Research Paper - Customer Satisfaction and The Transactional Approach to Marketing

Customer Satisfaction and Marketing Research

Company Information

The company which has been chosen as part of devising a new marketing plan for the next five years is a large corporation within the construction industry. It has been very successful in the past in achieving high profits and undertaking huge investments. The company traditionally follows the transactional marketing approach which did not focus much on the customer satisfaction.

The structure of the organisation has been based on a traditional hierarchical formation having only one-way communication and accountability. The organisation has employed customer directors who act as sales force while the operation directors manage the project functions. However, a lack of coordination could be witnessed among both of the directors which imply that the functions are systematically divided into distinct vertical silos leading to transactional efficiency instead of resulting in market effectiveness. The company rates its clients by distinct colours e.g. red, yellow and orange, according to the profit margins derived from each. Yet, this criterion is not made clear to the customer directors. It has been additionally observed that the traditional construction relationships in this company are not much worked on and hence are adversarial in nature. This leads to confusion in the firm's objective and lack of concerned attitudes towards the long-term relationships. The company also does not shows much concern about the environmental challenges that are faced by the construction industry and the firm's operations are generally focused on achieving profit maximization and having high returns on capital employed. The firm doesn't provide specialized training to its service staff who is directly dealing with the clients. This results in a lack of customer-centred approach.

Assumptions

The following assumptions are made:

- The company predominantly follows a transactional marketing mix approach.

- Recognises the importance of relationship building, yet currently leaves this to individual responsibility.

- Does not have a separate customer department.

- Adopts traditional marketing methods in undertaking projects.

What needs to be done?

- An entire change in the organisational structure which involves the ways in which the departments communicate and report to each other.

- Needs to adopt a more customer-centred approach.

- Focus on the firms' relation with all kind of stakeholders including the supply chain members, environmental agencies, government authorities and Non-governmental organisations.

Literature Review

The marketing management with its transactional marketing model since 1960s has ruled the literature, research and practices of marketing. Professional practitioners, researchers, instructors and various academics similarly have been overwhelmed with this method that long ago attained an exemplary position (Kuhn 1957; 1962). Occasionally the marketing mix is referred to as marketing model only. On the contrary, it always has been a lasting influence on the marketing thought of research practitioners and also on the marketing research directions as well as the organization .This has led the academics to describe it as a Paradigm. Furthermore, it has been termed as the leading marketing approach of the last decades. Although the elements of transactional marketing. i.e. Price, Place, Product and promotion, are not all impractical as marketing variables, the philosophical basis of the marketing mix and its Ps are not much applicable to the competitive state that has been developing in various industries. The traditional approach which relate to the marketing mix prevents the firm from adjusting its marketing strategies to address the growing demands of customer today for enhanced value and efficient service.

Since the 1980s, marketing has seen a large shift moving from the transaction approach of the marketing mix to a more proactive approach known as relationship marketing. The basis of relationship marketing has been to restore the customer relationship in the large organizations which was once the main feature of the sole trader businesses. The aim is to transform the relations and the way the business deals with its customers through changing the strategy, systems and behaviors. This particular concept has been seen to be more suitable for business to business transaction particularly asset-specific products (Smyth and Fitch 2009).

Relationship marketing is used as term in marketing literature, which aims to draw customer interest and gain customer retention through marketing tactics (Jackson, 1985; Doyle and Roth, 1992).

Ajio (1996), Day and Wensly, (1983); Gronroos (1990; 1994); Gummesson, (1997a, 1997b and Robicheaux and Coleman, (1995) added to this by explaining that relationship marketing could also be used to attract customers to a new marketing paradigm. Others (Berry, 1983; Christy, Oliver and Penn, 1996; Gronroos, 1994; Kotler, 1991; Morris, Brunyee, and Page, 1998; Mudambi and Mudambi, 1995) relate to this concept by perceiving this as being mainly associated with achieving strategic purposes. Numerous aspects are used to describe it as a tactical choice. For example, Berry (1983, p. 25) describes relationship marketing as "attracting, preserving and retaining, and enhancing customer relationships in multi-service corporations. Morgan and Hunt (1994, p. 22) explains the concept of relational marketing as all the activities that happens in marketing that are directed towards establishing, developing, and upholding successful social exchanges.

The common themes that underlie the foundational concept of relational marketing could be based upon the exchange which takes place between different parties.

According to Dwyer et al., (1987), relationship marketing can be explained by using the concept of relational exchange as opposed to discrete transactions. In reality, each of the business transaction consists of at least a nominal quantity of history and projection into the future, and consequently categorized as 'relational exchange'. Dwyer et al. (1987, p. 13) identify 12 dissimilarities of discrete versus relational exchanges to offer resources to classify when an exchange is more detached or more relational in its structure. Morgan and Hunt (1994, p. 22) use these ideas to define relationship marketing and say, "relationship marketing discusses all of the marketing actions directed in the direction of establishing, developing, and preserving effective relational exchanges". To recapitulate the nature of the exchange pattern for defining relationship marketing, it can be said that the aim of this new approach is to shift the exchange pattern from the traditional transactional exchanges to the modern relational exchanges assuming that the relational exchange is more desirable.

