The Evolution of Relationship Marketing
Relationship Marketing is emerging as a new phenomenon. However, relationship oriented marketing practices date back to the pre-Industrial era. In this article, we trace the history of marketing practices and illustrate how the advent of mass production, the emergence of middlemen, and the separation of the producer from the consumer in the Industrial era led to a transactional focus of marketing. Now, due to technological advances, direct marketing is staging a comeback, leading to a relationship orientation. The authors contend that with the evolution of Relationship Marketing, the hitherto prominent exchange paradigm of marketing will be insufficient to explain the growing marketing phenomena of collaborative involvement of customers in the production process. An alternate paradigm of marketing needs to be developed that is more process rather than outcome oriented, and emphasizes value creation rather than value distribution.
Although marketing practices can be traced back as far as 7000 B.C. (Carratu, 1987), marketing thought as a distinct discipline was borne out of economics around the beginning of this century. As the discipline gained momentum, and developed through the first three quarters of the twentieth century, the primary focus was on transactions and exchanges. However, the development of marketing as a field of study and practice is undergoing a reconceptualization in its orientation from transactions to relationships (Kotler, 1990; Webster, 1992). The emphasis on relationships as opposed to transaction based exchanges is very likely to redefine the domain of marketing (Sheth et al., 1988). Indeed, the emergence of a relationship marketing school of thought is imminent given the growing interest of marketing scholars in the relational paradigm. In this paper, we observe, that the paradigm shift from transactions to relationships is associated with the return of direct marketing both in business-to-business (BTB) and business-to-consumer (BTC) markets. As in the pre-industrial era (characterized by direct marketing practices of agricultural and artefact producers) once again direct marketing, albeit in a different form, is becoming popular, and consequently so is the relationship orientation of marketers. When producers and consumers directly deal with each other, there is a greater potential for emotional bonding that transcends economic exchange. They can understand and appreciate each other’s needs and constraints better, are more inclined to cooperate with one another, and thus, become more relationship oriented. This is in contrast to the exchange orientation of the middlemen (buyers and sellers). To the middlemen, especially the wholesalers, the economics of transactions are more important, and therefore, they are less emotionally attached to products. Indeed, many middlemen do not physically see, feel, touch, products but simply act as agents and take title to the goods for financing and risk sharing.
The separation of the producers from the users was a natural outgrowth of the industrial era. On the one hand, mass production forced producers to sell through middlemen, and on the other, industrial organizations, due to specialization of corporate functions, created specialist purchasing departments and buyer professionals, thus separating the users from the producers. However, today’s technological advancements that permit producers to interact directly with large numbers of users (for example, Levi’s making custom products directly for the users), and because of a variety of organizational development processes, such as empowerment and total quality programs, direct interface between producers and users has returned in both consumer and industrial markets, leading to a greater relational orientation among marketers. Academic researchers are reflecting these trends in marketing practice, and searching for a new paradigm of the discipline that can better describe and explain it.
In the context of these developments, the purpose of this paper is to trace the evolution of relationship marketing and to identify its antecedents. We plan to demonstrate that while relationship focus in the post-industrial era is a clear paradigm shift from the exchange focus of the industrial era, it is really a rebirth of marketing practices of the pre-industrial age when the producers and users were also sellers and buyers and engaged in market behaviours that reduced the uncertainty of future supply and demand assurances which could not be otherwise guaranteed due to the unpredictability of weather, raw materials, and customers’ buying power. Our approach mirrors the activities recommended by Savitt (1980) as the appropriate methodology for conducting historical research.
Relationship Marketing; Is it a paradigm shift?
Relationship marketing emerged as a contestant to traditional marketing theories since the early 1990s. Proponents of relationship marketing as a paradigm shift to traditional marketing theories criticized the transactional nature of traditional marketing concept. They argued that the positivist nature of theorizing marketing based on microeconomic models ignored the factor of relationship in a marketing process and its strategic implications in human interactions in an exchange process. This paper outlines their major contentions and provides a critique on the subject.
