chapter iii literature review on relationship marketing & brand image
TRANSCRIPT
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CHAPTER III
LITERATURE REVIEW ON
RELATIONSHIP MARKETING &
BRAND IMAGE IN THE CONTEXT
OF THE STUDY
This chapter is a curtain raiser towards the efforts
taken for collecting, scanning, analyzing and
comprehending past studies which are relevant to the
study undertaken. Researcher presents his train of
thoughts that string together with references logically
across various broad sub-sections. The purpose of this
chapter is to unfurl the concept of relationship
marketing and associate it to the study undertaken.
Apart from this resercher would find reserarch
methodological cues for conducting this study.
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“As a merchant, you’d better have a friend in every town” – A Middle Eastern
Proverb1
3.1 Service marketing in a changing environment – a paradigm shift towards
relationship marketing
Over the past six decades, focus of marketing is directed towards an increasing
number of specific sectors. During 1950s, consumer goods marketers were
considered as most sophisticated marketers. In 1960s, considerable attention was
given to industrial marketing or business to business marketing. In the 1990s,
social marketing got impetus as many non profit and public sector organizations
started embracing marketing concepts. Considering growth and size of global
service economy, it is surprising that service marketing stated to get attention in
1980s. This history has been docketed by many academicians like Christopher M,
Payne A, Ballantyne D (1991)2, Filip Alina and LaurenŃiu-Dan Anghel (2008)
3.
Figure 3.1 – Focus of marketing through decades
1950s 1960s 1970s 1980s 1990s
Relationship
Marketing
Service
Marketing
Non Profit &
societal
marketing
Business to
business
marketing
Consumer
Marketing
Adapted from: - Christopher M, Payne A, Ballantyne D (1991)4
Rather, Egan (2004)5 sees Nordic School was originally conceived for services
marketing research in the early 1980s and was characterized by a shift in focus
from those ideas associated with traditional marketing concepts such as stressing
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the importance and relevance of services marketing and industrial marketing more
than customers goods marketing; a gradual shift away from an emphasis on goods
and services to an emphasis on customer value; the integration of the marketing
department function with other organizational functions and with general
management and less emphasis on quantitative research than qualitative research.
Again Pyne, Adrian (1993)6 has come up with seven stages through which service
organizations adopted various marketing concepts. It was found that service
organizations had moved from selling to advertising & communication. This
focus has shifted from product development to differentiation and then to
customer service & service quality. Finally service organizations understood
integrating all these elements along with relationship marketing is paramount.
Another seminal work by Gummesson, Evert (2007)7 condemned service
marketing logic on following points.
1) Goods, services and the service sector are ill-defined categories. The
definitions become fuzzy for the very reason that they represent fuzzy
phenomena. An unsolved problem that has been swept under the carpet is
the fact that goods and services always appear together.
2) What had learnt about interaction in the service encounter has been
extended and becomes applicable to all marketing situations.
Relationships, networks and interaction have been proposed at the top
level of marketing with the 4Ps and the marketing mix demoted to the next
level. The marketing mix is supplier-centric and manipulative first and
customer-centric second.
3) Complexity must be recognized in marketing theory. Network theory
offers the most constructive attitude and manageable techniques for
approaching complexity. Many-to-many is a concept for merging network
theory and marketing reality.
He ended the work with a candid statement……..
“Although we have not yet got it conceptually and consistently together I am
prepared to say that a paradigm shift is taking place in marketing”
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Adrian Palmer (2002)8 came up with following explanation for paradigm shift
towards relationship marketing based on various environmental factors: -
1) Technological Environment - Ease with which technology can now
allow large organizations to communicate with thousands, or even
millions of individual consumers. Rather we are observing search engines,
comparative web sites and intelligent buying agents reduced the
information imbalance between buyer and seller.
2) Social Environment - Mainly individuals‟ network of relationships have
shifted, away from traditional network based on the church (read spiritual
in our context) and family, towards commercially oriented organizations.
From a practical perspective, such sources provide an increasing range of
services (e.g., care for children and the elderly) which were previously
undertaken by family and church. The number of associates of an
individual has been noted to be stable across cultures and relationships
with companies provide new opportunities for individuals to gain identity
and a position within society, replacing church and family as a source of
identity.
Numerous studies have pointed to the growing role of women. Women as
buyers and sellers are likely to bring values to commercial exchanges
which are more relational than transactional.
Finally, the need for greater social responsibility has encouraged the
development of business-consumer relationships in some sectors.
3) Economic Environment - There is the familiar argument that it is more
cost effective to retain existing customers than to continually recruit new
customers to replace lapsed ones. Secondly, the quality of buyer-seller
relationships emerged as a point of sustainable competitive advantage.
Relationship marketing also arose at a time when the choice available to
consumers within most product categories increased markedly. Buyer
behaviour models are essentially concerned with understanding how
buyers simplify their choice processes in order to reduce the psychological
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cost of a decision and it has been noted that buyers‟ motivation to enter
into a relationship with a seller is essentially based on a desire to reduce
their choice set and simplify their choice process.
4) Political – Legal Environment - Governments of many western countries
have sought to outsource many services provided to consumers (e.g.,
many health and pension services) and encouraged the development of
ongoing relationships between the two parties. Sometimes this has been
enshrined in legislation, as in the case of private pension provisions where
the existence of some form of relationship is a prerequisite to advice being
given by a pension provider.
In the UK, the Financial Services Act 1986 effectively made some form of
relationship compulsory for companies selling various life long, high risk
financial services. The absence of such relationships and an over-emphasis
on transactional exchanges has led to many financial services providers
being fined by regulatory bodies for failing to establish the true needs of
their clients.
Jagdish N. Sheth, Atul Parvatiyar (2000)9, Evert Gummesson (1997)
10 sees
relationship marketing as paradigm shift in marketing. He came up with following
reasons for “Relationship Marketing as a paradigm shift”:
1. Relationship Marketing represents ubiquitous and ancient practices in
business.
