‘These are turbulent times in the world of organizations’, observed Miles and Snow1 more than a decade ago, and there is every indication that the bumpy ride will continue beyond the turn of the century and into the new millennium. Behind the turbulence lies a Chapter 1 Relationship marketing: The six markets framework Internal Markets Supplier & Alliance Markets Recruitment Markets Influence Markets Referral Markets CUSTOMER MARKETS The six market domains series of frequently cited environmental factors: technological advances and the deregulation of markets, creating intensified global competition. These forces have changed and continue to change the dynamics of the marketplace, raising the profile of timebased competition and causing shifts in channel power. The world is becoming a buyers’ market, where increasingly discerning customers are freer than ever to select from their global marketplace – something that many corporations in the Western world were woefully slow to grasp. As the effects of deregulation and technological change have rippled through international trade, classical models of marketing have been found to be wanting. The classical models are based on the microeconomic market model and built around the ‘4 Ps’ framework for marketing decision making, the latter emerging from the work of Borden during the 1960s. Borden isolated 12 factors or elements which, when combined, would produce a ‘marketing mix’ that served to influence demand. The underlying concept was quickly simplified and popularized by its distillation into the four key elements of the teacher-friendly 4 Ps framework: product, price, place and promotion.2, 3 These models were developed from US studies of the indigenous market for consumer goods during the post-war boom of the 1950s and 1960s, an environment where rising consumer demand gave companies little reason or incentive to conside customer relationships as anything other than brief single transactions. As such they reflect the realities of another era.
The concept quickly broadened to encompass internal marketing in acknowledgement that the successful management of external relationships was largely dependent on the alignment of supporting internal relationships.10 The proposition by writers Christopher, Payne and Balanchine that relationship marketing represents the convergence of marketing, customer service, and the total quality movement underscores the notion of internal alignment, and stresses the cross-functional and process-dependent nature of relationship marketing.11 Explicit in this proposition is the recognition that customer satisfaction and loyalty are built through the creation of superior value for the customer, and that value is created throughout the organization and beyond. The writers factored relationships with a range of other parties, including distributors, suppliers and public institutions, into the relationship marketing equation, bringing their broadened interpretation of relationship marketing into line with a view of marketing put forward earlier by some of the leading writers of the IMP Group and ‘Nordic School’.12 While some well-known writers in the field still seek to limit the scope of the concept to the customer–supplier dyad,13 there is evidence that this broadened perspective is gradually gaining wider acceptance among scholars of relationship marketing.
The Six Markets model
Market domains or ‘markets’, each representing dimensions of relationship marketing and involving relationships with a number of parties – organizations or individuals – who can potentially contribute, directly or indirectly, to an organization’s marketplace effectiveness. The six market domains were initially presented as is shown in Figure 1.1, with the focal firm, the ‘internal market’, placed at the centre of the model. This configuration emphasizes internal marketing’s role as an integrator and facilitator, supporting the management of relationships with parties within the other ‘markets’. The model has since been subtly revised on a number of occasions as understanding of the nature of relationship marketing and the potential contributions from the various parties deepened.
The work of management consultants Bain & Co, directly linking customer retention to profitability in a number of mainly service situations, has done much to promote the benefits of customer retention through relationship building to the business community as a whole.26, 27 A study of marketing in key British enterprises, commissioned by the Chartered Institute of Marketing in 1994, confirms that in the views of experienced practitioners ‘relationship building is rapidly becoming the most powerful weapon in the professional marketer’s armoury’, and that ‘this relationship building and maintenance is taking place at each level of the organisation’.28 The issues of customer retention and relationship building will be explored in greater detail in Chapter 2 of this book.
Valued by the customer. For businesses offering professional or financial services, regularly replaced consumer durables such as cars, and for many organizations involved in business to business marketing, the long-term investment in building relationships with individual customers is easily justified. Similarly, for manufacturers of some low-priced consumer products with high frequency purchase rates and easily identifiable target groups (e.g. some baby products), the approach can readily prove its worth. Whether the same can be proven to be an economic proposition for the marketing of mainstream foci (fast-moving consumer goods) products is more questionable. Nevertheless, Swiss food giant Nestlé was willing to spend millions of pounds on its Casa Biotin Club, a database-marketing driven initiative devised to bypass the influence of the large retailers in the hope of raising customer loyalty towards what is essentially a commodity product (see Case 2.1).