This document provides an overview of relationship marketing and customer relationship management. It discusses relationship marketing as a holistic concept that focuses on identifying, establishing, maintaining and enhancing relationships with customers and other stakeholders for mutual benefit. Relationship marketing requires developing long-term trusting relationships and seeing customers as strategic resources. Customer relationship management involves collecting, analyzing and using customer data to improve profitability by generating greater customer lifetime value.

1. [7BSP1016 (B 010/11)] - Customer Relationship and Sales Management
The pursuit of the Relationship Marketing concept
“Relationship Marketing may still be regarded as an ‘umbrella philosophy’ with numerous
relational variations rather than as a wholly unified concept with strongly developed
objectives and strategies” (Egan, 2004)
Deniz Kurugollu
10283502
MSc Marketing
4th April 2011
Word count: 1662

2. Relationship marketing is cited as a new theoretical concept emerging in 1990s; in fact, it is
regarded as the future of marketing (Kandampully and Duddy, 1999). On the other hand,
some scholars argue that relationship marketing is actually ‘back to the future’ (Grönroos,
1996). Sheth and Parvatiyar (1995) state that it is a return to the ‘roots of trade and
commerce’ before the scientific management approach was employed, and before the
appearance of middleman, which broke up the close relationship between suppliers and
consumers. In this regard, Vavra (1994) explains that before 1960s marketing was applied
through sales people who had intimate and long-lasting relationships with consumers that
transcended economic exchange. During the following three decades, consumers started
expecting greater variety in products and services. This leaded marketers to expand their
offerings. Thus, the focus of businesses shifted from relationships to achieving greater
distribution. By 1990s when the computer technology has recorded significant
improvements, the focus has returned to the relationship again since the technology enables
marketers to contact with consumers on an individual basis, instead of ‘mass crowds’ (Vavra,
1994; Sheth and Parvatiyar, 2000; Egan, 2004). As a result, relationship marketing has
evolved as a hot issue in business world today.
The purpose of this paper is to shed light on the nature of relationship marketing. Is it a
holistic concept, a tool, or as Brown (1998: 173) indicates ‘changing the doorplate’ by adding
‘relationship’ up to the word ‘marketing’?
It seems that there is no consensus on the definition of the relationship marketing concept.
Some resources estimate more than 20 definitions, some goes further and pronounce 50
definitions on the subject (Morgan and Hunt, 1994; Harker, 1999). Buttle (1999) states that
all those terms are used to describe similar concepts such as direct marketing, one-to-one
marketing, database marketing, customer relationship management, and the list goes on. In
this respect, Egan (2004: 19) argues that “Relationship Marketing may still be regarded as an
‘umbrella philosophy’ with numerous relational variations rather than as a wholly unified
concept with strongly developed objectives and strategies”.
Some views suggest that RM can be depicted in four levels. First level is the improved form
of database marketing. It views RM as a technology-based tool. Secondly, RM focuses on
mainly current relationships (i.e. customer retention) and then potential relationships. In the
third level, RM refers to the true customer interaction by get them to involve in the product
design processes. Finally, it is regarded as an incorporative form of everything, namely from
database management to personalized service, loyalty programs, social relationship, internal
marketing, strategic alliances, and so on (Brodie et al, 1997; Coviello et al, 1997).
Kandampully and Duddy (1999) divides relationships into two as primary (i.e. company and
customers) and secondary (i.e. suppliers, retailers, and shareholders). Some sources limits
RM to customer relationships, hence see it as the use of information technology and data
base systems (Peppers and Rogers; 1995). Sheth and Parvatiyar (1994: 2) describes that RM
is the ‘understanding, explanation and management of the ongoing cooperative business
relationship between suppliers and customers’. Storbacka et al. (1994) state RM is the