2. The two major theories of marketing that have emerged during the past
between 1980 – 2000 are services marketing and the network approach to
industrial marketing. Although they represent different substantive areas,
both offer the same core variables i.e. relationships, networks and
interaction. These core variables also appear in other types of management
research.
3. Competition is usually hailed as the driver of a market economy. The
really significant contribution of Relationship Marketing is the emphasis
that it puts on collaboration. There is need collaboration between
customers and suppliers, between competitors, between firms and
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government, etc. A dynamic balance, the marketing equilibrium, includes
the three factors – of competition, collaboration and regulations
institutions.
4. Finally, society is a network of relationships in which we interact. If we
dissolve the networks of relationships, we become hermits, isolated and
self-supporting. We need no marketing. But business and marketing are
embedded in society and marketing is a subset of society. Consequently,
marketing is also part of the network of relationships, a fact that has so far
not been recognized in marketing theory.
Jagdish N. Sheth, Atul Parvatiyar (2000)11
assert that with the evolution of
Relationship Marketing, the hitherto prominent exchange paradigm of marketing
will be insufficient to explain the growing marketing phenomena of collaborative
involvement of customers in the production process. An alternate paradigm of
marketing needs to be developed that is more process oriented rather than
outcome oriented, and emphasizes value creation rather than value distribution
(see figure 3.2).
Their optimism stems from following observations:
(i) Relationship marketing has caught the fancy of scholars in many parts of
the world, including North America, Europe, Australia and Asia;
(ii) Its scope is wide enough to cover the entire spectrum of marketing‟s
sub-disciplines including channels, business-to-business marketing, services
marketing, marketing research, customer behaviour, marketing
communication, marketing strategy, international marketing and direct
marketing;
(iii) Like other sciences, marketing is an evolving discipline, and has
developed a system of extension, revision and updating its fundamental
knowledge; and
(iv) Scholars who at one time were leading proponents of the exchange
paradigm, such as Kotler (1972) 12
, and Hunt (1983) 13
, are now intrigued by
the relational aspects of marketing.
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Figure 3.2 – Paradigm shift in marketing orientation
Source: - Jagdish N. Sheth, Atul Parvatiyar (2000)14
Even criticizer of relationship marketing like Brito, Carlos (2011)15
, raised
question whether relationship marketing is old wine in a new bottle? His efforts to
answer this question led him to keep his fingers crossed.
“…. evidence was not found that one can yet speak of a new wine. But,
apparently, both researchers and practitioners are struggling to develop a
new wine. We have to look forward to seeing the next developments in this
front.”
Further this new paradigm has been differentiated from transactional or exchange
paradigm (see Table 3.1, Figure 3.2) by multiple researchers.
Though relationship Marketing is emerging as a new paradigm however;
relationship oriented marketing practices date back to the pre-Industrial era. Not
only scholars like Sheth and Parvatiyar (1995)16
but also practitioners like
Azevedo and Pomeranz (2009)17
agree that relationship marketing is not new to
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businesses. Rather the history of marketing practices and illustrates how the
advent of mass production, the emergence of middlemen, and the separation of
the producer from the consumer in the Industrial era led to a transactional focus of
marketing. Now, due to technological advances, direct marketing is staging a
comeback, leading to a relationship orientation. This fall and rise has been shown
in the figure 3.3
Table 3.1 Transactional Marketing – Relationship Marketing continuum
Transaction Marketing Relationship Marketing
Dominating
Marketing Function
Marketing Mix elements Interactive Marketing
supported by marketing
mix elements
Focus Focus on single sale Focus on customer
retention
Orientation Orientation on product /
service features
Orientation to customer
value
Time perspective Short Term Long Term
Emphasis on customer
service
Little emphasis on
customer service
High emphasis on
customer service
Customer
commitment
Limited customer
commitment
High customer
commitment
Customer contact Moderate customer contact High customer contact
Quality Responsibility Quality is primarily
concern of production /
operations functions
Quality is concern of all
Quality Dimension Quality of output is
dominating (technical
quality dimension)
Quality of interactions
(functional quality
dimension) grows in
importance and may
become dominating
Measurement of
customer satisfaction
approach
Monitoring market share
(indirect approach)
Managing the customer
base (direct approach)
Customer information
system
Ad hoc customer
satisfaction survey
Real-time customer
feedback system
Role of internal
marketing
No / Limited Substantial
Adapted from: -Payne (1995)18
; Grönroos, Christian (1991)19
; Grönroos, Christian
(1994)20
.
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Figure 3.3 – Evolution of relationship orientation
Source: -Sheth and Parvatiyar (1995) 21
Researcher can consider relationship marketing is new paradigm and different
from old exchange paradigm. As RM theory is into developing stage, next
subsection will study it in depth so that researcher can plan the study.
3.2 Defining and conceptualizing Relationship marketing for the study
Berry (1983)22
coined the term, relationship marketing, in the service marketing
literature. Relationship marketing is defined as attracting, maintaining, and
enhancing customer relationships in multi-service organizations. After that series
of definitions were proposed. Some researchers like Jackson (1983)23
; Jackson
(1985)24
; Turnbull and Wilson (1989)25
; McKenna (1991)26
; Shani and Chalasani
(1991)27;
Evans and Laskin (1994) 28
came out with definitions which can be only
applied to business to business settings.
A broad description of relationship was proposed by Gronroos (1990) 29
as
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 fulfilment of promises.
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Multiple works like Berry and Parasuraman (1991)30
; Morgan and Hunt (1994)31
;
Perrien and Ricard (1995)32
; Sheth and Parvatiyar (1995b)33
; Evert Gummesson
(1999) 34
further refined RM‟s definition from consumer markets‟ perspective.