Numerous existing definitions and metaphors of relationship marketing precisely perceive the customer as one of the exchange contributor." According to Berry (1994), the primary driver behind relationship marketing is to focus the marketing efforts on the customers after they have actually become one of the business's customers. Levitt (1986) on the contrary describes relationship marketing as 'relationship management' as he states relationship management can be considered as a unique field as it is focused towards maintaining the goodwill of the business.

Applying Levitt's theory that relationships to the firm are intangible assets, numerous current studies have anticipated that relationship marketing takes account of all forms of an organization's relationships; a fact put forward for consideration of four general partnership areas (supplier, internal, lateral, and buyer), Morgan and Hunt (1994, p. 22) state, "evidently all that is missing from existing definitions of relationship marketing is the precise acknowledgment that in several occasions relationship marketing as one of the exchange participants do not have a 'Customer''.

The interesting thing about this is that it does not matter whether one adopts a narrow approach towards relationship marketing which revolves around buyer-seller relationship or sticks to the broad perspective, the business customer relationship forms the basis of every kind of research done in this regard. However, it has been revealed that relationship marketing has often ignored the consumer markets as confirmed by Sheth (1994).

Marketing Plan

In order to overcome the inconsistencies that is seen in the marketing efforts of the chosen construction company, marketing plan for the next five years is devised. The marketing plan is based on the notion that the marketing efforts should be directed beyond the traditional concept of 4Ps.

The new strategy is to transform the traditional management functions into horizontal management functions where the business emphasizes on relationship management. This can be supported by the arguments given by Storbacka et al., (1994) and Pryke and Smyth (2006) who explain that horizontal management functions help in transforming the simple management processes into relationship management process model. These new processes are also systematically aligned with the part time marketing as argued by Gummesson (2001).

The new plan focuses on the concept of Partnering, one of the most commonly used relationship marketing techniques by the construction industry. Construction Industry Institute (CII) defines partnering as a longstanding loyalty between the service provider and consumer where the objective is to attain business objectives while maximizing the benefits to each party (CII, 1991). This means that as a means to add value to the business, the partnering strategy should be used by the selected construction company in order to create and agree on mutual objectives and collaborate at every level for providing enhanced services to the clients. Generally speaking, the plan is focused on bringing about change from shifting from project management approach to the managing of the project approach as previously done by Morris (1994). Particularly the aim is to improve the marketing as well as relationship management so that to facilitate in service provision which would hopefully enhance the profitability of the business by increasing the turnover.

In order to implement relationship marketing, the company cannot determine some set of marketing variables that could be used. Rather, the marketing decisions need to be formed on any encounter with a customer which would use business resources to make a marketing impact. The resources are used up regardless of their location in the organisational hierarchy which implies that the company's hierarchical forms will achieve more liberation though more delegation of power from the higher position. In order to come up with some marketing decision at the very encounter with the customer, the staff dealing with the customers would be provided enough training programs to deal with the customers efficiently (Gronroos 1996).

It has been observed that the company has separate vertical units which focus on transactional efficiency rather than creating market effectiveness. Hence, it is proposes that an awareness on the relationship marketing needs to be incorporated at all stages of the organisation's hierarchy (Gronroos 1996).

Being a construction company, it is essential to create a difference between long-term (strategic) partnering and short-term (project) partnering (Barlow and Jashapara 1998). Strategic partnership is association between two or more parties for a long period of time in order obtain the desired objectives by maximizing the efficient utilization of the resources of each party. This involves an inter-organizational collaboration where resources are shared and committed in order to work on common goals. This reduces costs and enhances the systems and procedures. On the other hand, project partnering involves short term collaborations where the two parties agree to work together on the common goals in order to resolve the issues and complete the works on timely basis (Black and Akintoye 2000).

The company needs divide its relationship marketing strategies into short-term and long-term categories. Once the partnering strategies are differentiated, the company can work towards building relationships and collaborations keeping in view its strategic preferences. Adopting this strategy does not means that the role of the marketing specialists ends here, for implementing the traditional activities the marketing specialists are required and also the company would need consultants to instil the market consciousness throughout the organization.

The development and implementation of a governing relationship plan would prove helpful in planning the relationship marketing. The governing relationship plan would be a market focused corporate plan that would aim to instil marketing orientation all the future planning.

