Chapter 04

Relationship Marketing
Redwan Salam
The classic Dyad The relationship between the supplier and the customer
The classic Triad The customer supplier competitor triangle
The classic network Distribution channels
The relationship via full-time marketers and part-time marketers works
The service encounter interaction between customers and service provider
The many headed customers and the many headed supplier
The relationship to customers customer
The close versus distant relationship
The relationship to dissatisfied customers
The monopoly relationship the customer or supplier as prisoners
The customer as Member concept
The non-commercial relationship
The green relationship
Chapter Content
Market Relationships - Classic
Classic market relationships
Supplier and customer
The customer - supplier - competitor triangle
Network - distribution channels
The Classic Dyad
The relationship between the one who sells something and the one who buys
something forms the classic dyad of marketing, a two party relationship.
This is the parent relationship of marketing where supplier and customer.
Caring for existing customers used to be second to attracting new customers.
Today, keeping, caring for and developing existing relationships gets priority.
Court your own customers before you start courting somebody elses customers.
The Classic Dyad
Real selling is not making sales but making customers. Relationship
with customers should be as follows:
If you are good to your customers, they will keep coming back
because they like you.
If they like you, they will spend more money.
If they spend more money, you want to treat them better.
If you treat them better, they will come back and the circle starts
again.
The Classic Dyad
Permission Marketing
The thought behind permission marketing is that customers have
scarce time and do not want to be disturbed unnecessarily.
Therefore, customers are asked for permission, something that an
interactive relationship makes possible.
Tag lines like, No advertising, thank you! or No junk mail! can be
conveyed.
Data Mining
- Data mining is a systematic process which may use advanced
models and techniques to store and analyze patterns of customer
and their purchasing behavior and develops hypotheses and
suggestions for strategies.
- Data mining offers an opportunity to see structures and links that
might be converted into implementable knowledge to better
customize and target its messages, goods and services, boost its
competitive power and increase customer retention.
The Classic Dyad Overcoming
Shortcomings
Up-selling
- Up-selling means that selling more of the same kind of product to a
customer usually buys.
- For example, customer is having a meal at a restaurant with a glass of
cola. Now, selling more cola to that customer will be called up-selling.
Cross-selling
- Cross selling means that selling more to a particular customer of different
relevant product types s/he is currently buying.
- For instance, selling sim card with the sell of a smart phone or selling
home insurance who already have car insurance with the insurance
company.
The Classic Dyad Overcoming
Shortcomings
A cornerstone of the market economy is the presence
of several suppliers in each market. Competition
arises, consisting of a triad of players:
- The customer
- The customers present supplier
- Competing suppliers
The Classic Triad
Pendant of Marketing Equilibrium
Competition
Collaboration
Regulations/Institutions
- Competition is desirable whenever it is efficient.
- The focus on collaboration is the most important contribution from RM, with an
impact on both marketing management and economics and that collaboration
in a market economy needs to be treated with same attention and respect as
competition.
- There is no known market that has functioned without regulations and
institutions, nor one that functions without competition and collaboration.
Marketing
Equilibrium
Regulations & Institutions
The Classic Triad Marketing
Equilibrium
Deregulation
Deregulation is the act or process of removing or reducing state regulations.
It does not mean abandoning all regulations rather a search for more
adequate laws and institutions which are supportive to constructive forces of
society and hold back destructive forces.
Reregulation
When new or additional regulations are enacted after an industry or sector is
deregulated, this is referred to as reregulation. The term can also refer to the
process of reversing deregulation in regions where deregulation turns out to
be impractical or unmanageable.
Since 1980s, this has been a leading strategy around the world.
The Classic Triad
Privatization
Privatization is the process of transferring ownership of
a business, enterprise, agency, public service or public property
from the public sector to the private sector.
Hypercompetition
Competition may become hypercompetition in unregulated
markets which can lead to severe price competition, streams of
bankruptcies, impaired quality and sell of dangerous products.
The Classic Triad
There are necessary elements of the market economy that
competition and the free market forces do not master.
They can be worded in two paradoxes:
1. Regulations are needed to secure that free competition
will not be curbed.
2. The goal of competition is to get rid of competition.
- So, regulations are not restrictions only guidelines for
doing things.
The Classic Triad Need for
Regulations
Physical distribution is the most obvious network in marketing; it
constitutes a classic network. The common designations today are:
- Supply chain
- Channel management
- Logistics
Distribution networks are numerous, complex and interwoven.
- Sometimes they are efficient and fast, providing the shortest route
to market and sometimes they are slow, inefficient and replete with
detours and broken chains.
The Classic Network
Domain of distribution channel:
- Physical distribution of consumer goods
- Distribution of industrial goods
- Distribution of services and information
- Distribution of people and even living organisms
The Classic Network
Network Marketing
- Network marketing is a system for marketing goods and
services which is usually based on contacts with friends and
friends of friends.
Multi-level Marketing (MLM)
- MLM offers a network of collaborating one-man firms who
support each other.
- You are in business for yourself, but not by yourself.
The Classic Network
Logistics
- The concept of logistics concerns the flow of goods, all the way
from the extraction of raw material, manufacturing of components
and assembly, to finished goods in the store and their arrival at
households.
- Logistics requires a holistic understanding of a business operation.
It is a matter of making processes more effective, so that
manufacturing and delivery are performed straighter and faster
and on time, keeping costs and capital employed down.
The Classic Network
The Hub-and-Spoke System
- First introduced by FedEx and DHL in 1970
- Enables company to carry smaller packages from different smaller
locations to other smaller locations via a hub.
- Hubs are the centers for connections around the world
The Classic Network
Market Relationships - Special
Special market relationships
Full-time marketers and part-time
marketers
Customer and service provider
Many-headed customer and many-
headed supplier
Relationship to the customer's
customer
Close versus distant relationship
Dissatisfied customer

