Relationship Marketing: Across the Retail Spectrum

نویسنده

  • John Egan
چکیده

Retailing, at first sight, appears to be an industry where relational strategies can be exploited. Despite this authors disagree about whether Relationship Marketing is likely to be beneficial across the wide spectrum of retailing activities. This paper seeks to investigate whether a claim for universality can be made or, if not, clarify those ‘conditions’ which most strongly support, or otherwise, the introduction of relational strategies. Introduction Relationship Marketing (RM) is probably the major trend in marketing (Mattsson 1997). It is a leading topic of discussion at academic conferences, at dedicated practitioner conferences, in academic journals (RM editions of major publications as well as dedicated RM journals), and texts by major marketing writers (e.g. Christopher et al 1994, Buttle 1996). Despite this explosion of interest the RM literature reveals little consistency in how researchers define RM, and even less how practitioners apply the concept (Barnes & Howlett 1998). Indeed much RM theory appears to have very little in the way of empirical observation of relationships over time to support it (Mattsson 1997) and it appears many service marketers have accepted the concept with little examination of the basis for genuine, quality, relationships (Barnes & Howlett 1998). Certainly much of the research to date appears highly selective (e.g. Reichheld 1996) and all too often designed to support a particular, usually consultant based, position. Indeed cynics have noted that consultancies peddling RM solutions are growing at a rate of 30-40 per cent per year whereas their clients are still growing at 3-4 per cent (Mitchell 1997). Even RM advocates have expressed doubts. Gummesson (1996) has summed up research efforts into the concept as a ‘theory-less stack of fragmented philosophies and observations’ not appearing to converge in the direction of an emerging theory. Despite these limitations the perceived wisdom of many marketers is to call for the application of RM across a wide range of industries. Indeed it seems to be widely assumed by scholars and practitioners alike that a relationship can be formed with any customer in any situation (Barnes & Howlett 1998). In consumer marketing it is in the broad area of retailing that has attracted most obvious interest in the development of relational strategies. Indeed many authors are now relating the widespread use of store loyalty cards as being evidence of the take up of relationship marketing in this field (Pressey & Mathews 1998). It is perhaps unsurprising that retailers should be interested in RM strategy development. The more intimate nature of the industry to the ultimate consumer relative to businesses further back in the distribution chain intuitively suggests that the closer the retailer can get to the customer the better they can provide the service that the customer seeks. The ‘moment of truth’ in consumer goods and services marketing is seen as that point when the consuming public comes face-to-face with the point of supply and it is the retailer who, most often, manages this interaction and who, historically, has gone beyond the mere ‘service encounter’(Strandvik & Storbacka 1996), 1 The Burroughs, London NW4 4BT, U.K. Tel: 0181 362 6836, E.mail: [email protected] Reichheld (1996) is one author who, very strongly, exhorts the benefits of customer loyalty (a perceived outcome of relational strategies) in retailing. Although prefacing his comments with a warning that the arguments are based ‘mostly on implication’ he claims that the ‘operating advantages of customer loyalty are particularly strong in retailing and distribution’. He cites benefits such as a more streamlined inventory, minimised mark-downs and improved capacity forecasting as beneficial outcomes of these strategies. Closer examination of the examples used, however, suggests high selectivity in the choices of retail categories (Payne & Frow 1997) which may suggest a weakness in the universality argument. Other authors take an alternative view on the general application of relational strategies across the retail spectrum. They argue that RM strategies cannot be applied universally and that the conditions necessary for relationship marketing are unlikely to be met by most high street services, particularly in fast moving consumer goods (FMCG) retailing (Pressey & Mathews 1998). It is evident, therefore, that differences exist regarding the merits of RM strategies in at least part of the retail sector. This paper seeks to clarify whether a division exists and, if so, which retail ‘conditions’ most strongly support the introduction of relational strategies and which do not. Relationship Economics The objective behind most commercial activity must, at least ultimately, be seen as sustainable profitability. Logic suggests that, providing the profitability of relational strategies (over whatever time horizon most practically can be used) outweigh those of traditional transactional strategies then a strong argument exists for their introduction. Much of the growth in interest in RM has been driven by so-called ‘relationship economics’ (Barnes & Howlett 1998). RM, it is suggested, is not