The quality of your life is the quality of your relationships.— ANTHONY ROBBINS

Learning Objectives:

After studying this chapter, you should be able to:Explain the various dimensions of relationship

and its theories.Elaborate the journey of marketing over the

years.Understand the relationship in psychological

and businessperspectives.

Provide information about the evolution of relationship as a marketing tool.

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Introduction Relationships are as old as mankind. We all are

part of one relationship or the other. Relationship has been studied by sociologists,

social psychologists, anthropologists, philosophers and many other people.

Business community in India since long has been relying upon relationships for business growth. Even today, it is widely prevalent among the Indian business fraternity. Some communities in India have been very successful in business because they are smart enough to sustain relationship while some others not.

So, relationship in general and with customers in particular have always been a key for growth of business.

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Theoretical Perspective of Relationship

Relationship has been subject matter of individual's personal feeling. Theories have made several attempts to explain this factor of relationship. As we know, there are several types and forms of relationships and theories to explain the concepts of relationship. Few important theories offered by social psychologists on relationships are as follows:

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To Conclude: This theory describes relationship in terms of breadth and depth. Breadth refers to the number of topics one talks about. Depth denotes the degree of personalness with which the people pursue the topics.

I. Social Penetration Theory:

This theory was formulated by professors Irwin Altman and Dalmas Taylor.

They described the dynamics of closeness of relationship. It was opined that closeness in a relationship occurs through a gradual process of self-disclosure, and closeness develops if the participants proceed in a gradual and orderly fashion from superficial to intimate levels of exchange.

Social Penetration Theory states that humans, even with out thinking about it, weigh each relationship and interaction with another human on a reward cost scale. If the interaction was satisfactory, then that person or relationship is looked upon favorably. But if an interaction was unsatisfactory, then the relationship will be evaluated for its costs compared to its rewards or benefits.

Developing Relationship through Social Penetration goes through following stages: 6

An insurance agent does not start the sales call with immediately starting the benefits of the policy or need of insurance. Instead, he first tries to develop some informality by talking something very general and gradually moves towards becoming personal in the number of issue he discusses. It is only after this that he starts introducing his offer and the rationale of it.

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To Conclude: This theory holds that one enters into those relationships that yield greatest profits. They seek relationship in which reward exceeds cost and are more likely to dissolve relationship when cost exceeds reward. Lot many salespeople visit a customer, but the customer subscribes only where he thinks he is at the maximum benefit. Similar is the trend observed in many of the services industries as insurance, telecom and tour and travel.

II. Social Exchange Theory:

This theory explains social change and stability as a process of negotiated exchanges between parties. Social exchange theory states that all human relationships are formed on the basis of a subjective cost-benefit analysis and the comparison of alternatives.

Social exchange theory has Cost, Benefit, Outcome, Comparison Level, Satisfaction and Dependence etc as important components.

Benefits include as material or financial gains, social status, and emotional comforts.

Costs generally consist of sacrifices of time, money, or opportunity lost.

Outcome is defined to be the difference between the benefits and the costs:

Outcome = Benefits – Costs8

When deciding whether to leave the relationship, an individual considers the alternatives. There are other considerations, such as the barriers to leaving the relationship. There are also considerations of the investments that an individual has made in the relationship. For instance, two brothers have spent many years together have invested a lot of time into a relationship, and this must be weighted against the benefits gained from an alternative relationships.

Satisfaction is defined as the difference between the outcome and the comparison level:

Satisfaction = Outcome - Comparison Level Satisfaction is not enough to determine

whether a person stays in a relationship or leaves for an alternative. That is to say, there are people who stay in unhappy relationships as well as those who leave happy relationships. What determines whether an individual stays in a relationship or leaves is the set of alternate relationships available.

If there are several options available to an individual, than the individual is less dependent on the relationship. Dependence is formalized as the difference between the outcome and the "comparison level of alternatives":

Dependence = Outcome - Comparison Level of Options

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To Conclude: This theory claims that wedevelop and maintain relationship in which rewards are distributed in proportions to the costs. When our share of reward is less than what is demanded by equity, we are likely to experience dissatisfaction and exit the relationship. The cost-reward ratio plays a very important role in the maturing of a sale.

