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Published: Mon, 5 Dec 2016
For Wingate systems to work, a relationship marketing model can be used via e-commerce to increase success. To most, it would seem late in the game to begin assessing whether continuous relationship marketing (CRM) can work in e-commerce. In the decade or so since the issue first arose, several things have become apparent, not least of which is that simply segmenting a market to serve different populations of customers, especially online customers, is inadequate. In fact, relationship marketing has been defined, since the 1980s, as “attracting, maintaining, and–in multi-service organizations–enhancing customer relationships,” (Stern, 1997) In addition, “the reality of customers’ forming relationships with people rather than [with] goods” is what drove it, and made it a key source of benefits to the firm. (Stern, 1997)
For traditional relationship marketing to work as it should in any organization, all other business parameters also need to be in place. Recently, this has been identified in a forward-looking model as a “holistic, dynamic and dialectical” model. (Chang, 2004) Not surprisingly, this model was developed in an Asian developing economy context. The author noted that local firms in developing countries need to be creative in developing e-business strategies because they are operating in under-developed e-business environments. It that is true for relationship marketing success in developing countries, it should, therefore, be even more valuable to mature organizations operating in mature business environments.
E-business is sometimes identified as the “convergence of digital technology, intellectual property and customer supremacy” (Chang, 2004) and it emphasizes the interconnectedness of both the hardware and human capital functions within any company that wants to be successful in using CRM in an e-business environment. Done right, it will transcend “the traditional boundaries of space, time, individuals and organizations.” (Chang, 2004)
Despite the dot-com failures of the recent past, few would doubt that e-business is a main driver of the new and future economy globally. It is also safe to assume that relationship marketing began its development when bricks-and-mortar businesses were able to operate without substantial Internet presence. Then, it was ‘relationship’ marketing, and depended on such things as ‘personal bankers,’ and ‘personal shoppers,’ and arguably, within each organization that had added the relationship marketing function, it was viewed as a ‘must have’ but with little relative impact on the bottom line.
However, three things entered the business arena that made it paramount for relationship marketing to become both continuous (CRM) and integrated into the business structures. Those three things were the development of digital technologies, the importance of intellectual property, and “customer supremacy,” defined as customization of product/service and reduced cycle time. (Chang, 2004)
E-business has altered prior relationships so that the complex of digital technology, intellectual property and customer supremacy when integrated with business activities makes conventional rules of business obsolete. “E-business seems to have the capability to change the competitive landscapes in the traditional industries, create new industries, and affect the configuration and coordination of firm-level business activities, especially such external activities as customer relationship management…..” (Chang, 2004) Companies that use e-commerce successfully within the holistic CRM paradigm will necessarily have integrated all these elements rather than treating each as a separate profit center or line item, with convergence merely found on the balance sheet and not in the conduct of the business itself.
Organizational form, business model and strategy have been considered the framework of commerce. In the holistic viewpoint, there are only two factors, business configuration and business coordination. In this context, business configuration is used to mean the scope of business coverage by a company, what was once known as strategy. Business coordination refers to the style of business relationships both within a company and with its customers and suppliers. (Chang, 2004)
If these two components of business are used in a truly holistic manner, the result will be virtually zero distance between customers and suppliers, zero inventory and (near) zero working capital. In short, the relationship marketing function will have made the company—whether a product- or service-based business—into a simply go-between. The profit comes from performing the service of obtaining supplies that become product or service, ‘warehousing’ that product or service only minimally, and transmitting it to the customer. Obviously, the trick to it all is knowing the suppliers and customers well enough that there is no additional negotiation needed and order and payment change hands almost simultaneously. For this, e-commerce would seem ideally suited.
