Relationship Marketing Practices in Hospitality Industry

A project report submitted in partial fulfillment of the requirements for

Thesis project

MBA
By
Divyank Shekhar Singh
(2010IPG-034)

ABV INDIAN INSTITUTE OF INFORMATION TECHNOLOGY AND MANAGEMENT

GWALIOR-474010
2014-2015

CANDIDATES DECLARATION
I hereby certify that the work, which is being presented in the report , entitled Relationship Marketing Practices
in Hospitality Industry, in partial fulfillment of the requirement for the award of the Degree of Master of Business
Administration and submitted to the institution is an authentic record of my own work carried out during the
period July 2014to October 2014under the supervision of Dr. Vinay Singh. I also cited the reference about the
texts/figures/tables from where they have been taken.
The matter presented in this thesis as not been submitted elsewhere for the award of any other degree of diploma
from any Institutions.

Date:

Signature of the Candidate

This is to certify that the above statement made by the candidate is correct to the best of my knowledge.

Date:

Signature of the Research Supervisor

ACKNOWLEDGEMENT
Im highly indebted to Dr. Vinay Singh for giving me the autonomy of functioning and experimenting with
ideas. I would like to take this opportunity to express my profound gratitude to him not only for his academic
guidance but also for his personal interest in my project and constant support coupled with confidence boosting
and motivating sessions which proved very fruitful and was instrumental in infusing self-assurance and trust within
me. The nurturing and blossoming of the present work was mainly due to his valuable guidance, suggestions,
astute judgment, constructive criticism and an eye for perfection. My mentor always answered countless of my
doubts with smiling graciousness and prodigious patience, never letting me feel that Im novice by always lending
an ear to my views, appreciating and improving them and by giving me a free hand in my project. Its only because
of his overwhelming interest and helpful attitude, the present work has attained the stage it has.

Lastly, I would like to thank supporting staff of IIITM and my peers for their cooperation and support which
enabled me to achieve my objective

Date:

Divyank Shekhar Singh

(2010-IPG-034)

ABSTRACT

Theoretically, the aim of relationship marketing is to establish long-term relationships with customers
and is subject to cultural specificities.
This thesis explores the scope, nature and form of relationship marketing in the hotel industry. For the
last twenty years, relationship marketing has attracted enormous interest from both academic
researchers and business practitioners. Due to the competitive environment, RM is crucial and has
become a niche for firm performance. However, there is limited research that reveals the relationship
between RM dimensions and hotel performance. This study serves not only to clarify the relationship
between RM dimensions and hotel performance, but also to explain the mediation role of marketing
capabilities in this relationship.

Contents
1. Motivation
2. Introduction
3. Literature Review.
4. Implications..
5. Objectives of the study
6. Research methodology..
7. Reference.
List of Tables
S.No.

TITLE

Table 1.

Definitions of relationship marketing

Table 2.

Dimensions of relationship marketing in literature

PAGE NO.

Chapter 1
Motivation
Relationships are as old as mankind. It has been studied by sociologists, social psychologists, anthropologists,
philosophers, theologians and many other people. For that matter even the traders and businessmen of
yesteryears relied on relationships for their success. However the modern marketers started taking a fancy to the
same only recently.
In the early 90s the concept of relationship marketing was formally introduced into the field of services marketing.
Financial service institutions, airlines and other service providers found it profitable to retain and reward the
existing customers than running after new customers. It was established that building closer relationship with
customers resulted in better returns to companies through the following means:

Increased use of company services by loyal customers.

Charging of price premiums for customized services.

Referrals by satisfied customers that brought new customers.

This was the motivation behind taking this research topic under study.

Chapter 2
Introduction
Hospitality product is largely people based, consumed and experienced in close encounter with the service
provider, lasting more than one interaction. This is punctuated by Moments of Truth leading to dissatisfaction.
Hence people, physical environment and process have significant role to play. The intangibles (service, ambience)
along with the tangibles (food, loading etc.) are equally important. Getting the right blend makes hospitality
service fairly complex and challenging.
Though hotels, restaurants and air-lines belong to the same industry, these satisfy very specific needs depending
on service characteristic and the targets catered to. While hotels serve to provide home away from home,
restaurants offer an ambience expected to be different from that of home. Hence the emphases on various aspect
of servicing are not the same.
The interaction with customers in hotels is often of a longer duration, where the concept of EAI (extended
affective interaction, see price et al., 1995) holds. This is turn raises certain expectations, namely, Responsiveness,

