Relationship Marketing in the UK Retail Sector

Chapter – 1: Introduction

1.1. Overview

Relationship marketing plays a significant role in the present market scenarios as it mainly illustrates the relationship among the customers and organizations. Relationship marketing is a form of marketing that evolved during 1970 and 1980s (Regis McKenna, 1991, p. 4). It mainly highlights the consumer satisfaction instead of focusing on sales transactions because these relationships will help the organizations in sustaining and supporting the technological edge of the company. According to Lisa A. Guion and Heather Kent (2005, p.1), ‘Relationship marketing is the process of attracting, maintaining and enhancing relationships with key individuals over time’. The marketer should act like an integrator where they must synthesize technological capability with the market needs and the marketer must be supposed to bring the customer into organizations. Customers mingle with the companies as participants for the adaptation and development of services and goods. So, the relationships are considered as the key point for the basis of customer choice and company adaption. Relationship marketing involves in using the one-on-one communication in earning the loyalty of customers (GUION, L. A., 2005). These relationships can be easily improved in the organizations if the marketing is part of everyone’s job description that is from receptionist to board of directors. This method integrates the customers in designing the products which in turn creates a substance in the relationship. Relationship marketing is the key point to be considered in the retail sector. Many of the countries have increased its growth due to retailing. ‘Retailers interact with the final customer in a supply network, but they are both buyers and sellers of goods and services’ (Malcolm Sullivan and Dennis Adcock, 2002, p.3). Presently, there is a vast change in the retail industry and offers employment to more number of people. In these sector, retailer acts as a trader or dealer who sells the goods in small quantities. Retail sector will include various organizations related to different markets. Marketing in the retail sector can be improved only when there is a constant relationship between the customer and the organizations. Hence, it can be said that relationship marketing plays a vital role in marketing the goods in retail sectors. This marketing increase the growth of the retail sectors and further raises the market level of the country over the worldwide.

In this thesis, the further sections include Literature review, Research methodology, Findings and Analysis, and Conclusions. In the Literature Review section it briefly describes about the retail marketing in UK, relationship marketing, approaches used for maintaining the relationship, types of markets and challenges that are faced by organizations. Research methodology section illustrates the approach that is selected for analyzing the relationship marketing in UK retail sector with the help of various case studies. Findings and analysis section discusses and analyzes the performance of maintaining the relationship marketing in various organizations. The last section draws the conclusions and recommendations.

1.2. Aims and Objectives

Aim: To study relationship marketing in the UK Retail sector

Objectives:

• To focus on retail and relationship marketing
• To identify the various approaches those are used by various sectors for maintaining the relationships between customers and organizations.
• Discuss the challenges that are faced in the retail sectors.
• To examine the experimental results of relationship marketing in different retail sectors.

1.3. Purpose of Study

The main purpose of this research is to study the relationship marketing among the various retail sectors in UK. This report helps many of the organizations in analyzing the relationship marketing as it provides a clear idea on the retail sector and relationship marketing. Relationship marketing mainly focuses on the relationship among customers and organizations, rather concentrating on sales of goods. It will highlight the organization performance with respect to the relationship between industry and consumers.

1.4. Research Context

The present research is done in relationship marketing as it consists of the customer service and improving the quality according to customers taste such that both the customers and organizations are profited in real drive. Relationship marketing is the secret of the successful business marketing (Jane F.Eastham, Liz Sharples and Stephen D.Ball, 2001). The research mainly focuses on the relationship of internal marketing, suppliers, requirements of the markets and there influences how they are co-related with each other (Helen Peck, Martin Christopher and Adrian Payne, 1999). Maintaining good relationship between quality and the services provided by retailers has influenced new customers which have increased the growth of sales such that most of the organizations earn more and more profits (Martin Christopher, Adrian Payne and David Ballantyne, 2002. The present research work will be beneficial for business people who will gain a better understanding regarding retail market and helpful for the organizations that implement relationship management in gaining profits (Bob Stone and Ron Jacobs, 2007). It may be useful for the organizations as it may directly affect people who are involved in generating new ideas. So, the relationships are considered as the key point for the basis of customer choice and company adaption. Relationship marketing involves in using the one-on-one communication in earning the loyalty of customers (GUION, L. A., 2005). These relationships can be easily improved in the organizations if the marketing is part of everyone’s job description that is from receptionist to board of directors. This research integrates the customers in designing the products which in turn creates a substance in the relationship. Relationship marketing is the key point to be considered in the retail sector. With the use of retailing most of the companies have improved their growth vigorously.