III. Equity Theory:

Equity theory was developed in 1963 by John Stacey Adams, who emphasised that employees seek to maintain equity between the inputs they bring to a job and the outcome that they receive from it against the perceived inputs and outcomes of others (Adams, 1965).

Inputs are defined as each participant’s contributions to the relational exchange and are viewed as entitling him/her to rewards or costs.

Outputs are defined as the positive and negative consequences that an individual perceives a participant has incurred as a consequence of his/her relationship with another.

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Customer dissonance often occurs with the companies that give differential treatment among the customers. In many of the industries where there is enough of customer interaction, this differential often repels the existing customers instead of keeping them for life.

Equity theory consists of four propositions: Individuals seek to maximize their

outcomes (where outcomes are defined as rewards minus costs).

Groups can maximize collective rewards by developing accepted systems for equitably apportioning rewards and costs among members. Systems of equity will evolve within groups, and members will attempt to induce other members to accept and adhere to these systems.

When individuals find themselves participating in inequitable relationships, they become distressed. According to equity theory, both the person who gets “too much” and the person who gets “too little” feel distressed.

Individuals who perceive that they are in an inequitable relationship attempt to eliminate their distress by restoring equity. 11

People do try to enter into relationship with people who generate enough attraction for him/her. Persons working in the same building but in different offices or working in the same office but in different department may enter into a good relationship because of this factor. Sales management principle says, "Before selling the product, one needs to sell oneself". This principle comes very handy and enables the salesperson to create attraction for oneself.

IV. Attraction Theory:

This theory postulates that one is attracted to others on the basis of four major factors:

(i) Attractiveness (physical appearance and personality),

(ii) Proximity,(iii) Reinforcement and(iv) Similarity.The factors discussed above play

an important role in creating attraction.

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Types of RelationshipRelationships form different types at different

times and different circumstances. Individuals perform different role at different times.

There are various types of relationship one gets engaged into during one's lifetime. The category of these relationships varies from the lap of mother to the finger of father, company of friends, support of wife to the mentoring of the boss. They, in most cases, expand with passage of time. The nature of relationship varies from one situation to another.

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It is for the marketer to understand the variables one is operating with and decide upon what relationship one needs to embark upon. It is also worth mentioning that the same strategy may not hold true for all the stages of customer life cycle.

Mitchell (1997) has identified the following types of relationship and their relevance for different business situations:

Parent-child (loan marketer) Teacher-student (mass marketer of

Internet software) Leader-follower (fashion brand) Comrade-at-arms (pressure group) Fellow enthusiast (sports car) Confidant (financial service advisor) Idol to be worshipped (luxury brand) Casual friend (beer) Soul-mate (special whisky) Old flame (the brands your mum used) A friend whom you seek out to escape

from everyday reality (holiday)14

Stages of Relationship

Contact

Increased frequency of

contact involvement

Depth of relationship

intimacy

Deterioration

Repair

Dissolution

Walking away from

relationship

The six-stage model of relationship

Evolution of Relationship as a Marketing Tool The emergence of a relationship focus provides a "refreshed

and expanded self concept" to marketing. This is the result of the following four observations:

1. Relationship marketing has caught the fancy of scholars in many parts of the world, including North America, Europe, Australia and Asia, as is evident from the participation in some of the recent conferences held on this subject (Sheth and Parvatiyar 1994).

2. The scope of relationship marketing is wide enough to cover the entire spectrum of the subdisciplines of marketing including channels, business-to-business marketing, services marketing, marketing research, customer behaviour, marketing communication, marketing strategy, international marketing and direct marketing.

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3. As in the case of other sciences, so marketing too is an evolving discipline, and has developed a system of extension, revision and updating of its fundamental knowledge (Bass 1993).

4. Scholars, who at one time were leading proponents of the exchange paradigm, such as Bagozzi (1974), Kotler (1972), and Hunt (1983), are now intrigued by the relational aspects of marketing (Bagozzi 1994; Kotler 1994; Morgan and Hunt 1994).

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Purpose of Relationship Marketing The way marketing is being practised

is changing. This is primarily because of dramatic changes in marketing contexts such as physical distance, time, economy, deregulation, globalisation, customer expectations and new information technology (Brookes et al. 2002; Doyle 2000; Hunt 2000).