Empathy, and Assurance, essential components of total offer. For restaurants, Responsiveness maybe the single
most important factor.
The entry and the exit barriers are higher in hotels business.
Both face product as well as brand competition. While hotels compete with similar 5-star services available in the
city, they have corporate guest house to keep in mind. Restaurants lose business to other food joints having
location advantage. They are also under pressure from various clubs (game, swimming) than a food outlet. There is
significant difference in the ambience or environments. The clubs are homely, informal whereas restaurants are
formal and impersonal. Besides, there are clubs catering to specific needs, sports, swimming, and gyms. The
competition however is indirect, generic in nature.
The business thrives mostly on prosperity of a region. Indeed for hotels, business mostly accrues from transient
population. In the case of restaurants, affluence, age composition of local population, and active support of
business houses are decisive factors. These in turn depend on state of economy of the region. In this context, the
city of Calcutta is not an ideal choice. It has neither a vibrant economy nor does it host major cultural or sports
events.
In view of the above, attracting customers become crucial.
The Indian hotel industry is experiencing increased globalization, competition, higher customer turnover, growing
customer acquisition costs and rising customer expectations, meaning that hotels performance and
competitiveness is significantly dependent upon their ability to satisfy customer efficiency and effectively. In the
hotel industry the basic products (rooms) are very similar, when comparing the same quality level the customer
focuses are on soft factor like personal treatment, personalization, one to one marketing and attention by the
hospitality professions. The hotel industry enjoys easy data access as the guests need to register their name and
address during check-in and in some countries, guests even need to provide their passport data and more detailed
private information. In addition, people are very likely to share their personal preferences with hotel staff to make
their stay more enjoyable. The hotel can make use of this database combined with IT and give the guests a unique
experience. They can establish a close relationship with customers and meet their needs perfectly. In order to be
able to compete on a highly competitive market a hotel has to meet every single customer's needs and
expectations. To do this it is important to understand the aspects of business performance that persuade
customers to become repeat purchasers and to exhibit behavioral loyalty as it costs five to ten times more to sell
to a new customer than to an old customer. To enhance profitability and guest satisfaction and loyalty, the
organizations (hotels) should focus on implementing Customer Relationship Management (CRM) strategies that
aim to seek, gather and store the right information, validate and share it throughout the organization (Goyal,
2011). Dominici and Guzzo (2010) said that to be successful in the market it is not sufficient to attract the new

customers but to concentrate on existing customers implementing effective policies of customer satisfaction and
loyalty.Significance of the study
The rationale behind this study has been carrying out an investigation on the various impacts of customer
relationship marketing in hotel and destination industries. Unlike in advertisement and promotional marketing,
relationship marketing focuses more on the retaining the customers, therefore, the researcher developed an
interest in the topic. This study enabled the researcher to acquire adequate knowledge on how relationship
marketing works as well as its benefits either to the companies or to their customers.
Moreover, the research will be crucial and it will enable people to gain deeper understanding on the difference
between relationship marketing and promotional marketing as well as advertising. This study will benefit future
researchers as well as marketers since it will provide them with adequate literature concerning the topic. The
study will provide guidance to the proprietors who own hotels concerning how they need to carry out relationship
marketing in order to increase the loyalty of the customer.

Chapter 3
Literature review
The effective management of customer relationships may increase the overall profitability of a hotel (Buttle1996;
Christopher et al. 2002; Hollensen 2003; Grnroos 2007; Gummesson 2008). However, in todays intensely
competitive marketplace, unwavering loyalty from customers is rare (Butte 1996), and the development and
retention of long-term relationships is therefore more crucial than ever.
Relationship marketing (RM) is perceived to be a key element in any corporate strategy which aims to enhance
customer satisfaction, develop customer loyalty, and sustain long-term customer relationships (Henning-Thurau&
Hansen 2000).

Origin of relationship marketing

Relationship marketing (RM) has been a topic of serious discussion among academics and practitioners over the
past few years (Henning-Thurgau& Hansen 2000; Christopher et al. 2002; Egan 2004). Controversy still exists over
the origins of RM. It has been argued that Len Berry (1983) was the first to introduce the term relationship
marketing as a modern concept in marketing (see Gronroos 1990; Morgan & Hunt 1994; Sheth&Parvatiyar 1995;
Aijo 1996; Henning-Thurau& Hansen 2000; Christopher et al. 2002; Buttle 2006). Subsequently, Barbara Bund
Jackson was the first to use the term relationship marketing in contrast to transaction marketing in a business-tobusiness context (Christopher et al. 2002; Sheth 2002; Gronroos 2004). During the 1990s, the term relationship
marketing evolved into a general marketing term (Gronroos 1990; Hunt & Morgan 1994; Christopher et al. 2002).
This was triggered by rapid and radical changes in the environment which meant that strategic competitive
advantage could no longer be delivered on the basis of product characteristics alone; satisfying existing customers
became the key to ensuring corporate profitability (Barnes 1994; Aijo 1996). According to Gronroos (1994), a clear
shift towards relationship marketing occurred in the areas of industrial marketing, service marketing, and
managing distribution channels. There was simultaneously a parallel shift from brand values to customer values,
where the delivery of superior customer value became a key objective (Christopher 1996). Relationship marketing
is also commonly referred to as customer-focused management (Gummesson 1994) and relationship
management (Payne et al. 1994).

Development of relationship marketing

The development of relationship marketing is analyzed in two parts; the first part outlines the development of
marketing, together with the history and development of transactional marketing (TM) and the eventual
emergence of relationship marketing (RM). The second part focuses on the development of relationship marketing
and encompasses criticisms of the weaknesses of TM and the importance of the RM concept.
As mentioned previously, the underlying theories and conceptualizations of relationship marketing were the result
of a shift from the theory and practice of transactional marketing. Therefore, in order to obtain an understanding
of relationship marketing, a brief overview of the history and development of transactional marketing is required.
The concept of TM originated during the industrial era circa 1910 as mass production grew rapidly and the range
and complexity of goods and services offered increased (Webster 1992; Sheth&Parvatiyar 2000; Gummesson
2008). The managerial approach to the study of marketing developed in the 1950s and 1960s as the contribution
of marketing to corporate profitability came to be regarded as increasingly important (Webster 1992; Hollensen
2003; Gummesson 2008). A number of textbooks adopting a marketing management perspective appeared during
this period (e.g. Howard 1957; McCarthy 1960; Kotler 1967). It was also the era of consumer marketing
(Christopher et al. 1991, p. 8-9) when corporate manufacturers and brand marketing concepts dominated the
marketing agenda (Sheth&Parvatiyar 2000; Gummesson2008 ;).