Monopoly relationship: customer or
supplier as prisoner
Customer as "member
Electronic relationship
Parasocial relationships, with
symbols and objects
Noncommercial relationship
The green relationship
The law-based relationship
The criminal network
Relationship via FTMs and PTMs
The marketing function is spread throughout the firm, and the
marketing and sales department may even play a limited role in the
total marketing effort.
- Perhaps there is not even a marketing and sales department.
Instead, each and everyone is involved in marketing.
We can identify two types of marketers.
- Full-time marketers and part-time marketers.
- These are not only found within the company, but also in its
environment
Full-time marketers (FTMs)
- Full-time marketers and sales people are those who are hired for
working marketing and sales tasks.
- FTMs are found in the marketing and sales departments and
among external providers of marketing services.
Part-time marketers (PTMs)
- Part-time marketers and sales people are all others in the company
and those in its environment that influences the companys
marketing.
Relationship via FTMs and PTMs
External services: They contribute to differentiation and uniqueness, and
ultimately competitiveness. Mainly focused on
o Before sales service
o After sales service
Internal services: Supportive to marketing. Like secretarial service,
computer services, legal services, canteen & health service etc
Besides customers, suppliers, investors, media and other stakeholders and
opinion leaders are also considered as influencing PTMs component.
PTMs Function Manufacturing
Organization
Service provider organizations such as management
consultants, CPAs (certified public accountants), lawyer and
architects etc
In small professional firms, partners and senior professionals
are the PTMs and
In large professional services firm, there is usually a
specialized marketing and sales department including
experienced professionals.
PTMs Function Service Organization
The Service Encounter
The interaction between customers and provider is referred to as the
service encounter, or in popular management jargon moment of
truth. The provider and customer create value together.
This encounter becomes increasingly more popular for all types of
enterprises, both those who are habitually called manufacturing
companies and those who are services companies
The following interactive relation can be defined in the service encounter, as seen
from a customer perspective:
Interaction between providers contact personnel (front line) and customer: Contact
between Doctor & a patient, Ad agencys account manager & marketing manager.
Customer-to-customer interaction (C-to-C): Dance club, celebration of national
achievement in sports.
Interaction between service cape, between the customer and the providers products
and physical environment: Super store (Location of products, lay out of super store,
convenience of parking).
Interaction between the customers and the providers service system: Interaction
between human being and systems like between customer and banking system
(ATM or Internet banking). The system should be user friendly.
The Service Encounter
The Relationship to Dissatisfied
Customer
When customers are dissatisfied they have the following options:
Exit: The customers leave for a competitor, or stop buying the
goods or services temporarily or permanently.
Voice: The customers speak their mind and demand correction
(spreads negative word of mouth).
Loyalty: The customers remain loyal for lack of alternative
suppliers or prohibitive switching costs, ideological reasons etc.
All these options are used by customers.
Recovery is more important than settling a claim, it is the
restoration and strengthening of a long term relationship.
Complain management is becoming a discipline of its own.
A positive way of dealing with the errors must be designed into
the customer relationship.
In USA and Japan, customer delight is not only meeting
customer expectations but also giving a little extra.
Immediate solution to the problem of a customer can make
them satisfied and loyal to the product or service of the
organization.
The Relationship to Dissatisfied
Customer
Many-Headed Relationship
In B-to-B including marketing via Whole seller and Retailers both
the Customer and the Supplier can be many-headed.
Companies are made up of individuals, and relationships between
companies have to be tied to people in order to become tangible
Supplier Customer