1.5. Research Method

According to Grinnell (1993), the word research is a combination of two syllables namely, re and search. Therefore, the meaning of research work can be taken as examining a particular thing again and again for achieving a systematic and faultless investigation in some kind of field that has been undertaken. The methodology of research work will focus on identifying the hidden problems of some field, determining solution for them and positioning the resulted data for reaching the conclusions of the research work (Ranjit Kumar, 2005). Case studies are selected as a suitable research methodology for the present research and researcher has to work hard in collecting the required data from different resources along with its evidences. In this type of research method, the gathered data is huge and many technologies have to be used for analyzing and organizing the data so as to reach the goals of the research work (Bill Gillham, 2000).

Research Area: Here the research area considered is UK retail marketing where it illustrates retail and relationship marketing, challenges that are faced in the retail sectors and gives experimental results of relationship marketing in different retail sectors.

Selecting Cases: Selecting cases is the critical step for any organization. UK market is very large and it became difficult here to select suitable cases studies for this research. At last this research considered two UK market leading organizations for the case studies including McDonald and Debenhams.

Identifications: This is the next step in research approach where the researchers need to identify the state of relationship marketing in considered organizations. Those identifications are given in the research methodology chapter of this research document.

Analyzing and monitoring results: An analysis must be taken after making research on any organization. And analysis must be monitor to understand the identification in the considered organizations. This research illustrates the analysis results with different types of graphs that can be understood by any person.

Recommendations: There are some recommendations given in the fifth chapter of this research documentation based on the research experience.

Chapter 2: Literature Review

2.1. Overview

Relationship Marketing is a marketing strategy that is developed from the direct response marketing campaigns that emphasizes customer retention and satisfaction rather than the major focus on point of sales transaction. It is a form of marketing the will recognize the long term values for the firm and focuses on acquisition of new clients by targeting the majority demographics based upon the prospective client lists. The main idea behind relationship marketing theory is the identification of key drivers which influences important outcomes for the firm and a better understanding of the fundamental relations between service providers and customers (Helen Peck, Martin Christopher and Adrian Payne, 1999). In the further sections of this chapter the retail marketing sector in UK is clearly discussed along with the relationship marketing in organizations with respect to six market frameworks. Creating and implementing the relationship marketing strategies and description of Relationship marketing along with the applications is clearly explained followed by the discussion on types of markets by comparing and contrasting the various approaches followed in the organizations.

2.2 Retail Marketing

Retailer is a dealer or trader who sells goods in small quantities or more. Retailing includes activities such as selling of products or goods and providing services to customers from a fixed location, which may be a departmental store or a boutique or by a mail in small or individual loads. Apart from these functionalities, retailing may also include services such as, delivery of products and goods. Retail Marketing is a process of buying and selling products or goods in the market. According to Philip J. Kitchen and Tony Proctor (2001) Retail marketing is mainly concerned with retail organization and it focuses on the application of marketing tools within its operating context. ‘The retail marketing task is to deflect the customer in to the retail store and help to decide an appropriate compromise with regards store design, provision of services and customer desires’ (Malcolm Sullivan and Dennis Adcock, 2002). ‘Retail marketing encompasses the activities involved in facilitating mutually beneficial exchange relationship between business organizations supplying goods and services and customers’ (Philip J. Kitchen and Tony Proctor, 2001, 264). ‘Retailing marketing is a distribution channel function where one organization buys products from supplying firms or manufactures the product themselves, and then sells these directly to consumers’ (Retailing, 2009, p. 1).

Retail marketing has its influence on the daily life of consumers and shopkeepers. Retailing is supported to provide utility to the customer and this comes from four different perspectives. These prospective can be explained as follows:

• Product utility – This type of utility is about the form of a product that is acceptable to the customer. That is the retailer provides final end products, but not raw materials and products which are usable to customers.
• Place utility – Retailing outlets will be available at places where the customers feel to be comfortable for their convenience (Malcolm Sullivan and Dennis Adcock, 2002).
• Time utility – Retail outlets or shops are available at a time suitable to the customer.
• Ownership utility – Retailers facilitate the transfer of ownership to customer depending upon the market situations (Malcolm Sullivan and Dennis Adcock, 2002).

2.2.1 Retail Marketing in UK

Since the Second World War, UK has become a service company: that is, in terms of output and in terms of employment. Many of the existing features of UK retailing are well known to the general public who has observed substantial changes in shops. Retail marketing is a highly dynamic industry in UK and it reflects the changes in rest of the society. With customer require patterns are affected by changing demographics and changes in incomes, customer credit and growth in part-time labor. Customers are comparatively affluent, sophisticated and time-pressured and therefore demanding a service (Philip J. Kitchen and Tony Proctor, 2001). In 1970’s, most of advertisers are the manufacturing companies, such as Currys and comet in electrical sector, supermarkets and high street banks. Now, the situation has changed and the retailers are maintaining close relationships with their customers. The change of influence has developed in 3 different ways and they can be given as follows:

Firstly, most of the retail groups in UK have grown to equivalent or gone beyond the manufacturing organization in both capacity and size.

