Relationship marketing: the wheel reinvented?

Relationship marketing: the wheel reinvented?

John V. Petrof

Instead of a brand new philosophy in the marketing field, this may be just a recent spin on an old concept.

Since the early 1980s, a new phrase has entered the marketing literature: “relationship marketing.” Most sources credit Leonard Berry (1983) with originating it. Many marketing specialists, especially those in the academic field, immediately appropriated this “new” concept and spoke and wrote about it to the point of saturation. Some journals have dedicated special editions to the subject; others have announced their intention to do so. In the “Introduction to the Special Issue” on relationship marketing, the editor of the Journal of the Academy of Marketing Science (Cravens 1995) praised it as a paradigm that places the customer at the center of all enterprise actions. Because of the importance of this “new” idea, several business schools with “vision” have established Centers of Relationship Marketing.

This time, the ever-questioning minds of the academic community failed to question the origin and implications of this new terminology. With very few exceptions, marketing specialists and, in particular, academicians accepted relationship marketing as the latest gospel and began spreading it faithfully as loyal disciples.

Definition

Relationship marketing is typically described as being oriented toward a long time horizon in contrast to the short-term orientation that existed in marketing before 1983. Berry and Parasuraman (1992) hold that relationship marketing consists of attracting, developing, and retaining customers. Morgan and Hudt (1994) refer to it as all activities directed toward establishing, developing, and maintaining successful relational exchanges. According to Gronroos (1995), the objective of relationship marketing is not only to acquire customers but to keep them as well. Moreover, in this “new philosophy,” customer satisfaction becomes the responsibility of everyone in the organization. People in other departments must share the responsibility of dealing with customers. Hence, the concept becomes instrumental in coordinating the activities of all departments, with the marketing function playing a pivotal role in the success of the firm.

Even though paying attention to relationships with clients has long been a way of doing business, much of the current literature assumes it to be a new phenomenon, especially in consumer markets. Advocates go so far as to maintain that buyer-seller relationships have become an integral part of business-to-business operating strategies only over the past ten years. Some authors, such as O’Neal (1989), contrast relationship marketing to transactional marketing, which is defined as stressing the individual sale (and hence short-term gains), and in which dealing with customers is viewed solely as the responsibility of the marketing department.

Relationship marketing not only has become a popular expression both in the academic and the business press, but has also been characterized as a major directional change in marketing theory and a fundamental reshaping of the field. At this point it may be appropriate to revisit the “old” marketing concept, as well as pause and examine the contribution, if any, relationship marketing makes to marketing theory.

The Evolution of “Marketing”

Although the function of marketing has always existed, historians agree that the term “marketing” was first used as a noun, in contrast to its earlier use as a verb, between the years 1906 and 1911. Arch W. Shaw and Ralph Starr Butler are often considered the godparents of the new discipline, which until then had been referred to as “trade,” “distribution,” or “commerce.”

Most marketing historians associate the birth of modern marketing with the beginning of the twentieth century. Bartels (1962) has divided its evolution into roughly six periods:

1. Discovery (1900-1910). This is when the conception of the subject took place, and was identified with a name.

2. Conceptualization (1910-1920). This stage is associated with the development, classification and definition of many marketing terms.

3. Integration (1920-1930). The emergence and subsequent harmonization of marketing principles took place during this decade.

4. Development (1930-1940). Specialized areas developed and several theories were verified and quantified.

5. Reappraisal (1940-1950). During this decade attempts were made to analyze and explain traditional marketing practices through the use of scientific methods. However, the prevailing practices were not conducive to good customer relationships. Misled by short-sighted profit objectives and exaggerated promotional claims, consumers were dissatisfied with their purchases. By the end of the 1950s, it was clear that businesses needed a new marketing philosophy to guide their strategies and tactics.

6. Reconception (1950-1960). Growing external pressures for educating managers in areas broader than technical business and economic skills were given voice in the landmark Ford Foundation report (Gordon and Howell) and Carnegie Foundation report (Pierson et al.) on business education, both published in 1959. In marketing, attention turned from traditional concepts to more modern ones. A new philosophy, the marketing concept, was articulated and began to shape competitive thinking. Such ideas as consumer satisfaction and social responsibility came to be viewed as important factors enabling managers to attain their profit objectives. The marketing function, wrote Lazo and Corbin (1961), evolved into a basic attitude and understanding that must pervade the entire business by interpreting the concept of client relationships to all functional areas.

