57

CHAPTER III

LITERATURE REVIEW ON

RELATIONSHIP MARKETING &

BRAND IMAGE IN THE CONTEXT

OF THE STUDY

This chapter is a curtain raiser towards the efforts

taken for collecting, scanning, analyzing and

comprehending past studies which are relevant to the

study undertaken. Researcher presents his train of

thoughts that string together with references logically

across various broad sub-sections. The purpose of this

chapter is to unfurl the concept of relationship

marketing and associate it to the study undertaken.

Apart from this resercher would find reserarch

methodological cues for conducting this study.

58

“As a merchant, you’d better have a friend in every town” – A Middle Eastern

Proverb1

3.1 Service marketing in a changing environment – a paradigm shift towards

relationship marketing

Over the past six decades, focus of marketing is directed towards an increasing

number of specific sectors. During 1950s, consumer goods marketers were

considered as most sophisticated marketers. In 1960s, considerable attention was

given to industrial marketing or business to business marketing. In the 1990s,

social marketing got impetus as many non profit and public sector organizations

started embracing marketing concepts. Considering growth and size of global

service economy, it is surprising that service marketing stated to get attention in

1980s. This history has been docketed by many academicians like Christopher M,

Payne A, Ballantyne D (1991)2, Filip Alina and LaurenŃiu-Dan Anghel (2008)

3.

Figure 3.1 – Focus of marketing through decades

1950s 1960s 1970s 1980s 1990s

Relationship

Marketing

Service

Marketing

Non Profit &

societal

marketing

Business to

business

marketing

Consumer

Marketing

Adapted from: - Christopher M, Payne A, Ballantyne D (1991)4

Rather, Egan (2004)5 sees Nordic School was originally conceived for services

marketing research in the early 1980s and was characterized by a shift in focus

from those ideas associated with traditional marketing concepts such as stressing

59

the importance and relevance of services marketing and industrial marketing more

than customers goods marketing; a gradual shift away from an emphasis on goods

and services to an emphasis on customer value; the integration of the marketing

department function with other organizational functions and with general

management and less emphasis on quantitative research than qualitative research.

Again Pyne, Adrian (1993)6 has come up with seven stages through which service

organizations adopted various marketing concepts. It was found that service

organizations had moved from selling to advertising & communication. This

focus has shifted from product development to differentiation and then to

customer service & service quality. Finally service organizations understood

integrating all these elements along with relationship marketing is paramount.

Another seminal work by Gummesson, Evert (2007)7 condemned service

marketing logic on following points.

1) Goods, services and the service sector are ill-defined categories. The

definitions become fuzzy for the very reason that they represent fuzzy

phenomena. An unsolved problem that has been swept under the carpet is

the fact that goods and services always appear together.

2) What had learnt about interaction in the service encounter has been

extended and becomes applicable to all marketing situations.

Relationships, networks and interaction have been proposed at the top

level of marketing with the 4Ps and the marketing mix demoted to the next

level. The marketing mix is supplier-centric and manipulative first and

customer-centric second.

3) Complexity must be recognized in marketing theory. Network theory

offers the most constructive attitude and manageable techniques for

approaching complexity. Many-to-many is a concept for merging network

theory and marketing reality.

He ended the work with a candid statement……..

“Although we have not yet got it conceptually and consistently together I am

prepared to say that a paradigm shift is taking place in marketing”

60

Adrian Palmer (2002)8 came up with following explanation for paradigm shift

towards relationship marketing based on various environmental factors: -

1) Technological Environment - Ease with which technology can now

allow large organizations to communicate with thousands, or even

millions of individual consumers. Rather we are observing search engines,

comparative web sites and intelligent buying agents reduced the

information imbalance between buyer and seller.

2) Social Environment - Mainly individuals‟ network of relationships have

shifted, away from traditional network based on the church (read spiritual

in our context) and family, towards commercially oriented organizations.

From a practical perspective, such sources provide an increasing range of

services (e.g., care for children and the elderly) which were previously

undertaken by family and church. The number of associates of an

individual has been noted to be stable across cultures and relationships

with companies provide new opportunities for individuals to gain identity

and a position within society, replacing church and family as a source of

identity.

Numerous studies have pointed to the growing role of women. Women as

buyers and sellers are likely to bring values to commercial exchanges

which are more relational than transactional.

Finally, the need for greater social responsibility has encouraged the

development of business-consumer relationships in some sectors.