3. process of ‘initiation, enhancement, and termination’ of relationships. Gummesson (1994)
defines RM as ‘relationships, networks, and interaction’. In this context, he encompasses
relationships between many parties such as competitors, government agencies, institutes;
and hereupon he suggests 30 types of relationships.
In this paper, the term relationship marketing is used to reflect a holistic approach as
Grönroos (1997: 407) defines:
“Relationship marketing is to identify and establish, maintain and enhance, and
when necessary terminates relationships with customers and other stakeholders,
at a profit, so that the objectives of all parties involved are met; and this is done
by mutual exchange and fulfilment of promises”
In its spirit, RM can be regarded as a shift from product-oriented perspective (i.e.
transaction marketing approach) to resource-based perspective (i.e. relationship marketing
approach) (Grönroos, 1996). In the transaction marketing, the product is the core element
around which the rest of marketing rotates. In other words, unless the product is developed
and packaged, other marketing mix elements cannot step in the process (McKenna, 1991).
However, today consumers expect the core product quality being offered by many
companies; so, it can be inferred that the product itself no longer provides a competitive
advantage, except innovative products which are totally new for the market. However,
consumers expect more services such as delivery, maintain, recovery, and so on. Therefore,
total offering, instead of the product alone, is the key in RM approach. As a matter of fact,
Webster (1994) notes that every business is a service business.
RM seeks to collaboration between functions in the company as opposed to scientific
management philosophy which is based on intense specialization, functional division,
standardization and control (Aijo, 1996). In this respect, Gummesson (1987) classifies all
employees into two groups; ‘full-time marketers’ – who work in the marketing department –
and ‘part-time marketers’ – all the people outside marketing departments whose behaviours
have significant impact on consumer satisfaction, word-of-mouth, loyalty, and so on.
Therefore, each person in the company, no matter what position they have, should nail
down the importance of relationships in every single activity they deal with; from field
salespeople, front-line personnel, or call centre employees to engineers, finance and
accounting people. In a nutshell, marketing responsibility has to be spread throughout the
organization wide (Grönroos, 1995). In this context, the role of marketing department (i.e.
‘full time marketers’) is to educate employees (i.e. ‘part-time marketers’) so as to create
good marketing impression (Piercy, 1985).
RM draws attention to partnerships and networks on a win-win ground. Grönroos (1996)
states that the company cannot provide with the total offering on its own without
cooperating with several parties; otherwise, it would be too expensive. Hereby, Hunt and
Morgan (1994: 25) indicate that ‘being an effective competitor also means being an effective
co-operator’. In addition, Peppers and Rogers (1997) suggest that if customers demand
products or services that are not within the company’s core competency, then the company
should find ways to provide with those new demands by establishing relationships with
other firms.

4. RM recognizes the approach of ‘what firms can do for customers’, instead of ‘what firms can
do to customers’ (Grönroos, 1996: 6). It is not a single-way communication where one party
pushes the other, but an interaction. Such that, Rapp and Collins (1990) maintain that mere
one-way communication costs too much and produces too little.
RM perspective regards consumers as one of the company’s resources. Regarding the
customer loyalty ladder (Payne, 1994: 30) for example, having an ‘advocate’ means having
someone who actively gives positive referrals to your brand and company; moreover, having
an ‘evangelist’ (Banks and Daus, 2002) means someone trying to convert friends who use
competitor’s products; furthermore, having your ‘brand community’ (Schmitt 1999: 188)
means people who enrich, attract attention and promote your brand. In a nutshell, all of
them imply that consumers are one of the key strategic resources of companies today and
they require great knowledge to manage. In this context, Customer relationship
management (CRM) seeks to acquire this crucial knowledge about customers.
CRM mostly refers to IT systems, which enable organization to realise customer focus,
involve acquisition, analysis and use of knowledge about customers in order to improve
organisational profitability through generating greater customer life time value (Bose, 2002;
Bull, 2003). CRM can be evaluated in three categories (Xu and Walton, 2005). Operational
CRM refers to data collection through any interaction points with customers such as mail,
fax, sales force, call centres, etc. Analytical CRM refers to analysing previously collected data
in order to, for instance, create customer information files, identify behaviour patterns,
satisfaction level, profitable segments and so on (Vavra, 1994; Kotorov, 2002). Collaborative
CRM refers to expanding those analysed data (i.e. information) throughout the supply chain,
namely employees, suppliers, partners (Kracklauer and Mills, 2004). However, the real
challenge does not lie in acquiring and delivering the information, but the key is to make it
use of strategically by proper knowledge (Xu and Walton, 2005). For example, Prasanna
Dhore, Hewlett-Packard's vice president of customer intelligence, states (Brandweek, 2008):
“There are three stages: Data (tells you what); information (so what?); knowledge
(now what?). Most people do No. 1, they create reports at stage 2, but then at No.
3 they fall apart. We are now taking that information and using the knowledge to
drive sales and increase efficiencies... In one of our business groups, we looked at
80 marketing programs (such as direct marketing, email marketing, customer
loyalty, etc.), and based on the knowledge from our CRM systems, we were able to
work out which ones were more effective for our customers. We've distilled them
down to two or three major programs now.”
This implies that CRM, in addition to enable organization to appreciate customer focus,
also plays a significant role in the company’s marketing strategy.

5. To return to the initial question, – is RM a holistic concept, only another instrument in the
marketing toolbox, or a current trend which will fade eventually? – it appears to be the case
that relationship marketing is a holistic concept with defined strategies such as defining the
business as a service business, managing the whole business process, and establishing
partnerships and networks; also defined tactical issues such as seeking direct contacts with
customers, developing database, and building a customer-oriented service system
(Grönroos, 1999). However, in line with these objectives, RM requires various instruments
such as database marketing, direct marketing, IT systems, and so on. Its ultimate goal is to
develop long-term relationship based on trust and commitment with the all parties that the
company has contacts with (Shani and Sujana, 1992). It can be concluded that RM is more
like a management philosophy, rather than marketing concept alone. Sheth et al. (1988)
reveals that the ideas behind RM have already been incorporated into marketing theory.
After all, as Egan (2004: 265) put it: “RM’s biggest achievement is that it has brought back
‘relationships’ into the mainstream of marketing”.

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