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CRM: An Introduction Chapter One. Fundamental Theoretical perspectives of Relationship: The term ‘Relationship’ can be defined as a series of interaction.

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Presentation on theme: "CRM: An Introduction Chapter One. Fundamental Theoretical perspectives of Relationship: The term ‘Relationship’ can be defined as a series of interaction."— Presentation transcript:

1 CRM: An Introduction Chapter One

2 Fundamental Theoretical perspectives of Relationship: The term ‘Relationship’ can be defined as a series of interaction that takes place between two parties over a period of time. In the context of business these interactions can take place between the Customer and the Organization This can be while purchasing a product, enquiring about the product, making a Sales Call, negotiating terms and Handling the Complaints Therefore Managing successful relationships with the Customers is an imperative for any Organization Relationship Management is an approach that aims to establish a partnership between an Organization and its Customers

3 On the other Hand the Customers will more likely maintain relationship with those Organization that serves their needs Therefore the organization must maintain effective Communication with its Customers, understand their needs and provide customized products and services to them They should also resolve the Customer queries on time and also take feedback regarding products and services on regular basis Thus Relationship refers to a state of connection or association between two parties. In business, a relationship exists when both the parties, the business firm and the Customer, move from the state of independence to dependence/ interdependence.

4 Example : When a customer occasionally buys from any organization it is called Transaction but when he repeatedly buys from the same organization then it means he is satisfied and there exists a relationship between the organization and the customer A relationship changes with time as both the parties become closer or distant or the interactions become more or less frequent. According to Dwyer “A relationship between the Customer and the Organization passes through five different phases They are Awareness, exploration, expansion, Commitment & Dissolution Sometimes the relationship between the two is terminated due to several reasons such as

5 Repeated Service Failures, or change in requirements the organization terminates relationship with those customers who require high acquisition cost. Theoretical perspectives/ Theories of Relationship: As we all know, Relationship is a subject of an individual’s personal feelings. The attempts have been made by several theorists to explain this concept of Relationship. The important theories are such as : Social Exchange Theory : It was developed by Thibant and Kelly in 1959. Social exchange theory has Cost, benefit, Outcome, Comparison Level, satisfaction & dependence as important components. It says that Outcome = Benefits - costs while Satisfaction = Outcome-Comparison Level and Dependence = Outcome - Comparison levels of Options

6 It propounds that an individual enters into relationship that yields maximum profits The Business firms prefer to manage relationship with those customers who are more profitable in the longer run and require less cost for their acquisition Likewise the customers prefer to purchase products /services from organizations which provides maximum value/benefits. This theory does not apply to Loyal Customers as they stick to a particular Brand under all circumstances Social Penetration Theory: It was developed by Altman and Taylor in 1973. It says that a relationship is developed between two individuals through a gradual process of Self

7 Disclosure. For example: A Salesperson always tries to buildup a rapport with the Customer and then gradually attempts to make a Sales deal. There are several stages of social penetration such as: Orientation stage: Here the main focus is on small talk and simple,Harmless greetings such as ‘How are you’ or comments on Weather. It means that the discussions follow Social desirability standards and norms of Appropriateness Exploratory Affective Stage : with focus on moderate Topics like Government and Education Affective Stage: having discussions on private and personal matters

8 Stable Stage: Now the personal things are shared and prediction of emotional reactions of other persons is done. Depenetration: The relationship starts to break down when the cost exceeds the Benefits. Also the there is withdrawl of disclosure along with Bitching, Ditching and Mental Itching. This theory describes the relationship in terms of Breadth and Depth. For example An Insurance Agent does not start the Sales Call with immediate starting of the Benefits of Policy or need of Insurance. Instead he tries to develop some Informality by talking something very general and gradual movement towards personal matters

9 Equity Theory: It was given by John Stacey Adams in 1963 It says that one enters into relationship if rewards are equal to Costs. If any thing out of the them is less than it breeds Dissatisfaction and results in quitting relationship He emphasized that Employees seek to maintain Equity between the Inputs they bring to a job and the outcome that they receive from it against the perceived inputs and outcomes of others.

10 Inputs are defined as each participants contributions to the relational exchange and are viewed as entitling him to rewards or Costs. Inputs include any of the following such as Time, Efforts, Loyalty, Hardwork, commitment, Ability, Flexibility, Adaptability, Tolerance, Enthusiasm, Determination, Sacrifice, Personal, Trust in Superiors, Co-workers Support and Skills while Outcomes are the positive or negative Consequences such as Salary, Employee Benefits, Job security, Expenses, Recognition, Reputation, Responsibility, Sense of Achievement, Praise, Thanks and Stimuli

11 Equity theory consists of four propositions Individuals seek to maximize their Outcomes ( Outcome = Rewards - Costs) Groups can maximize collective rewards by developing accepted systems for equitably apportioning rewards and costs among members. Individuals feel distressed when finding themselves participating in inequitable relationships They try to eliminate their distress by restoring equity. The greater the inequity, the more distress the people feel and the more they try to restore equity ( Walster 1978) To Conclude this theory claims that we develop and maintain relationship in which rewards are distributed in proportion to the Costs. The cost-reward relationship plays important role in maturing of a Sale

12 Attraction Theory: It was given by Aronson in 1980 and is one of the most important theories. It says that an individual enters into a relationship with other individuals who attracts him/her. There are four main factors behind this such as Attractiveness(Physical Appearance & personality), proximity, reinforcement and Similarity. An individual tries to enter into relationship with people who generate enough attraction for him. Persons with different backgrounds and working in offices do enter into good relations due to this factor. Cardinal rule in selling: Sell yourself before you sell your product” This principle enables salesperson to create attraction for oneself

13 Evolution of Relationship: Earlier producers used to interact with the Customers on one to one basis. Now due to technology advancements they are able to interact with several Customers and resolve their queries through various Channels like Telephone, E-Mails and Live Chat etc. The evolution of relationship between Producers and Customer can be reflected through the following points: Pre-Industrial Age : is the time period when there was one to one relationship between producers and Customers. In this age the producers were busy understanding the needs of Customers and provide them products accordingly.

14 Industrial Age : It refers to a time period the focus shifted to Mass production. Now the producers were more concerned with reducing the per unit cost of production by producing in large Volumes. The relationship between the producer and the Consumer was based on cost Advantages. Service Economy Age: Here in this the products were combined with the Intangibles to satisfy the needs and wants of the Consumers. At this phase the producers were focused on creating Value for the Customers by providing them additional benefits. Knowledge Economy Age: In this period the relationship between them was based on Mutual collaboration of Knowledge

15 Evolution of Relationship as a Marketing Tool The domain of Marketing has been redefined as it has become more of Relationship oriented rather than simple Transactions Today’s Technological advancement permits producers to interact directly with a large number of Users. The emergence of relationship focus provides a “refreshed and expanded self concept” to Marketing. This is the result of following four Observations such as :

16 1.Relationship Marketing has caught the fancy of scholars in many parts of the World inclusive of North America, Australia and Asia etc. 2.Scope of RM is very wide enough to cover disciplines of Marketing including Channels, B2B Marketing, services Marketing, MR, Consumer Behaviour, MC, MS, IM & Direct Marketing 3.Marketing is also evolving discipline 4.The scholars like Bagozzi, Kotler and Hunt who were earlier proponents of exchange process are now followers of relational aspects of Marketing

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