unit 4 - chapter 3

Question 1

what is the relationship between relationship marketing vs. transaction marketing?

Answer 1

• Relationship marketing (RM) developed through the 1990s growth of the services sector, which required interaction between suppliers and their customers
• an increasing recognition that the methods of B2B marketing, such as customer account management, were relevant to consumer markets.
• improvements in technology and the growth in direct marketing enabled organisations to communicate more effectively with their customers.
• focuses on keeping customers and developing the benefits of a customer relationship approach, such as repeat business. Internal marketing recognises the crucial role of employees in achieving customer satisfaction

Question 2

what are the structural and process implications of the marketing mix?

Answer 2

the marketing department – a discrete organisational department and function . marketing planning – a structured approach based on audits, identified objectives, selected strategies, implementation and evaluation . market segmentation – identification of target groups of consumers with similar sets of needs . performance measurement – an essential part of the feedback loop, drawing on market research and measuring success in terms of market share.

Question 3

what are the criticisms of transaction approach?

Answer 3

It assumes the customer is passive – the customer is somebody to whom something is done. . It is not driven by customer interests. . It does not allow for interactions between customer and supplier. . It implies that the power is with the supplier – that it is a sellers’ market. . It places responsibility for marketing with the marketing department rather than encouraging all staff to think about customers in marketing terms.

Question 4

what is the definition of relationship marketing by Gronross?

Answer 4

marketing is to establish, maintain, and enhance (usually but not necessarily long term) relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met. This is achieved by a mutual exchange and fulfilment of promises’ (Grönroos, 1990, p. 138) This approach views the relationship between supplier and customer as a network within which various interactions take place and where exchanges and adaptations occur. A main objective of relationship marketing is to move customers up the ‘loyalty ladder’, from a ‘prospect’ to a ‘customer’ and then to an ‘advocate’ (see Figure 3.1). Further development could lead to considering customers as partners. The progress of the relationship along this ladder is achieved by integrating the three key concepts of marketing – that is, the gathering of information on customers; the identification of segments of users with similar needs and the delivery of quality and customer service.

Question 5

what are the benefits of a relationship marketing approach for the supplier?

Answer 5

1 Marketing based on transactions relies heavily on the features of the product or service to achieve competitive advantage and to attract customers. This leaves the organisation vulnerable to the introduction of competitive products that match these features. When this happens it is likely that price (and profitability) will fall as businesses fight for market share. Conversely, with a relationship marketing approach, both parties make investments in the relationship so as to gain mutual benefits. Consequently, switching costs are higher since these involve losing the added value (including trust) that has been built up ver time, and customers are less likely to switch. 2 As indicated in the relationship marketing/loyalty ‘ladder’, loyal customers will act as advocates for the supplier, thus attracting new customers. A satisfied customer can be a much more effective and credible salesperson and reputation builder than the supplier’s own communications. 3 An emphasis on customer service, quality and retention will further enhance the reputation of the supplier. 4 The supplier is assured of future repeat business, which will aid with resource planning and forecasting, and it therefore reduces uncertainty and risk. 5 The cost/benefit ratio of maintaining a relationship should be lower than that involved in attracting new customers and establishing new relationships. Therefore marketing productivity will be higher. 6 Other benefits directly result from the building of trust within relationships (see Figure 3.2). These include the potential for greater cooperation and constructive conflict, which can benefit both parties

Question 6

what are the benefits of a relationship marketing approach For the buyer?

Answer 6

1 The customer benefits from a higher level of customer service and quality. Figure 3.2 also illustrates how buyers can be more certain that their requirements will be met and their buying risks will be cut as a consequence. Additionally, if mistakes are made, they are assured that any problems will be resolved. 2 Loyalty and therefore repeat custom benefits customers since it reduces the choices available to them. This increases efficiency in their purchasing decision making: by having trust in a particular supplier, they can save the time and money that is incurred in comparing and selecting suppliers. 3 A customer focus also creates the possibility of treating customers as individuals. Data processing allows appropriate information to be gathered and, even in large-scale markets, information technology is increasingly enabling mass customisation to be achieved, thereby approaching the ‘market segment of one’.

Question 7

what are the reasons for the growth of relationship marketing?