A second new thrust identified in relationship marketing is the intimacy model of relationship marketing. Personal sales, the traditional basis for relationship marketing, occur in real time. In some respects, so do e-commerce sales, with the difference that they are not happening in a ‘real place’ but rather a virtual storefront. That advertising—communication through a nonpersonal medium—is essential to e-commerce relationships brings into the equation the theory of intimacy. Some researchers regard evaluation of customer intimacy as a business concept as important as the holistic model. (Stern, 1997)
Intimacy theory “accounts for the influence of emotion in relationships as well as that of cognition (feelings as well as thoughts).” It also allows insight into the deterioration of relationships, and finally, it “emphasizes the association between relationship stages and persuasive communication that enhances the services firm’s ability to apply relationship management to advertising as well as to personal sales.” (Stern, 1997) Because e-commerce is a blending of all of these elements, but not in the presence of a ‘live’ intermediary, it may be useful to consider whether these factors are included in ecommerce relationship marketing today, or only in ‘bricks and mortar’ settings (Theodosiou, M. and Leonidou, L.C., 2003).
Five bases of intimacy in relationship marketing
Just as Chang identified two elements to the setting in which relationship marketing can occur and be holistic, Stern identifies five components of intimacy in relationship marketing (Vorhies, D.W. and Morgan, N.A., 2003).
Communication and sympathetic listening
This includes self-disclosure, a willingness to share personal or attitudinal information. In the relationship-selling arena, the communication will generally be one way, from customer to company.
The listener, in this case the company, must provide the sympathetic, that is, non-judgmental, listening. In that way, the customer reveals needs and desires and the company builds trust. So, “relationships in which a consumer tells all to a non-disclosing partner are perceived as intimate as long as the partner communicates a sympathetic attitude to what is being told.” (Stern, 1997) “Advertisements aimed at conveying sympathetic listening transform one-way media communication (that is, non-interactive messages) into a representation of responsiveness,” Stern adds. (1997) An example she gives is direct mail and online marketer Land’s End’s headline, “We’ll knock ourselves out for you.” The copy reads, “Ever since we started doing business back in 1963 . . . we’ve done our level best to satisfy our customers. So you can be sure that whenever you call, we’ll do whatever it takes to satisfy you, in our friendly Wisconsin way.” (Quoted by Stern, 1997)
Commitment: Bonding with Consumers.
A sense of “we’ness” is the belief that each member of a relationship is committed to the welfare of the other. (Stern, 1997) As a customer grows accustomed to positive responses in a business relationship, that feeling develops and they begin to say “my credit card company” or “my car dealership.”
Stern notes that bonding techniques are an increasingly popular marketing strategy for services marketers attempting to establish long-term bonds with consumers so they can be retained. By 1997, it had been ascertained that retention beat prospecting in terms of profitability. (Stern, 1997) This goes so far as to allow a firm to lose money, be design, on a particular transaction in order to retain the customer. In a credit-card relationship, this might include waiving a fee for a late payment when it was clearly an oddity in the customer’s usual behavior.
Caring and Giving
Altruism is the watchword here, and not demands for reciprocity, even though it is a ‘relationship.’ Companies carrying out relationship marketing can activate perception of this by basing decisions and reactions on a “needs rule rather than an equity rule” to establish a closer mental association. (Stern, 1007) This has been successfully used in financial services POS advertising. Chase Manhattan Bank used a message at the bottom of its ATM receipts that said, “Chase give you 6 other ways to connect.” (Stern, 1997) So, even though it was an impersonal, practically an online, setting, and the ‘reach out’ factor was present. But the appearance was that the bank cared enough about all users of its ATMs to offer the information, at least.
A consumer’s sense of security in a relationship is central to retention. In dealing with service firms, consumers have been found to “evaluate their level of comfort…. on the dimension of mutual engagement in a joint venture.” (Stern, 1997) The vocabulary of intimacy is used in advertising to create this image. For example, New England Life positioned itself as “Your Financial Partner,” and showed images of three-generations meeting, conveying an image of long-term relationships. (Stern, 1997)
Conflict Resolution and Trust
This is a sort of last-ditch tactic in any relationship-marketing program. Although at times conflict may be inevitable, even in a well-maintained relationship, conflict resolution and problem-solving abilities including skill in listening, negotiation, and conciliation are essential to maintaining relationship marketing. (Stern, 1997) How possible this is in an e-commerce setting, especially in a service such as credit, might be problematical. There must, then, be a mechanism to resolve conflicts satisfactorily (Doty, D.H., Glick, W.H. and Huber, 1993).