Relationship between the many-headed supplier and the many-headed customers
CEO
Marketing & Sales dept
R & D
Design dept
Factories
Installation dept
Finance/Accounts
Legal dept
CEO
Purchasing dept
Design dept
Planning dept
Quality inspection
Installation dept
Finance/Accounts
In many-headed supplier and many-headed customer relationship,
people representing a variety of functions and expertise on both
sides participate in marketing and purchasing process.
For instance, Ericsson, the global market leader in cellular
technology, supply telephone system and switches to the major
telecom operators around the globe.
Many-Headed Relationship
Several employees are involved both from the supplier and buyer side. The
following stages for such relationships have been discerned:
Establishing Trust and Credibility:
For the new customers, the supplier must start by establishing an initial
contact with the customer and create credibility.
Then professional and personal relationship need to be established with
key personnel in the buying organization.
Competitive Bidding:
During this stage, the tender is made and presented to the customer. The
idea behind tendering is to let the best man win.
Illegal means through facilitating payments may be needed in some cases
depending on the ethical condition. Mega relationships with lobbying
activities can play a role, and so the formation of alliances.
Many-Headed Relationship
Evaluation & Contact:
Usually the law demand that evaluation of tenders must be made
without contact between the bidders and buyers.
Contact may be preceded by a letter of intent.
Planning, engineering and market adaptation:
This stage embraces planning the execution of the contact and
fitting the equipment to an individual customers specific
technical requirement. On going RM.
Production:
Quality inspection by the buyer and taking proactive activities by
the supplier to ensure on time delivery.
Many-Headed Relationship
Delivery and Installation:
Collaboration between the installation team and the customers
employees is important in this stage.
After sales:
In this stage supplier must make customer satisfied. This stage is
an opportunity for further sale.
Conclusion and Evaluation:
It is desirable to reflect over a completed deal and learn for the
future, both what was good and bad.

Should a supplier who sells different products use different
salespeople for these, even if those employees who do the purchasing
in the customer organization are the same?
Many-Headed Relationship
Relationship to Customers Customer
In B-to-B customers are using received deliveries as input to what
they deliver to their customers.
It can be the same product.
Can go through further manufacturing or assembly.
Can be equipment or facilitating goods and services.
In that case, the supplier can chose their mission to be helping
customers to do business with their customers.
Suppliers must then understand the customers customer.
The importance of understanding the customers customer is also
imperative when it comes to consumer goods and retailing.
Example: The supplier of super shops, Software solution.
Close vs. Distant Relationship
The ultimate objective of marketing is earning profit through providing
superior value to the customers.
To do so, marketers needs to maintain a proper value creation
chain/network with each value stick.
But the basic problem is access to customers, competitors and
others. The relationship to customers can be close or distant.
The close relationship is direct and personal.
And the distant relationship is indirect and impersonal with market
survey reports as intermediaries.
Proximity: Supplier
Customer

Distance: Supplier
Customer

The interaction with customers is the single most important
source of marketing knowledge and the cry for more market
research is often a sign of failure.
Market research
Close vs. Distant Relationship
Monopoly Relationship Customer or Supplier as
Prisoners
Economic theory talks about MONOPOLY when there is only one supplier,
MONOPSONY when there is only one customer.
Monopoly is an accepted jargon for power and power misuse. It is an
unbalanced relationship, where one party has unlimited, or almost
unlimited control over the other party.
Example:
Before introducing mobile phone in Bangladesh, the activities of BTTB
was more or less monopolistic relationship with the customers.
Customer as Member
Sometime the supplier enlists some of the customers as their
member and provide them best service than the others.
Membership is used commercially to reinforce customers loyalty
and to promote long term relationship.
If you buy a Harley-Davidson, the king of motor cycle, you become
a member of Harley Owners Group (HOG), with 360,000 members
spread around the globe in 1000 local chapters.
The club offers insurance, emergency assistance, contests,
magazines, and most important the opportunity to make friends
and hit the road with other H.
Green Relationship
The green relationship concerns the companys way of handling
environment and health issues in its offerings and relationship that
are created to specific individuals and communities of individuals.
The green relationship in a broader sense in ethics and good
citizenship, which may partly be perceived as contrary to
commercial interests.
Cause related marketing has, however, become a term for doing
good in society, but is primarily part of sponsorship and public
relation with the purpose of boosting the public image.