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E Marketing Week12


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Relationship marketing

Week 12 of 13 of the 2007 Internet Marketing Course. Content is based in part on Dann, S and Dann S 2004 Strategic Internet Marketing 2.0, Milton: Wiley. Diagrams taken from the Dann and Dann text are copyright to their respective copyright holders.

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E Marketing Week12

  1. 1. MKTG7037 / MKTG2032 E-marketing Week 12
  2. 2. Course Structure Chapter 15 International marketing 21 May 12 Chapter 14 Relationship marketing 28 May 13 Chapter 13 Services marketing online 14 May 11 Chapter 12 Distribution 7 May 10 Chapter 11 Pricing strategies 30 April 9 Chapter 10 Promotion 2: the internet as a promotional medium 23 April 8 Chapter 9 Promotion: the internet in the promotional mix 2 April 7 Chapter 8 The role of product in internet marketing 26 March 6 Chapter 7 The internet in marketing strategy 19 March* 5 Chapter 6 Applications for business and non-business 12 March 4 Chapter 5 Creating cybercommunities 5 March 3 Chapter 4 Consumer behaviour 26 February 2 Chapter 3 Unique features of internet-based marketing 19 February 1 Topic(s)/Task(s) Week beginning Week No
  3. 3. Assessment Due Dates <ul><li>Task Weighting Due </li></ul><ul><li>Final Examination 30 June </li></ul><ul><li>Online Forum 20 </li></ul>
  4. 4.
  5. 5. News on the intertube front <ul><li> </li></ul><ul><ul><li>Status lifestyles </li></ul></ul><ul><ul><li>TRANSPARENCY TYRANNY! </li></ul></ul><ul><ul><li>Web n+1 </li></ul></ul><ul><ul><li>Trysumers </li></ul></ul><ul><ul><li>The Global Brain </li></ul></ul>
  6. 6. News offline The definition of marketing is (possibly) about to change
  7. 7. AMA (2007) (pending the final vote) <ul><li>the activity, conducted by organizations and individuals, that operates through a set of institutions and processes for creating, communicating, delivering, and exchanging market offerings that have value for customers, clients, marketers, and society at large </li></ul>
  8. 8. The Changes <ul><li>“ Marketing is an organization function” </li></ul><ul><ul><li>seen to be too strongly associating marketing with a departmental “company silo.” </li></ul></ul><ul><li>“ Marketing is the activity, conducted by organizations and individuals,” </li></ul><ul><ul><li>recognizes that marketing is an “action word.” </li></ul></ul><ul><ul><li>marketing is something that organizations and individuals do. </li></ul></ul>
  9. 9. The Changes <ul><li>“ a set of processes,” </li></ul><ul><ul><li>ambiguous as to who is engaged in the processes. </li></ul></ul><ul><li>“ a set of institutions and processes,” </li></ul><ul><ul><li>acknowledges that institutions such as manufacturers, wholesalers, retailers, and marketing research firms are an important part of marketing. </li></ul></ul><ul><ul><li>implies that marketing systems such as channels of distribution are a part of marketing as are social processes (e.g., regulations and norms). </li></ul></ul>
  10. 10. The changes <ul><li>“ creating, communicating, and delivering,” but not “exchanging.” </li></ul><ul><ul><li>Exchange was a central construct of the 1985 definition. </li></ul></ul><ul><ul><li>2007 definition thus captures this historical focus of marketing. </li></ul></ul><ul><ul><li>acknowledges that exchange continues to be an important part of marketing, it does not make it the central focus </li></ul></ul><ul><li>2004 definition included “value” </li></ul><ul><ul><li>left the concept ambiguous. </li></ul></ul><ul><ul><li>2007 focus on market offerings (i.e. “ideas, goods, and services,” as the 1985 definition put it) that have value </li></ul></ul>
  11. 11. A reversal of position <ul><li>2004 definition indicated that organizations create “value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.” </li></ul><ul><ul><li>marketing creates market offerings that have value to those who are not “customers.” </li></ul></ul><ul><ul><li>“ managing customer relationships” inappropriately elevates the strategy of “customer relationship management” to such prominence that this one, particular, strategic thrust becomes a part of the very definition of marketing </li></ul></ul><ul><ul><li>Relationship marketing is shot down. </li></ul></ul>
  12. 12. The biggest change <ul><li>The 2007 definition maintains that market offerings have value for “customers, clients, marketers, and society at large.” </li></ul><ul><ul><li>“ clients” acknowledges nonprofit institutions </li></ul></ul><ul><ul><li>“ marketers” acknowledges that those organizations and individuals that do the marketing benefit from the created, communicated, delivered, and exchanged market offerings. </li></ul></ul><ul><ul><li>“ society at large” incorporates the 2004 definition’s concept of “stakeholders,” </li></ul></ul><ul><ul><ul><li>acknowledges the aggregated nature of marketing across competing organizations that impels innovations, improvements, and price competition. </li></ul></ul></ul><ul><li>Creating market offerings that have value benefits society, as do communications about, and the delivery of, marketing offerings. </li></ul>
  13. 13. The bold claim In short, the practice and activity of marketing benefits society.
