Relationship Marketing: Theory and Practice

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Edited by: Francis Buttle

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    Preface

    Relationship marketing, the development of mutually beneficial long-term relationships between suppliers and customers, is being widely cited as the future of marketing. The traditional short-term focus on transactions has been criticised on two main grounds. First, short-termism has promoted a form of hit-and-run marketing in which the customer's best interests are not served. Second, short-termism has not served corporate self-interest either because it is more costly to attract new customers than it is to retain existing ones. Despite this, marketing theory is still resolutely transaction-oriented. Its focus is clearly on customer acquisition, rather than customer retention.

    Slowly, however, a body of relationship marketing (RM) theory is developing, and companies are beginning to experiment with relationship marketing strategies. For example, theorists are examining relationships between customer retention and profitability, relational longevity and trust, customer defection and customer satisfaction. Practitioners have begun to segment customers according to their profit potential. According to one recent report (Hales, 1995), only 15% of bank customers are profitable. In the pursuit of a greater share of customers, these have become the focus of customer retention strategies and cross-selling efforts. Charitable fundraisers are striving to move individual donors up the ladder from casual gift-giving to legacy status. Companies are developing sophisticated customer databases to enable them to finetune offers.

    In the light of this developing activity the main purpose of this book is to examine the association between relationship marketing theory and practice.

    The opening chapter examines relationship marketing theory, reviews a number of RM definitions and reports on the economic arguments in favour of RM. It describes the nature and scope of marketing relationships, picking out characteristics such as concern for the welfare of customers, trust and commitment between partners, and the importance of customer service. Finally, it identifies a number of requirements for successful RM.

    The next twelve chapters describe, analyse and critique RM practice in a number of organisational settings (supply-chain relationships, principal-agent relationships, business-to-business relationships, intra-organisational relationships) and industries (hospitality, air travel, retail banking, corporate banking, credit cards, financial advisory services, advertising agencies, not-for-profit organisations).

    The final chapter reflects on the relationship between theory and practice. It does so by revisiting a number of questions raised in the first chapter.

    • Is there evidence of a shift from short-term to longer-term orientation?
    • Is there any evidence of mutual interests being served?
    • Do companies understand the concept of life-time value of a customer?
    • Is there evidence of trust and commitment between relational partners?
    • Is endorsement of RM reflected in high quality customer service?
    • Is internal marketing necessary for RM to prosper?
    • Are sophisticated information systems employed, enabling managers to meet or exceed customer expectations?
    • Do organisational structures and reward systems facilitate the achievement of RM goals?

    The book has been written principally to meet the needs of the student reader. Students on MBA programmes, Masters students studying marketing, and Masters students on sectoral programmes examining financial services, hospitality, tourism, retailing, industrial and not-for-profit markets are the primary audience for this book. However, the clear link between theory and practice means that company directors and managers will also find much to interest them. Finally, upper level undergraduates on business studies and marketing courses will find the content challenges the traditions of marketing theory.

    The book is the product of collaboration between editor and contributing authors. Grateful thanks are extended to all the contributors: Gary Davies, Neil Carruthers, Peter Naudé, Chris Holland, Javier Reynoso, Brian Moores, John Murphy, Charles Schell, Steve Worthington, Chris Ennew, Mary Hartley, David Gilbert, Sue Gilpin, Paul Michell and Tony Conway. Since the final decision on what to include and what to exclude lies with the editor, Francis Buttle is responsible for all errors of commission and omission. Apologies to all those offended.

    Work continues to develop and refine RM concepts, and to promote better RM practice. The editor invites readers to join that effort. He may be contacted by e-mail at f.buttle@fs2.mbs.ac.uk or by writing to Manchester Business School, Booth Street West, Manchester M15 6PB, United Kingdom.

    Reference
    Hales, M.G. (1995) Focusing on 15% of the pie, Bank Marketing, Vol. 27, No. 4, April, pp. 29–34.

    Contributors

    Francis Buttle is Senior Fellow in Services Management at Manchester Business School. He has over 20 years experience in marketing management, research, consulting and education on three continents. Author of two books, he has contributed over 130 articles to academic and professional publications, as diverse as European Journal of Marketing, International Journal of Advertising, Cornell Hotel and Restaurant Administration Quarterly, and International Boat Industry. He teaches marketing management, customer service, and services marketing on MBA and executive courses. His PhD is from the University of Massachusetts.