Secondly, with the severe changes in retail marketing, the stores of ‘own-label’ merchandise have increased. Most of the stores are offering high quality and excellent value products.

Third one is the development the market information. With the new technology like scanning restocking issues, the retailer can plan ranges, layouts and promotional details very precisely (Malcolm Sullivan and Dennis Adcock, 2002).

There is revival of price competition in 1990’s, accompanied by a string service significance. And there has also been an increase in retailer diversification (e.g., high street fashion retailers moving into catalogue selling and grocers into non-food products). In spite of the increasing globalization of retailing, this is still usually the national environment, with its institutions, culture, and dictatorial framework. The UK retail market has experienced a dramatic re-shape in the year of 2004. This re-shape has been led by the achievement of Safeway supermarket chain by Morrison’s, which has created the country’s fourth biggest retailer. The UK biggest retailers are Tesco and asda and next are the Sainsbury’s. With the achievement of the Safeway supermarket chain, Morrison’s is in the fight for the third place with Sainsbury’s (Graduate Prospects, 2009).

Over the next five years, the UK retail Market is in a position to increase its size by 15%, taking its value to just over £312bn (Datamonitor, 2009). But this represents a slowing down of annual growth and with increase in cost of credit and operating costs; the UK retail sector faces challenging times. The companies will suffer who cannot compete against shrinking margins. Among the UK retail market sector, electrical sector is the best performer with a growth of 24 % (Datamonitor, 2009). Hence, from the above discussion it can be understood that the retail marketing is crucial to effectively communicate a business to its customers in order to sell the products, launch new products to the marketplace, and to capitalize on revenues and profits.

2.3 Relationship Marketing

Relationship marketing is a process of attracting, enhancing and maintaining the relationships between the customers and managers in an organization. It mainly concentrates on increasing the life time value of customers and the strategies of relationship marketing mainly focus on the enhancement and development of relationships with a number of key marketing’s. Relationship marketing will maintain the internal marketing relationships as well as external marketing relationships with suppliers, customers, referral sources, employees and recruitment markets (Adrian Payne, Martin Christopher, Helen Peck and Moira Clark, 1998). According to GRONROOS, C. (1994, p.421), relationship marketing is defined as ‘Marketing is to establish, maintain and enhance relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met. This is achieved by a mutual exchange and fulfillment of promises’. These relationships are of two types in the marketing field. First one is for attracting the customers and another one is to develop the relationships with customers for achieving maximum profits in the organizations (GRONROOS, C., 1994). But, According to ZEITHAML, V. A. and BITNER, M. J. (2000, p.30), Relationship Marketing (RM) is defined as ‘Relationship Marketing is a philosophy of doing business, a strategic orientation that focuses on keeping and improving current customers, rather than acquiring new customers’. Hence, from the above discussion it can be understood that relationship marketing plays a vital role to develop the organization by maintaining the relationships between consumers, suppliers and managers. RM is communicated closely with customers in order to improve a beneficial, mutually, continuous and long-term relationship. RM is a philosophy where it assumes that customers are maintaining the relationships within a single organization rather than selecting the different organizations. It is a consistent application up-to-Date Knowledge of consumers to service and product design.

Six markets framework in Relationship Marketing

Relationship Marketing contains six marketing models for improving the relationships between customers and company. These markets maintain the relationship between many organizations as well as within the organization. The six marketing models are considered as the central point of Relationship Marketing and the importance of these models is discussed as follows: (Helen Peck, Martin Christopher and Adrian Payne, 1999).

Internal Markets – Internal marketing maintains the relationships between employees in the organization. It mainly concentrates on the issues like why and how the employees are working in the organization to improve the effectiveness of an organization. In internal marketing, business to business marketing information can be examined. Thus, observing the employee behavior in the organizations is necessary to estimate their performance and the examined information is useful for managers to take decisions.

Customer Markets – In this marketing, it maintains the relationship with customers. It supplies products and services to two types of customers. They are consumers like end purchasers and trade customers like retailers and their relative power is to determine which sort of relationships are cultivated more continuously (Helen Peck, Martin Christopher and Adrian Payne, 1999).