Contentions of Relationship Marketing as a Paradigm Shift With the rapid changes in economic and business environment, Berry (1982) recommended the American banking industry to adopt a relational approach in marketing. He suggested that bank marketing should shift the focus from product-marketing and order-taking to a relational approach in marketing. The approach, relationship banking, was termed as “attracting, maintaining, and enhancing client relationships” Berry (1983) further reinforced the relational approach in a conference proceeding in services marketing with the American Marketing Association where the term “Relationship Marketing” was first used to describe the relational approach in services marketing.
In succession, Gummesson (1987) criticized that the short term nature of transactional marketing did not apply to services marketing and industrial marketing. He interpreted that practitioners in services marketing and industrial marketing emphasized long term, interactive relationship between buyers and sellers. Traditional marketing concept that focused on consumer marketing did not consider relationship as a crucial factor in the exchange process. He further raised nine issues that signified the deficiency in traditional marketing theories:
- The need to thoroughly understand the relational webs that consist of people in various operating units from both buyer and seller organizations
- The manipulation of regulations and policies by various professional and government authorities has crippled the marketing mix from being able to identify the real decision maker in an exchange process.
- While customer feedback is used to loop back the marketing process for refining the marketing mix, interaction between buyer and seller provides on the spot refinement opportunity in serving the customer.
- The market is a complex network of relationships between inter-linking industries that depend on each other. The network has to be analyzed to better identify and assess market opportunities.
- With increasing business partnerships such as strategic alliances, joint ventures and cross shareholding between organizations, market mechanisms are brought into organizations. Without clear boundaries as to who is the competitor, buyer, or seller, the phenomenon has created an internal market where marketing strategies have to be developed to address the need.
- Interactions between customers and staff in various operating units of different organizations in the exchange process have made them part-time marketers in addition to the full-time marketing professionals in the marketing unit.
- Product development, production, purchasing, marketing, and other functions within an organization work together toward achieving the common goal of serving the customer. People in an organization should treat one another as internal customers.
- People in an organization should be well attuned to achieving the common purpose of the organization. Human resources are crucial to the success of an organization. Therefore, internal marketing within the organization is a prerequisite for successful external marketing.
- Relational quality, the quality of a relationship, has a major impact on the long-term business relationship with the customer
Trust and commitment are imperative to a relationship (Morgan & Hunt, 1994). In an exchange process, they form the basis for a reliable and enduring relationship. With higher costs in creating new customers than retaining existing ones, economic benefit exists in building and maintaining relationship with customers (Gronroos, 1995; Storbacka, Strandvik & Gronroos, 1994). Transactional marketing has ignored the implicit financial value of relationship in an exchange process. The underpinning of the argument that relationship marketing is a paradigm shift lies in the interpretations on the differences between transactional marketing and relationship marketing. In addition to the critical challenges toward transactional marketing contended by Gummesson (1987), Gronroos (1994, 1995) further contended that relationship marketing maintained along-term relationship with the customer while transactional marketing was transactional and short-term in nature. In relationship marketing, customers tended to be less calculated. In addition, relationship marketing focused on the customer, attended to their satisfaction, and maintained quality interactions with the customers. On the other hand, transactional marketing relied on gimmicks, focused on single transaction (Christopher, Payne & Ballantyne, 1993), ignored quality of interactions with the customers, and was market share oriented.
Berry, L. L. (1983). Relationship Marketing. In L. L. Berry, G. L. Shostack & G. D. Upah (Eds.), Emerging Perspectives on Services Marketing (pp. 25-28). Utah: American Marketing Association.
Christpoher, M. Payne, A. & Ballantyne, D. (1993). Relationship Marketing. Oxford: Butterworth-Heinemann.
Gronroos, C. (2004). The Relationship Marketing Process: Communication, Interaction, Dialogue, Value. Journal of Business and Industrial Marketing, 19(2), 99-113.
Gummesson, E. (1987). The New Marketing – Developing Long Term Interactive Relationships. Long Range Planning, 20(4), 10-20.
