Relationship Marketing The Chartered Institute of Marketing/Butterworth-Heinemann Marketing Series is the most comprehensive, widely used and important collection of books in marketing and sales currently available worldwide. As the CIM’s official publisher, Butterworth-Heinemann develops, pro- duces and publishes the complete series in association with the CIM. We aim to provide definitive marketing books for students and practitioners that promote excellence in marketing education and practice. The series titles are written by CIM senior examiners and leading market- ing educators for professionals, students and those studying the CIM’s Certificate, Advanced Certificate and Postgraduate Diploma courses. Now firmly established, these titles provide practical study support to CIM and other marketing students and to practitioners at all levels. 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Hart Practice of Public Relations (fourth edition), Sam Black Profitable Product Management, Richard Collier Relationship Marketing, Martin Christopher, Adrian Payne and David Ballantyne Relationship Marketing for Competitive Advantage, Adrian Payne, Martin Christopher, Moira Clark and Helen Peck Retail Marketing Plans, Malcolm McDonald and Christopher Tideman Royal Mail Guide to Direct Mail for Small Businesses, Brian Thomas Sales Management, Chris Noonan Trade Marketing Strategies, Geoffrey Randall The Fundamentals of Corporate Communication, Richard R. Dolphin Relationship Marketing Strategy and implementation Helen Peck, Adrian Payne, Martin Christopher, Moira Clark Published in association with The Chartered Institute of Marketing OXFORD AUCKLAND BOSTON JOHANNESBURG MELBOURNE NEW DELHI Butterworth-Heinemann Linacre House, Jordan Hill, Oxford OX2 8DP 225 Wildwood Avenue, Woburn, MA 01801-2041 A division of Reed Educational and Professional Publishing Ltd A member of the Reed Elsevier plc group First published 1999 © Helen Peck, Adrian Payne, Martin Christopher and Moira Clark 1999 All rights reserved. No part of this publication may be reproduced in any material form (including photocopying or storing in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication) without the written permission of the copyright holder except in accordance with the provisions of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London, England W1P 9HE. Applications for the copyright holder’s written permission to reproduce any part of this publication should be addressed to the publishers British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 0 7506 3626 2 Typeset by Avocet Typeset, Brill, Aylesbury, Bucks Printed and bound in Great Britain by Biddles Ltd, Guildford and King’s Lynn Contents Foreword ix Acknowledgements xi Biographies xiii 1 Relationship marketing: The six markets framework 1 Introduction 1 The Six Markets model 4 Further perspectives 11 The Six Markets model revised 22 More questions of priority and structure 23 Experience in using the Six Markets model 26 Summary 28 References 28 2 The customer market domain: Managing relationships with buyers, intermediaries and consumers 33 Introduction 33 Buyers, intermediaries and consumers 34 Segmentation and analysis of the customer market domain 37 The decision-making unit 42 Customer acquisition and customer retention 43 Summary 51 References 52 Chapter 2 case studies 53 Case 2.1 Nestlé Buitoni: The house that mamma built 64 Case 2.2 Carlton Electronics 75 Case 2.3 Does Tesco hold all the cards? 79 Case 2.4 Rover Cars: The Catalyst and Conquest ’91 direct marketing programmes 97 Case 2.5 Direct Line Insurance Plc 111 vi Contents Case 2.6 Relationship marketing: The RSPB – a bird in the hand 127 3 The supplier and alliance market domain 161 Strategic outsourcing 165 Supplier development 166 Supply chain management 168 Creating win–win relationships in the supply chain 171 Creating successful alliances 173 References 177 Chapter 3 case studies 178 Case 3.1 Supplier relationships at Trico 182 Case 3.2 Cafédirect™: The building of a unique coffee brand 196 Case 3.3 Transvaal Nickel Mines 208 4 The referral and influence market domains 220 Introduction 221 The referral market domain 222 The influence market domain 235 Summary 246 References 246 Chapter 4 case studies 247 Case 4.1 Ratners: A case of corporate reputation 253 Case 4.2 Fisons: The fall from grace 268 Case 4.3 The Body Shop International: The most honest cosmetic company in the world 288 5 The recruitment and internal market domains 301 Introduction 302 The recruitment market domain 304 The internal market domain 312 References 325 Chapter 5 case studies 328 Case 5.1 Club Med 335 Case 5.2 Euro Disney: The first 100 days 351 Case 5.3 Nordstrom Inc. 375 Case 5.4 Digital Equipment Corporation: Counting the real cost of employee turnover 402 Contents vii 6 Creating and implementing relationship marketing strategies 406 Introduction 407 People 408 Processes 408 Proactive/personalized service 409 What sort of relationships with what sort of customers? 410 Developing a six market strategy 416 The relationship marketing plan 418 The relationship management chain 419 Defining the value proposition 421 Identifying appropriate customer value segments 421 Designing value delivery systems 421 Managing and maintaining delivered satisfaction 422 Organizational issues 423 Making it happen 424 References 428 Chapter 6 case studies 429 Case 6.1 Relationship marketing: Lessons from Laura Ashley 432 Case 6.2 Creating success through relationship marketing at British Airways 454 Index 501 This Page Intentionally Left Blank Foreword This book completes a trilogy that began in 1991 with Relationship Marketing, which was one of the first attempts to define the newly emerging concept from which the book took its name. Following this in 1995 the current team of authors produced a companion volume of selected readings, Relationship Marketing for Competitive Advantage. These readings were chosen to provide a broad, multi- faceted view of the by now rapidly developing arena of Relationship Marketing. Such has been the interest amongst teachers and students of Relationship Marketing that we felt it appropriate to augment these first two volumes with a third, this time constructed around a number of case studies and case histories. The framework used within this book is a modified version of the ‘Six Markets’ model, first advanced in the original Relationship Marketing. This simple but practical framework suggests that there are a number of market domains as well as the final marketplace that must be addressed if long-term profitability is to be assured. Since the development of the original Six Markets model, the authors, their colleagues and students have used this framework as the basis for assessing the extent to which true, pan-company rela- tionship marketing strategies are applied in the world of business. It has proven to be a powerful diagnostic tool, capable of aiding the development of successful relationship marketing strategies by highlighting potential weaknesses in one or more of the market domains and the stumbling blocks that may arise as a result of such neglect. The Six Markets model, though continually evolving, has been used by the authors and their students in over 50 real world applications. During this time the framework has demonstrated its merits through the insights it provides, establishing its worth as a practical analytical tool to explain and predict success or failure in the marketplace. x Foreword The book itself takes the reader first through an exploration of the Six Markets model and its development from inception to date. The contributions of other leading academics working towards similar frameworks