3) Economic Environment - There is the familiar argument that it is more

cost effective to retain existing customers than to continually recruit new

customers to replace lapsed ones. Secondly, the quality of buyer-seller

relationships emerged as a point of sustainable competitive advantage.

Relationship marketing also arose at a time when the choice available to

consumers within most product categories increased markedly. Buyer

behaviour models are essentially concerned with understanding how

buyers simplify their choice processes in order to reduce the psychological

61

cost of a decision and it has been noted that buyers‟ motivation to enter

into a relationship with a seller is essentially based on a desire to reduce

their choice set and simplify their choice process.

4) Political – Legal Environment - Governments of many western countries

have sought to outsource many services provided to consumers (e.g.,

many health and pension services) and encouraged the development of

ongoing relationships between the two parties. Sometimes this has been

enshrined in legislation, as in the case of private pension provisions where

the existence of some form of relationship is a prerequisite to advice being

given by a pension provider.

In the UK, the Financial Services Act 1986 effectively made some form of

relationship compulsory for companies selling various life long, high risk

financial services. The absence of such relationships and an over-emphasis

on transactional exchanges has led to many financial services providers

being fined by regulatory bodies for failing to establish the true needs of

their clients.

Jagdish N. Sheth, Atul Parvatiyar (2000)9, Evert Gummesson (1997)

10 sees

relationship marketing as paradigm shift in marketing. He came up with following

reasons for “Relationship Marketing as a paradigm shift”:

1. Relationship Marketing represents ubiquitous and ancient practices in

business.

2. The two major theories of marketing that have emerged during the past

between 1980 – 2000 are services marketing and the network approach to

industrial marketing. Although they represent different substantive areas,

both offer the same core variables i.e. relationships, networks and

interaction. These core variables also appear in other types of management

research.

3. Competition is usually hailed as the driver of a market economy. The

really significant contribution of Relationship Marketing is the emphasis

that it puts on collaboration. There is need collaboration between

customers and suppliers, between competitors, between firms and

62

government, etc. A dynamic balance, the marketing equilibrium, includes

the three factors – of competition, collaboration and regulations

institutions.

4. Finally, society is a network of relationships in which we interact. If we

dissolve the networks of relationships, we become hermits, isolated and

self-supporting. We need no marketing. But business and marketing are

embedded in society and marketing is a subset of society. Consequently,

marketing is also part of the network of relationships, a fact that has so far

not been recognized in marketing theory.

Jagdish N. Sheth, Atul Parvatiyar (2000)11

assert that with the evolution of

Relationship Marketing, the hitherto prominent exchange paradigm of marketing

will be insufficient to explain the growing marketing phenomena of collaborative

involvement of customers in the production process. An alternate paradigm of

marketing needs to be developed that is more process oriented rather than

outcome oriented, and emphasizes value creation rather than value distribution

(see figure 3.2).

Their optimism stems from following observations:

(i) Relationship marketing has caught the fancy of scholars in many parts of

the world, including North America, Europe, Australia and Asia;

(ii) Its scope is wide enough to cover the entire spectrum of marketing‟s

sub-disciplines including channels, business-to-business marketing, services

marketing, marketing research, customer behaviour, marketing

communication, marketing strategy, international marketing and direct

marketing;

(iii) Like other sciences, marketing is an evolving discipline, and has

developed a system of extension, revision and updating its fundamental

knowledge; and

(iv) Scholars who at one time were leading proponents of the exchange

paradigm, such as Kotler (1972) 12

, and Hunt (1983) 13

, are now intrigued by

the relational aspects of marketing.

63

Figure 3.2 – Paradigm shift in marketing orientation

Source: - Jagdish N. Sheth, Atul Parvatiyar (2000)14

Even criticizer of relationship marketing like Brito, Carlos (2011)15

, raised

question whether relationship marketing is old wine in a new bottle? His efforts to

answer this question led him to keep his fingers crossed.

“…. evidence was not found that one can yet speak of a new wine. But,

apparently, both researchers and practitioners are struggling to develop a

new wine. We have to look forward to seeing the next developments in this

front.”

Further this new paradigm has been differentiated from transactional or exchange

paradigm (see Table 3.1, Figure 3.2) by multiple researchers.

