Relationship Marketing

Home , Can We Still Be Friends

Relationship Marketing Gaining Competitive Advantage Through Customer Satisfaction and Customer Retention Springer-Verlag Berlin Heidelberg GmbH Thorsten Hennig-Thurau . Ursula Hansen Editors

Gaining Competitive Advantage Through Customer Satisfaction and Customer Retention

With 80 Figures and 24 Tables

Springer Dr. Thorsten Hennig-Thurau Prof. Dr. Ursula Hansen University of Hannover Department of Marketing Koenigsworther Platz 1 30167 Hannover Germany

ISBN 978-3-642-08622-9 ISBN 978-3-662-09745-8 (eBook) DOI 10.1007/978-3-662-09745-8

Library of Congress Cataloging-in-Publication Data Die Deutsche Bibliothek - CIP-Einheitsaufnahme Relationship marketing: gaining competitive advantage through customer satisfaction and customer retention; with 24 tables 1 Thorsten Hennig-Thurau; Ursula Hansen, ed. - Berlin; Heidelberg; New York; Barcelona; Hong Kong; London; Milan; Paris; Singapore; Tokyo: Springer, 2000

This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illus trations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer-Verlag. Viola tions are liable for prosecution under the German Copyright Law.

The use of general descriptive names, registered names, trademarks, etc. in this publica tion does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Hardcover-Design: Erich Kirchner, Heidelberg SPIN: 10865698 43/3111 43 2 Printed on acid-free paper PREFACE

The concept of marketing and managing relationships with customers and other interest groups is at the core of marketing today. In the academic world, the topic is covered in special issues released by numerous journals (e.g. Journal of the Academy of Marketing Science, Journal of Strategic Marketing, Psychology & Marketing), and conferences and conference sessions regularly discuss the advantages of the approach. But relationship marketing is not limited to theory. On the contrary, no service firm or business-to-business company can now do without some form of long-term orientation, and all have implemented at least some elements of the relationship market ing concept. Even in the consumer goods sector, there are a growing number of cases where the traditional orientation towards brand equity is being complemented by a relational focus. As Berry has mentioned, relationship marketing is a "new old" concept. Several important aspects of relationship marketing were already being discussed in the marketing literature. This applies both to central constructs (such as customer satisfaction) and to single elements (such as the management of complaints and after-sales services). Although they do not involve explicit mention of the term relationship VI Preface

marketing, a long-term orientation can be found in the network approach of industrial marketing (closely related to the work of the IMP Group), in the work of Gronroos, Gummesson and their colleagues at the Nordic School of Services Marketing and, last but not least, in the concept of customer-focused marketing. The latter concept has seen intensive discussion of topics like customer satisfaction, complaint management and consumer affairs departments since the early 1980s, mostly by German authors (Hansen, Stauss, Schoenheit), but also by researchers from the US and other countries (Goodman, Wikstrom). It was in the summer of 1998 that the Society of Consumer Affairs Professionals in Business asked us to organize a conference which would represent recent developments in relationship marketing theory and practice. Several of the chapters in this book are inspired by presentations made at this conference. We also invited some other leading authorities from the field of relationship marketing to add their own ideas on the management of relationships. The final book now contains the work of 29 authors and is organized into 23 chapters and 7 parts. In essence, it presents and analyzes the state-of-the-art of rela tionship marketing. In doing so, the book addresses four key objectives: First, we want to provide a comprehensive overview of the main findings of relationship marketing theory. We believe that this integration of knowledge is vital, as the research field is becoming increasingly fragmented. In addition, such an overview will help readers new to the relational concept to understand the basic concepts and principles. Second, we want to contribute to the further development of the field. Some of the aspects considered in detail in this book have only been given peripheral treatment in previous research and literature. Third, the inclusion of several case reports and practical examples reflects our wish to highlight how relationship market ing theory has been transferred into business practice. These particular contributions will hopefully be seen as a kind of feedback to theorists and may help to identify misunderstand ings, gaps in understanding and future research areas with more practical relevance. In addition, they may serve as benchmarks for practitioners from those firms which have yet to fully implement the relationship marketing approach. Finally, this book seeks an international perspective, not only through the subjects of those chapters written by Palmer and Botschen, but also through the nationalities of the book's Preface VII

contributors. The authors come from Germany, the United States, the United Kingdom, Finland, Canada, and Austria. We very much hope that this book will help overcome (or at least reduce) the existing gap between German and international research on relationship marketing. Of course, such a project is a collaborative venture, requiring the help and support of many individuals. We thank the authors for their tremendous efforts, which truly are the book. We are also especially grateful to Daniel Bornemann, who contributed enormously by organizing the layout of the manuscripts. It was a pleasure to work with Mark Brownlow, who helped us with the book's language and who proved a creative, flexible, and (most importantly) extremely competent guide. Our gratitude also to Carmen Triesch, who was an inspiring and effective partner in the planning and realization of the conference which served as a starting point for this publication, and to Christian Sunderdiek for helping us to conjure up an image of Stephen Brown, international man of mystery. Our final thanks go to Martina Bihn at SPRINGER, whose cooperation and help was greatly valued. The relationships we have developed with all these people are definitely worth intensifying in the future.