During the 1960s, Borden (1964) produced his 12 variables (product, price, branding, distribution, personal selling,
advertising, promotions, packaging, display, servicing, physical handling, fact finding and analysis) of a marketing
programmed which later came to be known as the 4Ps of marketing or the marketing mix (McCathy 1960;
Gronroos 1994; Rafig&Ahmer 1995). This framework viewed marketing as a strategic and managerial matching
process (Webster 1992), and this paradigm has continued to dominate both research and practice. During this
period, marketing was characterized as industrial marketing (Christopher et al. 1991, p.8-9;).
During the 1970s, most brands experienced faltering growth and markets were dominated by oligopolies (Webster
1992; Gronroos 2004). Consumers in particular became more demanding and sophisticated and were less easily
persuaded by simplistic marketing strategies (Webster 1992). The 1980s saw a significant rise in importance of the
service sector (Christopher et al. 1991 ;). During this period, The American Marketing Association defined
marketing (AMA Board 1985, p.2) as:
The process of planning and executing conception, pricing, promotion and distribution of ideas, goods and
services to create exchanges that satisfy individual and organizational objectives.
This definition describes the traditional concept of marketing, and is founded on the marketing mix: suppliers are
perceived as independent units in the market. Despite the growing complexity and competitiveness of the
marketplace at the end of the 1980s, marketers continued to persevere with the concept of the 4Ps. In practice,
however, a number of academics began to question the utility of this approach (e.g. Gronroos 1983;
Gummesson1987). They argued that it was no longer broad enough and failed to incorporate the importance of
customer retention, changes in the competitive environment and the limitations of transaction marketing. During
the 1990s the situation became more complex and confused. Companies were beginning to question the high level
of marketing expenditure which often failed to deliver a worthwhile return on investment (Gordon 1998). New
approaches were pursued in order to resolve these problems and discover new ways to survive in such highly
th

competitive markets. The last decade of the 20 century saw the marginalization of the marketing function in
many organizations (Sheth&Sisodia 1999). Egan (2004, p.9) called this period the century of marketing. However,
a number of marketers (e.g. Webster 1992; Gronroos 1994) recognized that a gap existed between what was
written in marketing textbooks and practical implementation. The 4Ps marketing framework was unlikely to win or
retain customers either in consumer or industrial markets (Gummesson 1987; Gronroos 1994). The 4Ps concept
concerned only mass marketing and standardized consumer goods as opposed to establishing relationships with
individual customers. Marketing management in practice is supplier oriented (Gummesson 2002, p.285), rather
than customer oriented. The concept of relationship marketing emerged from this perceived discrepancy
between theory and practice.
Transactional marketing remained dominant until it was challenged by a theory called relationship marketing. The
concept of relationship marketing stemmed from research in service marketing (Aijo 1996; Gronroos 2007) which

emphasized the importance of close customer contact. The majority of literature in this area focuses on the service
encounter, and the interaction between the customer and the service provider. Literature on relationship
marketing, however, focuses on the importance of establishing a long-term relationship between the customer
and service provider (Berry 1995).
As demonstrated in the previous section, there is widespread concern about the validity of the traditional
marketing approach as relationships are becoming increasingly important in todays complex markets. The 4Ps
framework has been criticized by many researchers (e.g. Kent 1986; Gronroos 1994; Rafig&Ahmer 1995;
Gummesson 2002; Hollensen 2003). Gronroos (1994) and Gummesson (2008), for example, claim that the 4Ps
framework is too restrictive for business-to-business and services marketing as the importance of intangible
service characteristics and customer service considerations have become a key differentiating factor between
products. Cowell (1984) argues that the 4Ps fails to incorporate the characteristics of services, while Rafig and
Ahmer (1995) state that personal contact is rarely discussed within this framework. A number of researchers (e.g.
Reichheld&Sasser 1990; Reichheld 1993; Gronroos 1994) concur that traditional marketing is becoming excessively
expensive and is far less effective than RM.
RM, on the other hand, has become the leading topic of discussion at academic conferences throughout Europe,
North America, Australia, and elsewhere since the 1990s. Various studies have provided evidence of the benefits of
establishing long-term relationships and an effective customer retention strategy within competitive consumerservice markets (e.g. Dwyer et al. 1987; Gadde&Mattsson 1987; Gronroos 1990; Parasuraman et al. 1991; Berry
1995).
Moreover, RM represents a more common sense approach to marketing; it makes important phenomena visible
in a confused world in which marketers and consumers search for meaning (Gummesson 2008). Berry and
Parasuraman (1991, p.133) argue that RM quite simply concerns attracting, developing, and retaining customer
relationships. It triggered a change in attitude from the traditional zero-sum winner/loser philosophy to a belief
in the possibility of a win-win situation (Gummerson 1997, p.56). Many researchers (e.g. Reichheld&Sasser 1990;
Reichheld 1993) have demonstrated that long-term customer relationships can be achieved through mutual
exchange and fulfillment of promises (Gronroos 1994 p.9).
In the traditional transactional approach, marketing management is about planning, coordinating, and controlling
marketing activities that are aimed at satisfying customer needs and wants. The emphasis is on acquiring as many
customers as possible by focusing on product quality and customer volume with less emphasis on meeting
customer expectations and ensuring customer satisfaction.
In contrast, the primary focus of RM is on the individual and the quality of customer relationships (Gummesson
2008). The focus has shifted from customer volume in the transactional marketing approach to customer

