Relationship Marketing

Relationship marketing is recommended as a strategy to overcome service intangibility (Berry 1983) and may be appropriate for "credence" services, that is, services that are difficult for customers to evaluate even after purchase and use (Zeithaml 1981). Many professional and financial counseling services are in this category. The buyer may have a relationship with a firm itself and/or a specific contact person, but personal relationships are believed to result in greater commitment (Liechty and Churchill 1979). Some economists say relationship marketing creates inefficiencies because buyers may indeed feel satisfied, but for the wrong reasons. Buyers become enamored with the interactive aspects of the service (Gronroos 1986) and fail to analyze price "rationally" in relation to an objective standard of core service (technical) quality. When relationship marketing is the pre-dominant strategy in an industry, economists contend that price competition is reduced. We compare two views of relationship marketing (Crosby and Stephens, 1987).

Relationship marketing is a new-old concept. The idea of a business earning the customers' favor and loyalty by satisfying their wants and needs was not unknown to the earliest merchants. Until recently, marketing's focus was acquiring customers. Formally marketing to existing customers to secure their loyalty was not a top priority of most businesses nor a research interest of marketing academics. As Schneider wrote in 1980: phrase "relationship marketing" appeared in the services marketing literature for the first time in a 1983 paper by Berry (Gronroos 1994). Berry defined relationship marketing as

"attracting, maintaining and--in multi-service organizations--enhancing customer relationships" ...

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...defection rate declines another 5 percent, the duration of the relationship doubles again and profits increase 75 percent--from $300 to $525 (Reichheld and Sasser 1990).

2.4 Benefits to the Customer

Relationship marketing benefits the customer as well as the firm. For continuously or periodically delivered services that are personally important, variable in quality, and/or complex, many customers will desire to be "relationship customers." High-involvement services also hold relationship appeal to customers. Medical, banking, insurance, and hairstyling services illustrate some or all of the significant characteristics--importance, variability, complexity, and involvement--that would cause many customers to desire continuity with the same provider, a proactive service attitude, and customized service delivery. All are potential benefits of relationship marketing.