Answer 7

. The emergence in Western Europe and North America of a surplus of goods and services. The economic power has therefore shifted from the producer to the consumer – it has become a buyer’s market. The growing dominance of services over goods. Not only have service businesses grown much faster than manufacturing industries, but also the service element in many goods markets has grown to the extent that it is often the determining factor in buyer decisions. The internationalisation of trade. The reduction or elimination of trade barriers has increased competition and removed the protection previously enjoyed by manufacturers and providers. The importance of quality. Customers are more discerning and their expectations of their suppliers are correspondingly more demanding. The expansion of information systems. The power to establish and utilise customer databases has transformed the way in which organisations understand and communicate with customers. The introduction of consumer protection legislation has placed responsibility for quality and safety on the shoulders of the supplier. . The success of Japanese companies in the 1970s and 1980s, with their greater emphasis on quality and their commitment to long-term relationships with both customers and suppliers, established new standards for Western organisations.

Question 8

what are the implications of a relationship marketing approach?

Answer 8

The aims are to build enduring relationships based on trust and a focus on maximising benefits and value. The supplier also benefits from a reduction in the costs involved in attracting new customers to replace those lost to competitors. In particular, there has been an increasing emphasis on CRM and loyalty programmes.

Question 9

what is CRM?

Answer 9

CRM focuses on using technology to build satisfying exchange relationships between buyers and sellers through the use of data collection at all customer-contact points (telephone, fax, online and personal/face to face). The aim of this data analysis is to understand customers’ needs better, therefore identifying: . strategies for customer retention . approaches to increasing customer satisfaction . customer problems and approaches to rectifying these . opportunities for cross-selling (that is, selling more products to the individual customer); the emphasis is therefore on ‘share of customer’ . requirements of specific target markets (even to the extent of customisation) . development of customised communications.

Question 10

what is the six markets model?

Answer 10

customer internal market: recruitment (external labour markets from which the organisation aims to recruit); supplier (the network of organisations that supply materials, products and services to which the organisation adds value); referral (customers and others such as professionals – banks, accountants – who through word of mouth supply new business) influence markets (those individuals or organisations that can influence the market environment – for example, local government agencies).

Question 11

what are cultural issues related to building trust relationships?

Answer 11

Usunier (1998, p. 107) highlights how the concept of trust (and many other commonly used business concepts, such as autonomy) may differ across cultures and the potential dangers in failing to recognise this when developing cross-cultural business relationships. He argues, from a linguistic perspective, that for the English language, trust involves remitting one’s interests into another’s hands (based on the concept of trust as ‘reliance on and confidence in the truth, worth or reliability of a person or thing’ whereas for the Japanese the orientation of trust is towards the future, a common enterprise and the sincere expectations of the parties. Additionally, cultural perspectives differ as to whether it is the relationship or the task that dominates the objectives of negotiations.

Question 12

what makes customer loyalty programmes successful?

Answer 12

o O’Brien and Jones (1995), to be successful, they should meet the following conditions. They must be targeted at the valuable customers – not all customers are equal and loyalty programmes must attract those of value to the organisation. . The value created must exceed the value of the incentives offered. In other words, programmes should not give something for nothing – they must reward customer behaviour that increases repeat purchases. . They must be designed with the long-term view. The objective is not to attract short-term customers but to build sustainable loyalty among valued customers.

Question 13

what are the limitations of a relationship marketing approach?

Answer 13

Limitations of a relationship marketing approach . The financial cost of maintaining relationships can be high. Although successful relationships should be beneficial to both parties (as outlined earlier) not all potential relationships may be financially attractive to suppliers, and they will need to analyse and segment their market based on customer relationship profitability. As a consequence, some customers may feel excluded and resentful. There may also be an ethical dimension, for example, when discriminating among customers requiring ‘essential’ financial products. . Customers may simply not want a relationship with suppliers, finding the collection and storing of database information and attempts to communicate directly with them as intrusive and inconvenient. This can potentially have a negative impact on the supplier’s image and possibly lead to switching behaviour. . Not all suppliers have the same potential for relationship marketing. As highlighted earlier, the roots of relationship marketing lie in the B2B markets and those service organisations with the potential for building long-term customer relationships. Where markets lack relationship benefits and/or other factors such as price competitiveness or convenience dominate customer decision making, then other strategies will be more appropriate.

Question 14

what issues do Dibb et al identify in terms of CRM approach?

