Title: The Past, Present and Future of Relationship Marketing
Authors: Harker, Michael John (email@example.com), Egan, John (firstname.lastname@example.org
Subject: Marketing & CRM
Status: full text
Source: Journal of Marketing Management; Feb2006, Vol. 22 Issue 1/2, p215-242
Abstract: the light of the redefinition of "marketing" by the AMA in service/relational terms, and a recent review of the current vector of research in marketing (Littler and Tynan 2005), it seems an appropriate time to provide a substantial review of the past, present and likely future of what has become known as Relationship Marketing, together with an extensive list of key RM literature. This paper will take a reader through the origin, development and current state of RM research, with notes on the future of the research and practice of RM. The paper concludes that RM is here to stay, whether or not it is recognised as the dominant logic/paradigm of marketing.
Keywords: Relationship Marketing, paradigm. --Download Article
Introduction: In the light of the redefinition of the term "marketing" by the AMA^ in service/relational terms, and a recent review of the current vector of research in marketing (Littler and Tynan 2005), it seems an appropriate time to provide a substantial review of the past, present and likely future of research of what has become known as Relationship Marketing. In the Dictionary of Philosophy, A.R Lacey (1996) defines a paradigm as "a shared assumption, or an accepted theory which governs the outlook of an epoch and its approach to scientific problems...[giving]... standard forms of solutions to problems". Within the physical and social sciences, it is common for one paradigm, a dominant paradigm to be prevalent. The dominant marketing paradigm of the twentieth century, the accepted model of how marketing worked and should be practiced, was what has come to be called Transactional Marketing (Gronroos 1996; Aijo 1996; Gummesson 1987; Berry 1983; Jackson 1985; Payne 1995). A paradigm, it is suggested, remains dominant until it is successfully challenged by a competing paradigm that can better explain scientific or social phenomena, such as the transition from Ptolemaic astronomy ("Earth is at centre of imiverse") to Copernican astronomy ("Sun is at centre of solar-system"). Kuhn (1962) called this process of change a paradigm shift, and suggested that it was evidence of evolution within a discipline. Some prefer the term "dominant logic" to "paradigm" (Vargo and Lusch 2004). Regcirdless of the appropriateness and exactness of philosophical terminology. Relationship Marketing (RM), a term alluded to by Thomas (1976), but first explicitly used by Berry (1983: see Kotler 1992; Gronroos 1990,1991; Hunt and Morgan 1994; Berry 1995; Sheth and Parvatiyar 1995; TurnbuU and Wilson 1989) has certainly challenged the primacy of Transactional Marketing as a theory and practice. Whilst the focus of the paper is the past, present and future of RM research and its claim to paradigmatic status, until very recently, the underpinning theories and conceptualisations of RM have only existed in relation, or opposition to the theory and practice of Transactional Marketing. It is therefore necessary to reflect on "Transactional Marketing" before RM can be fully comprehended.
The Distant Past
The origins of Transactional Marketing were in microeconomics. North America and the 195O"s. Prior to WWII, economists developed price theory to embrace what they called oligopolistic competition (Chamberlain 1933; Sheth, Gardner and Garrett 1988; Waterschoot and Van Den Bulte 1992). This theoretical development led early marketing theoreticicms (McGarry 1950; Mc Kitterick 1957; Alderson 1957) to create "lists" of marketing variables deduced from econometric, profit optimising equations - the so called functionalist school of marketing (McGarry 1950). In turn, this inspired Borden (1954) to introduce the concept of the marketing mix, a list of 12 variables (product, price, branding, distribution, personal selling, advertising, promotions, packaging, display, servicing, physical handling, fact finding and analysis) which "the marketer would have to consider in any given situation....[and]...would blend the various ingredients or variables of the mix into an integrated marketing program." (Gronroos 1994b: 350). In a seminal work, McCarthy (1960) presented the marketing mix management approach, reconstructing Borden"s original 12 variables into the now familiar "4Ps" framework (Price, Product, Promotion and Placement). Although probably the best known model in marketing its theoretical foundations have been severely questioned (Waterschoot and Van Den Bulte 1992; Gummesson 1987; Sheth et al. 1988; Webster 1992; Duncan and Moriarty 1998). This concern stemmed from the fact that the original microeconomic variables, derived through empirical induction, had solid theoretical foundations, whilst Borden"s list had only second-order links to these foundations and, crucially, were not intended as an exhaustive definition or method of implementation but merely as a set of guidelines within a fully integrated marketing program. The iriherent simplicity of the 4Ps, however, ensured the rise and rise of the model and its attendant Marketing Mix Management theory.