    Neil Carruthers is an ESRC Fellow in retailing at Manchester Business School. After completing an honours degree in Finance, his initial career involved him in large-scale corporate re-structuring programmes within the brewing and leisure industry. He then moved into the field of executive recruitment consultancy, ultimately becoming responsible for the successful launch and development of a new business venture. In 1991, he joined the full-time MBA programme at MBS, specialising in marketing and strategy. He is currently investigating the impact of inter-organisational relationships on performance outcomes for his Doctorate, as well as conducting research into the impact of governmental initiatives on entrepreneurial success.

    Tony Conway is Principal Lecturer in Management at University College, Salford. He has produced a number of journal articles, text contributions and conference papers on public sector and general services marketing. He teaches Services Marketing, and Marketing Communications to a variety of postgraduate and undergraduate programmes and is involved in short course consultancies in Customer Care and Service Quality in both public and private sector organisations.

    Gary Davies is POCL Professor of Retailing at Manchester Business School where he is also head of Marketing and Strategy and Director of the International Centre for Retail Studies. He has written over 200 articles and 10 books or monographs. His commercial experience includes employment with companies such as the Mars group and consultancy to organisations including retailers and manufacturers in Europe and North America. His current research interests involve a number of studies into supply-chain management.

    Christine Ennew is Professor of Marketing in the School of Management and Finance at the University of Nottingham. She has been involved in a range of research projects relating to the marketing of financial services and published in a variety of journals including Journal of Marketing Management, British Journal of Management and European Journal of Marketing. She is co-editor of a leading text on financial services marketing and Associate Editor of the International Journal of Bank Marketing.

    David Gilbert is Senior Lecturer in Marketing and Course Leader for Surrey University's Masters Degree Course in Tourism Marketing. He is the Research Director of the Thomas Cook Research Centre at the University of Surrey and carries out research for a number of leading UK companies. Other areas of interest include academic research related to tourism marketing and consumer behaviour. His specialist expertise has been sought for consultancy and the running of courses in many overseas countries and he has published over 50 refereed articles and papers.

    Suzanne Gilpin is Senior Lecturer in Marketing in the Department of Hotel Catering and Tourism Management, the Manchester Metropolitan University. A graduate of Strathclyde University, she later gained her MA in Marketing at Kingston Business School. She has over eight years experience of operational, sales and marketing management in the hospitality, leisure and information technology industries. Prior to her present position, she has held posts at the former Oxford and South Bank Polytechnics. She has published in the area of international standardisation of leisure products and is currently researching branding within the business travel market.

    Mary Hartley is a Graduate Teaching Assistant at the University of Nottingham. She is currently conducting doctoral research into relationship marketing and has co-authored a number of papers on this topic for conferences including MEG and EMAC. She has a BSc in Marketing and Organisational Behaviour from Lancaster University.

    Christopher P. Holland graduated from the University of Warwick in Computer Systems Engineering. After working in product marketing for P&P, an information technology company, he was appointed ICL research associate at Manchester Business School. The focus of his research for ICL was on the effects of information systems on the organisation of supply chains and competitive advantage in the retail industry. He moved to Salford University's IT Institute as lecturer and developed his work on electronic data interchange and strategic information systems implementation. He is currently lecturer in Information Management at Manchester Business School where he gained his PhD in business administration. He has published articles in Strategic Management Journal, Journal of Strategic Information Systems and Sloan Management Review and regularly contributes to international strategy and IT conferences. He is director of the Master in Business Information Systems (MBIS) degree at MBS and is co-ordinator of the information systems in global business track for HICSS. His main research interests are globalisation, supply-chain management and the implementation of strategic information systems.

    Paul Michell is Professor of Advertising and Marketing at Manchester Business School and Visiting Professor of Marketing at ESC Lyon Business School. He is a graduate of London, Boston and Brunel Universities. He has also worked at The Stern School New York University, and previously was in marketing management with United Biscuits and Procter and Gamble. He has published in Journal of Marketing, Journal of Advertising Research, International Journal of Advertising, Journal of Marketing Communications, among others.