The company relies on traditional market segmentation techniques to serve the customers; however in relationship marketing special attention is paid to individual customers and every kind of information obtained by the different customers. It is proposed that the company monitor its performance under relationship marketing and directly manage its customer base and use the statistics to make likely forecasts about the future expectations (Gronroos 1996). Rather than viewing all the changes as part of the broader term marketing, the word of 'task management' would be used across the organisation so everything is managed efficiently based on task specific requirements.

As part of long term change, the six market model known as KAM would be applied to this case. This function is introduced after considering its core capability to bring a change in the way organizations are run (Pralahad and Hamel 1990). It will also focus on generating relationship marketing throughout the management of the company making every one a part of this process (Gummesson 2001). Hence, it is realized that relationship marketing is not a one man show and thus should be reflected in the practices of each and every member of the firm.

The relationship management process model given by Storbacka et al. (1994) can also serve the purpose to act as a main driver being the change management required as the model was devised to manage the projects in the past (Pryke and Smyth 2006). This model has several aspects as it would seek to allocate the investment and the costs incurred in the new process and also apply the concepts of marketing to all of the organisation's dealings with the clients and activities of project management (Hamel and Prahalad 1996). This contrasts with the traditional marketing mix approach.

Through the six markets model provided as KAM, a serious consideration about the project management and clients' needs would be made. As part of the implementation process, the first year the primary focus would be the internal and customer markets. The internal situation of the firm would initially be organised and strategies devised to penetrate in the customer markets. This would be done in the first year of the marketing plan. However, it is recognized that without a high quality staff no progress can be made. Hence, the plan for the next year will constitute to train the existing staff and hire the new high quality staff so that the churn rate could be reduced.

By the third year, other markets would be paid attention to in order to incorporate the new market developments and increase the learning in the existing markets. The company's foremost plan would be incorporate relevant strategies so that a healthy and effective relationship is made with the customers.

By 2008 referral markets and influence markets were beginning to be additional foci. Iterative adjustment to existing processes have been required to accommodate both new market developments and learning in existing markets.

The model of KAM is to be implemented in the organisation through two roles. It is realized that the company has customer directors as well as operation directors who lack communication among each other. Additionally, the customer directors act more as a sales force and are not customer centred. Hence, the company would seek to appoint Sector Directors (SDs) so that they coordinate all the strategies among the departments and manage the sales activities by concentrating on individual processes. These directors would offer services by addressing all the activities involved related to engineering of the activities, management service, domestic as well as international construction, Financial Management and other finance related services which are related to a specific market sector.

These market sectors would include many areas including the areas of transport and energy, retail sector etc. this will help to broader the company's scope.

Appointing Senior Directors (SDs) is part of the new marketing strategy of the firm which seeks to incorporate relationship marketing into each and every area. In addition to these, the job description of the Customer directors (CDs) will be enhanced so that they have an increased responsibility not only for higher sales but also to ensure customer satisfaction. Their dealings with the customers would be in form of cross selling of business services, refining the repeat business they would also seek to gain high net profit margins about 3 to 4 per cent. This would help the firm in increase its other strategic benefits that are explicit in nature such as its own reputation, and increasing the return on capital employed.

The current structure of the company is very similar to a military hierarchy. This entails a change in its organisational structure. Incorporating the new structure which is less hierarchical and is based on both the vertical and horizontal communication requires a change in the philosophy of the ways in which things are done. Thus, delegation is one of the drivers behind this kind of change and it will require an initiative on part of the top heads. The horizontal communication and accountability can be stressed upon as a very important element for the company which would link the marketing operations of the company and enable cross functional working and encouraging the opportunities for gaining a sound reputation in the supplier markets.

The model of KAM will operate at two levels: the Senior Directors and the Customer Directors. The SDs will develop the sector plans which will form the bases for the business plan. In each of the sectors, separate customer account plans are to be made for each of the customer. Along with the customer account plans, the customer relationship action plan is also to be developing which will allow the firm to build valuable relations and add service value.

The win strategies for different projects will be addressed by these separate plans which will also be linked with the project specific factors. This will provide a clear stance on each of the project. Additionally, the SDs will chair the sector meeting which will provide a means for cross-functional coordination. The marketing plan includes the development of skills of the SDs so that they possess the required management skills and a technical knowledge of each issue in the projects.

Conclusion

The transactional approach to marketing which has mainly focused on changing the core elements of the marketing mix including the 4Ps has been practiced for quite a long time. However, the changing needs of the world and the customers have made this approach unsuitable for today's competitive market situation. Organisations have recognized the growing importance of the customer role and realize that ultimate success and profitability depends on customer satisfaction. Customer satisfaction is not a simple concept but one which requires a complete change in an organisation's structure. The organisations have thus shifted to the relationship marketing approach which focuses on 'building relations with the customers'. It is fallacy that construction sector does not needs to pay much attention to building strong relations with the customers. The fact is that customers are the ones who contribute to the good or bad reputation of an organisation. Further, a company needs to take into account every need of their clients. For this, relationship marketing has proved very useful. For the selected organization, it is proposed to adopt a partnering strategy where the long-term and short-term strategic partnerships are clearly distinguished. As a part of the relationship marketing concept, the KAM model has been practiced in some constructions firms and has proved to be successful. Considering this, the company chosen in this case also has been applied with the concept of KAM. The aim is to shift from the transactional approach to a more customer centred one.