Along with these continuing refinements, it was also observed that word
relationship do have socio - cultural aspect. Local context is very important for
RM as Sabine Flambard - Ruaud (2005)35
found Relationships are built on
cultural platforms. Relationships are referred with variety of terms in various
countries like Gaunxi in China Kankei or Toyama or Kusuri in Japan, while in
Russia it is known as Svyazi. Methods and relative importance to attributes are
different in different countries. He further found that in the strongly capitalist
economies (western) transaction creates and develops the relationship (transaction
in the centre of the exchange) whereas in less capitalist economies (Asia, Africa,
and Middle East) relationship creates and develops transaction. Relationships are
built on cultural platforms. Methods and relative importance to attributes are
different in different countries.
Table 3.2 – Western Relationship Vs Asian Relationship
Western Emerging Markets mainly china
(Asia)
Economic and impersonal involvement
Calculative Commitment
Affective and personal involvement of
the parties
Affective Commitment
Close explicit roles Implicit role. Beyond existing role
(reciprocal exchange)
Guiding principles are legality and
rules
Guiding principles and morality and
social norms
Formal relationship Informal relationship based on personal
affiliations
Compiled from: - Sabine Flambard-Ruaud (2005)36
, Relationship Marketing in
emerging economies: some lessons for the future, Vikalpa, Vol. 30, No. 3, July –
September 2005
These cultural differences paved way for various schools of thoughts like IMP
(Industrial Marketing and Purchasing) school, UK perspective Payne (1997)37
,
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Finland – Nordic school, etc. Ganguli Shirshendu, Eshghi Abdolreza, Nasr
Bechwati Nada (2009)38
.
As this study in pertaining to relationship between retail investors and distribution
intermediaries, which is of B2C nature, it will be appropriate to understand
various schools of thoughts pertaining to B2C context.
3.2.1 Overview of RM schools of thoughts for consumer markets
In this section we will briefly discuss those schools which are relevent to B2C
relationhsips.
Table 3.3 – Various RM schools of thoughts from B2C market perspective
Research
stream Main Theme Context
Important issues and
concepts
Nord
ic S
chool
Cross functional
marketing with
service quality
as basis of
differentiation
Service in the
consumer
markets (B2C)
Service Marketing, 30Rs,
Internal Marketing,
Customer Perceived
Value, interaction -
communication -
dialogue
Su
per
ior
cust
om
er
valu
e (A
nglo
-
Au
stra
lian
Ap
pro
ach
)
Delivering
customer value
based on
service
marketing and
quality
management
Customer
Perceived value
in B2C markets
Process to deliver
relationship quality, six
markets model, customer
perceived value
Cu
stom
er r
elati
on
ship
Man
agem
ent
Process of
creating value
for both
company and
customers by
integrating
different
organizational
functions
Customer
selectivity and
corporate
strategy
Formal Process Model,
One to one buyer seller
relationships, interaction
and collaboration, value
addition
Cu
stom
er
Ad
voca
cy
Customer's best
interest is the
firm's priority
Customers as
integral part of
firm and thus
firm act as
trusted advisor
for them
Resource Allocation,
Best products, complete
information, Mutual
Advocacy
Source: - Ganguli Shirshendu, Eshghi Abdolreza, Nasr Bechwati Nada (2009)39
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a) Nordic School – Nordic School focuses on consumer markets only. The
Nordic school offers a structured approach towards relationship
marketing. However, it is a limited approach in that the issues of cross
functional marketing, delivering customer value or the 30Rs revolve
around service as the sole differentiating factor in building relationships.
Prominent contributors to this school are Evert Gummesson and Christian
Grönroos.
b) Superior Customer value (Anglo Australian approch or UK approch) -
Another research stream in relationship marketing focuses on delivering
superior customer Value by integration of service marketing and quality
management techniques. This concept of relationship marketing based on
delivering superior value emphasizes customer perspective as the focal
point of relationship building activities and as such extends the Nordic
School beyond internal marketing to the six markets model. Leading
contribuors are Christopher, Crossby, Payne, and Holt.
c) Customer Relationhsip Managment - Parvatiyar and Sheth (2001)40
define
CRM as “a comprehensive strategy and process of acquiring, retaining,
and partnering with selective customers to create superior value for the
company and the customer. It involves the integration of marketing, sales,
customer service, and the supply-chain functions of the organization to
achieve greater efficiencies and effectiveness in delivering customer
value.” The essence of CRM lies in customer selectivity and there are
certain tools of data warehousing and data mining which are crucial to
CRM systems. However, CRM has a problem of becoming more of an IT
function because of its process-based approach. In effect, more emphasis
has been put on the process rather than the outcome or underlying
mechanisms. Leading contributors to this school are Jagdish Sheth, Atul
Parvatiyar, Webster, and Sisodiya.
d) School of customer advocacy - If companies advocate their customers,
then customers will reciprocate by advocating for the company by not
only buying the products but also telling other customers as well as
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helping to produce better products. Customer advocacy represents a major
shift in mind-set from competitive rivalry around quality and price to
cooperation and collaboration around shared goals and objectives.
Companies can develop a long-lasting competitive advantage through
becoming a trusted advisor for their customers and in the process,
optimize allocation of their scared resources. As this school is very recent
that is why very few works had found. McDonald (1993)41
Gruen
(2000)42
; Urban (2004)43
; Urban (2005)44
; Huetteman (2005)45
; Lawer and
Knox, (2006)46
.
After comprehending all relevant schools researcher felt first two
schools i.e. Nordic school and Anglo – Australian schools are more
appropriate to our study.
Further researcher will delve deeper into these two schools to form in depth
understanding of RM. This discussion may help researcher to decide most
appropriate school between them.
3.2.2 Nordic School of relationship Marketing
Nordic school‟s explanation based on three concepts i.e. dialogue, value and
interaction which is referred as “triplet of relationship marketing” (see figure 3.4)
Figure 3.4 – Triplet of Relationship Marketing
Source: - Gronroos Christian (2000)47
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The core: Interaction Process - In the context of consumer services interaction
process has been studied in terms of acts, episodes, and relationships. Multiple
acts form episodes and episodes further paves way for relationships.
Dialogue – This is nothing but how marketer communicates to customers.
Communication efforts must be relational such as personally addressed letters.