Economic conditions conspired to reinforce the perceived superiority of the marketing mix. A huge domestic post-WWII US market of relatively homogenous and insatiable customers led to rapid increases in the demand for standardised consumer goods and the crowning of the United States as the dominant marketing culture. Despite the demand, the prevailing economic thinking was to ensure that consumption kept up with output (Packard 1957). As a result "there was a great need to formalise marketing; to guarantee that it worked every time" (O"Malley and Patterson 1998: 833). In this time (and place) of high consumer trust, effective mass marketing, growing prosperity, homogenous demand, poorly developed distribution channels and dominant manufacturers (O"DriscoU and Murray 1998: 396) the transactional or marketing mix paradigm appeared to be working very effectively indeed. In time it became the basis of "modem" Transactional Marketing (Takala and Uusitalo 1996; Kotler 1992; Aijo 1996). The simplicity and communicability of the marketing mix paradigm, in combination with its apparent success, combined to turn marketing into "a highly effective impact machine" (Gronxoos 1996: 16). As marketing education spread around the globe from its American birthplace, Transactional Marketing rapidly became the overwhelmingly dominant marketing paradigm (Dixon and Blois 1983, Kent 1986).
Since the 196O"s, the conceptual and theoretical development of Marketing has been constricted by the "canorusation" (Gronroos 1994) of the "holy quadruple...of the marketing faith" (Kent 1986: 148). The donunance of the marketing mix has been such that other marketing theories, such as parameter theory - based on the idea that marketing can be dynamically managed by responding and adapting to market elasticities measured using microeconomic theory - (Abbott 1955; Mickwitz 1966: see Gronroos 1996c) were effectively stillborn. The "marketing mix management" approach, originated by McCarthy (1960) had the "4Ps" model at its conceptual core.
This model represented an "oversimplification of Borden"s concept" (Gronroos 1994a: 6; see also Clarkson et al 1997 and Payne 1995) as it had been completely severed from its conceptual and theoretical underpirmings, "...theoretically, the marketing mix became just a list of P"s without roots" (GrOnroos 1994a: 8). The 4Ps model was criticised as a list of decision making variables on four further fronts. Firstly, the lack of any formal and precise specification of the properties or characteristics of the marketing mix elements that could he classified was seen as a major flaw (Waterschoot and Van Den Bulte 1992). Secondly, the lack of a clear conceptual framework suggested that the categories were not mutually exclusive (Gronroos 1994a).
Thirdly, it lacked the integrative, interactive dimension necessary to combine with either the customer or a generalised marketing programme (Kent 1986). Fourthly, it portrayed the marketer as the active party in pursuit of a passive customer within a simple market framework - in reality, the situation was far more complex (Clarkson et al 1997). Does the blame for this lie with McCarthy? Whilst he was certainly responsible for filleting Borden"s list^, principally for pedagogical reasons (Brodie et al. 1997; Deshpande and Webster 1989; Aijo 1996), McCarthy presented his model as an aid to instruction and a starting point from which to construct a complete marketing strategy (Gronroos 1994ab 1996c), not, as it had become, the foundation for an entire marketing paradigm. The fault lies not with McCarthy, but with marketing academia as a whole. Almost from the moment of its ascendancy in the mid nineteen-sixties, questions began to arise about the validity of Marketing Mix Management as a general theory of marketing (Waterschoot and Van Den Bulte 1992; Gummesson 1987). Principally, these questions originated from those operating within business and socio-political environments very different from that of the United States, for example Europe (Hammarkvist et al. 1982; Elg and Johansson 1996) and from marketers working within the industrial (business-to-business) and service sectors. Rather than start again by challenging the conceptual basis of Transactional Marketing, the quickest and most convenient "solution" to the problem was to paper over the cracks.
The standard method of "overcoming" deficiencies in the 4P "tablet of faith" (Gronroos 1994) was to expand on the same approach - abstracting the market relationship into a list of decision making variables (Brodie et al. 1997; Gronroos 1994). An unintentional legacy of McCarthy"s 4P model was that most of these lists used words beginning with the same letter (for example Lipson and Darling 1971; Kelly and Lazer 1973: see Gronroos 1994). From the late nineteen-seventies, this pedantry became more extreme, "after the four P"s were definitely canonised ...new items to the list [were] almost exclusively put in the form of P"s" (Gronroos 1994a: 5). The guilty are many, Kotler (1986), public relations and politics; Booms and Bitner (1982), people, physical evidence and process; Judd (1987), people; LeDoux (1991), preservation.
