Relationship Marketing Taxonomy 1

Running head: RELATIONSHIP MARKETING TAXONOMY

Relationship Marketing Taxonomy

Ed Jennings

University of Phoenix Relationship Marketing Taxonomy 2

Relationship Marketing Taxonomy

Marketing theory and author Timeframe Description of the Current use or theory influences The Innovation Diffusion The innovation The innovation The innovation diffusion model diffusion model wasdiffusion model is Model by Bass was first proposed created as a primarily used as a by Bass in 1969 mathematical model forecasting tool. and modified to forecast the Global product again in 2004. adoption rate of a managers want to Since then, new product or know how fast a suggestions have service. Essentially, new product can be been made for the diffusion is a adopted in their modification process of home country as based on a change communicating the well as other rate which new product or countries. In the changes the service to members early 1990’s Direct behavior of the of a similar social TV used the adoption rate system. There are innovation (Kapur, Singh, four main elements diffusion model to Anand, and to the diffusion forecast a five year Yadavalli, 2007). model which consistprojection of of: time; innovation:subscriptions which communication; andproved to be the social accurate. At US environment itself WEST / QWEST (Kapur, Singh, the innovation Anand, and diffusion model Yadavalli, 2007). was used to forecast the number of Internet yellow page searches when the Internet was in the infancy stage. Five forces of Competition The first referenceThe work done by Siaw and Yu Framework by Michael Porter to Michael Porter strategized (2004), wrote an Porter’s five five determinants article on the forces of for long-term impact of the competition profitability. The Internet within the framework was first determinant is banking industry. mentioned in the rivalry among The Internet 1979. However, competitors within provides both the first an industry. This benefits and threats. publication can range from The barrier of entry outlining subdued to vicious. is reduced because techniques for The second Internet banking Relationship Marketing Taxonomy 3

analyzing determinant is the does not require industries and threat of new brick and mortar competitors was competition. The buildings. The published in 1980 ability of a new Internet has forced (Goett, 1999). competitor to enter banks to look for the market is additional partially based on segmentation the barriers to entry. opportunities and Substitute products customer are the next relationships. consideration. If the customer has many choices, there is more competition. The final two forces deal with the bargaining power of buyers and suppliers. Based on their ability to negotiate the prices, services provided, or extra services such as storing inventory. This will have an effect on the five forces competitive framework (Goett, 1999). Market-Oriented Ethnography Arnould and The phrase market- Market-oriented by Arnould and Wallendorf Wallendorf used oriented ethnography is used the phrase market-ethnography is used to observe people oriented to describe the dealing with ethnography in behavior of people products and 1994 in the market for a service in the product or service context of strangers and the who do not conversations they represent a threat to have with strangers, the anonymity of taking into account conversation. the surroundings, in Additionally, the context of the positive and conversation. Therenegative comments are three main can be placed in the stages of analysis. context of what was Relationship Marketing Taxonomy 4

The first stage is to happening at the examine the moment. Also extensive field notescontext specific and massive amountstimuli can be of data. The second observed. A report stage is to identify was conducted on themes and rail travel. An categories which example of context were behavioral in based stimuli was a nature and took passenger asking a place between stranger to wake strangers. The third them up when they phase was to arrived at a certain develop the links stop. Another between the example of market- concepts, indicators oriented and context of the ethnography was a comments between woman who strangers regarding purchased a cup of products or services.coffee but the lid was not placed properly on the top of the cup resulting in frustration that the coffee could have spilled on her. The woman commented to a stranger this was her biggest frustration with purchasing coffee at the particular coffee shop. Conjoint Analysis by Luce, Conjoint analysis Conjoint analysis is The benefit of Tukey, Green, Rao, Johnson, has had several a methodology for conjoint analysis is Westwood, Lunn, and significant exploring how to infer the buyers’ Beazely. contributors. Mostconsumer’s trade- attributes and worth of the credit for off attributes when when making a conjoint analysis making purchasing purchasing is given to Green. decisions from decision. An The origins began competing application of in 1964 in suppliers. conjoint analysis mathematical was Courtyard by Psychology where Marriott. Marriott Luce and Tukey wanted to create a Relationship Marketing Taxonomy 5