The Marketing Concept

Ralph Cordiner, chairman of General Electric in the 1950s, is often credited with introducing the marketing concept to the North American business community. In describing GE’s philosophy, the company’s 1952 annual report referred to

an advanced concept of marketing,

formulated by the Marketing Services

Division. This, in simple terms, would

introduce the marketing man at the

beginning rather than at the end of the

production cycle and would integrate

marketing into each phase of the business.

A quarter of a century ago, McNamara (1972) defined the marketing concept as a philosophy of business management based on a company-wide acceptance of the need for customer and profit orientation. The importance of consumer relationships was clearly reflected in the concept. This philosophy, which replaced the old short-term marketing practices (called “selling” in those days, conveniently labeled as “transactional marketing” by proponents of relationship marketing today), represented a truly new marketing doctrine. It stated that the primary objective of every business was to satisfy customers at a profit within the limitations imposed by legal and ethical customs. Later, such experts as Kotler and Levy (1969) suggested that this new way of treating clients should not be limited to the commercial sector but should also be applied to the entire range of socioeconomic activities within a democratic society.

The marketing concept has always been synonymous with having a client orientation. To implement this philosophy, an organization must remain close to its customers in the long term as well as in the short run. Keith (1960) spoke of a sales concept (transactional marketing?) as being inferior and antecedent to the marketing concept. Whereas the latter directs the organization to design its strategies only after the needs of current and potential partners have been assessed, the former aggressively seeks buyers for short-run benefits. As Alderson and Green (1964) put it, “The firm always takes its working orders from the market.”

Contribution to Marketing Thought

One would hardly argue with the logic of relationship marketing. To question the importance of good customer relations for businesses operating in a competitive free enterprise system would be foolish indeed. However, to give this concept a history of only 13 years or so would be doing a gross injustice to the contributions previous generations of marketing scholars and practitioners have made to our knowledge and understanding of the process.

The notion that relationships with customers became important only during the 1980s is clearly untenable, because it ignores well-documented facts. Institutionalists have traditionally underlined the importance of the reciprocal and interactive relationships that exist among actors engaged in marketing. They have always been concerned with the social and political relationships among all interest groups–owners, employees, government, suppliers, customers, and the like. According to Polanyi (1957), marketing cannot limit itself solely to consumption and trade. As a social institution it must take into consideration the satisfaction of the psychological and social needs of people (consumers and trade partners). Scholars such as Alderson (1957) and Revzan (1968) have studied and reported on organized behavior patterns of cooperation and conflict between participants engaged in marketing.

Some serious students of marketing, such as Stanley Hollander and Donald Dixon, maintain that what is perceived to be a different situation or practice today has often been in existence for several decades. Unfortunately, marketing lags far behind other fields in historical research, and scholars typically quote only recent sources in their journal articles. Many concepts appear to be new only because their authors did not search back beyond the very recent past.

The marketplace in the 1920s and 1930s was as competitive as–if not more so than–it is today. To tap it effectively required marketing knowledge. With buyers in increasingly short supply, the marketer of the 1930s could scarcely afford to neglect customer relationships. The astute marketer of the time, says Fullerton (1988), knew very well that it was crucial to maintain good relationships with his clients. Hollander (1986) also indicates that many marketing practices of today have been in use much longer than we realize, without having been articulated.

It is true that at times short-run suspensions of competitive factors might force businesses to pay less attention to customer relationships. But to transform such temporary deviations from competition into assumptions of secularity under the normative label of transactional marketing is a distortion of reality. Under the marketing concept such practices were described simply as selling and not marketing, because the original thinkers of our profession did not wish to dignify them with the word “marketing.”

The phrase “The customer is always right” originated decades before there was any talk about the importance of customer relationships. Long before relationship marketers emerged, pioneers in the field concluded that the primary purpose of all commercial activity should be to satisfy human wants. As early as 1910, Butler and Shaw were observing that marketing is more than a combination of selling, advertising, and distribution. Bartels says it was described as a job of coordination, planning, and managing complicated “relationships” among the various factors that must be considered by decision makers. In 1927, Maynard, Beckman, and Weidler emphasized the importance of the “consumer viewpoint” in contrast to the corporate viewpoint, which was the prevailing approach of the time. The effect was the introduction of marketing at the beginning rather than at the end of the planning process. The 1922 Montgomery Ward catalog stated:

Our buyers have been spending most of

their time visiting many of our customers in

their homes. Our representatives are

constantly calling upon many of you getting

your ideas, your criticisms, your

suggestions.