Again creating symmetry between interaction and dialogue is also important.
Value – In any relationships there are some benefits (core service, additional
services) as well as costs (sacrifice). Value in relationship context can be
described with the help of following two equations: -
Core Solution + Additional services
Customer perceived value = ------------------------------------------
Price + Relationship Cost
Customer Perceived Value = Core Value + Relationship Cost
Moreover, as highlighted by Grönroos (2007) 48, research conducted
in this school has taken essentially a qualitative and conceptual
nature, rather than a research-oriented hypothesis testing based on
more quantitative methodologies. As researcher intend to test
hypothesis in this study, using Nordic school approach is not
completely suitable. Rather researcher would use this model partially
in the study.
3.2.3 Anglo Australian (UK) school of relationship marketing
a) Six markets Model - Followers of Anglo Australian (UK) schools like
Christopher, Payne and Ballantyne, on their turn, have developed an outstanding
work in the field of the relations with different types of actors embodied the so-
called Model of six Markets (Refer figure 3.5).
This is a tool that deals with relationship management with the main stakeholders
of a company i.e. Customer market, supplier and alliance market, internal market,
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recruitment market, influence market and referral market. These markets are
shown in tabular format below. (Refer Table 3.4)
Figure 3.5 – Six Market model of relationship marketing
Adapted from: - Payne (1993)49
, “the relationship marketing: six markets
framework”, the canfield school of management working papers, SWP 35/93
Table 3.4 – Six Markets at a Glance
Sr. No. Name of the
market
Explanation / sub markets
1 Customer
Market
Direct buyers, intermediaries and final
consumers
2 Supplier and
alliance market
All those entities that typically provide
skills and capabilities based more on
knowledge than on the product
3 Internal Market Employees
4 Recruitment
Market
Includes those who can potentially come
to work with the company
5 Influence Market Those that directly or indirectly can
influence the direction of the company
(shareholders, financial analysts, media,
advocacy groups, consumers,
environmental organizations, unions,
etc.)
6 Reference
Market
Those who can give some information
about the company.
By aligning marketing, quality and services, businesses should formulate
marketing activities to develop relationship with each market.
Researcher found many works which are in line with six markets model like
Ravald, Annika and Grönroos, Christian (1996)50
; Gummeson‟s (1999)51
; Richard
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Batterley (2003)52
; Grigoras, Elena (2009)53
. Relationship marketing does not
refer only at the relationship with the clients, but also at the ones with other
categories of business stakeholders, like suppliers, distributors, employees,
shareholders, different organizations and other major actors from the environment
where the company is activating. Gummeson‟s (1999)54
termed this phenomenon as
“Total Relationship Marketing”.
Considering studying all markets is difficult (and some markets are also not
applicable individual agents), researcher limits this study to consumer market
and partially to referral market only.
b) Relationship Quality - Another important concept emerged out from UK school
is process of delivering relationship quality. Researcher came across with lot of
research related to “relationship quality”.
W.G. Kim, Y. Cha (2002)55
refers Relationship quality as a customer perceptions
and evaluations of individual service employees‟ communication and behaviour,
such as respect, courtesy, warmth, empathy, and helpfulness. This involves
inducing feelings and emotional states through customer–employee interactions.
While as observed by Papassapa Rauyruen, Kenneth E. Miller and Nigel J Barrett
(2007)56
there are major four factors of relationship quality which are trust,
commitment, satisfaction and service quality.
It shows there is some sort of differences exists in terms of constructing
relationship quality measure. A work of Thorsten Hennig-Thurau, Kevin P.
Gwinner, Dwayne D. Gremler, (2002)57
is helpful in this regard. They came out
with following approach: -
Relationship Quality (RQ) is nothing but customer evaluation of
transaction and relationship as a whole.
To measure RQ one has to measure both transactional as well as relational
quality. This view has been also taken by Chiung-Ju Liang, Wen-Hung Wang
(2007)58
. They have classified relationship marketing efforts into financial
bonding tactics, social bonding tactics, and structural bonding tactics. Financial
bonding tactics refers to a kind of bond that stimulates customer consumption
motivation and facilitates knowledge of customers‟ intentions by use of price
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decisions, such as price discounts, low advisory fees and a higher interest rate.
“Social bonding tactics” refers to personalized / customized service, customers‟
trust and satisfaction and understanding and learning about customers‟ needs and
wants. We can easily state that relationship quality refers to social bonding while
transaction quality refers to financial bonding. Structural bonds are not applicable
to B2C situations.
Pengi Choong (2008)59
studied various distribution intermediaries in US mutual
fund industry. He further labelled social quality (personal manner in which core
services are delivered) as a relationship quality. He identified factors responsible
for relationship quality such as personalized service, perceived quality of
investment advice, perceived quality of information. He took various factors like
Fees, convenience, efficient documentation, transparency to measure transactional
quality.
Figure 3.6 - Relationship building model for Indian financial services
industry
Source: - Vaibhav Shekhar, and Nitin Gupta (2008)60
TRUST
INVOLVEMENT
EMOTIONS
PERCEIVED VALUE
CUSTOMER
COMMITMENT
TOTAL OFFERING
SERVICE
CONVENIENCE
DEDICATION
BASED
MOTIVATION
LONG TERM
RELATIONSHIP
WITH SERVICE
PROVIDER
DEPENDENCY
CONVICTION
SERVICE QUALITY
CONSTRAINT
BASED
MOTIVATION
74
For our study researcher found factors suggested by Vaibhav Shekhar, and
Nitin Gupta (2008)61 which are total services offerings, trust, customer
commitment, customer involvement, service convenience, service quality,
emotions, and customer’s perceived value of services are most appropriate
considering this model is developed for financial services that to also in
Indian context. This model is shown in figure 3.6.
