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creation of service profit centres within manufacturing firms;r
financial pressures on public and non-profit organisations; andr
the internationalisation of service businesses. (Lovelock, 1991, p. 2)M a r k e t i n g m a n a g e m e n t 177
In addition to these, there was increased emphasis on the service dimensions of manu- facturing organisations, or the servitisation of market offerings. A good example is the car manufacturing industry. As noted earlier, the US car industry struggled in the emerging quality-based market competition when faced with their Japanese counterparts. Initially, the Japanese car makers enjoyed a distinctive market position for their superior customer value. In addition to lower price for superior quality, they also offered an extended warranty (that is, service) based on their confidence in their ‘built-in quality’ cars. Redefining this with a mar- keting term, they were superior on all ‘determinant attributes’ (Hansotia et al., cited in Hutt and Speh, 1995, p. 305) that are both important to customers and differentiating product attributes. The early offensive strategy of the US car makers was to improve product quality (that is, reliability of the car) and lower costs, so that they could match market offerings of their Japanese rivals. When they achieved this goal through the practice of TQM, they were standing on an equal footing with their once-invisible competitors in the market; no cars stood out for superior value along those ‘determinant attributes’ in the eyes of customers. All the cars came on to the market with similar quality, price and service warranty. This elevated their competition to a higher level, where the identification of new determinant attributes became a top marketing priority. Many car makers responded to the increased competition by expanding their marketing scope to incorporate more services, such as credit, transportation, delivery and maintenance.
Markets for computers, and electrical and mechanical equipment are another familiar example where service attributes became not only part of the determinant attributes, but also an important source of profit. In association with capital goods and expensive consumer durable goods, a ‘system selling’ marketing approach was adopted where a good is packaged with services (that is, sales of parts, supplies and maintenance) based on increased concern for customers (Sheth and Parvatiyar, 1995). (See the Skippers example discussed in Chapter4.) Evolution of these business practices led to an important development in marketing thinking and practice where the notion of ‘transactional’ was replaced by the concept of ‘relational’ for the assumption behind the central marketing concept of ‘market exchange’. Interestingly, the origin of relationship marketing goes back to early works on (1) services mar- keting (Berry, 1983; Gummesson and Gr¨onroos, cited in Gummesson et al., 1997), and (2) industrial marketing (Arndt, 1979; Ford, 1978; H¨akansson, 1982; Jackson, 1985). The adop- tion of TQM and the servitisation of market offerings are attributed to the dynamic paradigm shift in marketing among other macro-environmental drivers (Sheth and Parvatiyar, 1995) (see Chapter2).
In essence, a relationship can be viewed as a pair of evolving commitments of buyer and seller (Jackson, 1985) which manifests as a series of interactions where buyer and seller act, react and re-react to each other (Ford et al., 1986). The relationship marketing paradigm posits customers as an important co-creator of value, and advocates an organisation’s pursuit of mutually beneficial, long-term exchange relationships with individual customers. More specifically, relationship marketing, which has gained a strong foothold in marketing, cus- tomer service and quality management domains, can be contrasted with the conventional marketing paradigm in terms of its:
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focus on customer retention rather than acquisition;r
greater customer service emphasis;r
greater customer commitment;r
more intensive interaction; andr
greater emphasis on quality. (Christopher et al., 1991)In principle, the extent and intensity of the reciprocal nature of the exchange rela- tionship is determined by the effectiveness of the exchange parties in facilitating meaning- ful interactions, based on their relationship-building competence and willingness to support and enhance the further development of the relationship (Rexha and Miyamoto 2000). As for the relationship-building competence, which is largely built on a deep understanding of the exchange partner’s needs and wants, there are three types of relationship-building behaviours – namely, responding, initiating and alerting (that is, informing the exchange part- ner of any foreseeable problem that would affect the partner, so that the partner can make any necessary prior arrangements in case the problem eventuates) (Miyamoto and Rexha, 2004). Box5.5outlines some prescriptions for relationship marketing strategy in the banking sector.
Box 5.5 How banks can keep and build their relationships with seniors
The seniors market has changed. It has grown in size, with people living longer, enjoy- ing better health, and having a younger state of mind. The average life expectancy in the United States has increased to 77, up from 47 in 1900. Today, 64.2 million Americans are over age 50, and this group controls 43 per cent of the country’s US$300 billion in discretionary income, according to Primelife, a consulting firm in Orange, California.
Seniors represent a group of consumers with particular life-stage needs and, in turn, specific financial services needs. They are less likely to carry debt, but are very concerned about funding their retirement years, covering escalating health-care costs and not becoming a financial burden to their children. Other issues seniors may face are completing payments on their children’s college or graduate school education; convenient bill payment and banking while travelling; rolling over pension plans; and estate planning. They are also looking for convenience while pursuing active lives.
Here are some things banks can do to reach this important market segment.
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Consider new product offerings: Direct deposit (payroll or pension cheques), invest-ment services, life insurance and coverage for long-term care benefits are just a few new product areas banks could consider providing. Fixed-income mutual funds, reverse mortgages and annuities are others. Also, many seniors travel or spend periods of time at a second home. Debit and ATM cards, and bill payment and home banking by phone or the Internet give them the convenience to keep their banking relationships no matter where they go.