Literature review on relationship marketing

1. MirazizBazarov 2011 Миразиз Базаров 1
Literature review on relationship marketing
Toughening competition and increasing standards of service and goods quality demanded by
customers in the late of 20th century has given the need to the additional attention to
relationship marketing, which was paid not only by marketing academia, but also by the
industry managers (Singh T. and Srivastava V., 2008). The relationship marketing concepts
also had a considerable influence on the marketing academic world, because of the mass shift
from transaction based marketing to the focus on customer relations. (Webster, 1992).
Moreover, it resulted in the emphasis on continuous customer contact and longer time scale, in
addition to focus on high customer service and regular communication, instead of persuasive
one (Chase 1984, Sergeant and Frenkel 2000, Kotler et.al.2002, Infor CRM 2010).
It is important to mention that there were a number of the concepts that were proposed previous
to the definition of Relationship Marketing in its current form. Macneil (1980) proposed the
concept of relational contracting; Varadarajan and Rajaratnam (1986) suggested so-called
symbiotic marketing, Dwyer at.al. (1987) created the concept of relational marketing, while
Andeson and Narus (1990) and Day (1990) proposed working partnership and strategic
alliances respectively, as Singh and Srivastava (2008) summarizes. To add, the concept of
internal marketing and co-marketing alliances can also be considered as the prerequisite of
relationship marketing (Arndt 1983, Singh and Srivastava, 2008). Gronroos states (1990) that
there was a parallel development of the concepts of relationship marketing in both customer
and industrial marketing, which was then mixed into the current understanding of the concept.
One of the first developers of these concepts was Berry (Berry, 1983, cited in Narasimhan
2009), and McKenna (1991), who made the initial definition and the comprehensive analysis of
the features of the concept of relationship marketing. The further development of the concept of
Relationship Marketing was done by Nevin (1995) who proposed to use this concept in broad
area of marketing issues, and revised the previous recommendations related to relationship
marketing.
So, nowadays, Business Dictionary (2011) suggests the modern and up-to-date definition of
relationship marketing, defining it as a number of marketing activities which are targeted at
developing and managing trusted and long-term relationships with individual customers.

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After the description of the process of the devolvement of this concept, main authors and
current general definition of relationship marketing were found, it is now important so make a
review of the articles on the essence and benefits of relationship marketing. For instance, Sheth
and Parvatiyar (2002) state that relationship marketing activities are mainly targeted at the
consistent implementation of up-to-date knowledge about the individual customers’ attitudes to
products and service design, in order to maintain conditions and long-term relationship with
them. Morgan and Hunt (1994) notice that relationship marketing is usually adopted in the
firms in order to make an emphasis on the customer retention, as the basis of long term
relationships with the key customers. Moreover, Law et al. (2003) mention the fact that the
companies which adopted relationship marketing are focused mainly on the existing customers
because of the emphasis on customer retention. According to a number of researches, the
higher profitability and general success of the company steams from both attraction and
retention of the customers, but many companies make the main emphasis on attracting, which
is why adoption of well developed relationship marketing strategy can lead to significant
increase in competitive advantage, thus relationship marketing is considered as one of the key
tools in enhancing business performance. (Ahmad and Buttle 2002, Tzokas and Saren 2004,
Kanagal 2005). Besides, the correlation between the customer retention and profitability is
well-known and studied phenomenon (Narver and Slater 1990, Zeithaml 2000, Larivie`re and
Van den Poel 2005, Foster 2006). Therefore, it can be concluded that the main reason for
adopting relationship marketing is increasing customer retention which lead to the range of the
benefits.
So the most important aspect of relationship management is the emphasis on customer
retention, as it was mentioned previously, because the adoption of relationship marketing
targeted to the increase of the customer retention, which leads to various benefits (Ghavami and
Olyaei, 2006). This includes the decreased costs because of the lowering costs on acquiring
new customers since higher retention rate means the less customers ought to be acquired,
usually less time needed from sales staff to serve, they are usually less sensitive to the changes
in prices and more predictable in the long turn, they gradually increase the range of the
products they buy in most of the cases, in addition to the fact that they provide word of mouth
recommendations, lowering the possible market share of newcomers (Reicheld 1993, Thomas
2001, Lewis 2004, Gustafsson Johnson and Roos 2005).