Morgan, R. M., & Hunt, S. D. (1994). The Commitment Trust Theory of Relationship Marketing. Journal of Marketing, 58(3), 20-38.
Globe Business College Munich: University and College Ranking
Globe business College Munich understands that an important factor in choosing a successful career is studying at a reputable college. With a wide range of options available for students, it is important to choose an accredited institution to aid in the employment process. Colleges that have been through an accreditation process are more likely to offer degrees that employers and recruiters recognise.
When you study at Globe Business College you have the guarantee:
- That your qualification is internationally recognised. The Higher National Certificate/Diploma and Advanced Professional Diploma programmes offered at GBCM have state recognition in England through Edexcel (www.Edexcel.com) while the Bachelor degree is accredited by the Irish government (www.HETAC.ie). As both Ireland and England are EU member states, this means that under the Bologna process students can transfer credits gained at Globe College to other Universities or apply for Master programmes in Europe or further afield
- The continuity of study is guaranteed as the programmes are bonded. This means that if a programme ceases at Globe College students can transfer to the partner College to complete their studies.
- The Bachelor degree at Globe College is run in conjunction with and is issued by Griffith College in Dublin Ireland. Griffith is ranked in the top 15 to 20 Universities and third level institutions in Ireland (http://www.webometrics.info/en/europe/ireland%20) and is one of the largest private colleges on the Island. The College has a history that spans more than 35 years and operates according to the Bologna Process (which is aimed at creating the European Higher Education Area which in turn improves transparency between higher education systems, as well as implementing tools to facilitate recognition of degrees and academic qualifications, mobility, and exchanges between institutions across Europe). As such, the degrees undertaken at Globe Business College Munich has the required 180 ECTS points at European level and are issued with the necessary Diploma Supplement (which allows students to transfer freely throughout Europe for educational purposes). In addition to HETAC accreditation, Griffith College are in partnership with and recognised by Notting Trent University and the Kings Inn.
Welcome to Globe Business College Munich
Globe Business College Munich was founded to meet the needs of a specific group of German and international students. These are the next generation of sons/daughters of successful SME company owners, individuals who want to use their thrid level to develop their own businesses or those to wish to work in an international business environment upon graduation.
‘Flexibility, self-development, contexualization and partnering, These four values are at the heart of everything we do at Globe Business College Munich and form the basis of our educational programme.’
– Dr. Susan Walsh, Dean, Globe Business College Munich
The Business of doing Business in China
The next in this Globe Business College Munich series on Business in China is an article by Jeffery C.P. Wang. This is an extract from an article he wrote for the Orange County Lawyer, which gives us an interesting insight into the cultural and legal boundaries that may exist before a company may start doing business in China.
Every nation approaches life and business in a unique way—a product of its own history, culture, and experience. Both China and Great Britain are good examples of this. Britain has a long tradition of respecting and protecting the individual rights and liberties of its citizens. This is not because the British enjoy constitutional protections similar to the United States. In fact, Britain lacks a written constitution, a Bill of Rights, a Supreme Court, and most of the checks and balances that Americans take for granted. Yet, strong cultural and legal norms protect a tradition of liberty and individual freedom that goes back to the Magna Carta.
1 Similarly, Americans doing business in China must open their cultural eyes. It is natural that many Americans—living in the United States, the global superpower—think that the way things are done at home is the standard way to do things. However, business in China is conducted by different sets of norms, customs, and laws than in the United States. Adjusting to these different rules of the game is critical to business success in China. And one of the best ways to get on track in China is to draw on the experience and skill of legal counsel with deep knowledge of the Chinese legal system and business culture. One striking difference between doing business in China and the United States concerns contracts.
2 In the United States, a meticulously detailed contract spells out all the understandings between the parties. However, in China much of the legal protection for contracting parties lies in the all-important Chinese Civil Law code, and the two parties involved mainly negotiate basic numbers and how long the contract will last. In Chinese business deals, the personal relationship and a person’s reputation in the local business community are much more important than the written contract. American businessmen looking to sign papers and move ahead may become frustrated in China.