Answer 14

Although technology drives CRM and can help companies build relationships with desirable customers, it is used too often as a cost-reduction tactic or a tool for selling, with little thought towards developing and sustaining long-term relationships. Some companies spend millions to develop CRM systems yet fail to achieve the associated benefits. These companies often see themselves as sophisticated users of technology to manage customers, but they do not view customers as ‘assets’. CRM cannot be effective, however, unless it is developed as a relationship-building tool. CRM is a process of reaching out to customers and building trust, not a technology solution for customer sales. . Perhaps because of the software and information technology associated with collecting information from consumers and responding to their desires, some critics view CRM as a form of manipulation. It is possible to use information about customers at their expense to obtain quick results: for example, charging higher prices whenever possible and using available data to maximise profits. However, using CRM to foster customer loyalty does not require collecting every conceivable piece of data from consumers or trying to sell customers products they do not want. Marketers should not try to control customers; they should try to develop relationships that derive from the trust gained over many transactions and are sustained by customers’ belief that the company genuinely desires their continued business. Trust reduces the costs associated with worrying about whether expectations will be honoured and simplifies the customers’ buying efforts in the future.

Question 15

what are the core objectives of internal marketing?

Answer 15

Berry and Parasuraman (1992) identify the core objectives of internal marketing as attracting, developing, motivating and retaining qualified employees

Question 16

why are service employees important to internal marketing?

Answer 16

Zeithaml et al. (2006), for example, highlight that service employees are important for the following reasons. the service . the organisation in the consumer’s eyes . the brand the marketers.

Question 17

what is internal marketing?

Answer 17

philosophy for managing the organisation’s human resources based on a marketing perspective (George, 1990). It focuses on creating and delivering ‘quality services’ to the external customer. Fisk et al. (1993) state that two basic ideas underlie the concept. First, everyone in the organisation has a customer, and second, that internal customers must be happy in their jobs before they can effectively serve the final customer

Question 18

what are the building blocks of an internal marketing approach?

Answer 18

All employees within an organisation are both providers and users of internal services. Even though there may be no choice of supplier, it is nevertheless important that internal service provision develops the same focus on customer needs and customer service as do external services. . Organisations that are successful in providing high levels of customer service (or product quality) achieve this by ensuring that all staff work together to achieve a common goal. This requires a clear statement and ownership of the organisation’s aims, an appreciation by all staff of how their own activities contribute to this aim and a recognition that all staff are responsible for ensuring customer satisfaction – that is, are part-time marketers as discussed in the previous section

Question 19

what is Kotler’s approach to internal marketing?

Answer 19

Kotler (1994) describes the approach as comprising three elements – external marketing (‘setting the promise’), which takes place between the company (management) and the customers; interactive marketing (‘delivering the promise’), which takes place between the employees and the customers; and internal marketing (‘enabling the promise’), which takes place between the company (management) and the employees.

Question 20

what are potential limitations of service-profit chain?

Answer 20

One particular issue is that this is a managerial model – in other words, it seeks to show how management can encourage employees to offer better service. You may have had experiences where employees have offered superior service (professionalism) despite poor HR practices. In other words, the model fails to emphasise the individual’s or team’s personal qualities and motivation. Additionally, other authors (for example, Chenet et al., 1999) have highlighted other factors, such as employee role conflict and role ambiguity, as having important impacts on customer service levels. Despite the limitations, as with most models this does provide an overview of some of the issues and should be relevant to all organisations. The model outcomes of revenue growth and profitability will, however, have to be adjusted to reflect those of the not-for-profit or social marketer.

Question 21

what are the main components of an internal marketing programme?

Answer 21

e main components of an internal marketing programme mirror those for external customers, including research to understand internal customers’ needs, expectations, preferences, etc.; segmentation and targeting of internal audiences; identification and development of relationships; creation and delivery of internal products; and developing effective communications. Grönroos (1990) distinguishes between strategic and tactical approaches to internal marketing. At a tactical level, internal marketing can include ongoing training, encouragement of formal and informal communications (such as newsletters) and internal segmentation. At a strategic level, adoption of supportive management styles, human resources policies and customer service training will be necessary. Ahmed et al. (2003) emphasise the role of leadership and senior management support as crucial to effective internal marketing.

Question 22

what is Piercy’s matrix?

Answer 22

Synergy – this is the happy customer and the happy employee situation. . Coercion – where high customer satisfaction is generated by changing the behaviour of employees through management control systems and direction. This may be an option in the short term but in the long term it will be difficult to sustain. . Alienation – low levels of satisfaction both internally and externally and therefore vulnerable to both losing customers and suffering from high staff turnover. Internal euphoria – high internal satisfaction but not translated into high customer satisfaction.

Question 23

what is segmentation and targeting in the context of internal marketing?

