Analyzing and comparing transactional and relationship marketing. Interaction approach and organizational buying

Contents

Introduction.

Relationship Marketing – Definition.

Transactional marketing & Relationship Marketing.

Industrial network approach.

Interaction approach and organizational buying.

Conclusions.

Reference List

Introduction

In today’s modern business environment, the development of close and long-term relationships is a strategy which aims at creating competitive advantage and the successful revival of businesses. The scientific field of marketing has created “relationship marketing” which deals with the study of these relationships.

The present essay focuses on analyzing and comparing transactional and relationship marketing. It presents the IMP Group interaction approach which is considered as one of the most prevalent approaches of relationship marketing. The IMP Group approach is analyzed and more specifically its implementation in the purchasing process is studied. IBM is the company that is taken as an implementation example of the IMP Group approach. In IBM’s case study relationship marketing and IMP Group approach are successfully implemented and are in full accordance with the relevant theory.

The paper is structured as follows: first a definition of relationship marketing is given, then transactional and relationship marketing are compared followed by a brief description of IMP Group approach. Finally, IMP Group approach and other relevant strategies are presented as well as how these strategies were implemented in the IBM case.

Relationship Marketing – Definition

In academic literature there is no agreement on a specific definition of relationship marketing although most definitions have a common denominator. In 1995 Berry introduced this new marketing concept as the attraction, maintenance and enhancement of customer relationships. Later, Gronroos (1989,1991) extended the concept by stating that relationship marketing is the process of identifying, establishing, maintaining, strengthening and if necessary terminating relationships with customers or other interested parties with a profit so that the objectives of all parties are achieved and this is done by mutually exchanging and fulfilling promises.

Most definitions of relationship marketing concept conclude that it refers to the management of company relations (Gronroos, 1996) and includes all actions that are intended to create, enhance and maintain successful relationships in all types of transactions. Nowadays the term relationship marketing has become so extensive as to include a variety of relationships with a company's customers, suppliers, employees, competitors and generally all stakeholders (Morgan and Hunt, 1994) but the customer continues to be located in the center of all theories since an effective business relationship with customers is key to survival and success (Benpapudi and Berry, 1997). In brief, relationship marketing is a philosophy of successful business strategy and culture that places the company’s relations at the center of its operational thinking.

Transactional marketing & Relationship Marketing

Most scholars have defined relationship marketing as a new paradigmatic model (Gronroos,1991,Sheth and Parvatiyar, 1995) which has an alternative perspective and not just a tool of the marketing mix (Gronroos, 1999) and they observed its effects on competitive conditions (McKenna, 1991, Vavra, 1995). Almost all studies agree that relationship marketing is the opposite of transactional marketing (Gummesson, 1996).

Transactional marketing deals with the development, sale and delivery of products through short economic transactions with separate start and abrupt end. Relationship marketing orientation refers to transactions that last longer and reflect a continuous process (Dwyer, Schurr & Oh, 2007).

The difference of these two marketing approaches is not only limited to the duration of contacts between the transacting parties but is extended to other dimensions that make clear the distinction between transaction and relationship marketing. In transaction marketing the required activities for the implementation of a marketing strategy were performed by one department of the organization which was responsible for it. The implementation of relationship marketing requires the diffusion of marketing philosophy in the whole business and the participation of its departments in marketing programs so as to ensure their success. This complete marketing view from the whole organization is referred as internal marketing and is important in order to ensure that the activities of external marketing result in the desired outcome.

Another difference is that in transaction marketing, price is an important factor for “keeping” customers since it is believed that they will prefer the suppliers that will offer the cheapest product (Gronroos, 1999). Companies that follow the approach of relational marketing offer more comprehensive packages and through the creation of links, they increase the value of their purchasing proposal making their customers less price sensitive. The price continues to be an important variable for the assessment of suppliers but other elements emerge which differentiate product offerings and generate additional benefits.

The differences of transaction and relationship marketing are the following (Vavra, 1995):

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Industrial network approach

Industrial network approach is a typical interaction approach. It was developed by the International Marketing and Purchasing Group (IMP Group). The approach supports that a company has continuous relations with the customers and the suppliers as a result of a continuous interaction among them (Whitelock, 2002).

The industrial network approach, particularly the one of multinationals e.g. in the host country is self-evident. The model defines the existence of four variable groups which should be examined for the development of successful networking (Whitelock, 2002): a) the elements and the interaction process that applies e.g. in the host country b) the characteristics of the parties involved in interaction c) the “atmosphere” of interaction – i.e. factors coming from the external environment in host country and, d) the environment of interaction. The interaction of variables taken into consideration by the model supports two very basic decisions in the internationalization process of the business opportunities of a company a) the decision of locating in another country and b) the type of customers the company is addressed to – a decision for segmenting the market.

The matrix of the above decisions reflects, in each case, the current organizational structure of the company, but mainly its transformation and adjustment in the light of taking over international activities. The model explains the choice of entering a market and was influenced by the Uppsala model of Johanson and Vahlne (2003).

Interaction approach and organizational buying

In this chapter will be examined the interaction approach in purchasing with the use of examples. A company has to face various hindrances that limit its strategic choice. Among these factors are the company’s marketing strategies and the economic situation it has to face. Other factors are the stage in the life-cycle the company’s products are. Technology is another factor and particularly the way the supplier uses and applies it. Lastly, the organizational structure of the business may be another limitation. The interactionist approach implies that the analysis should examine the different aspects of supplier relationships i.e. portfolio analysis, assessment of the marketing strategies, examination of the company’s buying power and its expertise in having effective interactions with its suppliers.

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