Referral Marketing – It develops a plan for referral motivation and can be characterized based on the type of relationship. If Referral market has high credibility factor, then it can be considered as a decisive element and it is considered as customers, if the consumers enter into this markets with formal and informal referral agreements between themselves and suppliers of corresponding services and products. Thus, the relationships in this market need to be fair, open and well defined in the areas (Helen Peck, Martin Christopher and Adrian Payne, 1999). Thus, from the above discussion it can be understood that planning is necessary to take the further actions within the organizations. Referral Marketing can prepare perfect plans in the organization.

Recruitment Markets – This is also called as Employee Markets. Employment is becoming a part of an organization. It is a market related task so that it maintains the relationship with educational institutions, labor unions and recruitment partners. From the above discussion it can be stated that Recruitment Marketing plays an important role in developing the organization. The performance of the company can be improved by recruiting the best employees.

Influence Marketing – It is closely linked with the decision-making department within the organization because it influences the relationships in the organizations internally as well as externally. This market consists of different types of sub markets like stockholders, government agencies and consumer associations (Soren Hougaard and Mogens Bjerre, 2003). Thus, it also considered as an important marketing model in the organization because well defined decisions are useful for the company to get more profits.

Supplier Markets – In recent years, improving the relationships with the suppliers is considered as a great deal in the organizations. Every organization need to maintain contain the relationship with suppliers because marketing system approach contains downstream as well as upstream activities. This approach matched with the developments within the Supply Chain Management (SCM). Supplier Markets deals with the supplier issues in the organization (Soren Hougaard and Mogens Bjerre, 2003). Hence, it is necessary to maintain the relationship with the customers to get the mutual benefits in the organization and every marketing business needs long term relationships to improve the performance of the markets.

2.4 Creating and implementing the relationship marketing strategies

According to NORMANN, R. and RAMIREZ, R. ‘Marketing strategies provide the intellectual frame work, conceptual models and governing ideas that allow company mangers to identify the opportunities for bringing value to the customers and for delivering that value at a profit’ (cited in Helen Peck, Martin Christopher and Adrian Payne, 1999, pp. 407). These strategies are helpful for a company to define its business and links together. Relationship marketing implies relationship between the customer and buyer. Traditional marketing approach is based on management of the so-called marketing mix and relationship marketing rather than management of the stakeholder domains.

Marketing strategies and planning approaches are influenced in the retail business environment. The relationship marketing values emerge from customers and consumer values. These customer and consumer values are an impact of various elements like people, process and proactive (personalized) services. People are the essential part of a company and consumers are motivating and training the employees to attract the customers for selling their retail business shares. Customer satisfaction is very important in this interaction process. Processes are the way for creating values for the customer. The core processes of retail business include new product development processes, customer management process, supplier management process and order fulfillment process (Helen Peck, Martin Christopher and Adrian Payne, 1999). Now-a-days, most of the retail markets are developed based on the customer supported services. Customer services include relationships between the suppliers and customers. These services affected on the development of the retail firms and their customers to face market competitors. Customer services are helpful for the retail organizations and thereby increasing the share value in market. The relationship marketing strategies are defined by the implementation methods. These implementation methods are based on the sub system to improve the organization processes and relationships (Alain Ferrand and Scott McCarthy, 2008). Hence these three elements of the marketing can affect the marketing success and these elements are helpful while building up the relationship strategies.

Implementation of relationship strategies is based on delivering and creating a value in retail business. This implementation involves many strategies. The first one is relationships in multiple stockholders this issue illustrates two models in the retail business and the models are relationship value management frame work and service profit chain. These models are helpful in market domains for understanding the relationships between the consumer and customer. The second one is selecting an appropriate relationship marketing strategies for different customers. Third strategy is detail planning within the six market models. Finally organizations make use of this relationship management (Martin Christopher, Adrian Payne and David Ballantyne, 2002).

Achieving more profits for a retailing company is not an easy task and needs good customer relationship management. Customer relationship is the most important aspect in every market strategy. Marketing relationships are the living things in all types of businesses. If the company maintains good market relationships with their customers then automatically profits are obtained. These profits are obtained in the following ways (William M. Pride and O. C. Ferrell, 2004).

• By attracting new customers.
• By enhancing the profits of the existed customer.
• By increasing the customer relationship.

Implementing the market relationship means exchange of relationships between the consumer and customer. Maintaining good relationship with customers is the main goal of many retail marketers. To maintain these relationships for a long time retail marketers are turned into the market research and information technology (William M. Pride and O. C. Ferrell, 2004). To create marketing strategies Customer Relationship Management (CRM) focuses on the customer information. Managing these relationships need to identify the buying behavior and consumer behavior with the customer. CRM is mainly focused on developing the company relationship capabilities. To improve these capabilities customer management leader must contain good relationship qualities with the customers (Bryan Foss and Merlin Stone, 2001). Hence from the above discussion it can be stated that implementation of marketing strategies depends upon customer interactions because profits for an organizations can be obtained by maintaining good customer relationships.