3.3 Understanding Relationship Marketing Outcomes
All relationship marketing activities are ultimately evaluated on the basis of the
company‟s overall profitability. However, as a firm‟s profitability is influenced by
a number of variables largely independent of relationship marketing activities, it
seems appropriate to conceptualize relationship marketing outcomes on a more
concrete level while investigating possible outcomes. Two RM outcomes are
referred to in the marketing literature as key relationship marketing outcomes:
customer loyalty and (positive) customer word-of-mouth communication.
Anna Walz (2009)62
defines loyalty as intention (or actual activity) by the
customer to perform a diverse set of behaviours that signal a motivation to
maintain a relationship with the focal firm, including increased share of wallet,
positive word of mouth, and repeat purchasing. Customer Loyalty can be
measured on seven dimensions i.e. As suggested by J. Clement Sudhahar, et al
(2006)63
Behavioural, Attitudinal, Cognitive, Conative, Affective, Trust and
Commitment through a specially designed SERVLOYAL scale.
Researcher would use this scale and limit customer loyalty measurement to
three set of behaviours only.
a) Maintain a relationship with the focal firm
b) Increased share of wallet
c) Positive word of mouth,
3.4 Applying Relationship Marketing to Financial services
As observed by Berry (2002)64
, the practice of relationship marketing is most
applicable to a service firm when each of the following conditions exists:
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1. There is an ongoing or periodic desire for the service on the part of the
service customer,
2. The service customer controls selection of the service supplier,
3. There are alternative service suppliers and customer switching from one to
another is common,
Berry (1983)65
relationship marketing (RM) is recommended as a strategy to
overcome service intangibility and further Zeithaml (1981)66
found RM is
appropriate for services that are difficult for customers to evaluate even after
purchase and use. Jagdish Seth and Atul Parvatiyar (1995)67
observed that the
greater the need for information, knowledge and expertise in making choices,
greater will be the consumer propensity to engage in relational behaviour.
Many financial services especially investment services like mutual funds fit in
both these criterion.
Mutual fund is a complex service as Vroomen, Bjorn, et al (2003)68
found that
(complex) services are characterized by many items per attribute, are often tailor-
made, purchased infrequently, difficult to comprehend, and often require
assistance during the decision-making process. Being a complex service,
engaging advisors while buying mutual funds seems to be natural. That is why
researcher has decided to study relationship marketing phenomenon between
mutual fund sellers and buyers.
Bhattacharya, C. B., Bolton, Ruth N.,(2000)69
came out with some service
characteristics which facilitate RM. These characteristics are as follows: -
a) Risk involved – Risk is nothing but probability of any loss that can be
occur as a result of an exclusion of an alternative from consideration
multiplied by importance of loss. It can be financial risk, performance risk,
physical risk and convenience risk. In case if MF / ULIPs financial risk is
higher and importance of loss is also larger. MF / ULIPs is high risk
category.
b) Switching Cost – It is one time cost that buyer encounter in switching
from one supplier to another. In addition to monetary cost, there are search
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cost and non monetary cost. Non monetary cost includes mental
processing cost and social cost. Mental processing cost will be higher
when customers have little knowledge about the product. MF / ULIPs fall
under high switching cost side as both monetary and non monetary cost
while switching are higher.
c) Service category Heterogeneity – Heterogeneity is linked with various
factors like number of alternatives, complexity and differences amongst
alternatives for that category. Mutual Funds / ULIPs are heterogeneous as
there are many alternatives are available and these alternatives are
different from each other. Mutual Funds / ULIPs fall under heterogeneous
category.
Figure 3.7 shows position of MF / ULIPs on these three characteristics. It has
highest propensity of relational engagement.
Figure 3.7 – Service category characteristics facilitating relationship
marketing
Low Risk High Risk
Homogenous Heterogeneous Homogenous Heterogeneous
Low
switching
cost
Cellular
services Restaurants
Fixed Deposits,
Saving Accounts
Financial
Advisory services
High
switching
cost
DTH services Computers
DMAT
Accounts, Term
insurance,
Health Insurance
Housing Loan,
Financial
services like
Mutual Funds,
ULIPs
Red – highest propensity; Blue – Moderate propensity; Green – Low propensity
Researcher‟s adaptation from: - Bhattacharya, C. B., Bolton, Ruth N., (2000)70
,
Eisingerich Andreas, Simon Bell (2006)71
effective relationship selling will be
critical when 1) service is complex, customized and delivered over a continuous
stream of transactions 2) Buyers are unsophisticated about service 3) customer
face uncertainty regarding outcomes.
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Financial services are highly intangible and complex service based offerings,
which vary enormously in context, consumption, delivery, duration, and
significance to the customer. Again lifetime nature and continuous nature of
transactions makes relationship marketing appropriate. Many customers exhibit
sense of ownership over their services like “my bank” or “my advisor” or “my
mutual fund company.”
Alexander, Nicholas and Colgate, Mark (2000)72
observed that the financial
services retailers are moving from a transactional approach to a relationship
approach that recognizes the lifetime value of the customer.
Mutual Funds and ULIPs are highly suitable case for studying relationship
marketing.
3.5 Reviewing various studies involving Relationship Marketing
While reviewing various studies pertaining to RM, researcher observed that
some of the scholars have used both the terms almost interchangeably Sin et al.
(2005)73
. Relationship Marketing and Customer relationship Management also
have strong similarities: both strongly focus on individual buyer-seller
relationships, accept that these relationships are longitudinal in nature, and that
both parties benefit in the process.
Along with these similarities both the concepts are different in terms its execution
and focus. These differences are showcased in the Table 3.5 below.
From the discussion so far, researcher formed opinion that CRM can
be regarded as, to some extent, a subset of RM. That is why CRM
studies are also reviewed by researcher.