3 Another major difference between the Chinese and American legal systems is the discovery process. In Chinese courts, it is the judges, not the attorneys, who undertake discovery. In China, the judge handles all the investigation, hiring an investigator for assistance. This, of course, strikes American-trained lawyers as strange. In fact, both contracts and discovery point to a critical legal fact about China: the legal process is far less adversarial and less litigious than in the United States. Consequently, business relationships and trust, built up over time, are more important in business transactions in China than in the West. Despite the legal and cultural challenges, China continues to be a place of opportunity for U.S. investments and a giant market.
4 For more than a decade, the Chinese and American economies have been so intermeshed they essentially function as one integrated economic engine at the heart of the global economy.5Yet when Americans express interest in doing business in China, they often hear warnings about the difficulties and hurdles some United States companies have experienced operating in China.6To be successful in China, entrepreneurs and business leaders new to China need all the business skills and resources that have made them successful in the United States and a highly skilled legal adviser to help them navigate the Chinese system.
Fluency in both cultures and their respective legal systems forces the realization that the cultural gap between America and China can be large. A law firm must be focused on China to be well-situated to assist American business leaders to negotiate what is sometimes confusing and perplexing terrain in their quest for business success. A crucial part of an American-Chinese business attorney’s role is establishing guanxi(relationships) and allowing each side to understand the other. Certainly, Chinese are eager to finance and conduct business in an obvious effort to contribute to the infrastructure of developing Chinese industry; therefore, technology and the know-how to utilize and to promote the technology are the primary transferable commodities sought in any business venture. The risks of losing ownership of such commodities and of possibly creating a future Chinese competitor present a legitimate concern; so, with that in mind, significant due diligence of prospective partners’ background, motivations, and character are of critical importance before any terms of agreement for a business venture may be effectively formulated.
Jeffrey C. P. Wang. (2013). The Business of Doing business in china.Orange County Lawyer. 55 (8), p22-23.
Understanding China
The following is an extract from the book entitled; ‘Running Multinational Corporations in China, A Survival Kit for Western CEO’s’, by Globe Business College Munich’s Qeis Kamran. Mr Kamran is currently a head lecturer at GBCM, and is a highly qualified serial entrepreneur, manager and leader with over 20 years of experience. He has led large divisions with organisations in the wholesale, retail, energy and franchise industries to name but a few.
Understanding China is not about the decline of the US economy and economic supremacy or the West’s general addiction not only to oil but to cheap labor; it’smoreover about the rise of the rest, lead by China.
CEO’s, top managers, researchers, writers, and countries raise an essential question why some nations advance and prosper? However, the betterquestion as Porter (1990) emphasizes is; why some countries become the home base for some of the most successful companies? Here we find the core and decisive characteristics that a nation (government) provides its companies to create and sustain a viable competitive advantage and business climate. We need to look through the above described lens (Chinese business model) to understand China and its unique success. As the most recognizable to US supremacy, China will pay an especially vital role in determining the future shape of international business and politics. At this relatively early but highly successful stage in its development.
In the past four decades, China has experinced some historic events of global significance. The first was to reestablish its legal status as a soverign country by the Security Council and the United Nations. The second was the open-door policy and strategy implemented in 1978. The third was the successful bid for the 2008 Olympics, which in itself was an investment of 20 billion dollars over a seven year project. This was more than a sporting event, since it secured an essential place for China as the new fully integrated member of the international community. The fourth was the successful entry into the World Trade Organisation (WTO).
If the West can read the signs it describes a pathway China will take in the future. China with its substantial amount of cash and financial resources will be soon on a shopping spree and will challende the West from two prespectives. First it will make, production in the Western world impossible and economically uncompetitive. Second it will have some major companies of strategic importance under control in the West in addition to its own companies in China, MNC’s dependent on Chinese governments mercy and relations, and the highly favourable business climate.
Is China overtaking the US economy?
