FACULDADE DE ECONOMIA UNIVERSIDADE DO ALGARVE Relationship Marketing and Consumer Behavior In Fast-Moving Consumer Goods João Manuel Pinto e Castro Thesis presented to obtain a doctoral degree in Management (Ramo de Gestão, especialidade de Marketing) Supervisor: Prof. Eduardo Casais May, 2006 FACULDADE DE ECONOMIA UNIVERSIDADE DO ALGARVE Relationship Marketing and Consumer Behavior In Fast-Moving Consumer Goods João Manuel Pinto e Castro Thesis presented to obtain a doctoral degree in Management (Ramo de Gestão, especialidade de Marketing) Supervisor: Prof. Eduardo Casais May, 2006 DEDICATION To my parents. To my wife. To my children. i TABLE OF CONTENTS CHAPTER 1 ................................................................................................................................................1 INTRODUCTION .....................................................................................................................................1 1.1 - BACKGROUND TO THE RESEARCH.....................................................................................................1 1.2 – RESEARCH PROBLEM...................................................................................................................................4 1.3 – JUSTIFICATION FOR THE RESEARCH..................................................................................................7 1.4 – METHODOLOGY............................................................................................................................................8 1.5 – OUTLINE OF THIS THESIS.......................................................................................................................11 1.6 – DELIMITATIONS OF SCOPE AND KEY ASSUMPTIONS .............................................................14 1.7 – CONCLUSION.................................................................................................................................................16 CHAPTER 2..............................................................................................................................................17 THE NEW PARADIGM OF RELATIONSHIP MARKETING: CONCEPTS AND THEORIES .17 2.1 - INTRODUCTION............................................................................................................................................17 2.2 – FROM TRANSACTIONAL TO RELATIONSHIP MARKETING: THE CASE OF THE AUTOMOTIVE INDUSTRY.........................................................................................................................18 2.2.1 – Ford Motors....................................................................................................................................................18 2.2.2 - General Motors...............................................................................................................................................22 2.2.3 - Toyota ...............................................................................................................................................................26 2.3 – THE NEW MARKETING ENVIRONMENT.........................................................................................29 2.3.1 - More knowledgeable and demanding customers .....................................................................................29 2.3.2 - Segmentation of markets and product proliferation................................................................................30 2.3.3 - Bargaining power of retailers........................................................................................................................32 2.3.4 - Media fragmentation and saturation ...........................................................................................................33 2.3.5 – Mass customization .......................................................................................................................................35 2.3.6 – The application of information technologies to marketing...................................................................36 2.3.7 – Emergence of interactive communications ..............................................................................................38 2.4 – KEY CONCEPTS OF RELATIONSHIP MARKETING......................................................................39 2.4.1 - Definitions........................................................................................................................................................39 2.4.2 - Motivations for the adoption of relationship marketing ........................................................................41 2.4.3 - Operational definitions of brand loyalty ....................................................................................................43 2.4.4 - Customer lifetime value (CLTV) .................................................................................................................46 2.4.5 – Differentiation and segmentation of the customer base........................................................................48 2.4.6 - Moments of truth............................................................................................................................................52 2.4.8 – The Customer Relationship Cycle..............................................................................................................53 2.4.9 - The strategic process of relationship marketing.......................................................................................56 2.5 – APPLICATIONS OF RELATIONSHIP MARKETING .......................................................................58 2.5.1 – Relationship Marketing programs in practice...........................................................................................58 2.5.2 - Relationship marketing in consumer markets...........................................................................................60 2.5.3 - Typology of relationship marketing programs..........................................................................................63 2.6 - CRITICISM OF RELATIONSHIP MARKETING ..................................................................................65 2.6.1 – Dubious benefits of relationship programs..............................................................................................65 2.6.2 – Customers’ unwillingness to get involved.................................................................................................66 2.6.3 – Role and cost of rewards..............................................................................................................................67 2.6.4 – Unrealistic assumptions ................................................................................................................................68 2.7 - CONCLUSION..................................................................................................................................................68 CHAPTER 3..............................................................................................................................................71 TWO CONFLICTING MARKETING THEORIES ............................................................................71 3.1 – INTRODUCTION...........................................................................................................................................71 3.2 – MARKETING AS PRACTICE .....................................................................................................................72 i 3.2.1 – The origins ......................................................................................................................................................72 3.2.2 – The massification of distribution................................................................................................................72 3.2.3 – The diffusion of the new commercial practices.......................................................................................73 3.2.4 - The Procter & Gamble story........................................................................................................................74 3.2.5 – Distinctive features of modern marketing ................................................................................................76 3.3 – MARKETING AS THEORY ........................................................................................................................78 3.3.1 – Marketing as a specialized discipline ..........................................................................................................78 3.3.2 – The contribution of Wroe Alderson..........................................................................................................80 3.3.3 – The marketing concept and marketing management..............................................................................83 3.4 – THE COGNITIVE THEORY OF BUYER BEHAVIOR......................................................................85 3.4.1 – The first models of buyer behavior............................................................................................................85 3.4.2 – The emphasis on the decision process in the Howard-Sheth model ..................................................87 3.4.3 – Attitude and behavior ...................................................................................................................................89 3.4.4 – The formation of attitudes...........................................................................................................................90