retention. RM emphasizes the importance of meeting customer expectations by focusing on customer value and
long-term relationships.
Within the hotel industry, the marketing mix plays a key role in making decisions on hotel characteristics and hotel
design, pricing, distribution channels and promotional strategies (Kotler et al. 2003). Although the 4Ps marketing
mix is still considered important in the management of a hotel business, it is no longer regarded as sufficient for
hotel success (Gronroos 1994; Javalgi&Moberg 1997; Lovelock et al. 2005; Gummesson 2008). Gummesson (2008)
states that the 4Ps only focus on short-term relationships with less emphasis on the importance of customer
service and customer satisfaction, which in practice should be the main focus of the hotel business.
Marketing within the hotel industry is further complicated by the intangible nature of the services which are
provided, which are typified by a high degree of human interaction. As a result, the standardization of services is
practically impossible (Harvey 1998; Henning-Thurau& Hansen 2000) and customers may not always be satisfied
with the quality of service that they receive. Customer dissatisfaction may trigger negative word-of-mouth and
non-repurchase and may be detrimental to the profitability of the hotel. The formulation of a marketing strategy
which enables a flexible response to customers needs and the establishment of long-term, stable relationships is
therefore crucial (Booms & Bitner 1981; Javalgi & Moberg 1997).
In summary, many academics and practitioners have concluded that TM needs to be evaluated, and a shift towards
a relationship-based approach is due. RM has evolved into a general marketing approach (Kotler 1992;
Grnroos1994; Gummesson 2008) and some researchers believe that it represents a paradigm shift in marketing
(McKenna 1991; Sheth &Parvatiyar 1995; Morgan & Hunt 1994; Aijo 1996; Grnroos 1996; Donaldson & OToole
2002; Hollensen 2003; Gummesson 2008). However, others view RM as an alternative to, rather than a substitute
for, TM (Moller&Halinen 2000; Varey 2002; Egan 2004). Palmer (1996), for example, believes that the popularity of
RM arose as the result of a rediscovery in Western markets of a concept that forms a fundamental part of
exchange in Eastern cultures. Palmer et al. (2005, p.316) state that RM has not yet been fully recognized as a
paradigm, but it is at least a well-ordered and distinct concept.

Definition of relationship marketing

Many scholars have attempted to define RM. However, there is no general consensus on what exactly is meant by
the term relationship marketing (Gronroos 1995; Egan 2004; Harwood et al. 2008). A common definition which
has been advocated by many researchers is that RM represents a customer-centered approach whereby a firm
seeks long-term business relationships with potential and existing customers and stakeholders which results in
greater commitment, repurchase and loyalty (Sheth&Parvatiyar 1995; Hunt 1997). Barnes and Howlett (1998)

suggest that two factors must be present for an exchange situation to be described as a relationship, and that a
true relationship cannot exist if these factors are absent. These two factors are the following:

Attracting, maintaining, and enhancing relationships between firms & customers.

Creating, communicating, and delivering value to customers.

Developing and maintaining successful relational exchanges.

The relationship must be mutually perceived to exist and must be acknowledged by both parties.

The relationship must go beyond occasional contact and have some sort of special status.

According to Berrys definition (1983, p.25), the aim of relationship marketing should be the retention of
customers and the development of stable, long-term relationships.
Jacksons definition is centered in the business-to-business context, and raises the issue of whether a relationship
marketing or transaction marketing approach is the best strategy for industrial customers.
The definitions provided by Buttle (1996, p.vii), Evans and Laskin (1994, p.440) stress the importance of long-term
relationships between suppliers and customers.
Later contributions to relationship marketing expanded the scope of research and emphasize the importance of
cooperation between parties in order to achieve mutual benefit (Morgan & Hunt 1994; Gronroos 2008).
Gummesson (2008), for example, defines relationship marketing as a whole series of relationships, networks and
interactions, rather than merely a dyadic relationship between the buyer and the seller.
Morgan and Hunt (1994,p.22) and Ballantyne (1994, p.3) offer similarly broad definitions. Scholars define
relationship marketing according to their particular area of interest and thus each definition is presented
discursively. OMalley and Tynan (1999, p.589) suggest that this lack of clarity has provided researchers with the
luxury of being able to choose whatever relationship definition best suits their research agendas at any given time.

Table 1. Definitions of relationship marketing

Authors (year)
Berry (1983)

Definitions
Relationship marketing (RM) is attracting, maintaining and in multi-services organizations
enhancing customer relationships.

Jackson (1983)
Jackson (1985)

RM is managing strong, lasting relationships with individual accounts.

In industrial marketing Relationship marketing refers to marketing oriented towards strong, lasting

relationships with individual accounts.

Dwyer et al.(1987)

Relationship marketing focuses on attracting, maintaining, and enhancing relationships

between firms.

Turnbull

The formation of long-term buyer-seller relationships through the creation of structural and social

and wlison(1989)

bonds between companies.

Gronroos (1990)

The purpose of marketing in the new context is to establish, maintain, and enhance
relationships with customers and other partner, at a profit, so that the objectives of the partners
involved are met. This is achieved by a mutual exchange and fulfillment of promises.

Berry and

Relationship marketing concerns attracting, developing and retaining customer relationships.

