the sales force of a B2B client. At a more advanced

stage, organizations can learn enough about their business partner so that they come to

alter their own goals and objectives. Electronic commerce provides many opportunities for

enhancing organizational learning (Watson et al., 2000). For instance, data bases can be

created to summarize and recognize patterns in buyer preferences. Consider Amazon.com’s

system of collaborative learning. By studying an individual customer’s book selections

and comparing these with other customers, Amazon is able to recommend future purchases

(e.g., ‘‘other people like you seem to enjoy this book – Into Thin Air by Jon Krakauer). In

many instances, the collaborative learning technology may recognize patterns or suggest

solutions that the consumers themselves could not articulate precisely.

Affinity Marketing

The third article, by Horne and Worthington, is a conceptual paper that focuses on affinity

marketing, which can be viewed as a sub-area of relationship marketing. In the extant

literature, affinity marketing involves three different actors and seems more applicable for

B-to-C situations. First, there is the customer who has some kind of loyalty or association

ZINKHAN86

with a non-profit organization (such as a university, a charity, or a club). Second, there is

the for-profit organization which typically serves as the seller and initiator of the affinity

process. Third, there is the (typically) non-profit organization, which commands loyalty

from a segment of the population.

Consider the following example. The non-profit organization could be a university (e.g.,

the University of Texas – UT) which has many loyal alumni. The alumni, of course, are the

potential customers who are, at present, loyal to the university. The initiating organization

could be a credit card company (such as American Express or a financial institution). The

financial institution contacts UT alumni, who are given the opportunity to obtain a credit

card which includes the UT name and logo. In turn, the University of Texas may receive

some sort of donation which is pegged at some percentage of the total charges which

accumulate on the new credit card. In this way, there is a possibility for all three parties to

benefit. In this case, UT has a small opportunity to increase alumni loyalty and also benefits

financially. The customers receive a new service, plus obtain the benefits of affiliating

with their alma mater. Finally, the financial institution gets a stream of new customers.

Horne and Worthington expand on this traditional model of affinity marketing to

develop what they call a ‘‘relationship rhombus.’’ In other words, they add a fourth actor

to the traditional three-actor conceptualization. This fourth actor offers products / services

to the customer which provide an incentive or reward for continued or repeat use of the

affinity credit card (to continue the example from the previous paragraph). For instance, a

credit card user may ‘‘earn’’ a box of chocolates (or a free brief case) by charging a certain

level of expenditures to the affinity card. In this way, the chocolate shipper is a fourth party

who provides added value to the customer. The authors argue that there can be substantial

disagreements among the four parties to the affinity arrangement. That is, affinity

marketing does not necessarily create a win-win situation. In this way, Horne and

Worthington provide a very specific example of the Polonsky et al. thesis. Relationships

are complex, and they are quite easily frayed. Just as in the case of personal relationships,

there are many problems which must be overcome for an organization to establish and

maintain successful business relationships.

Trade Incentives in a Retail Setting

Parker et al. explore the impact of promotional incentives in a retail setting. Of course, the

sales force is a key instrument for establishing and maintaining customer relationships.

Thus, it is interesting to see how an organization’s motivational techniques (targeted to the

sales force) influence the behaviors and attitudes of the employees. Among the sales

incentives considered here are: cash awards, recognition, travel, merchandise, and praise.

Parker et al. survey 95 salespeople who work in the automotive parts and accessories

industry. The respondents indicate that the most effective incentives for them are money,

travel, and praise. However, the respondents also indicate that such incentives

(e.g., financial rewards for themselves) do not interfere with their ability to promote

customer satisfaction. For instance, the salespeople seemed to be reluctant to try and get a

customer to switch brand preference just so that they (the sales force) could achieve their

goals (e.g., pumping up sales volume for the brand that is offering an incentive). In terms

RELATIONSHIP MARKETING 87

of future research, it would be interesting to see how promotions targeted to consumers

interact with promotions targeted to a sales force. Do such short-term promotional tactics

have the potential to create long-term, productive relationships? How?

Leadership

The final article, by Locander et al., examines a subject – leadership – that cuts across all

of business practice. Leadership is an integral part of strategy formulation. At the same

time, it is a key element in sales management. Is it possible for an organization to be

market focused, if there is not sufficient leadership? Certainly, a key component of being

market focused is to create an organizational culture that values the customer as a primary

stakeholder. Another key component is to find innovative ways to reward employees for

advancing organizational objectives.

Locander et al. link the areas of leadership development, leadership skills, and internal

customer culture to create strategic recommendations. Leadership is defined as an

influence relationship between leaders and followers (Yuki, 1998). On the one hand,

leaders concentrate on organizational outcomes and objectives. On the other hand, leaders

can focus on the individual outcomes for both the followers and the leader. For instance,

there could be a kind of mutual stimulation that turns followers into leaders in their own

right. Such a transformation could result in a culture that is ‘‘leadership rich.’’ By giving

control to others, a leader strives to develop a true community within the organization. As

argued throughout this special issue, the internal organizational community must be quite

sensitive to the needs of external stakeholders, including customers and business partners.

Summary

The business literature is witnessing an explosion in vocabulary. Key terms discussed here

include: customer relationship management, relationship marketing, affinity marketing,

B2B, B2C, stakeholders, and transformational leadership. These phrases are more than just

buzzwords. In academia, individual courses are being created to deal with each one of

these subjects. At the same time, business practice embraces the new philosophies that are

implied by these terms. It is interesting to note that ‘‘market focused management’’

provides an umbrella that can shelter and summarize such a broad array of emerging

business perspectives. In the 21st century, the market focused philosophy continues to

provide a useful metaphor for thinking about the many ways that organizations should

strive to integrate their activities around a customer orientation.

References

Arnould, E., Linda, P., and Zinkhan, G. M. (2002), Consumers, Chicago: Irwin / McGraw Hill.

Ganesan, S. (1994), ‘‘Determinants of Long-Term Orientation in Buyer-Seller Relationships,’’ Journal of

Marketing, Vol. 58, April, pp. 1–19.

ZINKHAN88

Kerber, R. (1996), ‘‘Ligitious Crusader Uses Checks to Ensure No Junk is in the Mail,’’ Wall Street Journal, B1.

Koiranen, M. (1995), ‘‘Custopreneurship Coalitions in Relationship Marketing.’’ In: Juha, N. (ed.), Under-

standing Stakeholder Thinking, pp. 184–194. Helsinki Finland: LSR-Publications.

Srivastava, R., Tasadduq, S., and Liam, F. (1999), ‘‘Marketing, Business Processes, and Shareholder Value: An

Organizationally Embedded View of Marketing Activities and the Discipline of Marketing,’’ Journal of

Marketing, Vol. 63, Special Issue, pp. 168–179.

Webster, F. R. (1992), ‘‘The Changing Role of Marketing in the Corporation,’’ Journal of Marketing, Vol. 56,

October, pp. 1–17.

Yuki, G. (1998), Leadership in Organizations (third edition), Englewood Cliffs: Prentice Hall.

Zinkhan, G. M., and Cheng, C. S. A. (1992), ‘‘Marketing Communication Intensity Differences Across Indus-

tries,’’ Decision Sciences, Vol. 23, May/June, pp. 758–769.

RELATIONSHIP MARKETING 89