The following is an extract from the book entitled; ‘Running Multinational Corporations in China, A Survival Kit for Western CEO’s’, by Globe Business College Munich’s Qeis Kamran. Mr Kamran is currently a head lecturer at GBCM, and is a highly qualified serial entrepreneur, manager and leader with over 20 years of experience. He has led large divisions with organisations in the wholesale, retail, energy and franchise industries to name but a few.
Price Waterhouse Coopers (PWC) predicts that the Chinese economy will overtake that of the US by 2030, Goldman Sachs has corrected its suggestion to as early as 2027 and BNP Paribas goes as far as to declare 2020 in which China would be the world’s largest economic super-power. However the degree to which some changes may occur in real terms, are a lot more dependent on the West’s behaviour in the time until then than anything China may actually do, this includes also a correction in the Western management practice. The only problem, which every China CEO and CEO’s in the West must rightfully observe is that the managerial tools and models, which used to work must be revised and updated. Either managers will be working in or they need to deal and cope with the dragon (China), means its history and civilization, the dynasty, Confucianism, and the way of thinking.
The West sees China as a place of cheap labour, pollution, human rights violation, repression over crowdedness and communism. However, in the last days China has been seen with a bit fear of its constant performance and American Chinese-owned debt summing up to 1152.5 billion dollars, which caused a slow shift in the West’s overall thinking towards China. It is not possible to oversee the nervous and short-sighted Western behaviour lead by the US in its geostrategic crusade towards securing the Eurasians Chessboard.
The main challenge, which Western managers will face in managing MNC’s in China in the future is not only the lack in their training and skills but moreover the assumption that a modern China will become like the West and the Western style management will function in the dynamic and fast pacing Chinese environment. The illusion that ‘Countries that modernize, will also Westernize’ will cost some of the most promising management talents their careers in China.
Running Multinational Corporations in China, A Survival Kit for Western CEO’s
The following is an extract from the book entitled; ‘Running Multinational Corporations in China, A Survival Kit for Western CEO’s’, by Globe business College Munich’s Qeis Kamran. Mr Kamran is currently a head lecturer at GBCM, and is a highly qualified serial entrepreneur, manager and leader with over 20 years of experience. He has led large divisions with organizations in the wholesale, retail, energy and franchise industries to name but a few.
China’s breathtaking ten per cent growth over three decades, an unsteady foundation of overcapitalized state-owned enterprises, a fiercely protectionist government, and a rapidly changing business landscape, which floods and oversupplies the world market with its products, makes it not only a vital place for multinational multinational corporations to win big in China by its growing size of domestic market, especially in the decades to come, but at the same time a subject of high relevance for the world of academia in particular for management scholars and practitioners.
China is fast to become the world’s factory. It has the potential to reshape the landscape of global business and creating an environment of fierce competition between MNC’s. According to leading researchers (Jacques 2009; Hexter, Woetzel 2007; Fernandez, Underwood 2006 et al) China and its market will set the next standards globally, thus the China CEO’s experiences and the gained best practices for MNC’s will shape the very world of international and Western business. Therefore, this work is written for top managers entering the Chinese market who are already working in China and seeking to have an interdisciplinary work on their hands, which addresses many divers issues of their primarily concern.
The purpose of Mr Kamran’s study was to provide a conceptual research method by finding and implementing key literature available on how top managers succeed in China, how they have made it a rewarding experience, and how the new China can make the operation China a success story for the MNC he/she will run.
In the year 2009, China achieved a pivotal milestones in its unprecedented climb to the Olympus of economic power by achieving 9.6% share of global trade, surpassing Germany with 9.0% and the USA with 8.5% to become the world’s largest trader. China is the largest success story of the 21st century, a change happening at an unprecedented pace not known yet to the phenomenon of economic development is different from what has been known in recent history. It is the first time in modern history that a developing country has bridged the gap into becoming a developed country. Furthermore we need to correct our assumption that China will surpass America as the largest economy in the world.
Globe Business College München, Karriere 