At the very least, this shows recognition of the importance of customer relationships.

“The final consumer was the ultimate authority,” said Mason (1964):

His desires … gave the necessary direction

to business enterprise; and, as the doctrine

of “consumer sovereignty” implied,

establishing and maintaining good relations

with customers was of paramount

importance.

Relationships do exist and are important in every kind of human endeavor. Marketing has always been a very human activity. It is based on a series of interrelationships among people who play the roles of buyers, sellers, public officials, and consumers. This psychological process will not be established or maintained if the individuals participating in it do not perceive it to be satisfactory. “Destiny is and has always been linked to customer satisfaction,” stated Blankenship and Holmes (1974). Clients will not buy from companies that insult them as long as they have the choice to patronize a competitor who treats them fairly. And most customers will not give a company a second chance if their first buying experience is not satisfactory.

Marketing was never meant to be a one-night stand. The word itself signifies a time horizon that is much longer than the immediate period of operational activity. More than three decades ago Peter Drucker (1964) wrote that the basic purpose of any business was not to sell a product but to create and keep customers. If customer creation is the raison d’etre of a firm, one can hardly imagine how this can be accomplished by neglecting relationships with customers.

Customer satisfaction at a profit is the cornerstone of the marketing concept. No relationships can be established or maintained with unsatisfied clients. On the other hand, one may conceive of many situations in which there may exist a relationship that is not satisfactory. The critical element in this equation is not the concept of relationship but that of satisfaction.

Gronroos’s notion that only under relationship marketing does customer satisfaction become the responsibility of everyone in the organization also flies in the face of historical facts. Implementing the marketing concept involves the efforts of every sector in a firm. GE’s idea was to have engineers, accountants, shipping personnel, and secretaries get to know the customers and become sensitive to their needs. Businesses have always used a variety of mechanisms to coordinate the marketing function with their other activities. They may have lacked some of the sophisticated tools of contemporary marketers, says Hollander (1986), but these are matters of technology rather than orientation.

If necessary, one could add a multitude of examples in substantiation. The examples already provided indicate that the proposition that relationships are important in marketing is scarcely a new contribution to marketing thought. The premise underlying it–that good relationships are a means to satisfy customers and thus increase profits–is well within the framework of the marketing concept.

If this new philosophy favors establishing and maintaining relationships, then the old approach must be described by an antonym such as non-relational or anti-relationship. Of course relationships exist, and are important in marketing as in any other type of human endeavor. However, a discipline should be identified through its core concept rather than through its fringes, and the core concept in marketing is customer satisfaction.

Even so-called transactional marketing, under certain conditions, may be the only plausible strategy available to establish and maintain a relationship with a customer. For example, in times of economic adversity clients tend to patronize (and hence maintain a relationship with) only those companies that offer tangible financial advantages. The slogan of Consumers’ Distributing in Canada, “Suffer a little, save a lot,” served the company very well for several years because its customers were willing to endure some annoyance in exchange for lower prices. There may be times when the existence of a relationship will not produce the type of satisfaction clients are seeking.

In the end, people deal with people. Sophistic arguments will do nothing but accelerate client dissatisfaction if parties on either end of a relationship are not people of integrity who are prepared to do what smart thinkers in our discipline told us almost half a century ago: Keep your customers satisfied.

A major aspect of the marketing concept is to place the objective of profitability into a more socially acceptable role for a company by emphasizing the importance of customer satisfaction. Rather than promoting relationship marketing as a new philosophy, marketing theoreticians should chastise those who have not accepted, or have failed to implement, the marketing concept. Sanctioning the existence of another type of marketing misses the opportunity to officially condemn some of the negative characteristics the public traditionally has associated with marketing. It also fails to create a positive image for the profession.

Theoreticians in marketing should strive to explain the marketing process simply, even parsimoniously. The terms “marketing concept” and “relationship marketing” are redundant, and the latter should be stricken from the literature, because maintaining both leads to confusion and misunderstanding. To say that relationship marketing is a new philosophy may fit the dictionary’s definition of propaganda, but it does very little to serve the interests of a marketing science. A science by definition seeks the truth. Blurring the truth by developing buzzwords is hardly a justifiable action.

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John V. Petrof is a professor of marketing and the director of the marketing department at l’Universite Laval in Ste-Foy, Quebec, Canada.

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