Answer 23

Segmentation in the internal context is the process of grouping employees with similar characteristics, such as needs, wants, tasks and attitudes. Segmentation can be based on attitude surveys, observation and management appraisals. Often employees are segmented on basic criteria such as job role or department, but other more sophisticated approaches – for example, psychographic or behavioural (discussed in Section 1.1 with respect to external customers) – may be more appropriate in terms of readiness or willingness to change or become involved in initiatives.

Question 24

examples of internal marketing programmes

Answer 24

. A supermarket launched a formal programme to improve the quality of relationships between customers and store staff. Presentations were made to staff of all levels to raise awareness of the programme and the importance of maintaining positive relations with customers. The programme was enhanced by messages to position it as a way to make the staff working environment more pleasant because customers would have fewer reasons to complain. In addition to the formal plan, ad hoc initiatives were launched gradually and management listened to staff suggestions for new ways to improve customer service levels. One such initiative encouraged staff to put forward the names of colleagues who they felt excelled in providing good service. . A water company in the midst of internal restructuring wanted to improve morale and staff commitment to the changes. Formal presentations were made at large-scale corporate dinners and information packs were available giving details of the changes and improvements to the working environment. In reality, deadlines for changes were never met, improvements were never achieved, and staff were told of forthcoming changes on a ‘need to know’ basis. The result was a lack of trust of management, who were viewed as indecisive and without concern for employees. . A UK-based market research agency adopted an approach where employees of any status or level were encouraged to give preprinted notes when they had been exceptionally impressed by another employee’s effort. These worked on a similar basis to a child receiving a gold star at school for good work. The outcome was that employees were rewarded not only for customer

Question 25

further examples of internal marketing campaigns

Answer 25

A hospital used an internal marketing approach, including a communications campaign, training, and team building to change behaviour relating to hygiene on the wards. This was considered to have significantly reduced the levels of infection among patients. . A not-for-profit local authority used a team of consultants to facilitate employees in the development and implementation of new initiatives for the reduction of CO2 emissions. Activities included cross-functional workshops, a communications campaign, a new reward system and training and development. The programme resulted in an 8 per cent reduction in carbon emissions over a six-month period

Question 26

what are the criticisms of internal marketing approach?

Answer 26

ambiguous and under-researched different understandings - some may use IM to describe how products are bought and sold within an organisation – that is, an internal market elements of an IM approach as described above are the province of HRM and that marketers should not interfere in employee relations. This view fails to recognise the positive contribution that an IM approach can bring it is about manipulating employees? formal approaches often unsuccessful many attempts limited to internal magazine

Question 27

what are the barriers to effective marketing communication?

Answer 27

Lack of understanding of the target audience by the sender Inadequate definition of required feedback Incorrect choice of medium/media Content and consistency of messages

Question 28

what are key issues for message development?

Answer 28

• the purpose of the message .- advertising appeals - establishing message credibility - adapting messages for international audiences - message pre-testing.

Question 29

what are the two main approaches to advertising appeals?

Answer 29

1. informational/rational - Belch and Belch (2009) focus on the consumer’s practical, functional or utilitarian need for the product and the benefits or reasons for owning or using a particular product or brand. rational motives include comfort, economy, convenience, health, taste, quality, dependability and efficiency. 2. emotional appeals relate to the customer’s social and/or psychological needs for purchasing or using a product. Feelings or needs used as the basis for advertising appeals include security, happiness, nostalgia, acceptance status and recognition. Often humour is involved

Question 30

what is the role of emotions in advertising appeals?

Answer 30

Kotler and Armstrong (2008) highlight that emotions can play an important role in business buying. Volvo: efficiency and ease of maintenance of their trucks, also emotional features, such as the ‘raw beauty of the truck’ and the comfort and roominess features, which ‘make drivers a lot more possessive’. Social marketing campaigns and not-for-profit organisations evoke negative emotions such as guilt and fear

Question 31

how message credibility achieved?

Answer 31

Credibility derives from the perceived expertise and motivation (and therefore trustworthiness) of the source. Credibility can be improved through identifying individuals who are respected by the target audience

Question 32

what is Integrated marketing communications

Answer 32

a concept of marketing communications planning that recognises the added value of a comprehensive plan that evaluates the strategic roles of a variety of communication disciplines – for example, general advertising, direct response, sales promotion and public relations – and combines these disciplines to provide clarity, consistency and maximum communications impact.

Question 33

which factors are relevant to development of IMC?