Campaigns: Advertising and Subscription
How does a not-so-well known company show what they have, or how does a known company attack new segments seeking more consumer attention? Since the rolls on the net became voiceovers, the consumer retrieves what it wants, and the producer has to be hunted. The advertising model is based on using creative advertising banners and links in very frequented web-pages. Some companies have successfully advertised their new products and services through this system making sure their ads are more creative and attractive for the roaming eyes of the consumer (Gupta, A.K. and Govindarajan, 1991). The biggest winner here though, is the page that offers that space. Search engines like Amazon or Yahoo have made big use of this model. All the services they offer (e.g. chats, games, e-mail, search engine etc.) are for free, charging companies for the use of space for ads on their Web-pages. The more frequented a page is the more it costs to display an ad. Companies starting to use this model are definitely at an advantage for their present position and the its cost. Wingate proposes to use this model to advertise its latest concepts and designs (DiMaggio, P.J. and Powell, W.W., 1993).
Wingate therefore plans to use the intimacy model and combine it with both the subscription model and the advertising model in order to market its product. The Subscription Model has become a very popular model with a high range of success. By subscribing in any service or company on the net, all your given information is stored on a special data base that is used to classify users. With this data-base that has all the records of visited products and purchases, the providers are able to target the visitors on a more personal basis. An example of this is Hotmail. Hotmail is not only one of the most popular, free e-mail services, but it also belongs to Microsoft. The new way to link the customer to the wanted page can also be manipulated by the new “Passport” system of Hotmail (Gresov, C. and Drazin, 1997). All the information given in subscription to Hotmail is automatically transferred to other services Microsoft offers. Say you entered, your hobby is to travel, therefore you will get e-mails about travel with new offers on where to fly, it also facilitates one with the advantage of not having to re-enter all their personal details all over again when subscribing in a new company run by Microsoft. This model is very powerful and it does not end there, consumers are followed through their life cycle becoming aware of what the company has to offer to the specific consumers. It is more likely that a father will consider the idea of a family insurance rather than a child. For the child, the company will target for example new bikes. This model divides the segments even further, making sure that the consumer feels special, with not costing much extra.
Therefore, it will be important to start a database of existing customers and retain their information in order to provide them with updates of Wingate’s latest offers and ideas. Furthermore, a website could be setup and advertised to allow individuals to know about this subscription service if they would like to sign up for information. More information about how this concept can be advertised overall is discussed below in the basic advertising model.
Wingate plans to budget $3000-$5000 for monthly advertising. The idea will be to run banner ads on various websites for a fee, and to also advertise on pay per click websites such as Google adwords. Other Internet marketing companies can also be hired to keep keywords high on the search engine lists. Below is a chart demonstrating this.
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DiMaggio, P.J. and Powell, W.W. (1993) ‘The iron cage revisited: institutional isomorphism and collective rationality in organizational fields’, American Sociological Review 48(2): 147-160.
Doty, D.H., Glick, W.H. and Huber, G.P. (1993) ‘Fit, equifinality, and organizational effectiveness: a test of two configurational theories’, Academy of Management Journal 36(6): 1196-1250.
Gresov, C. and Drazin, R. (1997) ‘Equifinality: functional equivalence in organization design’, Academy of Management Review 22(2): 403-428.
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Ohung, Sungmi and Mike Sherman. (2002). “Emerging Marketing: Companies don’t need state-of-the-art tools, huge volumes of customer information, and armies of experts to use continuous relationship marketing effectively.” The McKinsey Quarterly, 62+.
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