78
Table 3.5 - Relationship Marketing (RM)
Vs Customer Relationship Management (CRM)
Relationship Marketing (RM)
Customer Relationship Management
(CRM)
More Strategic Tactical (implementing RM using
information technology )
Goes beyond the traditional customer-
supplier dyad and encompasses
building of relationships with the entire
range of stakeholders
Focused on building
relationships with profitable customers
Relatively more emotional and
behavioural, focusing on concepts such
as bonding, empathy, reciprocity and
trust
CRM is relatively more managerial per
se, focusing on how management can
make concerted efforts in attracting,
maintaining and enhancing customer
relationships
Source: - Ryals and Payn (2001)74
; Gummesson (1994)75
; Mitussis et al (2006) 76
;
Hunt et al (2006)77
; Payne et al., (2000)78
; Sin et al., (2005)79
; Yau et al.,
(2000)80
.
As this study endavored to compare various distribution channels, initially
resercher explored many studies to came across with two studies which are
similar on this aspect.
a) Gilbert, David; Choi, Karen (2003)81
research findings imply that different
ownership (based on culture i.e. Chinese, non Chinese and merged) of
bank will exert a different emphasis on RM practices. Cultural factors
pertaining to bank ownership plays an important role in RM practices.
Though this study is similar to the study undertaken; researcher found
some dissimilarities with Gilbert, David; Choi, Karen (2003)82
work on
following points.
- Instead of cross cultural comparison, researcher is comparing
business set ups i.e. individual Vs bank & corporate agents.
- Study undertaken is wider as it not only covers RM but also
aspects like investor education, emerging channels, etc.
- Study undertaken is customer centric as against the work of
Gilbert, David; Choi, Karen (2003) which was mostly supplier or
seller centric.
79
Importantly, by conducting this study in Indian context researcher is
endeavoring to fill this gap.
b) Peter C. Verhoef and Bas Donkers (2005)83
used data on 3,317 customers
of a financial-services provider concerning the acquisition channel, their
socio-demographics at the individual and at the zip code level, customer
loyalty and cross-buying. We used probit models to empirically establish
the effect of the acquisition channel on retention and cross-selling. We
then combined these two factors into a measure of total sales after the first
year. They found that customer loyalty differs among channels. They also
found the acquisition channels had some effect on cross-buying. However,
these effects are weaker than those for loyalty.
Our study is diffent as resercher is comparing customer loyalty and cross
selling amongst distribution channel as against acquision channel.
Das Kallol (2008)84
performed content analysis of 209 research paper (only in
high impact factor journals) and observed that contribution of services is largest
and within it, the relative contribution of the financial services was the highest.
She found that overall RM research has been largely concentrated in countries
like the UK, the USA and China. Interestingly not a single paper was published
from India during 1994-2006.
Figure 3.8: - Classification of RM literature
Source: - Lindgreen (2001)87
80
Das Kallol (2008)85
offered a comprehensive roster of RM studies which are
published in high impact journals during 1994 -2006. Researcher compressed this
roaster from 209 papers to 41 papers to make it a “roster of RM studies in banking
and financial services”. (Refer Appendix – F)
These 41 studies are further studied and classified into various categories as
suggested by Lindgreen (2001)86
. Researcher has applied this classification to RM
studies pertaining to banking and financial services. (Refer Table 3.6)
Table 3.6 – Classification of RM literature in financial services
Studying what? Number of studies
RM Objectives 7
Defining construct 9
Instruments / Tools 2
Issues 19
Industry Applications 4
Table 3.6 shows that most of RM research in financial services is focussed on
objectives, issues and defining construct. These studies have already reviewed by
the researcher in preceding sections. Researchers‟ attention is less towards RM
tools and industry applications. As present study is mainly pertaining to industry
practices; one can easily say this study is different from the herd.
Further researcher would analyse these studies from geographical scope
perspectives. Based on geographies, researcher classified these studies not only
country wise but also continent wise.
Table 3.7 – Continent wise distribution of RM studies in financial services
Continent Number of works
Europe 20
Asia 9
North America 6
Australia 2 Africa 1
81
Table 3.8 – Country wise distribution of RM studies in financial services
Country Number of works
United Kingdom 14
China 4
USA 4
Malaysia 3
Canada 2
Australia 1
Finland 1
Ireland 1
New Zealand 1 Singapore 1
Spain 1
Thailand 1
South Africa 1
Sweden 1
Based on Table 3.8 researcher can infer that majority of RM research in financial
services are concentrated in United Kingdom, China and USA. Further
comparison based on continents, shows that Europe is leading the pack followed
by Asia. It is surprising that Indian researchers have not taken inspiration from
other Asian countries in this regard. This study is novel as it has undertaken in
Indian context.
Researcher would further go in detail to find out within financial services which
services had attracter researcher most. This analysis is shown in Table 3.9.
Table 3.9 – Distribution of RM studies based on specific area in financial services
Scope Number of work
Banking 22
Insurance 1
Banking + Insurance 1
Financial advisory 1
Other Financial services 16
The entire focus of RM researchers within financial services is on banking
services. Only one study found on “advisory services”. Considering researcher
82
is focusing on various financial advisors in MF / ULIP, study undertaken is
novel one.
For getting some research methodological insights, researcher compared these
studies on research methods perspective. Based on research approach (Refer
Table 3.10) it was found researcher has emphasised both quantitative as well as
qualitative approach.
Table 3.10 – Research approach used in financial services‟ RM studies
Approach Research Method Number of times
Quantitative Survey Research 22
Experimental Research
1
Qualitative Case study 8
Other Qualitative Research Methods
10
Based on which party surveyed, it was found that both suppliers and consumers
are studied equally. (Refer Table 3.11)
Table 3.11 – Classifying RM studies in Financial Services based on elements
studied
Elements studied Number of times
Sellers / Suppliers/ service providers
15
Buyers / Consumer 15
Both buyer & seller 1
secondary data / case based 10
Surprisingly, researcher found only one study in which both seller and buyers are
studied. This research is different as researcher would study both retail investors
as well as distribution intermediaries.