Parasuraman (1991)
McKenna(1991);

Relationship marketing attempts to involve and integrate customers, suppliers and other

Shani and

Infrastructural partners into a firms developmental and marketing activities.

Chalasani (1991)
Shani and

An integrated effort to identify, maintain, and build up a network with individual

Chalasani(1992)

consumers
and to continuously strengthen the network for the mutual benefit of both sides, through
Interactive, individualized and value-added contacts over a long period of time.

Morgan and Hunt

Relationship marketing refers to all marketing activities directed toward establishing,

(1994)

developing and maintaining successful relational exchanges.

Evans and Laskin

The role of relationship marketing is to augment the vendors core product, i.e., to

(1994)

differentiate the firms total offering in the marketplace. They define relationship
marketing as a process that includes inputs (understanding customer expectations,
building service
partnerships, empowering employees, and total quality management); outcomes
(customer
satisfaction, customer loyalty, increased profitability, and quality products); and ongoing
assessment (customer feedback, integrating relationship marketing into the firms strategic
planning framework).

Sheth and

Developing close interactions with selected customers, suppliers, and competitors for

Parvatiyar (1995)

value creation through cooperative and collaborative effort.

Cravens (1995)

Relationship marketing, as a field of study, began to attract attention in the early 1990s as
Firms began to enter into long-term associations to counter the effects of increased
customer demands and intensifying global competition.

Perrien and

An asymmetrical and personalized marketing process that takes place in the long-run

Ricard (1995)

results in some bilateral benefits and rests on an in-depth understanding of customer

needs and characteristics.

Table 1. Continued
Perrien and

An asymmetrical and personalized marketing process that takes place in the long-run

Ricard (1995)

results in some bilateral benefits and rests on an in-depth understanding of customer

needs and characteristics.

Sheth and

RM can be defined as the process of developing cooperative and collaborative relationship

Parvatiyar

with customers and other market actors.

(1995b)
Morris et al.

Relationship Marketing is a strategic orientation adopted by both the buyer and seller

(1998)

organizations, which represents a commitment to long-term mutually beneficial

collaboration.

Galbreath (1998)

CRM integrates marketing, sales and service functions through business process
automation, technology solutions and information resources to maximize each customer
contact. CRM-facilitates relationships among enterprises, their customers, business
suppliers and employees.

Gummesson

Relationship marketing is marketing based on interaction within networks of relationships.

(1999)
Harker (1999)

An organization engaged in proactively creating, developing and maintaining committed,

interactive and profitable exchanges with selected customers (partners) over time is
engaged in relationship marketing.

Sheth and

Relationship marketing as the ongoing process of engaging in cooperative and

Parvatiyar (2000)

collaborative activities and programs with immediate and end-user customers to create or
enhance mutual economic value at reduced cost.

Gronroos (2000)

Process of identifying and establishing, maintaining, enhancing, and when necessary

terminating relationships with customers and other stakeholders, at a profit, so that the
objectives of all parties involved are met, where this is done by a mutual giving and
fulfillment of promises.
Vavra (1995);

RM includes efforts to keep customers satisfied after purchase, taking steps to increase the

Patoka (2001)

likelihood of cross-purchasing, measuring the extent to which customers are satisfied, and
translating the sales process into an effective program complete with two-way dialogue

American

Marketing is an organizational function and a set of processes for creating,

Marketing

communicating, and delivering value to customers and for managing customer

Association

relationships in ways that benefit the organization and its stakeholders.

(AMA) (2004)

Dimensions of relationship marketing

Marketing literature provides some important dimensions (Table 2) of relationship marketing like
commitment, trust, cooperation etc which is more important for any firm to consider these factors in
their marketing programs.

Paradigm Shift in relationship marketing

Lacey (1996) defines a paradigm as a shared assumption or an accepted theory which governs the outlook of an
epoch and its approach to scientific problems... *giving+... standard forms of solutions to problems. Relationship
marketing is the new paradigm in marketing literature (Kotler, 1991, Gronroos, C.1994, Gummesson, 1997; Brodie
et al., 1997) that challenges the existing and entrenched Philoso-phies in marketing literature. The new paradigm
asserts that intelligent marketers should view existing customers as a tremendous growth opportunity (Claycomb
& Martin, 2002). For academicians it is a paradigm shift in marketing (Table 3) philosophy urging the importance of
long term relationship and retaining existing customers over getting new customers; since a bird in hand is better
than the two in a bush. For practitioners Relationship marketing is a competitive advantage (Day, 2000), a tool to
reduce the customer churn (Schneider & Bowen, 1999), a tool to overcome service failures (Crosby & Stephens,
1987), an opportunity for marketing additional products and services to a more receptive customer base (Priluck,
2003). However today relationship marketing gets a wide makeover to take Holistic marketing view (Kotler &

Keller, 2006) to achieve customer attraction as well as retention by a mutual exchange and fulfillment of promises
(Gringos, 1990).