  14. 14. The three way comparison 2007 2004 1985 have value for society at large benefit the stakeholders 9 have value for marketers benefit the organization that satisfy organizational objectives 8 have value for customers have value for clients value to customers that satisfy individual objectives 7 for managing customer relationships in ways 6 and exchanging market offerings to create exchanges 5 market offerings that have value value of ideas, goods, and services 4 creating, communicating, delivering, and exchanging creating, communicating and delivering conception, pricing, promotion, and distribution 3 operates through a set of institutions and processes a set of processes process of planning and executing 2 activity conducted by organizations and individuals organizational function 1
  15. 15. Marketing definitions and internet marketing AMA (2007) downgrades the role of relationship marketing from core theory to part of the strategic tool kit
  16. 16. Relationship Marketing
  17. 17. Defining relationship marketing <ul><li>RM is to </li></ul><ul><ul><li>identify, </li></ul></ul><ul><ul><li>establish, </li></ul></ul><ul><ul><li>maintain, </li></ul></ul><ul><ul><li>enhance and, </li></ul></ul><ul><ul><li>when necessary, also terminate relationships </li></ul></ul><ul><ul><li>with customers and other stakeholders, at a profit, so that objectives of all parties are met, and so that this is done by a mutual exchange and fulfilment of promises. </li></ul></ul>
  18. 18. Core concepts of RM <ul><li>The lifetime value of the customer </li></ul><ul><ul><li>The total value of the customer to the organisation; as the customer stays with the organisation this value increases </li></ul></ul><ul><li>Customer loyalty </li></ul><ul><ul><li>The cornerstone of relationship marketing; the theory assumes that the development of trust, commitment and responsiveness will result in the customer reciprocating loyalty to the organisation </li></ul></ul>
  19. 19. Theory of loyalty <ul><li>Loyal customers exhibit behavioural and psychological commitments </li></ul><ul><ul><li>Behavioural commitment includes: </li></ul></ul><ul><ul><ul><li>Repeat purchases </li></ul></ul></ul><ul><ul><ul><li>Increased transactions </li></ul></ul></ul><ul><ul><ul><li>Providing constructive feedback </li></ul></ul></ul><ul><ul><li>Psychological commitment includes: </li></ul></ul><ul><ul><ul><li>Wouldn’t consider terminating the relationship </li></ul></ul></ul><ul><ul><ul><li>Engages in positive word-of-mouth referral </li></ul></ul></ul><ul><ul><ul><li>Holds a positive attitude towards the firm </li></ul></ul></ul>
  20. 20. Suitability for RM <ul><li>There is an ongoing periodic desire for the service on the part of the customer </li></ul><ul><li>The service customer controls the selection of the service supplier </li></ul><ul><li>There exists an alternative choice </li></ul><ul><li>Brand switching is common </li></ul><ul><li>Word-of-mouth is key </li></ul><ul><li>Ability to cross-sell products </li></ul>
  21. 21. Philosophical principles in RM <ul><li>Trust: </li></ul><ul><ul><li>willingness to rely on the exchange partner in whom one has confidence and reliance to perform </li></ul></ul><ul><li>Commitment: </li></ul><ul><ul><li>need to maintain the relationship because of the value of staying or cost associated with leaving </li></ul></ul><ul><li>Reciprocity: </li></ul><ul><ul><li>notion of equality, </li></ul></ul><ul><ul><li>mutual obligation and </li></ul></ul><ul><ul><li>exchange theory </li></ul></ul>
  22. 22. Trust in business relationships <ul><li>Five processes by which trust can be formed in business relationships: </li></ul><ul><ul><li>Calculative process </li></ul></ul><ul><ul><li>Prediction of future intent on past behaviour </li></ul></ul><ul><ul><li>Credibility </li></ul></ul><ul><ul><li>Motive assessment </li></ul></ul><ul><ul><li>Transference process </li></ul></ul>
  23. 23. Commitment <ul><li>Commitment is almost the end-game in RM </li></ul><ul><li>Commitment is the operationalisation of contractual obligations; it depends on: </li></ul><ul><ul><li>Service and product quality </li></ul></ul><ul><ul><li>Satisfaction </li></ul></ul><ul><li>Commitment has been defined as: </li></ul><ul><ul><li>An affective event </li></ul></ul><ul><ul><li>A calculative approach </li></ul></ul>