References

Aijo, T. S., 1996, The Theoretical and Philosophical Underpinnings of Relationship Marketing: Environmental Factors behind the Changing Marketing Paradigm, European Journal of Marketing, 30 (2), pp. 8-18.

Barlow J, and Jashapara A., 1998. Organisational learning and inter firm partnering in the UK construction industry. Learn Organ J;5(2):86-98.

Berry, L. L., 1983, Relationship Marketing, in Emerging Perspectives on Service Marketing.eds. Leonard L. Berry, G. Lynn Shostack, and George Upah. Chicago, IL:American Marketing Association, pp. 25-28.

Black C, and Akintoye A, 2000. Fitzgerald E. An analysis of the success factors and benefits of partnering in construction. Int J Project Manage;18(6):423-34.

Christian Gronroos., 1996. Relationship marketing: strategic and tactical implications, Management Decision, 34 (3), .5 - 14

Christy, R, , Oliver, G., and Penn, J., 1996, Relationship Marketing in Consumer Markets," Journal of Marketing Management 12, pp. 175-187.

CII (1991), Partnering, Partnering Task Force Report, Construction Industry Institute, Austin, TX.

Day, G. S. and Wensley, R., 1983. "Marketing Theory with a Strategic Orientation, Journal of Marketing, 47, pp. 79-89.
Doyle, S. X. and Roth, G. T., 1992. Selling and Sales Management in Action: The Use of Insight Coaching to Improve Relationship Selling, Journal of Personal Selling &Sales Management 12 (Winter), pp. 59-64.

Dwyer, F., R. ,Schurr, P. H., and Oh, S., 1987, Developing Buyer-Seller Relationships, Journal of Marketing, 51,pp. 11-27.
Gronroos, C., 1994, "From Marketing Mix to Relationship Marketing: Toward a Paradigm Shift in Marketing," Management Decision, 32 (2), pp. 4- 20.

Gronroos, Christian (1990), "Relationship Approach to Marketing in Service Contexts: The Marketing and Organizational Behavior Interface," journal of Business Research, 20, pp. 3-11.

Gummesson, E. (2001) Total Relationship Marketing, Oxford: Butterworth-Heinemann.

Gummesson, E., 1997a. Relationship Marketing - the Emperor's New Clothes or a Paradigm Shift? Marketing and Research Today, pp. 53-60.

Gummesson, E.,1997b. 1n Search of Marketing Equilibrium: Relationship Marketing versus Hypercompetition:' Journal of Marketing Management 13 (5), pp. 421-430.

Jackson, B.B., 1985. Winning and Keeping Industrial Customers, Lexington: KY:Lexington Books.

Kuhn, T.S., 1957. The Copernican Revolution, Harvard University Press, Cambridge, MA,

Kuhn, T.S., 1962. The Structure of Scientific Revolutions,The University of Chicago Press, Chicago, IL,

Morgan, R. M., and Hunt, S.D., 1994, The Commitment-Trust Theory of Relationship Marketing, Journal of Marketing, 58 Ouly),pp. 20-38.

Morris, M. H., Brunyee, J., and Page, M., 1998, Relationship Marketing in Practice: Myths and Realities, Industrial Marketing Management, 27, pp. 359-37l.

Morris, P.W.G. (1994). The Management of Projects, London: Thomas Telford,.

Mudambi, R., and Mudambi, S. M., 1995. From Transaction Cost Economics to Relationship Marketing: a Model of Buyer-Supplier Relations, International Business Review, 4 (4), pp. 419-433.

Prahalad, C. and Hamel, G., 1990. The core competencies of the organization. Harvard Business Review, 63(3), 79-91

Pryke,S.D. and Smyth, H.J. (2006) The Management of Complex Projects: A Relationship Approach, Oxford:Blackwell.

Robicheaux, R. A and Coleman, J. E., 1995, The Structure of Marketing Channel Relationships, Journal of the Academy of MarketingScience, 22 (1), pp. 38-51.

Smyth, H., & Fitch, T., 2009. Application of relationship marketing and management: a large contractor case study, Construction Management and Economics, 27:4, 399-410

Storbacka, K., Strandvik, T. and Grocnroos, C. (1994) Managing customer relationships for profit: the dynamics of relationship quality. International Journal of Service Industry Management, 5(5), 21-38.