Table 2. Dimensions of relationship marketing in literature

Authors (years)

Dimension

Definition

Sharma and Patterson (2000)

Attractiveness of alternatives

The clients estimate of the likely

satisfaction available in an alternative relationship

Gounaris (2005)

Bonding

The (psychological) process through

ugh which the buyer and the
provider build a relationship to the
benefit of both parties

Gounaris (2005)

Commitment

The desire for continuity manifested

by the willingness to invest resources into a relationship

Anderson and Narus (1990);

Communication

Vatanasombut et al. (2008)

The formal as well as informal

sharing of meaningful and timely
information between firms

Selnes (1998); Sichtmann (2007)

Competence

The buyers perception of the

suppliers technological and
commercial competence

Anderson and Narus (1990)

Conflict

The overall level of disagreement in

the working partnership

Anderson and Narus (1990);

Lages et al. (2008)

Cooperation

Similar or complementary coordinated actions taken by firms in

interdependent relationships to
achieve mutual outcomes or singular outcomes with expected
reciprocation over time

Table 2. Continued
Mohr et al. (1996); Payan (2007)

Coordination

The extent to which different

parties in a relationship work well
together to accomplish a collective
set of tasks

De Wulf and Odekerken Schroder

Customization

(2000); Danaher et al. (2008)

The extent to which a seller uses

knowledge about a buyer to tailor
his offerings to the buyer

Gao et al. (2005)

Dependence

The extent to which there is no

equivalent of better alternatives
available in the market

Sin et al. (2005)

Empathy

Seeking to understand the desires

and goals of somebody else

Wilson (1995); Coote et al. (2004)

Goal compatibility or

The degree to which partners share

goal congruence

goals that could only be accomplished through joint action and the
maintenance of the relationship

De Ruyter and Wetzels (1999);

Opportunistic behavior

Delerue-Vidot (2006)

The behaviour of a party that

endangers a relationship for the
purpose of taking advantage of a
new opportunity

Hunt and Nevin (1974);

Power

Ashnai et al. (2009)

The ability of one individual or

group to control or influence the
behavior of another

Sin et al. (2005)

Reciprocity

The component of a business relationship that causes either party to

provide favors or make allowances
for the other in return for similar
favors or allowances at a later stage

Morgan and Hunt (1994);

Sweeney and Webb (2007)

Relationship benefits

Partners that deliver superior benefits will be highly valued and firms
will commit themselves to establishing, developing and maintaining

relationship with such partners

Wilson (1995); Perry et al. (2002)

Relationship-specific investment

The relational-specific commitment

of resources that a partner invests
in the relationship

Garbarino and Johnson (1999);

Satisfaction

Barry et al. (2008)

An overall evaluation based on the

total purchase and consumption
experience with a good or service
over time

De Ruyter and Wetzels (1999)

Service quality

A comparison between customer

expectations and performance

Morgan and Hunt (1994); Vatana-

Shared values

sombut et al. (2008)

Table 2. Continued
Morgan and Hunt (1994); Vatana-

Shared values

sombut et al. (2008)

The extent to which partners have

beliefs in common about what
behaviors, goals and policies are
important , unimportant, appropriate or inappropriate, and right or
wrong

Burnham et al. (2003);

Switching costs

Barry et al. (2008)

The one-time costs that customers

associate

with

the

process

of

switching from one provider to

another
Moorman et al. (1993);

Trust

Orth and Green (2009)

A willingness to rely on an exchange

partner

in

whom

one

confidence
Noordewier et al. (1990)

Uncertainty

The unanticipated changes in the

circumstances surrounding an
exchange

has

Pros of Relationship Marketing

1.

Customer Loyalty
A significant benefit that can be derived from successful relationship marketing (RM) in a business is the
development of loyalty in customers. Hennig-Thurau, Gwinner & Gremler (2002) mentioned that
customer loyalty and positive word-of-mouth recommendations are usually the two outcomes of effective
RM. Furthermore, it is further emphasised by Reynold & Beatty (1999) that RM can provide exclusive
benefits for customers, consequently reducing competition from other businesses that offer the same
product which can thus assist in the achievement of consumer loyalty.
Oliver (1997) defines loyalty as a close bonding between the consumer and the seller which results in
frequent purchase of a certain product or service from the same supplier, despite the influence from
other competitors which has the potential to evoke switching behaviour in consumers. The concept of
customer loyalty has long been regarded as an important aspect of the integral operations occurring in
organisations nowadays, as companies are becoming increasingly aware of the rewards to be reaped in
the form of superior financial performance in the long run. This is further supported by Dowling & Uncles
(1997) purporting that loyal customers are more likely to spend additionally and often make favourable
recommendations to other potential customers.
In addition, McMullan & Gilmore (2008) noted that greater knowledge and understanding of customer
loyalty may allow companies to align their management strategies to meet the different needs of its
customers in a more effective manner and hence, resulting in a more profitable business. Therefore,
many hotels in today's world have implemented their own customer relationship management (CRM)
system in order to offer their customers a unique and satisfying experience by accurately identifying the
various needs of customers. Lo, Stalcup & Lee (2010) stated that the concept of CRM has evolved over the
past decades into a strategy employed by many organisations to integrate the different aspects present in
the company, so that a greater understanding of their customers can be attained and ultimately, resulting
in a long-term profitable relationship between the customers and themselves.
However, it is crucial for hotels not to overlook other areas that are closely related to the concept of
customer loyalty, instead of just merely focusing on the establishment of an effective CRM system.
Customer loyalty is often linked to other service management concepts such as customer satisfaction and
customer centricity. Businesses including the hotel industry should be mindful and take into consideration
these other concepts that might affect the development of customer loyalty - the ultimate aim of
successful RM. It is also critical for hotels to recognise the obstacles impeding them from instilling loyalty
in customers. One of the more noteworthy obstacles includes unresolved areas of dissatisfaction in
consumers which, if left unattended, can result in dropping sales and profitability (McMullan & Gilmore
2008). Therefore, a two-way communication becomes all the more essential for businesses to understand

what customers want and knowing how to deal with dissatisfaction Lastly, managers should always assess
the pros and cons of a loyalty program before implementing them, so that resources get measured and
managed.