    Brian Moores undertook postgraduate research at UMIST into the efficacy of the work measurement process. He was awarded a Harkness Fellowship in 1964 and returned to UMIST in 1966. Brian Moores was appointed to a chair in Management in Cardiff in 1984 and he moved in 1987 to the chair of Management Science at Stirling where, amongst other activities, he created and directed the Scottish Quality Management Centre. He took up a chair at Manchester Business School in 1990. A less than satisfactory experience in a hospital Accident and Emergency Department led to him becoming involved in the development of methods for assessing inpatient perceptions of their hospital care and also triggered off a wider concern for quality assurance and customer service across all service industries. During his time at Manchester Business School he concentrated on the development of a portfolio of educational programmes across the full spectrum of specialised customer service issues. He has been involved, since its inception, with the SIGMA project in the Trent region.

    John A. Murphy is the Abbey National Visiting Senior Fellow in Service Quality at Manchester Business School, prior to which he was Visiting Professor of Quality at the University of Ulster. He directs the Quality Master Class in Service Quality and teaches customer retention management on MBA and executive courses. He has over 15 years experience in senior management and is currently managing director of CRD International Ltd. He holds three professional fellowships and is a member of the International Academy for Quality, whose members are chosen from among the most active and experienced protagonists of quality in the world. He is the author of three books, the most recent of which – Service Quality in Practice – has also been published in several countries.

    Peter Naudé did his undergraduate studies in marketing at the University of Cape Town, and subsequently completed his MSc in Operational Research at Sussex. He spent a number of years as a research officer with the Council for Scientific and Industrial Research and then as a consultant with the P-E Consulting Group. He moved into academia by joining the Department of Business Science at the University of Cape Town in 1983, and then moved to the Graduate School of Business at the same university in 1985. He joined the Doctoral programme at Manchester Business School in 1988, and became a faculty member there in 1990. His PhD studies were concerned with the statistical modelling of purchasing decisions in industrial marketing. His research interests focus on the general area of the application of statistical techniques for marketing analysis.

    Javier F. Reynoso obtained a BSc in Industrial and Systems Engineering from Instituto Technologico y de Estudios Superiores de Monterrey (ITESM), Mexico. From 1983 to 1989 he worked as an internal facilitator in the design and implementation of quality management systems in major Mexican manufacturing industries. In 1987 he studied for a diploma in Total Quality Management in Osaka, Japan sponsored by the Japanese Government. From 1989 to 1991 he joined the ITESM faculty to work as a senior researcher and consultant in the Graduate and Research Division. From 1991 to 1995, he studied for a PhD in Services Management at Manchester Business School sponsored by The British Council, ITESM and the Mexican Government. During this period, he conducted research in service organisations, including the hotel industry and the health service. He is currently Assistant Professor at the faculty of the Graduate School of Business Administration at ITESM, Monterrey, Mexico.

    Charles Schell is a Fellow in Banking at Manchester Business School and lectures on the MBA and executive programmes in the areas of finance, banking and business strategy. He is a regular contributor to executive training programmes for a number of UK banks and insurance companies and has undertaken consulting and research contracts for some of the UK's best-known institutions. His recent publications include Corporate Credit Analysis (with Nick Collett, now in its 2nd edition) and Project and Infrastructure Finance in Asia. Prior to joining MBS Charles worked as a consultant in Asia and the Pacific Islands and was employed as a financial and market analyst for Dun & Bradstreet, Canada.

    Steve Worthington is the Britannia Building Society, Professor of Marketing of Financial Services at Staffordshire University Business School. He specialises in the issues surrounding the distribution of financial services via plastic cards and in the organisation and control of the payment systems through which these cards are used. He has previously lectured at Manchester Business School, the University of Stirling, and Trent University, Nottingham. Before returning to academic life in 1992, he worked as Marketing Group Head within Co-op Brand, the own label of the Co-operative Wholesale Society. Prior to that he was Head of Marketing and Planning with the Co-operative Bank, a subsidiary of the CWS. He also has business experience with ManuLife Insurance and Kodak. He was published widely both in academic journals such as Journal of Marketing Management, International Journal of Retailing and the International Journal of Bank Marketing, and in more practitioner focused publications such as The Financial Times, European Card Review, Retail Week and Point of Sale Terminal News.


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