The Development of the Marketing Thought - Essay Example

?From Transactional to Relational: The Development of the Marketing Thought Section A Introduction Marketing is an ever-changing concept in the business literature, making it technically a form of abstraction. Marketers of one generation may define it as something entirely different from how marketers of another perceive it. Despite the fact that there is not one universally accepted definition for it, marketing remains to be an increasingly elemental business process. Several external drivers such as the rise of the services sector; growing number of markets worldwide due to decreasing protectionism thereby increasing competition; and most notably, the escalation of technology that gave birth to informatization, and consequently, consumer power have contributed to its evolution as a theory and practice. These forces, while closely interrelated, produced fickle consumer markets which are more sensitive to price, services, and such other features which create customer value that a slight difference would equate to huge economic losses. From transactional marketing to relational marketing follows a tool for building customer relationships: customer relationship management (CRM). If developed and implemented effectively, Strategic CRM has been a guiding tool for most businesses today in competition-filled markets for without a loyal customer base, the business will eventually remain stagnant and cease to exist. Evolution of Marketing: From Transactional to Relational The Marketing Concept. After more than a decade of confining the marketing concept as “a process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives,” the American Marketing Association (AMA) developed another definition of marketing, describing it as “...an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.” The former definition relates marketing as a transactional process while the latter is relational. While the both contexts agree on the idea that marketing is a social business process, marketing evolved from a cold means to maneuver a product into the market in both ways strategical and tactical to a humanitarian obligation that likewise yields two-way benefits; only that in the second definition, marketing purports to be the only tool to stay profitable in the industry taking into consideration the radical changes in the business environment. In brief from a product-oriented approach, organizations now divert their attention to their customers and in creating a profitable rapport with them. Marketing Paradigm Shift? The so-called shift in marketing paradigm is seemingly misguiding as what a few authors contest. What is considered a paradigm shift is not applicable to how the marketing concept evolved from transactional into being relational. Some studies have indicated that transactional and relational marketing may still co-exist today although the former is slowly dominated by the latter with the rise of the web technology where direct marketing became virtually possible not to mention, efficient for both buyer and seller. Business firms used to concentrate only on the mass production of goods with less or without particular consideration to consumer relations knowing that the consumers will patronize such products anyway through an unsegmented promotional technique. There was technically no form of personality and individuality -- absence of a human touch. In the business equation, there were only enthusiastic retailers and submissive buyers; therefore in theory, businesses did not consider the profitability of confining the emotional link in between human transactions. In the early 1980s, Len Berry coined the term relationship marketing, describing it as the strategical approach that invites, improves, and maintains customer relationships. Unlike transactional marketing, relational marketing centers on the notion that loyal consumer markets are a valuable addition to the long-term profitability of the firm. At present, there is a steady increase in the acceptance of RM in the business context whereupon refusal to exploit it especially with the fact that almost all manufacturers and retailers alike are now deploying it, will make it hard for a business to increase its market share. Transactional and relational marketing can be employed concurrently. A good example to this is Wal-Mart. Wal-Mart does not concentrate on acquiring a stable consumer base not only through an RM approach but also through its pricing position which is transactional in nature: Everyday Low Prices (EDLP); and the convenient shopping experience it offers. The important difference between implementing the transactional approach and the relational lies in creating a satisfying and longer-lasting customer experience. The important similarity is that every value is created in every marketing process. Customer Relationship Management. Relationship-based marketing created a mainstream tool in deploying business and marketing strategies: customer relationship management (CRM). Because of the growing popularity of information technology, every commodity became a public good because everyone gains access to centralized information. The web technology paved the way for an efficient correspondence between the seller and the buyer through direct marketing (i.e. e-mail, online forums, blogging, web advertising, and social networking) that may increase both satisfaction and loyalty, then, sustainable competitive advantage for the organization. The Information Age truly played a great role in the ultimate evolution of the marketing thought. Consequently, fickle consumers started dominating the market. Trade customers and consumers obtained the prerogative to exhibit individuality. Additionally, the increase of resources awakened untapped markets worldwide, therefore increasing competition. Stiff competition had compelled businesses to segment markets and differentiate products. However, retaining customers begun to be an all-time challenge for these firms, save those who already have established their consumer bases before such marketing practice ever developed. Establishing customer relations remains to be a first priority for most businessmen. On another perspective, there could be no easy way relationship marketing just sprouted from the sphere of transactional marketing. The evolution of relational marketing can also be primarily associated with the rise of the tertiary sector and the business-to-business markets in that both encultured the impalpable element there is in a human transaction. Every product began requiring a certain kind of service -- before, during, and after the transaction. The age of information, the rise of service industries, and the steady growth of emerging markets are just few of the major interconnected stimuli that contributed to the development of the relational marketing thought. Section B Relationship-based Marketing: Issues and Themes This section elaborates the supporting themes and issues (specifically with