Researches have shown that organisations are increasingly focusing on attracting, developing and retaining businesses (Jackson 1985; Morgan and Hunt 1994; Reicheld 1996). This is called relationship marketing which is in contrast to the 4 Ps of marketing (which is also called as transactional marketing—TM): product, price, place and promotion that primarily concentrated on attracting businesses but less to retaining businesses (Buttle 1996; Gummesson 1999).

Relationship marketing attempts to involve and integrate customers, suppliers and other infrastructural partners into a firm's developmental and marketing activities (McKenna 1991; Shani and Chalasani 1991). Such involvement results in close interactive relationships with suppliers, customers or other value chain partners of the firm. Interactive relationships between marketing partners are inherent compared to the arm's length relationships implied under the transactional orientation (Parvatiyar, Sheth and Whittington 1992). The relationship among various components, hence, augments each other instead of fighting for the resources. The development of relationship marketing points to a significant shift in marketing from competition and conflict to mutual cooperation, and choice independence to mutual interdependence.

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Transactional Marketing

Relationship Marketing

Transaction marketing

Relationship marketing

One off exchanges Focus Ongoing exchanges

Brand management Customer management

Short-term focus Time dimension Long-term focus

Mass communication Primary communication

Personal communication

Isolated market research

Customer feedback mechanism

Ongoing dialogue

Mass markets or market segments

Market size Markets of one

Market share Criterion for success Mind share

Profitability of transaction

Critical metrics Lifetime value of customer

Brand equity Customer equity

Distinction between Transaction Marketing and Relationship Marketing

Approach towards Marketing: a Paradigm Shift The discipline of marketing grew out of economics, and the growth was

motivated by lack of interest among the economists in the details of market behaviour, especially those related to the functions of the middlemen (Bartels 1976; Houston, Gassenheimer and Maskulka 1992; Hunt and Goolsby 1988).

Most of the opinions of the early marketing thinkers were centred on the efficiency of marketing channels and the services performed by them in transporting and transforming the goods from the producers to the consumers (Shaw 1912).

However, the relationship orientation of marketing is not entirely a new phenomenon. The practice of marketing before the 1900s was that relationship orientation was quite prevalent. Although the history of marketing thought dates back to only the early 1900s (Bartels 1962), marketing practices existed in history, even to pre-history (Nevett and Nevett 1987; Pryor 1977; Walle 1987). During the agricultural era, the concepts of domesticated markets and relationship orientation were equally prevalent.

In short, the current popularity of relationship marketing is a reincarnation of the marketing practices of the pre-industrial era in which producers and consumers interacted directly with each other and developed emotional and structural bonds in their economic market behaviours.

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Marketing Phase One: Practices in the agricultural Economy Pre-industrial society was largely based on agricultural economy and the

trade of art and artefacts. During the agricultural days, most farmers sold their produce directly in the bazaars. Similarly, artisans sold their arts and artefacts at these markets.

Consumers and producers gathered together face-to-face for trading products. The role of the producer was not separated from that of the trader and the producer functioned as both 'manufacturer' and 'retailer' of own products. Also, producers and consumers developed strong relationships that led to the production of customised products made by the artisans for each customer.

Similarly, relational bonding between traders was also quite prevalent, partly because of the need to do business with others whom one could trust. Thus, ongoing trade relationships were a critical element of business practices in the pre-industrial days where ownership was linked with the management of business.

Even on the Silk Trade Route, relationships between customers and suppliers of silk were vital because the Indian weavers and silk craftsmen heavily depended on the supply of Chinese silk to produce the garments and artefacts required by local kings and nobles.

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Relationship Orientation

The relationship orientation in marketing and trade continued into the early years of the Industrial Revolution and the emergence of capitalism. Market development efforts were complemented by close cooperation between business and government, which helped develop markets among the nobility, the high clergy and the growing urban bourgeoisie (Fullerton 1988).

Such relationships once again reflect the inter dependencies of these marketing actors. In order to facilitate future trade, some traders cooperated with weavers and designers in India, providing them with contemporary designs from China. The influence of Chinese designs in the earlier arts of India bears clear evidence of the cultural exchange in the interest of promoting future trade of the Chinese silk. Retaining customers, influencing repeat purchases, fostering trust and facilitating future marketing also were concerns of marketers in the pre-industrial days.

