■ Developing relationships
There is a strong body of evidence supporting the economic case for relation-
ship marketing. For example, Reichheld and Sasser (1990) illustrate that rela-
tively minor improvements in customer defections can generate significant
improvements in profit. As relationships are built on mutual benefit, what
benefits does relationship marketing bring to customers? The approach typ-
ically benefits customersthrough: (i) requires marketers to have a much
closer understanding of customer needs and therefore provide more appro-
priate solutions to customer problems, (ii) may result in schemes rewarding
customer loyalty and (iii) fuses together all aspects of the business, making
the entire entity more customer focused and responsive to customer need.
Having clearly established the benefits of a relationship approach
organisations must consider, how they can move from transaction-based
marketing (focusing on single sales) to sustainable relationship-based
strategies? Common principles of relationship marketing are:
● Appropriate use: Like any technique, relationship marketing works bet-
ter in certain situations. Not all transactions are relational in nature.
For example, impulse buys or one-off purchases generally do not
require, or offer, scope to develop relationships. Indeed, attempts to
install a relationship approach in such circumstances may simply agi-
tate potential customers. Relationship strategies work well in high-
involvement purchases categorised by: (i) complex decision making,
(ii) a degree of risk associated with purchase, (iii) a requirement for
on-going support and/or (iv) regular purchase. To be worthwhile, the
additional revenue generated needs to exceed the cost of any relation-
ship programme. Organisations may well prioritise customers in
terms of relationship potential, with higher priority being given to cer-
tain segments or type of customer.
Alliances and relationships 237Illustrative Example 11.2
Costa Coffee: strategic relationships
Coffee has now become a hot market! Driven by changing lifestyle patterns and the popular-
ity of US TV shows featuring coffee houses (e.g. Friends, Frazer, etc.). The coffee market is
emerging as one of the fastest growing retail sectors.
The UK market leader Costa, owned by Whitbread, has embarked on programme of rapid
expansion. Strategic relationships with other parts of the Whitbread group are vital to building
the chain. David Thomas, Managing Director of Whitbread Restaurants and Leisure states, ‘In
addition to stand alone coffee retail outlets, we are developing opportunities for the brand in our
existing retail and leisure businesses’ (e.g. Marriott Hotels). Additionally, outlets are opening in
airports and railway stations. By building working relationships with other outlets, Costa is well
placed to extend its brand and develop long-term relationships with the consumers.