As O"Malley and Patterson (1998: 836) have noted; "given the nature of some of the proposed additions it is not improbable that words such as propaganda, panacea or even plankton could be added to the list assuming some vague marketing meaning could be attributed to them." Some managed the minimal level of revolution to add terms that didn"t start with P - Traynor (1985) "research is the fifth "P"; Berry (1990) an S and 2 C"s and Kotler (1991) 4Cs. these new lists were an admission that the Marketing Mix Management and the Transactional Marketing Paradigm, based on what was by now a bygone age, were failing to satisfy modern marketing conditions. It became apparent that these lists did not represent a solution to the inadequacies of the 4Ps model, given the fundamental deficiency in the format of the marketing mix model. Any such list, regardless of the number of variables or the letter they began with, cannot hope to be comprehensive. It was becoming apparent that since marketing mix management became the dominant marketing pirating, much, if not all of marketing research "gave the impression of being based on a conceptually sterile and unimaginative positivism...The consequence.. .is that most of the resources are directed toward less significant issues, over-explaining what we already know, and toward supporting and legitimizing the status quo" (Arndt 1980: 392). The structure of the 4Ps model and its "clones" have been given considerably more attention than those of market relationships (Kent 1986). Furthermore, the one single activity that could provide the 4Ps model with more substantial theoretical foundations "...empirical studies of what the key marketing variables are, and how they are perceived and used by marketing managers" has been mostly neglected (Gronroos 1994:15).
Further criticisms of Transactional Marketing were generated by the difficulties in applying it outside its original context. Many weaknesses of the transactional paradigm were initially hidden in the context of a buoyant post-WWII US autarky. These defects were revealed as the environment in which firms operated evolved beyond recognition (TurnbuU and Wilson 1989; Blattberg and Deighton 1991; Aijo 1996). In the USA, intra-market competition intensified considerably as the number of firms - both local and foreign - increased (Jackson 1985; Gummesson 1987). This spread to most developed consumer goods markets changing them from a state of growth to one of maturity (Hammarkvist et al 1982; Levitt 1989). Firms had to compete for a static number of customers within markets that were becoming increasingly saturated with products (Berry 1983; Morgan and Hunt 1994), a development which has been termed hyper-competition (Ohmae 1990; Kotler 1991). This exposed Transactional Marketing as a theory developed out of growth, not stagnation (Gronroos 1991, Gummesson 1991) or supercompetitiveness, and that it was proving unsuitable in many, but perhaps not all, circumstances.
The characteristics of consumers also changed. Standardisation had been the key to mass production, but mass markets had begun to fragment. Customers became more sophisticated and demanding, requiring products and services tailored to their specific needs (Bennett 1996; Christopher et al 1991; Farrance 1993). Whereas the Transactional Marketing Paradigm sought to "bend" the customer to fit the product, what was required was theory and practice that would shape the product to the consumer (Tzokas and Saren 1996; Thomas 1976; Shani and Chalasani 1993). What the Transactional Marketing paradigm had become in practice was not a customer-orientated approach to business but a product-orientated philosophy (Gronroos 1994b;
Still more criticisms of Transactional Marketing were directed at its practice. The most typical organisational structure, and one commonly found within the context of end-user orientated firms (Christy et al 1996) is to have within the organisation a sub-urut (i.e. the marketing department), separate from the rest of the firm, with responsibility for "marketing" – market analysis, advertising, sales promotion, pricing and distribution (Buttle 1996; Deshpande and Webster 1989; Gummesson 1994ab). "In everyday marketing vocabulary....marketing department, an organisational unit, is used as a synonym for marketing function" (Gronroos 1994b: 353). The imphcation is clear, Transactional Marketing as a theory/practice suggests that marketing can be treated as a separate, discrete function, rather than as an integrated one (Berry and Parasuraman 1995; Waterschoot and Van Den Bulte 1992; Palmer 1994; Payne 1995b; Thomas 1996). The existence of these "marketing departments" echoes much about the functionalist, scientific [econometric] origins of Transactional Marketing. In many businesses, this marketing department is seen as having total responsibility for "...various marketing tasks, such as market analysis, market planning, advertising, sales promotion, pricing, distribution and product packaging" (Gronroos 1994: 353). This begs the question that if the marketing department takes care of all these key activities, what exactly does the rest of the business do? One of the primary and most traditional justifications of a firm adopting a marketing orientation is that marketing integrates the other functions of the business (Bennett 1996; Jackson 1985) into a more coherent whole, built around the needs and wants of the customer. The outcome of creating a "marketing department" is to bring about a situation where, within an organization, "the rest of the organization is alienated from marketing, and the marketers are isolated from design, production, deliveries, technical service, complaints handling, and other activities of the firm" (Gronroos 1994a: 7). Marketing was treated as a specialist management function, rather than a general management issue. It is a fact of business life that those who practice marketing are, for the most part, educated and trained in the "correct" theories, models and concepts to use by those who theorize it (Palmer 1994; Payne 1995ab)…