  24. 24. Commitment’s impact <ul><li>Commitment has an impact on the following areas: </li></ul><ul><ul><li>Intention to stay in the relationship </li></ul></ul><ul><ul><li>Desire to stay in the relationship </li></ul></ul><ul><ul><li>Performance of the relationship </li></ul></ul><ul><ul><li>Willingness to invest in the relationship </li></ul></ul><ul><ul><li>Development of alternatives </li></ul></ul><ul><ul><li>Opportunistic behaviour </li></ul></ul>
  25. 25. Reciprocity <ul><li>Reciprocity can move beyond simple financial functions to include: </li></ul><ul><ul><li>Increasing stability by reducing risk and uncertainty </li></ul></ul><ul><ul><li>Establishing legitimacy </li></ul></ul><ul><ul><li>Increasing effective and efficient resource usage </li></ul></ul><ul><ul><li>Accessing resources not currently available to the organisation </li></ul></ul>
  26. 26. Three levels of RM <ul><li>Tactics: incentive schemes designed to get the user from pre-purchase to purchase </li></ul><ul><li>Strategic direction: developed for the medium to long term to foster mutually dependent relationships </li></ul><ul><li>Relationship marketing philosophy: aimed at a long-term relationship rather than one-off transactions </li></ul>
  27. 27. Approaches to long-term retention of customers
  28. 28. Approaches to long-term retention of customers (contd)
  29. 29. Approaches to long-term retention of customers (contd) Source: Gilbert, D. C., Powell-Perry, J. & Widijoso, S. 1999, ‘Approaches by hotels to the use of the Internet as a relationship marketing tool’, Journal of Marketing Practice: Applied Marketing Science , vol. 5, no. 1, pp.21–38.
  30. 30. Creating relationships online <ul><li>Six strategic steps for RM using the Internet: </li></ul><ul><ul><li>Treat the Internet as new medium </li></ul></ul><ul><ul><ul><li>exploit its unique properties </li></ul></ul></ul><ul><ul><li>Start with customers </li></ul></ul><ul><ul><ul><li>define them </li></ul></ul></ul><ul><ul><li>Build relationships by getting to know customers </li></ul></ul><ul><ul><li>Build a service and not a web site </li></ul></ul><ul><ul><ul><li>Web2.0? </li></ul></ul></ul><ul><ul><li>Leverage by building on assets (brands) </li></ul></ul><ul><ul><li>Think radically to achieve best results </li></ul></ul>
  31. 31. Other tasks that help in creating relationships online <ul><li>Learn more about the customer through database analysis. </li></ul><ul><li>Improve the product or service and make it more attractive. </li></ul><ul><li>Inform to build the customer’s knowledge of the company. </li></ul><ul><li>Tempt customers to purchase more regularly. </li></ul><ul><li>Retain the customer using different forms of loyalty schemes. </li></ul><ul><li>Web2.0 / Social media </li></ul>
  32. 32. Trust: where does it need to occur? <ul><li>Common areas where trust is a heightened issue in online exchanges: </li></ul><ul><ul><li>Sending/seller/merchant trading partner to a receiving/buyer/customer trading partner </li></ul></ul><ul><ul><li>Customer and bank where trust is derived </li></ul></ul><ul><ul><li>A bank and a merchant </li></ul></ul><ul><ul><li>A merchant and a customer </li></ul></ul><ul><ul><li>A trusted third party such as eBay </li></ul></ul>
  33. 33. Barriers to trust <ul><li>Specific barriers include the lack of: </li></ul><ul><ul><li>Co-presence in time and space </li></ul></ul><ul><ul><li>The entire human bandwidth (sight, hearing, smell, touch and taste) </li></ul></ul><ul><ul><li>Capacity for interruption, feedback and learning </li></ul></ul><ul><ul><li>Prior familiarity with one another </li></ul></ul>
  34. 34. Trust and e-servicescape Source: Papadopoulou, P., Andreou, A., Kanellis, P. & Martakos, D. 2001, ‘Trust and relationship building in electronic commerce’, Internet Research: Electronic Networking Applications and Policy , vol. 11, no. 4, pp. 322–32.
  35. 35. Trust and e-servicescape <ul><li>A six-step approach: </li></ul><ul><ul><li>Offers goods and services (a promise) </li></ul></ul><ul><ul><li>Customer decides to buy (trusting intention) </li></ul></ul><ul><ul><li>Web site is secure (enable the promise) </li></ul></ul><ul><ul><li>Credit card details entered (trusting behaviour) </li></ul></ul><ul><ul><li>Goods shipped (keep the promise) </li></ul></ul><ul><ul><li>Customer is satisfied – this increases trust </li></ul></ul>
  36. 36. Discussion Questions for the Board <ul><li>In your owns words – give a 50 word summary of your assignment topic. Group members may not post “What they said” or equivalent to avoid answering the question. </li></ul><ul><li>If the AMA (2007) is adopted, and what impact will that have on the value of relationship marketing in internet marketing? </li></ul>