published a paper new hotel chain. about collecting They evaluated 160 data based on rank attributes of staying score at a hotel. Users measurement. were asked to make Green began tradeoffs. The running many project was a experiments in the success and by late 1960’s. 1990, Marriott had Ultimately, Green 300 Courtyard and Rap published hotels (Green, their findings in Krieger, and Wind 1969 which (2001). appeared in a marketing journal in 1971. Later, Johnson, Westwood, Lunn, and Beazley published articles on trade-off models using two attributes (Green, Krieger, and Wind (2001). Affinity Marketing by Macchiette There are three In the 1990’s Macchiette and Roy andRoy published concepts which Mastercard hosted a a seminal paper constitute the idea sports team affinity around the of affinity card worldwide concept of affinitymarketing. First, consistingof 15,000 marketing there is the nature ofmembers. The card programs in 1992. the affinity group had a picture of the Further research whom would be customers’ favorite in this area is interested in the team on the card. recognized by specific affinity The typical attrition Swaminathan and program. There can rates for other cards Reddy in 2000 be different levels were 31% (Woo, Fock, and of affinity and compared with only Hui 2006). interaction. The 5% for the second aspect is MasterCard affinity some element card during the membership testing period requirement. This (Woo, Fock, and reflects a higher Hui 2006). degree of affiliation. The third aspect Relationship Marketing Taxonomy 6

refers to the interrelationships between the institution and members. If a member is part of the affinity group they receive a benefit from the institution (Woo, Fock, and Hui 2006). Prospect Theory by The concept of The basic British Airways Kahneman and Tversky prospect theory assumption is offered a lower was first consumers are not price to fly into an introduced in very good with airport which was 1979. This statistics or math. much further away concept deals withPeople tend to use from London. incorporating rules of thumb to British Airways consumer answer such then raised the price psychology into questions. So, when for flights into pricing decisions deciding to Heathrow. People (Shoemaker, purchase a product paid the higher 2005). or service, the price and British consumer Airways made determines from a money in a year neutral point when several other whether the carriers lost money purchase will create (Shoemaker, 2005). a positive or negative change of well-being in their lives. Kahneman and Tversky furthered their research in 1981 by outlining the consumer frame of reference is based on two basic considerations: how they formulate the problem; and the norms, habits, and typical characteristics of Relationship Marketing Taxonomy 7

the consumer (Shoemaker, 2005). Word of Mouth Marketing by Arndt and Ditcher Arndt and Ditcher Fashion designers Arndt and Ditcher first developed thecreated the first list starting out such as concept of word of factors as to why Zac Posen often use of mouth people engage in word of mouth to marketing in the word of mouth launch their 1966-1967 advertising. First, is businesses. timeframe to reduce confusion. (Cheung, Anitsal, Second, is being and Anitsal, involved with the 2007). product itself. Third, is self- involvement. Fourth, is to help others and fifth, is to enhance relationships (Cheung, Anitsal, and Anitsal, 2007). Customer reacquisition by In 1999, Stauss Customer In 2001, BellSouth Stauss and Friege and Friege define relationship was losing customer management has be customers at a rate reacquisition as a hot topic for the of 29,000 lines per losing a customer last 10 years. The month. By the first then rebuilding basic premise is half of 2003, the relationship establishing a BellSouth had won with the customer relationship with a back 26,000 (Tokman, Davis, customer and previously lost and Lemon, finding the best lines. Through high 2007). ways to make that economic benefit, a customer loyal. company has a Stauss and Friege 60%-70% focused on a probability of customer who has winning back a been lost and previously lost reacquiring them as customer. This a returning compares to a customer (Tokman, success rate of 5% Davis, and Lemon, to 20% success rate 2007). of selling a new buyer. Comprehensive Product Tellis and CPEC was closely The Internet has Evolutionary Cycle (CPEC) Crawford aligned with chaos been a rapid and by Tellis and Crawford proposed the theory which is chaotic change for CPEC model in designed to explain many businesses. Relationship Marketing Taxonomy 8

1981. This theory the rapid innovation Whether the topic is was based on and evolution of banking, printing, natural sciences markets based on yellow pages, or models which new technology. medical advice, the explain The advancement ofInternet has played transformation technology can a role in from simple to change the evolutionary and complex. In competitive chaotic change. 1991, Achrol landscape very suggested that quickly. Outcomes technology can of chaos theory as remove traditional applied to CPEC are geographic innovation, market boundaries and niches, diversity, evolve alliances, organizations acquisitions, and (Doherty and uncertainty in long- Delener, 2001). term forecasting. The three key elements of chaos theory are Nonlinearity, system states and how things are ordered when they emerge (Doherty and Delener, 2001). Dynamic pricing in Internet Dynamic pricing Dynamic pricing is With the increase in Retail by Shepherd 1997 is a concept whichperceived to be Internet users and has been inherently good for database sizes, discussed by the business. More more companies are Shepherd since current research has experimenting with 1997. As the show if customers changing pricing in Internet offers find a lower price the Internet more for a product or environment. transparency, service on the same Amazon.com found customers are web site, they are consumers to be more informed frustrated and frustrated and (Garbarino and disenchanted complain if they Lee, 2003). (Garbarino and Lee, found a lower price 2003). after they had purchased something from the company (Garbarino and Lee, 2003). So, while the Relationship Marketing Taxonomy 9

ability exists to change the prices quickly on the Internet, consumers feel taken advantage of if the price is lower after they have made their purchase (Garbarino and Lee, 2003).

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