Further, based on data collection methods, researcher found that majority of the
researchers had employed mail survey and interviews method. (Refer Table
3.12)
83
Table 3.12 – Data Collection Methods used in
RM studies pertaining to financial services
Data Collection Method Number of times it is used
Mail Survey 16
Interviews 10
Depth Interviews 8
Observation 6
Documents 4
Telephonic survey 3
Focus Group 1
Take home assignment 1
With all these deliberations, researcher came across with multiple studies and
understood how these studies are either similar or dissimilar to the one
undertaken. During this discussion we got vital cues for research methodology
which helped researcher to develop research methodology as such. Further
researcher would move towards making research variables operational for the
study in remaining sections.
3.6 Making Relationship Marketing operational for the study
Relationship marketing is possible when both the buyer and sellers are ready to
develop / engage in long term relationships. In this regards, buyer – seller
relationship grid will come into the fore which was developed by Lindgreen,
Adam and Pels, J. (2002)88
.
To understand buyer – seller paradigm in the context of our study, researcher has
developed constructs (Refer Table 3.13).
84
Figure 3.9 - Buyer – seller relationship grid
Buyer’s Paradigm
Transaction
Marketing
Relationship
Marketing
Sel
ler’
s P
ara
dig
m
Tra
nsa
ctio
n
Mark
etin
g
Transaction
Marketing
Hostage situation
Rel
ati
on
ship
Mark
etin
g
Free rider
situation
Relationship
Marketing
Adapted from: - Lindgreen, Adam and Pels, J. (2002)89
Table 3.13: - Establishing buyer’s as well as sellers’ relational paradigm
Item Statements Variables
1 I am ready to develop long term relationship with MF /
ULIP agent.
Buyer‟s
Paradigm
2 I / We try to develop long term relationship with our
customers.
Seller‟s
Paradigm
3 My / Our business focus is on the products & services
offered by us.
4 My / Our business is focused on retaining the existing
customers.
5 My / Our business focus is on quality interactive (two
way) communications with the customers.
6 My / Our business focus is on developing customer
relationships for mutual benefit.
Leonard L. Berry (2002)90
the common element in all relationship marketing
strategies is the incentive the customer is given to remain a customer. The
incentive may be extra service (service augmentation) or a price break
85
(relationship pricing) or something else but in each case the customer is given one
or more reasons not to change suppliers.
Table 3. 14 - Relationship Marketing Strategies
Sr. No Strategies Explanation
1 Core Service
Strategy
Design and marketing of a „„core service‟‟ around which
a customer relationship can be established. This will
attract new customers, cements the business through its
quality, long-term nature, and provides a base for the
selling of additional services over time
2 Relationship
Customization
By learning about the specific characteristics and
requirements of individual customers, service firms can
more precisely tailor service to the situation at hand.
3 Service
Augmentation
Involves building „„extras‟‟ into the service to
differentiate it from competitive offerings
4 Relationship
Pricing
Pricing services in such a way to encourage
relationships. In effect, customers are given a price
incentive to consolidate much or all of their business
with one supplier. E.g. Frequent flyer programmer
5 Internal
Marketing
Quality of services sold is determined in large measure
by the skills and work attitudes of the personnel
producing the services. So service firms can use
marketing to attract, keep, and motivate quality
personnel, they improve their capability to offer quality
services.
Source: - Leonard L. Berry (2002)91
, “Relationship Marketing of Services--
Perspectives from 1983 and 2000”, Journal of Relationship Marketing, Vol.
1(1) 2002, Page 59 - 70
If researcher would relate these strategies in the context of the study, first three
strategies i.e. core service strategies, service augmentation and relationship
customization is appropriate. In the context of study relationship pricing (mostly
pricing is governed by regulators) and internal marketing (this is only applicable
to large organizations – in our case only for corporate agents & banks) strategies
are inappropriate.
To establish what level of core services intermediaries are offering to retail
investors, researcher designed 20 statements to understand various facets about
86
core services like explaining basics of product, transactional services, advisory
services and information services (Refer Appendix H – statements labelled E1 to
E5 & S1 to S15).
Again based on discussion made in earlier sections researcher has designed
constructs as follows: - (Table 3.15, 3.16, 3.17, and 3.18)
Table 3.15 – Measuring Customer commitment and involvement
Item Articulation Variable (Sources)
R 1 is one that I am very committed to Involvement
Emotions
(Jaebom Suh,
2001)92
R 2 Is very important to me
R 3 is one that I really care about
R 4 is one toward which I can develop a warm feeling
R 5 Has a great deal of personal meaning to me
Table 3.16 – Assessment of Relationship Quality
Item Articulation Variable (Sources)
R 6 He (advisor) is very honest / truthful. Trust / Honesty
Shekhar Vaibhav,
Gupta Nitin ,(2008)93
;
Jaebom Suh, (2001)94
R 7 He can be trusted completely
R 8 He can be trusted sometimes
R 9 He has high integrity
R 10 He can be counted on to what is right
R 11 I am satisfied with total services offered by
him
Satisfaction
Service Quality
(Pengi Choong,
2008)95
R 13 He provides quality services
R 14 He gives more benefits in comparison what I
pay
Perceived Value
Shekhar Vaibhav,
Gupta Nitin ,(2008)96
;
Zeithaml, (1988)97
R 16 I get personalized services from him Personalized Service
Pengi Choong,
(2008)98
R 22 He is responsive Overall Perception
R 23 He is reliable
87
Table 3.17 – Assessment of Transactional Quality
Item Articulation Variable
(Sources)
R 19 He charges me the lowest possible fees / commission. Transactional Quality
Pengi Choong,
(2008)99
R 20 He is very efficient in documentation.
R 21 He maintains high level of transparency in every
aspect of the transaction
Table 3.18 – Measuring Customer Loyalty
Item Articulation Variable
(Sources)
L4 I would continue with MF / ULIP financial service
provider
Customer Loyalty
J. Clement
Sudhahar, et al
(2006)100
L5 I would like to recommend your MF / ULIP advisor
to my relatives, friends
3.7 Exploring Technology aspect of Relationship Marketing
Sharma, Gagan Deep, Mahendru, Mandeep and Khanna, Nidhi (2011)101
Technology has been a major driving factor for CRM and therefore, is bringing
radical changes. The developments in several technological areas are likely to
have a major impact on CRM. Integration of process, people, technology and
information will offer a greater value to the customers, Verma, Bigyan (2005)102
.