2.

Focus on Customer Retention

Another advantage derived from relationship marketing is the increased profitability that stems from the
retention as opposed to capturing new customers. Firstly, customer retention can be defined as the
'ability of a firm's offer for a customer to purchase or patronage its product over a specific time period.'
(Shajahan,S, 2004. p.109) This occurs when, in the context of this essay, a hotel adopts a customer
management orientation where it seeks to apply RM to retain its customers.
Customer retention reduces marketing costs and as such benefits the hotel financially. This means that
hotels need to spend potentially less money to attract customers they have lost as a result of the
defection of its existing ones. This was exemplified in a study showing increase in profit by 25% to 125% in
a company when it retained 5% more of its customers. (Reichheld, F & Sasser, WE, 1990) This can be done
by the hotel developing a customer retention strategy and thus focussing its energies on particular
customers in which they would like to retain. This is as not all customers are worth the additional effort as
well as cost to retain, certain customers are with more important with regards to their perceived value to
the company as well as potential for development in the future (Buttle F, 2009). In the context of a hotel
for example, a hotel might want to centre its attention on the higher spending, more affluent members of
its clientele, as they represent more profits for the company as compared to the ordinary spending
customer that patronises the hotel. With these measures and understanding of customer retention in
place, hotels can reap increased profits as an advantage of relationship marketing.

3.

Word-of-mouth (WOM) Advertising

As mentioned earlier in this paper, one of the desired outcomes of successful RM is the positive word of
mouth recommendations by satisfied customers. WOM has been regarded as a powerful tool of
communication which can influence consumers' purchasing behaviour and judgements (John 1994).
Sweeney, Soutar & Mazzarol (2008) further elaborated that WOM behaviour plays an influential role in
promotion and it is very important especially in businesses that provide services such as hotels. Zeithaml
(1981) reinstated that WOM creates significant impacts in service organisations because the intangibility
of service made it impossible for consumers to pre-trial the product before purchasing it. Hence, it is
paramount that hotel operators are aware that WOM behaviour can affect them to a large extent

Though significant repercussions may prove to be an issue if negative words about the company were to
spread around, operators of hotels should be forewarned of the positives that WOM marketing can

provide for them. For instance, WOM can reduce geographical boundaries that used to exist in traditional
marketing, especially true with the increased affluence of internet in our modern society today. This is
supported by Trusov, Bucklin & Pauwels (2009) stating that the use of Internet can provide many various
platforms and avenues for users to share their views and opinions with one another. In addition, it also
serves as an advertising channel which can lower costs and ensure that consumers receive the message in
the shortest possible time.

4.

Costs Savings for Businesses

As most organisations face difficulties in nurturing and maintaining long-term relationships with their
customers (1999), the advancement of information technology (IT) has significantly improved efficiency
and decreased the costs associated with RM. For customers, RM through the use of IT will ensure a better
understanding and better fit for marketing efforts (Xu, Yen, Lin & Chou 2002).
For hotels, RM through the use of IT means moving from general market segmentation to a more
definitive segmentation while enhancing the level of intimacy between the hotel and her guests
(Gummesson 1994). Barlow (1992) concurs that generally, guests desires to be communicated with on a
one-on-one basis. Based on past data collected through the use of information systems and property
management systems, hotels are able to utilise sequential data in RM (Gronroos 1995). Berry (1995)
perceives that the use of IT in customer RM will facilitate information exchange, allow possible tracking of
buying patterns, and the personalisation of service experience. This translates into cost-savings for the
hotel for their marketing efforts.

5.

Understanding the Market

Relationship marketing can be taken advantage to narrow the demand gap for accommodation rooms
caused by seasonality of tourism demand. As mentioned by Butler (2001), seasonality in tourism
exacerbates problems relating to capital access, retention of skilled labour and the under-utilisation of
resources such as hotel rooms. Generally, the two main causes of seasonality in tourism has been
identified as natural causes and institutionalised causes (Hartmann 1986).
Weather conditions can often lead to the seasonality of demand in tourism (Kozak & Rimmington 2000).
As such, the ski industry has a large turnover rate of employees and often, ski resorts are vacant during
the summer (Ismert & Petrick 2004). Based on the geographical environment that it is in, hotels can
actually sell nature tourism to potential guests during the off peak seasons. By having leisure activities at
the destination, it creates a compelling justification for travellers to stay over. This form of marketing
would be best communicated via the use of relationship marketing as hotels will have a better understand
of guests' preferences.

Similarly, hotels can utilise existing guest records to target those that do not have work obligations for
instance, and those that they deem as potential guests. During the low-peak seasons, hotels can make use
of that as a selling advantage. A different group of guests may be attracted as a result of marketing the
hotel to be quiet and peaceful. For example, by creating special packages that addresses accessibility
issues, and includes a wide variety of leisure options and accommodation standards for the elderly, the
hotel is able to tap on the retired greying population and boost room occupancy rates even during these
periods.

Cons of Relationship Marketing

1.