Though relationship Marketing is emerging as a new paradigm however;

relationship oriented marketing practices date back to the pre-Industrial era. Not

only scholars like Sheth and Parvatiyar (1995)16

but also practitioners like

Azevedo and Pomeranz (2009)17

agree that relationship marketing is not new to

64

businesses. Rather the history of marketing practices and illustrates how the

advent of mass production, the emergence of middlemen, and the separation of

the producer from the consumer in the Industrial era led to a transactional focus of

marketing. Now, due to technological advances, direct marketing is staging a

comeback, leading to a relationship orientation. This fall and rise has been shown

in the figure 3.3

Table 3.1 Transactional Marketing – Relationship Marketing continuum

Transaction Marketing Relationship Marketing

Dominating

Marketing Function

Marketing Mix elements Interactive Marketing

supported by marketing

mix elements

Focus Focus on single sale Focus on customer

retention

Orientation Orientation on product /

service features

Orientation to customer

value

Time perspective Short Term Long Term

Emphasis on customer

service

Little emphasis on

customer service

High emphasis on

customer service

Customer

commitment

Limited customer

commitment

High customer

commitment

Customer contact Moderate customer contact High customer contact

Quality Responsibility Quality is primarily

concern of production /

operations functions

Quality is concern of all

Quality Dimension Quality of output is

dominating (technical

quality dimension)

Quality of interactions

(functional quality

dimension) grows in

importance and may

become dominating

Measurement of

customer satisfaction

approach

Monitoring market share

(indirect approach)

Managing the customer

base (direct approach)

Customer information

system

Ad hoc customer

satisfaction survey

Real-time customer

feedback system

Role of internal

marketing

No / Limited Substantial

Adapted from: -Payne (1995)18

; Grönroos, Christian (1991)19

; Grönroos, Christian

(1994)20

.

65

Figure 3.3 – Evolution of relationship orientation

Source: -Sheth and Parvatiyar (1995) 21

Researcher can consider relationship marketing is new paradigm and different

from old exchange paradigm. As RM theory is into developing stage, next

subsection will study it in depth so that researcher can plan the study.

3.2 Defining and conceptualizing Relationship marketing for the study

Berry (1983)22

coined the term, relationship marketing, in the service marketing

literature. Relationship marketing is defined as attracting, maintaining, and

enhancing customer relationships in multi-service organizations. After that series

of definitions were proposed. Some researchers like Jackson (1983)23

; Jackson

(1985)24

; Turnbull and Wilson (1989)25

; McKenna (1991)26

; Shani and Chalasani

(1991)27;

Evans and Laskin (1994) 28

came out with definitions which can be only

applied to business to business settings.

A broad description of relationship was proposed by Gronroos (1990) 29

as

The purpose of marketing in the new context is to establish, maintain, and

enhance relationships with customers and other partner, at a profit, so that

the objectives of the partners involved are met. This is achieved by a

mutual exchange and fulfilment of promises.

66

Multiple works like Berry and Parasuraman (1991)30

; Morgan and Hunt (1994)31

;

Perrien and Ricard (1995)32

; Sheth and Parvatiyar (1995b)33

; Evert Gummesson

(1999) 34

further refined RM‟s definition from consumer markets‟ perspective.

Along with these continuing refinements, it was also observed that word

relationship do have socio - cultural aspect. Local context is very important for

RM as Sabine Flambard - Ruaud (2005)35

found Relationships are built on

cultural platforms. Relationships are referred with variety of terms in various

countries like Gaunxi in China Kankei or Toyama or Kusuri in Japan, while in

Russia it is known as Svyazi. Methods and relative importance to attributes are

different in different countries. He further found that in the strongly capitalist

economies (western) transaction creates and develops the relationship (transaction

in the centre of the exchange) whereas in less capitalist economies (Asia, Africa,

and Middle East) relationship creates and develops transaction. Relationships are

built on cultural platforms. Methods and relative importance to attributes are

different in different countries.

Table 3.2 – Western Relationship Vs Asian Relationship

Western Emerging Markets mainly china

(Asia)

Economic and impersonal involvement

Calculative Commitment

Affective and personal involvement of

the parties

Affective Commitment

Close explicit roles Implicit role. Beyond existing role

(reciprocal exchange)

Guiding principles are legality and

rules

Guiding principles and morality and

social norms

Formal relationship Informal relationship based on personal

affiliations

Compiled from: - Sabine Flambard-Ruaud (2005)36

, Relationship Marketing in

emerging economies: some lessons for the future, Vikalpa, Vol. 30, No. 3, July –

September 2005

These cultural differences paved way for various schools of thoughts like IMP

(Industrial Marketing and Purchasing) school, UK perspective Payne (1997)37

,

67

Finland – Nordic school, etc. Ganguli Shirshendu, Eshghi Abdolreza, Nasr

Bechwati Nada (2009)38

.