Those who participated in the market knew and trusted each other (Mackenney 1987) once again providing continuity and security for the repeat purchaser. The producers established permanent retail shops at the marketplace where they could make and sell those goods on a daily basis (Cundiff 1988). As a consequence, consumers and producers had direct relationship with each other.

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Marketing Phase Two: Practices in the Industrial EconomyDuring the height of the industrial period, marketing

practices were aimed at promoting mass consumption. Developed out of the need to support the mass production

machinery, the emphasis was directed at increasing the sale of products. Both personal and impersonal manifestations of the selling 'force' were found increasingly in business, supported by other activities such as advertising and promotion.

Marketing was considered successful only when it resulted in sale. Marketing performance measures were linked, as is still the practice today in many companies, to sales and market share. Some marketers resorted to extreme practices of persuasive selling, including deceptive advertising and false claims.

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Development in Marketing in Industrial Era1. The first was the marketer's realisation that repeat purchase by

customers was critical. This research was further advanced in the buyer behaviour theory of Howard and Sheth (1969), in which they closely examined repeat purchase behaviour and brand loyalty.

It was in order to achieve a brand image, brand differentiation and effective advertising that certain marketing techniques emerged. The development of market segmentation and targeting became important tools for marketing planning. In the face of competition, marketers realised the benefits of focusing on specific groups of customers for whom they could tailor their marketing programmes and successfully differentiate themselves from their competitors (Peterson 1962). Brand marketing which grew during this period, supported the philosophy that the retailer was not the salesman for the manufacturer but rather the buyer for the consumer. Some marketers read this change and shifted focus from discrete, one-time sales to ongoing, repeat-purchase possibilities.

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Development in Marketing. . . Contd.

2. The second was the development of administered vertical marketing systems (McCammon 1965), whereby marketers not only gained control over channels of distribution, but also developed effective means of blocking competitors from entering into these channels. Vertical marketing systems such as franchising and exclusive distribution rights permitted marketers to extend their representation beyond their own corporate limits to reach final customers (Little 1970).

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Marketing Phase Three: Practices in the Post-industrial Economy Post-industrial phase has seen substantial development toward

relationship marketing, both in practice and in managerial thinking. The marketers started realising the need to show more concern for

customers. It began with the advent of complex products, which gave rise to the systems selling approach. This approach emphasised on the integration of parts, supplies, and the sale of services with the individual capital equipment. The approach forced intimacy and permanence in the buyer-seller relationships.

Instead of purchasing a product or service, customers were more interested in buying a relationship with a vendor. Such programmes led to the foundation of strategic partnering relationships that emerged under relationship marketing (Anderson and Narus 1991; Shapiro 1988).

The growth of relationship orientation of marketing in post-industrial era saw the rebirth of direct marketing between producers and consumers.

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Marketing Phase Three. . . Contd. Several environmental and organisational development factors were

responsible for this rebirth of direct relationships between producers and consumers. At least five macro-environmental forces can be identified:

1. Rapid technological advancements, especially in informationtechnology

2. Adoption of total quality management programmes by companies3. Growth of service economy4. Organisational development processes leading to empowerment of

individuals and teams5. Increase in competitive intensity leading to concern for customer

retention. These forces have reduced the reliance of producers and consumers on

middlemen for effecting the consummation and facilitation processes (Sheth and Parvatiyar).

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Conclusion

In this the chapter we have discussed various changes that have taken place in the history of marketing.

We have also dealt with various forms of relationship and the emergence of relationship as a potent marketing tool in light of various theories of relationships.

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PROJECT ASSIGNMENT

Prepare a study of the Indian Banking Industry and analyse the changes that took place in the relationship practices of this industry.

REVIEW QUESTIONS

1. Comment on the rationale of emergence of relationship as a business tool.

2. Discuss the paradigm shift in marketing as a discipline over the years.

3. "Relationship has since long been the key of success of marketing of Indian businesses. It has only now been recognised and glamourised". Critically analyse the statement.

4. Differentiate between transaction marketing and relationship marketing.

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