regard to the marketing paradigm shift, the rise of the information of technology and the services industries that contributed to the development of the thought; and customer retention and building relationships) presented in the previous section through an academic framework. Shift in Paradigm. Almost all authors in conclude that there is indeed a diversion in the business focus -- from the concept of the marketing mix to the relationship-oriented approach. A few others, however, suggest that ‘paradigm shift’ is sweeping a term. Brookes and Palmer (2004) argue that to be considered as such there should be coherence and adequate comparability between both schools of thought. Also, the fact remains that both may still be applied simultaneously and in doing so could be the ideal business approach instead (Brookes & Palmer, 2004) wherein customer satisfaction and retention are both achieved. With Thomas Kuhn’s construction of a paradigm shift, RM is only evolutionary and does not provide fresh concepts (Hansen & Hennig-Thurau, 2000). The acceptance of RM as a new paradigm lacks adequate substantiation in order to qualify as such for it assumes to be universally socially beneficial and thus eliminates diversity in the whole equation. Information and Web Technology. Glazer (1991) studies the impact of the commercialisation of information technology in the early 1990s on the marketing thought and practice. This is to say that while the information technology is not the immediate parent of the new marketing focus, it still contributed to the maturity, nevertheless. According to Glazer (1991), there had been amounting evidence to the ‘growing obscurity of traditional unconditional differences’ such as the ‘traditional approaches and choices to market attractiveness and strategic options, respectively.’ From this vantage point is a proof to the changing structure of business and its corresponding philosophies and functions of which marketing is one. Hougaard and Bjerre (2003) state that not only did it reduce the costs of transactions, it also superceded mass marketing in terms of identifying the actual needs and wants of a consumer. The Internet or the web technology, as a result of the advancement of information technology, managed to centralize a certain information. Communication between the buyer and seller used to be one-sided (by way of mass marketing) but with the web technology that defied inherent barriers, it became efficient, fast, and two-way. Tertiary Sector. The tertiary sector or commonly known as the services industry had developed the idea on services marketing where interaction is inherently componential in implementing the marketing thought (Gummesson, 1994). The “intangibility, heterogeneity, perishability, and inseparability” of services in every transaction (Lovelock & Gummesson, 2004) created a psychological aspect there is now in the relationship oriented marketing perspective (Gummesson, 1994). Customer Relationship Management. ‘Customers don’t buy products, they buy benefits,’ so the business thinking prevails. What comes along these perceived benefits could be internal and external such as the services offered alongside the patronization of the product. CRM is the means to provide such benefits. Since CRM is the practice of the relationship marketing theory, it is the systematized tool to ‘attract, enhance, and maintain’ loyal customers (Anderson & Kerr, 2002). The successfulness of the implementation depends on how it is developed nonetheless. In the light of determining its effectiveness as a tool, Reinartz et al. (2004) conclude that CRM is directly related to a better firm performance wherein maintaining the relationship with the customer provided economical benefits although as the bond expires, there are no significant negative impacts upon the firm. Information technology diversified the scope of CRM such that the flow of information became more manageable than it used to be decades ago (Frow & Payne, 2005). Easier and faster access to pertinent customer information has revolutionized the techniques and tools used during market research. In sum, CRM produced positive effects on customer retention (Verheof, 2003) and satisfaction (Fjermestad & Romano, 2006). Customer Retention and Building Relationships. Theories are always easier said than applied. Implementing the relational marketing thought is no different. Customer relationship management is the tool in the application of the theory of relationship-based marketing in a way that marketing no longer becomes a divisional function but rather an organizational function. Everyone is obligated to employ it in every step of the value chain. This concept argues that customer retention is enough to keep the business afloat. Gustafsson et al. (2005) derive three components to customer retention: customer satisfaction, affective commitment, and calculative commitment. Satisfaction is captured during the pre-transaction, transaction, post-transaction processes and which can be measured in the change of attitude, repurchase, and loyalty (Churchhill & Surprenant, 1982). Achieving customer satisfaction requires financial allocation for instance, in training employees to be more customer-friendly, upgrading facilities, paid surveys, and etc. (Rust & Zahorik, 1993). Meanwhile, the calculative and afflictive commitment relates to the whole point of RM (Gustafsson et al., 2005). The former is the rational type resulting from the ‘lack of choice’ (Gustafssion et al., 2005) while the other as Verheof (2003) defines, is the ‘psychological attachment from loyalty and affiliation.’ Affective commitment has a positive involvement in the retention of customers (Verheof, 2003). It was indicated that one of the underlying causes behind the development of the RM concept is the intensifying competition that fragmented more market niches and highly differentiated products so that there could be no effortless means to acquire prospective and (all the more) loyal customers. Loyal customers contribute to the efficiency of a firm economically and operationally (Parvatiyar & Sheth, 1995). Conclusion The evolution of the marketing thought clearly describes how consumers and humanitarian values slowly dominate as vital market forces. However there is a preexisting downside to this. The buyer will always haggle for the lowest price possible while the seller will always aim for the highest (Jackson, 1985 as cited in Webster, 1995). With the above-mentioned premise in case, even though relationships are in fact all a give-and-take affair, relationship marketing (being used as a standalone approach) will compel firms to resort to giving in to the customer’s favor in order to retain them. For this reason and in not adopting some of the essential cores the transactional concept, RM may not become a full-blown school of thought. References Anderson, K. & Kerr, C., 2002. Customer relationship management. USA: Mc-Graw Hill. Brookes, R. & Palmer, R., 2004. 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