As this study in pertaining to relationship between retail investors and distribution

intermediaries, which is of B2C nature, it will be appropriate to understand

various schools of thoughts pertaining to B2C context.

3.2.1 Overview of RM schools of thoughts for consumer markets

In this section we will briefly discuss those schools which are relevent to B2C

relationhsips.

Table 3.3 – Various RM schools of thoughts from B2C market perspective

Research

stream Main Theme Context

Important issues and

concepts

Nord

ic S

chool

Cross functional

marketing with

service quality

as basis of

differentiation

Service in the

consumer

markets (B2C)

Service Marketing, 30Rs,

Internal Marketing,

Customer Perceived

Value, interaction -

communication -

dialogue

Su

per

ior

cust

om

er

valu

e (A

nglo

-

Au

stra

lian

Ap

pro

ach

)

Delivering

customer value

based on

service

marketing and

quality

management

Customer

Perceived value

in B2C markets

Process to deliver

relationship quality, six

markets model, customer

perceived value

Cu

stom

er r

elati

on

ship

Man

agem

ent

Process of

creating value

for both

company and

customers by

integrating

different

organizational

functions

Customer

selectivity and

corporate

strategy

Formal Process Model,

One to one buyer seller

relationships, interaction

and collaboration, value

addition

Cu

stom

er

Ad

voca

cy

Customer's best

interest is the

firm's priority

Customers as

integral part of

firm and thus

firm act as

trusted advisor

for them

Resource Allocation,

Best products, complete

information, Mutual

Advocacy

Source: - Ganguli Shirshendu, Eshghi Abdolreza, Nasr Bechwati Nada (2009)39

68

a) Nordic School – Nordic School focuses on consumer markets only. The

Nordic school offers a structured approach towards relationship

marketing. However, it is a limited approach in that the issues of cross

functional marketing, delivering customer value or the 30Rs revolve

around service as the sole differentiating factor in building relationships.

Prominent contributors to this school are Evert Gummesson and Christian

Grönroos.

b) Superior Customer value (Anglo Australian approch or UK approch) -

Another research stream in relationship marketing focuses on delivering

superior customer Value by integration of service marketing and quality

management techniques. This concept of relationship marketing based on

delivering superior value emphasizes customer perspective as the focal

point of relationship building activities and as such extends the Nordic

School beyond internal marketing to the six markets model. Leading

contribuors are Christopher, Crossby, Payne, and Holt.

c) Customer Relationhsip Managment - Parvatiyar and Sheth (2001)40

define

CRM as “a comprehensive strategy and process of acquiring, retaining,

and partnering with selective customers to create superior value for the

company and the customer. It involves the integration of marketing, sales,

customer service, and the supply-chain functions of the organization to

achieve greater efficiencies and effectiveness in delivering customer

value.” The essence of CRM lies in customer selectivity and there are

certain tools of data warehousing and data mining which are crucial to

CRM systems. However, CRM has a problem of becoming more of an IT

function because of its process-based approach. In effect, more emphasis

has been put on the process rather than the outcome or underlying

mechanisms. Leading contributors to this school are Jagdish Sheth, Atul

Parvatiyar, Webster, and Sisodiya.

d) School of customer advocacy - If companies advocate their customers,

then customers will reciprocate by advocating for the company by not

only buying the products but also telling other customers as well as

69

helping to produce better products. Customer advocacy represents a major

shift in mind-set from competitive rivalry around quality and price to

cooperation and collaboration around shared goals and objectives.

Companies can develop a long-lasting competitive advantage through

becoming a trusted advisor for their customers and in the process,

optimize allocation of their scared resources. As this school is very recent

that is why very few works had found. McDonald (1993)41

Gruen

(2000)42

; Urban (2004)43

; Urban (2005)44

; Huetteman (2005)45

; Lawer and

Knox, (2006)46

.

After comprehending all relevant schools researcher felt first two

schools i.e. Nordic school and Anglo – Australian schools are more

appropriate to our study.