Answer 33

The IMC programme is developed by reference to a number of factors. . The overall marketing plan – including marketing objectives and competitor analysis . The promotional programme situation – internally, from previous experience and ability with respect to promotions, and externally, with respect to consumer behaviour analysis, segmentation, targeting and positioning decisions . Communications process analysis – the communication goals, receiver’s response processes; source, message and channel factors (discussed above). . Finally, the available budget and decisions with respect to budget allocation will input into the planning process.

Question 34

what are the six main approaches to marketing communications?

Answer 34

Advertising – advertising can be defined as ‘any paid form of nonpersonal communication about an organisation, product, service or idea by an identified sponsor’ (American Marketing Association in Belch and Belch, 2009, p. 18). Advertising involves a range of media including television, radio, newspapers, magazines and the internet. . Direct marketing – this involves direct selling, direct response advertising, telemarketing, etc., and is a rapidly growing medium in the commercial world. . Interactive/internet marketing – Fill (2002, p. 17) describes the internet as ‘a distribution channel and communications medium that enables consumers and organisations to communicate in radically different ways’. I. Sales promotion – whereas advertising is traditionally associated with long-term brand building and can reach a wide audience particularly with the growth in global media, sales promotion is more often considered a short-term approach to generating sales. Promotional tools include introductory offers, competitions and point-of-sale promotions. . Public relations/publicity – similar to advertising, publicity is a nonpersonal form of communication, but here there is no direct payment and no identifiable sponsor. Consequently, publicity may also be negative, or adverse, since the organisation, group or individual may not be able to control it. For social marketers, publicity, negative and positive, often arises in the media as a result of scientific reports dealing with issues such as childhood obesity or environmental pollution. . Personal selling – personal selling is particularly important in B2B markets where there is a need to identify, and reach, the key decisionmakers and influencers. Effective sales-force planning, including approaches to recruitment, training, motivation and remuneration, is essential.

Question 35

what issues are there around the communication mix?

Answer 35

Communication tools change over time and particularly as a result of technological developments (see the above box). . Related to the above point is a blurring of distinction between ‘promotion’ and ‘place’ (method of distribution). This is particularly true as direct marketing and subsequently internet/interactive marketing have been included as separate communications tools. It is also relevant to the personal selling element.

Question 36

what is the AIDA framework?

Answer 36

The AIDA (attention, interest, desire, action) model was originally designed to illustrate the stages that a salesperson should take the customer through and has subsequently been adopted as an explanation of how advertising works.

Question 37

what is the DAGMAR model?

Answer 37

The DAGMAR (defining advertising goals for measured advertising results) model provides communications tasks that are specific and measurable using a four-stage approach – awareness, comprehension, conviction and action.

Question 38

what is the four-stage approach for DAGMAR model?

Answer 38

awareness, comprehension, conviction and action.

Question 39

what is the hierarchy of effects model?

Answer 39

the ‘Hierarchy of effects’ model (awareness, knowledge, liking, preference, conviction and purchase) is based on the idea that advertising will guide potential consumers through a number of stages that are essential if purchase (or other required behaviour) is to result.

Question 40

what are the criticisms of sequential models

Answer 40

Behaviour can precede the other elements of attitude for some decisions. For example, an impulse (unplanned) buy of a bar of chocolate may precede an evaluation of the product characteristics. . A favourable attitude and positive intention does not necessarily result in purchase. . The length of time that consumers take to move through the stages is unclear. . How are these stages to be measured – for example, how would you measure conviction? . focus on the consumer as a passive recipient of messages rather than one who will actively engage in information search and is also likely to reject messages that are inconsistent with current attitudes. . Later approaches to communication theory have added other sources of information that have an impact on the target market. In particular, the role of opinion leaders and word-of-mouth communication from peer groups and others are important determinants of whether consumers will act on the basis of formal communications from marketers.

Question 41

what approaches are there to measuring advertising success?

Answer 41

post-tests, such as advertising recall (based on the audience’s memory as to which advertisements they have seen and what they remember about them) recognition (where the audience is asked, typically for print advertisements, what they have read). longitudinal, such as tracking studies that measure consumer awareness of advertisements over time as well as any changes in consumer attitudes and preferences. Common problems with research in this area relate to reliance on the audience’s memory and their willingness/ability to provide ‘truthful answers’; costs are also an issue.

Question 42

what are the issues with sales-force evaluation?

Answer 42

issue around link to bonuses

Question 43

what are sequential models of advertising (AIDA etc.)

Answer 43

Question 44

what are the features of service-profit chain?

Answer 44

Question 45

what are the six markets?

Answer 45

Question 46

what is the overview of trust relationships?

Answer 46