altruistic but based on two profit driven arguments (Buttle 1996). These can be described, perhaps over simply, as the complimentary views that existing customers are less expensive to retain than to recruit and that securing customers’ loyalty over time produces superior profits. Advocates (e.g. Reichheld 1996) suggest that retention is best achieved through the development of supplier/customer relationships which promotes customer satisfaction (itself restricting defections) and that savings can be delivered by increasing customer retention and reduced transaction costs (Tynan 1997, Gummesson 1997). Although the arguments are appealing there appears to be several inconsistencies with the ‘retention economics’ perspective when applied generally across the retail sector. Acquisition/Retention costs The industries chosen most frequently as examples of the successful working of relational strategies (e.g. banks, credit card and insurance companies) appear all to have high ‘front end’ acquisition costs inherent in their make-up. Most important among these are the high costs of personal selling and the direct and indirect costs of detailed information gathering. Logic suggests that, in any industry where the greater part of expenses are ‘up-front’, benefits accrue from ‘writing off’ these costs over an extended period of time. In these instances the longer the relationship the lower the costs relative to income. At the other end of the retail spectrum (e.g. FMCG retailing) the cost of customer acquisition is marginal as intense personal selling and/or detailed information gathering are not necessary to make an individual sale. Although it may be argued that FMCG retailers will invest considerable resources in research into store location and customer profile these are ‘sunken costs’ which should not form part of the acquisition cost equation. Indeed the FMCG consumer would only seem to require one or more of a limited number of drivers, such as location, perceived service quality, price competitiveness, product range and quality and/or promotional offerings, to stimulate a sale. It can be argued that these are the same factors that influence the customer retention process. Similarly advertising and other marketing communication costs are commonly included in the FMCG customer acquisition calculations but are not enough to justify the ‘up front’ cost argument. High communication costs attributed to customer acquisition fail to acknowledge the part played by those same messages in the retention process. As has been noted (Barnard & Ehrenberg 1997) advertising may often work defensively to protect the existing customer base, rather than aggressively bringing in new buyers. If drivers promoting the sale of goods for potential customers are similar or the same as those for existing clients then the cost of acquisition must nearly equal the cost of retention. Indeed if the retailer introduces schemes which reward repeat buying over and above the single purchase (the basis of most schemes) then the cost of retention may, potentially, exceed the cost of acquisition in the FMCG sector. The economics of costly relational techniques must, in circumstances where acquisition/retention cost ratios are small, be closely scrutinised. This is particularly evident in the case of many costly loyalty schemes which are, perhaps ironically, most prevalent in those sectors where validity is most highly questionable (e.g. FMCG retailing). As the 1998 Mintel ‘Customer Loyalty in Retailing’ research report suggests customers are still getting more out of loyalty schemes that retailers (Khan 1998). Incentives to retention in these schemes are costs which (if profitability is to be maintained) leads ultimately to higher prices. In such markets differentials may occur in costs between the loyalty incentivisors and the lower priced competition (Palmer & Beggs 1997). The phenomenon is not new. The history of British Supermarket retailing is peppered by swings between ‘price wars’ and ‘differential advantage’ strategies. What evidence exists suggests that industries where recognisable high ‘front end’ costs such as personal selling and information gathering are involved these are ‘drivers’ to relational strategies which promote customer retention. Where acquisition costs are low and/or where the real differences between acquisition and retention costs are marginal the introduction of costly relational strategies may become a burden. Long Term Benefits ‘Retention economics’ is also promoted as a time-based form of competitive advantage through the suggestion that long-term term relationships bring long-term advantages (Murphy 1997). Reichheld (1996) lists a number of accumulating benefits which, he considers, contribute to revenue and profit growth, although the highly optimistic assumptions made suggests this analysis is of doubtful universal appeal. The model presented assumes revenue growth over time. It is possible to hypothesise that this may be the case in industries with a low turnover of customers and high exit barriers as income is more likely to increase rather than decrease. In businesses with a high turnover of customers and low exit barriers, however, it may be suggested that increased revenue from one customer