These views prompted researcher to explore technology aspect of relationship
marketing.
Susi Geiger and Shane Martin (1999)103
studied Irish businesses and observed that
Internet marketing can be ornamental, informational, and relational. There are
various benefits in using internet as a relationship building tool such as reduction
in transaction cost, frequent exchange of information, interactivity, enhanced
service delivery, Network of network, ease with which information can be
captured in real time with unprecedented detail. They also underlined the fact that
88
interactivity is most important aspect for using web as a relational tool. Various
web based relational tools like e mails, personalized interface, interactive games,
browser compatibility options, presence of complaint mechanism were suggested
by them.
A study was set out by Opara, Bright C., Olotu, Ayopo O. , Maclayton, Darego
W. (2010)104
to investigate technology impact on Relationship marketing
Orientation (RMO) and Business Performance (BP) of the Nigerian banks.
Quantitative and qualitative data were generated from 123 different bank branches
in Port Harcourt, with 565 as target respondents. Study reveals that technology as
a moderating factor, and appreciate its (technology) importance in influencing
RMO for enhance performance.
Gilbert, David C., Powell-Perry, Jan and Widijoso, Sianandar, (1999)105
opined
that both RM and the World Wide Web combined together can offer a powerful
competitive advantage for hotel companies at a time when there is increasing competition
over a reduced customer base. Various web based tools suggested by them is tabulated
below. (See Table 3.18)
Table 3.19 – Using web at various stages of relationship development
Sr.
No. Stage to develop relationship Web tools
1 Identify more about the customer
through database analysis.
Incentivized online questionnaire
2 Improve and make the
product/service more attractive.
E mails, Customized online
questionnaire
3 Inform to build customers‟
knowledge of the company.
Direct e mailing, online news letters,
online notice boards, Online
information center
4 Tempt customers to purchase more
regularly, try different products,
etc.
Direct e mailing, automated cross
selling, Special electronic promotion
leaflet
5 Retain the customer by developing
different forms of loyalty schemes.
Exclusive online support for members,
online member only magazine, Online
member only online services.
Source: - Gilbert, David C., et al (1999) 106
89
Considering role of technology in relationship marketing is becoming
larger and important, researcher would include some questions in research
instruments especially related with following aspects: -
- Use of technology in customer contact
- Perception towards using technology
- Emphasise on technology as compare to face to face interaction
3.9 Measuring Brand Image
Keller (1993)107
defines brand image “as perceptions about a brand reflected by
the brand associations held in consumer memory”. These associations of brand
image are multidimensional and consist of the affective dimension or the attitudes
towards the brand and the perceived quality dimension.
Brand image formation is a subjective learning process and is consequence of past
total experience. It consists of associations and attributes organized in some
meaningful manner that are activated from memory when recalled, Aaker
(1991)108
. Further Brand image is the perceptions and beliefs held by consumers,
as reflected in associations held in consumer memory Kotler & Keller (2005)109
.
Researcher came across with multiple definitions of brand image which are
classified based on emphasis given while defining it. (Refer Table 3.20)
After going through several definitions, researcher found clueless about
operationalizing brand image for the study undertaken. Fortunately, Dawn Dobni,
George M. Zinkhan (1990)110
also observed that the definition of brand image has
not necessarily remained stable and also discovered little agreement on
operationalizing brand image construct. Their literature survey revealed that
considerable variation exists among researchers in defining "brand image".
Dawn Dobni, George M. Zinkhan (1990)111
further summed up the concept of
brand image as 1) Brand image is the concept of a brand that is held by the
consumer. 2) Brand image is largely a subjective and perceptual phenomenon that
90
is formed through consumer interpretation, whether reasoned or emotional. 3)
Rather, it is affected and moulded by marketing activities, by context variables,
and by the characteristics of the perceiver. 4) Where brand image is concerned,
the perception of reality is more important than the reality itself.
Table 3.20 – Definitional Approaches for Brand Image Concept
Emphasis Description / Explanation
Symbolism Symbol which enhances person‟s worth in his
own eyes and in the eyes of others.
Meanings &
messages
Meanings connected with the brands. What the
brand connotes or means in the eyes of
consumers.
Personification Also refereed as brand personality. Describing
brand as if it were human being. Customer prefer
those things which match their self image
Cognitive or
psychological
elements
Sets of ideas, attitude and feelings that consumer
have about brand.
From above discussion, point which is emerging out is brand image factors are
relative and researcher has to explore the same for the study undertaken. Again
seminal work of Dawn Dobni, George M. Zinkhan (1990)112
came to the fore for
this purpose. There are various approaches for identification of brand image
attributes and construction of measurement instruments which are as follows: -
Table 3.21 - Techniques for measuring Brand Image
Typical approach Typical Techniques
Identification of brand image
attributes
Free responses, Focus Groups, Depth
Interviews, Kelly Repertory Grid
Creation of measurement
instrument
Semantic Differential, Staple Scale, Q –
Sort Technique, Thurston Scale
Adopted from - Dawn Dobni, George M. Zinkhan (1990)113
91
Researcher decided to use free responses in the pilot study to identify brand image
attributes. Again researcher also went through articles and statements of the
people closer to financial services industry. All these efforts helped the researcher
to spot following factors: -
1. Returns (Financial performance)
2. Clear Communication
3. Consistent Communication
4. Convenience
5. Range or variety of the products offered
Researcher further chose semantic differential scale to construct scale for brand
image measurement. Researcher went further and designed six questions relating
to brand image (Q.C1 – Q. C5 – see annexure). First two questions are free
response questions to find out which brands investors are highly preferred while
investing. Third question is asked to find out sources mainly responsible for
making investors familiar about particular brand. Remaining questions were
asked to seek investors‟ responses towards these brand image factors and
importance attached to these factors.
92
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95
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, “Total Relationship Marketing”, second edition,
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