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So the benefits of relationship marketing and increased retention are proved to be evident, but
Grönroos (2004) proposes one of the most precise and largely cited reason for its adoption,
according to which there is a suggestion that “the top of the value products and/or services that
are exchanged, the existence of a relationship between the two parties creates additional value
for the customer and also for the supplier or service provider”.
The previous part of review has clearly demonstrated that benefits of relationship market are
largely exposed in the academic sources. This leads to the fact that it also spreads to the
researches and following recommendations related to the basics of relationship marketing, or,
to be more specific, to the ways of reaching the applicable model in practice. Nevin (1995) and
McKenna (1991) look into the core of relationship marketing and suggest that it can be build
only on the basis of the establishment of an individual approach to each of the customers. But
Morgan and Hunt (1994) state that this approach would be meaningless without the emphasis
of the company on honest and trust, in addition to keeping the promises given to the customers.
While developing of prolonged relationship with customers, this approach also should be aimed
at cultivation of the crucial customers and improving the performance via the decrease of
customer turnover, also making an orientation towards the benefits and value proposed to the
customers rather than simply products features (Berry 1995, Ravald and Grönroos 1996, Winer
2001, Sanches 2002). The adoption of total quality approach is highly recommended in order to
attain the high level of relationship marketing in the company, as Christopher (1991) states,
however, Bathie and Sarkar (2002) go further and suggest that high class relationship
marketing requires the adoption of the synthesis of TQM and marketing processes. Groos
(1994), (2004) also notes how important to develop the skills of employees via trainings and
other tools in order to maintain valued contact with the customers.
In order to create effective relationship marketing it is better to separate and describe each of
the type of customers of the company, as Kala (2008) and (2008) suggest. So, they suggest that
the implementation of the customer loyalty ladder, which, will consist of several types of
customers, from suspect to raving fan, and unlike the traditional approach, is created in order to
invest into maintaining the high level of satisfaction of the loyal customers, and creating the
system in a way that encourages the customers to climb up the ladder as high as it possible,
thus it will encourage people to become permanent customers.

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There is a number of ways, techniques and approaches regarding how a company can develop
and maintain on the high level the relationship marketing, as many authors suggest. One of the
ways, as Gustafsson, Johnson and Roos (2005) note, is increasing and ensuring the high level
of satisfaction. Another way is ensuring the superior value, as Ravald and Grönroos (1996)
state, since customer satisfaction and readiness to maintain long-term relationships is directly
related to the perception of the quality received. Customer orientation, which is also
undoubtedly related to relationship marketing, in addition to enhanced knowledge of customers
about the loyalty schemes will also allow highly targeted promotion of the product and ensure
the effectiveness of the marketing strategy adopted, as Taleghani and Gilaninia and Mousavian
(2011) note.
So during the research it was firstly found out that there were many concepts which were
considered as the prerequisite of relationship marketing concept, because of the global changes
in the marketing paradigm occurred in late 20th century. It was then revealed that the current
comprehension of the concept mainly remains the same from early 1990s. The review exposed
the fact that the concept of relationship marketing makes the main emphasis on customer
retention rather than attraction. Secondly, the relationship marketing focuses on on-going,
regular and trusted relationships. This is done by the implementation of the customer- and
quality-oriented operation process. The trust, loyalty is also important for creation of highly
effective relationship marketing strategy, according to which every customer is treated as a
partner, rather than impersonal buyer of the products and services. The review has
demonstrated the fact that the concept of relationship marketing is still demanded, because of
the further increase of the competition for each customer, and because of the increased number
of electronic and internet-based tool which now allow implementing relationship marketing for
customer business on the higher level.

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