will, most probably, be largely negated by those customers whose purchases decline or even cease over the same period. The cost savings predicted by the Reichheld model are equally industry dependent. As has been noted the ability to amortise costs over a period brings supplier benefits. A certain naiveté as to other opportunities available in the market and/or barriers to exit may help in this process. In the FMCG sector, however, the end of the twentieth century is an age where customers are less naive, more professional and more cynical (Lannon 1993). In this market the customer may, over time, learn to manipulate the supplier to his/her own ends ultimately leading to increased, not decreased, costs. Income from referrals has always been an objective of retailers. To depend on this for revenue growth, however, as suggested by the model, assumes that competitors are inactive and/or that the market is growing at a reasonably substantial rate. Neither situation currently exists in the FMCG sector. Lastly the model predicts the potential of ‘price premiums’ applicable to purchases by longterm customers. This may again be determined by the naiveté of the consumer and the level of exit barriers. In FMCG markets this disregards the fact that widespread use of promotional schemes are helping create a ‘generation of increasingly promotion literate customers’ who become ‘adept at leaping from one retailer to another’ to take advantage of the best offers (Harlow 1997). Hardly a scenario where the application of price premiums are rewarded. In industries with low exit barriers even normally loyal customers are likely to be prompted into action by such a strategy. Sustainable Advantage Another factor in the long-term relationship calculation is whether any competitive advantage, gained through the introduction of relational strategies, can last long enough to recoup investment. With regard to financial services the package is most often designed with barriers and costs which discourage customers from defection. The advantage gained through the initial attractiveness of the offering is, therefore, sustained regardless of what products or services are introduced in the interim period. At the FMCG end of the spectrum, however, the ability to build barriers to exit are limited. Most FMCG retailers depend on some form of customer retention programme offering ‘added value’ to ‘loyal’ customers to try to build longterm relationships. The problem is that the potential always exists for competitors to replicate these relational programmes, in many cases, relatively easily. Loyalty programmes, in particular, tend to be very easily copied (Treacy & Weirsema 1993) and doubt must be expressed whether they can possibly give companies long term advantage. It may be hypothesised that, where differentiated advantage is perceived to be low, or where a programme can be easily replicated (as in much FMCG retailing) the ability of relational strategies to develop lasting competitive advantage is minimal. If, over time, the customer perceives the only difference between alternative companies is the size of the bribe offered to them they will become increasingly promiscuous seeking out the highest bribe available as the only satisfaction they receive from the exchange (Tynan 1997). It may be further hypothesised that the greater the ability to replicate differential advantage, the greater the need to constantly develop and refine RM strategies to keep ‘ahead of the field’. The expense involved in such cost escalating strategies may, ultimately, lead to a divide between relational suppliers and cost competitive ones and the consequential division of an industry between RM companies and their more ‘transactional’ competitors. The assault on the airline industry (whose introduction of loyalty programmes preceded most retailers) by cut price, ‘no frills’ airlines such as Easy Jet and Ryan Air and the introduction by British Airways of GO, may be an examples of the development of this phenomenon in that industry. In FMCG retailing in the UK there are a number of cut-price retailers (e.g. Netto) waiting in the wings for the opportunity to make in-roads into the market.. Risk, Salience and Emotion Examples quoted of companies who appear to benefit from relational strategies are invariably those involving ‘high risk purchases’ either with a large single monetary outlay (e.g. vehicle purchases) or with payments over an extended period (e.g. financial services). These latter extended payments are often associated with high opportunity or actual costs as a possible consequence of incorrect decision-making at the initial sale. In the case of multi-payments over time the observation has been made that, in developed relationships, efforts are often made by suppliers to ‘lock-in’ customers both financially (through the loss resulting from dissolving the relationship) or by psychological means (Pressey & Mathews 1998). The examples quoted will also, generally, be highly salient to the consumer either representing major and current status symbols or as affecting status or quality of life at some point in the future (e.g. Pensions). In situations characterised by high risk and high salience, the customer may enter the service encounter with