2.5 Description of Relationship marketing and its applications

In relationship marketing organizations mainly concentrates on customer satisfaction. Relationship marketing has lot of applications towards organization and customers. Organizations can maintain a long relationship with the customers through relationship marketing. Maintaining long relationship with the customers will be a benefit for both customers and organizations (Rajeev Batra and David Shepard, 1999). For any organization, though profit is the main motive they should also concentrate on customer needs. If organizations concentrate on quality and needs of customer then they can get the profits easily (Jakki J. Mohr, Sanjit Senguptha and Stanley F. Slater, 2004). Some of the applications towards the organizations for maintaining good customer relationships:

• Increased purchase – If organization maintains a good relationship with the customer then they tend to buy more products. Organizations must ensure that the customers should remain interested and engaged in purchasing the product (Christian, 2008).
• Lower costs – Sometimes organizations may decrease the cost of the product for attracting the new user and to maintain the existing customers. This decrease of costs will be a great benefit to both the customers and organizations. Customers can buy their products for low costs as well as the organizations can attract more customers.
• Life time value – Good and loyal customers can generate life time value of a product or organization. If loyal customers buy the products in same organization throughout his life time then organization will get profits continuously (Shajahan, S., 2004).
• Sustainability – Maintaining long relationships with customers is a great benefit to the organization. Customer may stick to one particular organization for a long time if organizations have good relationships with their customers. Through these long relationships with the customers an organization can give a good competition to other organizations. Organizations can sustain in the competitive market with good customer relationship.
• Word of mouth promotion – To promote any product organizations needs lot of promotions and advertisements, for this it requires lot of money. But if organizations maintain good will in the market then the product will automatically promoted through customer referrals and mouth promotions.
• Employee’s job satisfaction – Satisfaction of customers will bring satisfaction to the employee’s in the organization. If customer satisfied then the turnover of the organization will increase (Levitt, 2009).

From the above discussion it can be understood that, all the applications towards the organization will lead to the profits of the organization. For any organization Profit is the ultimate goal. So ultimate goal of the organization can be achieved by maintain good relationships with the customers.

Relationship marketing has been implementing in many organizations. For example, Meridien group of hotels used relationship marketing very effectively for satisfying the customers. Meridien hotels are established all over the world. This hotel is open to all the travelers all over the world. Meridian group of hotels recently launched a program called moments.com. By this program they are attracting the customers and they are finding the loyal customers. Before using relational marketing they used to implement the seasonal packages. But implementing relationship marketing is more advantageous than other methods. Now Merridian hotels are implementing the packages based on the customer needs but not on the seasons. They provided all the requirements for the customers within the hotel only. This made the customers to choose Merridian hotel as one of the best hotel in the world (SHAINESH, G. and Atul Parvatiyar, 2001).

2.6 Approaches for maintaining relationships among the customers and retailers

Customer plays an important role in any type of business. The relationship between customer and retailer is maintained when customer is loyalty and satisfied. Further, developing the relationship retailers must and should have the total information about the customers (Margaret Bruce, Christopher Moore and Grete Birtwistle, 2004). But according to Robert H. Lowson, ‘The relationship between customer service level and inventory of finished goods for low, medium and high vendor process time’ (2002, p.207), if the retail markets provide better services for the customer in supply of good in time that maintains a good relationship between them. But as some aspects the retails are unable to meet the requirements of the customer satisfaction.

Some of the approaches for maintain relationship among the customers and retailers were as follows:

• Identify the customer – Try to find out relevant customer that what the products and services they need they might be either internal or external customers and by maintain the data base of the customers (Greg Balanko-Dickson, 2006).
• Gaining customer attention-Try to attract the more and more customer by advertizing the product.
• Understanding customer needs-Try to understand the needs of the customer in detail regarding what they are, actually what is the need and what they do.
• Customer expectations-Try to clarity the customer exactly what the products are been delivered.
• Feedback of customers-Taking the feedback from the customer also helps a lot for the retailers, regarding the comments they mentioned and opine of the customer about the performance of the product and how useful to them (Kimball Fisher, R.Rayner and William Belgard, 1995).

According to Gavriel Salvendy (2001, p.775), ‘Relationship among manufacturers, suppliers, vendors, retailers and customers work together to provide a product that the customer wants at a price that the customer is willing to pay’. By maintaining the quality of service in the production of goods at best price the market standards and retailers are trying t