Importance of Recognising Cultural Differences

One of the disadvantages of RM, and especially so for global hotel businesses, is that cultural differences
are not being recognized when a single approach is being implemented for different societies. Culture
must be first defined in this essay as 'an integrated system of learned behaviour patterns that are
distinguishing characteristics of the members of any given society (Czinkota, MR & Ronkainen, IA, 2007
p.54) This would mean that different cultures adopt different mindsets on various issues, attitudes and
feelings. In the context of this essay this means various cultures respond differently with respect to RM in
hotels. For example, Chinese tourists attach great significance to ritualistic behaviour such as a smile,
greeting or a hand-shake as part of a service orientated experience which represents respect and
importance of the guests. In the UK, however, ritual greetings by hotel employees are rare; furthermore
interactions with guests from Chinese cultures are inclined to be hindered by language barriers. (Wang,Y.
Vela,MR. &Tyler, K.2008) This means that tourists from a Chinese culture would be affected in ways that
guests from for example, a western culture would not be. Hotels therefore are faced with the constant
challenge of providing a positive service experience for a variety of visitors with different expectations
and needs.
It is also noted that RM in the Chinese cultural setting is approached in a different manner than how it is
done in western cultures. In the former, it is custom to establish kuan-hsi (networking/relationship) first
followed by the business dealing. However in western cultures, a closer relationship is fostered only after
the business dealing, with the view of acquiring further business opportunities. (Gilbert, D&Tsao, J,2000 In
the hotel's context this would mean that international hotel chains such as Starwood would have to deal
with local suppliers or partners in different ways with regards to business dealings. A deal in China would
not be approached in the same way as a deal in New York, lest offending or putting off potential suppliers.
Hence the challenges faced by global hotel brands in RM with regards to different cultures.

2.

Involvement of High Costs for Training and Software

Because of the different approaches to RM and a need to recognise these different cultural elements,
hotel employees are required to undergo a stringent training process. As Zelkowitz (2005) advocates, the
high costs related to relationship marketing generally spawns from the recruitment and training of staff.
Thus, it contributes to the additional costs of the hotel.
Furthermore, managing relationships have now been rarely limited to just the customer and the business,
but also relationships with other stakeholders such as agencies and other suppliers which have different
levels of integration and ways of operating. As a result of these complexities identified, many hotels are
utilising integrated RM software to simplify their business operations process and effectively manage
these multiple relationships. As such, this technology acquisition contributes to ongoing operating costs
for the hotel and can be viewed as a form of maintenance (Little & Marandi 2003).

3.

Counter Productivity of Relationship Marketing

While trying to meet the needs of existing loyal guests, RM may have an adverse impact on customer
loyalty. Sending unsolicited promotional materials such as mass customised emails to guests may risk
jeopardising the relationship the hotel has with the guest (Brown & Muchira 2004; Prasad, Ramamurthy &
Naidu 2001). At the same time, RM can result in guests being bombarded with promotional messages
from various hotels that they have previously lived in. Bowie and Buttle (2004) believe that customer
loyalty can only be dedicated to a small number of brands. Thus, overloading of information via marketing
might be counterproductive and will eventually result in less benefit for both the hotel and the customers
(Jayachandran, Sharma, and Kaufman & Raman 2005). Although RM might be able to anticipate guests'
needs and wants by accessing sequential records in the information system, it is important to remember
that individual guests may not always desire for the same product and service even when being at the
same property (Bowie & Buttle 2004).

4.

Negligence of Existing Customers

RM can be detrimental to any business if used in an improper manner. For instance, certain hotels may
tend to use RM or tailor their strategies toward acquiring new markets whilst at the same time, lesser
emphasis is placed on managing existing guest relationships. As previously established, the cost of
attaining a new customer is five to six times more than retaining a loyal guest (Ndubisi, Malhotra & Wah
2009), meaning some hotels suffer from the leaky bucket syndrome as they seem more interested in
attracting new customers rather than retaining existing ones (Dowling & Uncles 1997; Gummesson 1994).

Chapter 4
Implications
Meaningful implications are made that building an extensive and effective CRM dimensions in hotel firms
is crucial to face a high competition and improve performance in hotel sector.
This study will provide a theoretical model to show the firm relationship between CRM dimensions,
marketing capabilities and hotel performance. It will contribute enormously to the body of knowledge, as
it will provide a comprehensive framework that will be used for explaining the impact of the CRM
dimensions on hotel performance.
Also the study will benefit future researchers as well as marketers since it will provide them with
adequate literature concerning the topic. The study will provide guidance to the proprietors who own
hotels concerning how they need to carry out relationship marketing in order to increase the loyalty of
the customer.

Chapter 5
Objectives of the study
The general purpose of this paper is to find out whether relationship marketing has an impact on the
organizations values to their customers. It should be understood that the chief goal of relationship
marketing implementation is to make improvements on the value of services offered to customers. With
this in mind, the study will try to evaluate whether there has been any improvement especially on
customer satisfaction and retention. The steps that have been advanced in order to help the researcher
attain the aim are formulated into various objectives as stated below:

To determine how relationship marketing affects different aspects of hotels.

To determine how relationship marketing impacts satisfaction.

To review the impact of relationship marketing from previous studies.

To analyse the impact that satisfaction has on customer loyalty.

To propose a refined list of dimensions of RM tailored to the dynamics/operations of the hotel

industry.

To provide recommendations on how management teams can improve the effectiveness of their
relationship marketing endeavours.

Chapter 6
Research methodology
The study demonstrates two methods that will be utilized to gather adequate information. In the first
step, an infinite body of literature was reviewed and relevant conclusions have been drawn. Second step
will involve designing of questionnaires and evaluating the responses.

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