Thorsten Hennig-Thurau Ursula Hansen CONTENTS

Preface v

Part A Basic Issues in Relationship Marketing 1

Chapter 1 Relationship Marketing - Some Reflections on the State-of-the Art of the Relational Concept 3 THORSTEN HENNIG-THURAU AND URSULA HANSEN

1. 1ntroduction 3 2. Where We are Today: Important Findings 4 3. Looking Ahead: Some Emerging Perspectives 12 4. Concluding Remarks 18

Chapter 2 Customer Loyalty: Fata Morgana or Realistic Goal? Managing Relationships with Customers 29 HERMANN DILLER

1. Loyalty and Relationship Marketing 29 2. Conceptualization of Customer Bonding and Loyalty 30 3. The Economic Effects of Customer Loyalty 31 4. The Quality of Loyalty 33 5. The Degree of Loyalty: Empirical Impressions 36 X Contents

6. Motivators and Demotivators of Loyalty 39 7. Principles of Relationship Marketing 43

Chapter 3 Relationship Marketing at VOLKSWAGEN 49 KLAUS CHOJNACKI

I. Introduction 49 2. Ident!fying the Needfor Relationship Marketing: From Product Orientation to Customer-Driven Change 50 3. Quality not Quantity - What Kind of Information is Neededfor Relationship Marketing? 5 I 4. Giving Customers Reasons to Stay Loyal 53 5. The VOLKSWAGEN Club and Card Concept: Managing Relationships on a One-to-One Basis 53 6. Effective Database Management Must be Part of Relationship Marketing 55 7. Conclusion 58

Chapter 4 Relationship Marketing at LOEWE OPTA 59 OLIVER Hupp

1. A Brief Introduction to LOEWE OPTA 59 2. Relationship Marketing - The LOEWE Perspective 60 3. Summary and Outlook 67

PartB Strategic Options in Relationship Marketing 69

Chapter 5 Patronage and Loyalty Strategies: Understanding the Behavioral and Attitudinal Outcomes of Customer Retention Programs 71 ROBERT M. MORGAN, TAMMY N. CRUTCHFIELD AND RUSSELL LACEY

I. Introduction 72 2. Retention Programs and Sustainable Competitive Advantage 74 Contents XI

3. Behaviors vs. Attitudes: The Implicationsfor Customer Loyalty 76 4. The Relationship-Based Customer Retention Program: Building Trust and Loyalty Through the Economic, Resource, and Social Content of Marketing Relationships 78 5. The Outcomes of Customer Retention Programs 81 6. Conclusions 83

Chapter 6 Closeness in Customer Relationships: Examining the Payback from Getting Closer to the Customer 89 JAMES G. BARNES

1. Introduction 89 2. Customer Relationships 91 3. Research Propositions 94 4. Methodology and Operationalization 94 5. Results 96 6. Conclusions and Implications 100

Chapter 7 Relationship Marketing Success Through Investments in Services 107 ANTON MEYER AND CHRISTIAN BLUMELHUBER

1. About a Little Bicycle Shop and a Great Model: "Let WAL MART Come - I'm Ready" 107 2. Customer Loyalty: The Term and its Use 109 3. Value-Added Services and their Contribution to Customer Loyalty 112 4. Selected Strategic Questions: "Which" and "How" 115 5. Conclusion: Is Service the Most Important Factor? 122

Chapter 8 Relationship Marketing Success Through Investments in Customers 127 THORSTEN HENNIG-THURAU

1. Introduction 127 2. The Concept of Investments in Customers: Increasing Customer Skills 129 XII Contents

3. The Influence of Increased Customer Skills on Relationship Quality in Marketsfor Consumer Goods 131 4. Empirical Results 136 5. Discussion of Results and Some Steps Toward the Development of a Broader Perspective 138 6. Summary and Outlook 140

Chapter 9 Relationship Marketing Success Through Investments in Products - The Case ofBSH 147 MATTHIAS LOHRUM

1. Product Design in the Era of Relationship Marketing: Where We Stand Today 147 2. User-Friendly and Barrier-Free Products for All: Using "Handicapped" Individuals as a Reference Point 149 3. BSH Opinions and Objectives 149 4. Establishing BSH Benchmarks 151 5. Implementation in Product Design /54 6. Conclusion 156

Parte Personnel as a Key to Relationship Marketing Success 159

Chapter 10 The Importance of Internal Relationship Marketing for External Relationship Success 161 VERONICA LIL.lANDER

1. Background 161 2. Customer Relationships 164 3. Employee Relationships 169 4. Discussion 184

Chapter 11 Internal Marketing and its Consequences for Complaint Handling Effectiveness 193 KURT JESCHKE, HENNING S. SCHULZE AND JACK BAUERSACHS Contents XIII

i. Conceptual Framework i93 2. Complaint Management and internal Marketing: The Expression of a Customer and Employee-Oriented Marketing Concept i95 3. internal Marketing Approaches for Promoting Effective Complaint Management 206 4. Conclusion 212