certain specific expectations associated with rather intense emotions (Cumby & Barnes 1998) and may be seeking specific reassurance and reduction of cognitive dissonance. These situations appear to benefit from closer ties and frequent communication associated with RM strategies and tactics. At the other end of the retail spectrum are those products and services that may be defined both as low (actual or opportunity) cost and decidedly low risk. Thus FMCG retailers and repetitive services (e.g. laundry services) do not generate the emotional intensity of major purchases largely because of their low value and repetitive nature. There are, however, some products and services which, seemingly, exert emotions out of proportion to their value. These tend to be highly personalised and usually associated with self-esteem. These categories include products such as clothing and services such as hair dressers or beauticians. With most consumers these personal goods or services involve a trade off. If they are an important emotional driver to a customer then relational strategies may help secure that customer’s patronage. Thus the introduction of ‘personal shoppers’, personal trainers or expert stylists, at an increased cost to the consumer, may be acceptable to a percentage of the population although the core cost of the product service is low. This strongly suggests that the emotion generated by particular individual consumers in the purchase may also be a major driver towards relational policies. Trust & Commitment Trust and commitment also appear to be important constituents where RM strategies are seen to be potentially successful. Trust and commitment are frequently paired in RM literature with very few authors discussing one without the other (Pressey & Mathews 1998). Trust is generally ill-defined but is often taken to mean an acceptance of vulnerability to another’s possible, but not expected, ill will or lack of good will (Blois 1997). So strong is this expectancy of trust in certain retail relationships (e.g. financial services) that it is expected to supersede normal commercial decision making. Thus when UK finance houses were seen to sell company products designed to return the institution a handsome profit (a notion encouraged by most sectors of industry) the British Government regarded it as ‘mis-selling’ and highly publicised action taken to refund customers. Commitment is again often illdefined. In RM literature it would seem to be regarded as a situation where one or other of the parties’ intention is to act and their subsequent attitude towards interacting with each other (Storbacka et al 1994). Commitment is undoubtedly connected with the notion of trust but it is less clear which, if any, assumes precedence. Whether commitment is the outcome of growing trust or whether trust develops from the decision to commit to one or a few suppliers is not immediately clear. Notionally, however, they appear inseparable in the relationship marketing debate. Trust and commitment are invariably associated with a pre-requisite that the relationship is of significantly high importance to one or both parties (Morgan & Hunt 1994) for this to develop. This again implies that retailers who might benefit from relational strategies are likely to be those where the consumer and/or the supplier (but not necessarily both) regard the formation of a relationship as important. Where the supplier alone recognises the importance of a relationship (perhaps because of the size of the market or level of competition) RM policies designed to ‘lock-in’ customers over time seem a logical development. Where the customer alone sees the singular importance of a relationship the supplier may use this desire to attract customers through the development of strategies perceived by the customer as fulfilling this need. This suggests that, whatever the industry, it is important to build trust and commitment if the establishment of a relationship is the end goal (Pressey & Mathews 1998). Equally it may be hypothesised that if trust and commitment is generally a pre-requisite to a sale then relationship building is an important step in achieving this. At the more transactional end of the retail spectrum trust may be seen to be important in that the consumer relies on the brand promises of the retailer and/or their suppliers to produce safe, reliable and ‘value for money’ products and services. Indeed the breaking of this trust may be seen to be a potential dis-satisfier and a reason for defection. Commitment, however, rarely if ever appears to exist. In the FMCG sector the consumer has no reason to commit themselves to one or a few suppliers because of the availability of supply in a largely undifferentiated market. Exit barriers are, therefore, small and the psychological costs nearly non-existent. At this end of the retail spectrum seduction is the favoured option (Tynan 1997). The risk is that promiscuous customers will be attracted by the best deal with little regard for who supplies it. Even customer satisfaction, being a relative term, will exert little influence or generate commitment. It can always be provided elsewhere in a largely undifferentiated market although inertia may prevent the consumer actively searching for these