Chapter 12 Gaining Customer Satisfaction Through the Empowerment of Service Personnel in Retailing Organizations 217 STEFAN DAHLE

1. Customer Satisfaction and Customer Retention in Chain Store Trading Companies 217 2. Service Personnel as important Customer Contact inteifaces 220 3. Personnel Flexibility and Competence in Handling Customers Through Empowerment 222 4. Dedicated implementation of Customer-Oriented Personnel Management: The Example of DM-DROGERIEMARKT 223 5. Conclusions 228

PartD Information and Communication Technologies: The Heart of Relationship Marketing? 231

Chapter 13 Using New Media for Customer Interaction: A Challenge for Relationship Marketing 233 BERND STAUSS

i. introduction 233 2. Structuring New Media 234 3. Management-Controlled Electronic Communication 236 4. Customer-Controlled Electronic Communication: internet Customer Communication 24i 5. Summary 25i XIV Contents

Chapter 14 Enterprise Customer Management: Integrating Corporate and Customer Information 255 HENNING AHLERT

1. Introduction 255 2. Assessment of the Situation 256 3. Opportunities that Can Be Supported by Technology 258 4. Identifying the Gaps 262 5. Moving Towards the Implementation of ECM 264

PartE International Dimensions of Relationship Marketing 269

Chapter 15 Cultural Influences on Relationship Marketing 271 ADRIAN PALMER

I. Introduction 271 2. Can There be a General Theory of Relationship Marketing? 272 3. Relationship Marketing and Economic Development 272 4. Exchange Mechanisms 274 5. Adapting Ways of DoinfJ Business in Foreign Markets 275 6. Conclusions 276

Chapter 16 Internationalization of Encounter-Based Relationship Strategies 279 GUNTHER BOTSCHEN

1. Introduction 279 2. Encounters - The Ultimate Foundations of Relationship Marketing 281 3. The Type of Encounter and its Influence on the Development of Relationships with Customers 282 4. The Internationalization ()j'Encounter-Based Relationship Strategies 287 5. Summary 293 Contents xv

PartF Relationship Marketing from a Services Marketing Perspective 297

Chapter 17 Services Relationship Marketing: A Sector Case Study 299 ADRIAN PAYNE AND PENELOPE FROW

1. Introduction 299 2. Changes in the Utilities Sector 300 3. The Utilities Market 301 4. Relationship Marketing and the Utilities Sector 304 5. The Role of Customer Retention in Relationship Marketing 307 6. Customer Retention Economics for Utilities: A Case Study 308 7. Discussion 313

Chapter 18 Customer Relationship Marketing in the Airline Industry 317 REINHOLD RAPP

1. Customer Orientation in the Airline Industry 317 2. The Role of Relationship Marketing 319 3. Relationship Marketing in the Airline Industry 321

Chapter 19 The Close Connection Between Relationship Marketing and Marketing Research: The GLOBUS Experience 333 BENNOBRILL

1. Introduction 333 2. An Overview of GLOB US 334 3. Company Structure Helps Drive Customer Orientation 334 4. Customer Loyalty through Dynamic Customer Orientation 335 5. Toward Total Customer Orientation: the "Customer Satisfaction" Project Group 342 XVI Contents

Part G The Pitfalls and Limitations in Relationship Marketing: Some Critical Issues 351

Chapter 20 Relationship Marketing from a Consumer Policy Perspective 353 GUNTHER ROSENBERGER

1. Introduction: Marketin!; from a Consumer's Perspective 353 2. The Voice of Consumer Policy 356 3. What is a Customer? 357 4. Limitations of Relationship Marketing 360 5. What Consumers Want 363 6. What Business Can Do 365

Chapter 21 Why Customers Build Relationships with Companies - and Why not 369 THORSTEN HENNIG-TnURAU, KEVIN P. GWINNER AND DWAYNE D. GREMLER

1. Introduction 369 2. A General Model of Relationships between Companies and Customers 370 3. Customers' Beneflts and Barriers for Relationships: Literature Review and Integration 373 4. Customers' Relationship Benefits: A Segmentation Approach 380 5. Implications for Managing Relationships with Customers 386

Chapter 22 The Three Rs of Relationship Marketing: Retroactive, Retrospective, Retrogressive 393 STEPHEN BROWN

1. You Never Loved Me! 393 2. Where Did We Go Wrong? 395 3. Breaking Up is Hard to Do 396 4. Who'll Take Care of the Children? 401 5. Can We Still be Friends? 404 6. Try, Try Again! 407 7. Tragedy or Farce? 409 Contents XVll

Chapter 23 Lost in Relationship-Marketing Space: The Limitations of Relationship Marketing from the Perspective of the Consumer 415 URSULA HANSEN

1. The Development and Importance of Relationship Marketing 415 2. The Costs and Benefits of Relationship Marketing for the Consumer 419 3. Selected Elements of a Relationship Typology 421 4. The Problems and Limitations of Relationship Marketing from the Perspective of the Customer 423 5. Conclusions 430

Subject Index 437

Brand / Company Index 447

About the Contributors 451