alternatives. As there is no need to commit oneself either to a brand or to a supplier consumers frequently develop a ‘portfolio of brands’ (Barnard & Ehrenberg 1997) including branded retailers. If the requirement for the successful application of RM is both trust and commitment and not just one or the other (Morgan & Hunt 1994) then FMCG retailing, in particular, fails to fulfil this criteria. Customer Satisfaction Satisfaction is regularly suggested as an outcome of relational strategies and a prerequisite for loyalty and retention. The view that ‘customer satisfaction is the key to securing customer loyalty’ (Reichheld 1996) is, however, far from a fully robust philosophy. Satisfaction does not always result in retention and, it is equally apparent, dissatisfaction does not necessarily result in defection (Buttle 1997). Where consumer purchases create high emotion it may be hypothesised that they will generally make some initial effort to ‘shop around’. Where this emotion is low the drive to investigate other sources of supply is much less. Any model, therefore, needs to differentiate between true vendor loyalty and simple repeat purchase behaviour (Blois 1997) or indeed inertia (Cumby & Barnes 1998) both of which are invariably missing from the majority of consumer studies (e.g. Hallowell 1996). Inherent satisfaction may be the basis of one form of loyalty, particularly where the consumer has exerted some effort in establishing the best deal, but other situational drivers (such as time and opportunity costs) may result in ‘default loyalty’ when this effort is not required and satisfaction, therefore, plays little or no part. Research by East (1997), for example, notes that convenience of location may be a far stronger motivator in FMCG retailing than supermarket loyalty schemes. Mintel’s (1996) earlier research came to similar conclusions. These customers are ‘hostages’ (Jones & Sasser 1995) to the effect of other, more potent, forces. In FMCG retailing in particular strategies designed to encourage simple repeat behaviour or to minimise disruption of consumer inertia may be considerably more beneficial than costly, interactive, relational strategies. In industries with lower or more complex comparability a different need exists. Continual reassurance and frequent comparison may be required to ensure customers remain relatively satisfied. Conclusion It is incumbent on retailers to ask the question whether they and/or consumers perceive benefits from closer relationships in their particular form of commercial transactions. In business-to-business markets there is somewhat more clarity in that relationships between individuals are explicitly recognised by both parties and this recognition may be extended to those retail businesses where similar recognition is perceived as justified by either or both parties. In FMCG consumer markets, however, this notion of relational benefits seems only to exist in the mind of the retailer. The term ‘relationship’ is often used by practitioners in this market to underpin a supplier’s marketing activities without the customer necessarily being conscious they are even participating (Blois 1997). If the sine qua non of a relationship is communication (Buttle 1997) and if situations exist where consumers are not even aware they are participating then can this be called a relationship? Most FMCG consumers would be amused at any suggestion that they have a relationship with their local supermarket but may be willing to take advantage of rewards offered to them under whatever guise. Whereas 93% of FMCG shoppers believe stores offer loyalty cards in an attempt to attract and hold their custom only 13% say it causes them to spend more money (Khan 1998). There appears to be a gulf between the intention and the reality of these programmes and consumers have been quick to take advantage. At the other end of the retail ‘spectrum’ consumers may see the need for a trusting and committed relationship and that this benefits them in some way. This ‘consumer recognition’ factor may be the prime driver to a relational approach. A relationship then can only be said to truly exist if and when the customer says there is one (Barnes 1997) and not when the company marketing department suggests that it may be beneficial to construct one. Where the emotional attachment is low, because of value or lack of risk, the benefits of developing relationships is minimal. Where the consumer recognises the need for trust and the value of commitment, the benefits of developing and maintaining relationships comes to the fore. Factors Promoting Relational Strategies Factors Acting Against Use of Relational Strategies High acquisition costs relative to retention costs Marginal Difference Between Acquisition & Retention Costs High Exit Barriers Low Exit Barriers High Consumer Naiveté Smart, Cynical Consumers Competitive Advantage Sustainable Competitive Advantage Unsustainable Buoyant/expanding Market Saturated Market High Risk & High Salience Low Risk & Low Salience High Emotion Low Emotion Requirement for Trust & Commitment Requirement for Trust Only Satisfaction beneficial to retention Repeat behaviour strategy beneficial

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تاریخ انتشار 2002