Further researcher will delve deeper into these two schools to form in depth

understanding of RM. This discussion may help researcher to decide most

appropriate school between them.

3.2.2 Nordic School of relationship Marketing

Nordic school‟s explanation based on three concepts i.e. dialogue, value and

interaction which is referred as “triplet of relationship marketing” (see figure 3.4)

Figure 3.4 – Triplet of Relationship Marketing

Source: - Gronroos Christian (2000)47

70

The core: Interaction Process - In the context of consumer services interaction

process has been studied in terms of acts, episodes, and relationships. Multiple

acts form episodes and episodes further paves way for relationships.

Dialogue – This is nothing but how marketer communicates to customers.

Communication efforts must be relational such as personally addressed letters.

Again creating symmetry between interaction and dialogue is also important.

Value – In any relationships there are some benefits (core service, additional

services) as well as costs (sacrifice). Value in relationship context can be

described with the help of following two equations: -

Core Solution + Additional services

Customer perceived value = ------------------------------------------

Price + Relationship Cost

Customer Perceived Value = Core Value + Relationship Cost

Moreover, as highlighted by Grönroos (2007) 48, research conducted

in this school has taken essentially a qualitative and conceptual

nature, rather than a research-oriented hypothesis testing based on

more quantitative methodologies. As researcher intend to test

hypothesis in this study, using Nordic school approach is not

completely suitable. Rather researcher would use this model partially

in the study.

3.2.3 Anglo Australian (UK) school of relationship marketing

a) Six markets Model - Followers of Anglo Australian (UK) schools like

Christopher, Payne and Ballantyne, on their turn, have developed an outstanding

work in the field of the relations with different types of actors embodied the so-

called Model of six Markets (Refer figure 3.5).

This is a tool that deals with relationship management with the main stakeholders

of a company i.e. Customer market, supplier and alliance market, internal market,

71

recruitment market, influence market and referral market. These markets are

shown in tabular format below. (Refer Table 3.4)

Figure 3.5 – Six Market model of relationship marketing

Adapted from: - Payne (1993)49

, “the relationship marketing: six markets

framework”, the canfield school of management working papers, SWP 35/93

Table 3.4 – Six Markets at a Glance

Sr. No. Name of the

market

Explanation / sub markets

1 Customer

Market

Direct buyers, intermediaries and final

consumers

2 Supplier and

alliance market

All those entities that typically provide

skills and capabilities based more on

knowledge than on the product

3 Internal Market Employees

4 Recruitment

Market

Includes those who can potentially come

to work with the company

5 Influence Market Those that directly or indirectly can

influence the direction of the company

(shareholders, financial analysts, media,

advocacy groups, consumers,

environmental organizations, unions,

etc.)

6 Reference

Market

Those who can give some information

about the company.

By aligning marketing, quality and services, businesses should formulate

marketing activities to develop relationship with each market.

Researcher found many works which are in line with six markets model like

Ravald, Annika and Grönroos, Christian (1996)50

; Gummeson‟s (1999)51

; Richard

72

Batterley (2003)52

; Grigoras, Elena (2009)53

. Relationship marketing does not

refer only at the relationship with the clients, but also at the ones with other

categories of business stakeholders, like suppliers, distributors, employees,

shareholders, different organizations and other major actors from the environment

where the company is activating. Gummeson‟s (1999)54

termed this phenomenon as

“Total Relationship Marketing”.

Considering studying all markets is difficult (and some markets are also not

applicable individual agents), researcher limits this study to consumer market

and partially to referral market only.

b) Relationship Quality - Another important concept emerged out from UK school

is process of delivering relationship quality. Researcher came across with lot of

research related to “relationship quality”.

W.G. Kim, Y. Cha (2002)55

refers Relationship quality as a customer perceptions

and evaluations of individual service employees‟ communication and behaviour,

such as respect, courtesy, warmth, empathy, and helpfulness. This involves

inducing feelings and emotional states through customer–employee interactions.

While as observed by Papassapa Rauyruen, Kenneth E. Miller and Nigel J Barrett

(2007)56

there are major four factors of relationship quality which are trust,

commitment, satisfaction and service quality.

It shows there is some sort of differences exists in terms of constructing

relationship quality measure. A work of Thorsten Hennig-Thurau, Kevin P.

Gwinner, Dwayne D. Gremler, (2002)57

is helpful in this regard. They came out

with following approach: -

Relationship Quality (RQ) is nothing but customer evaluation of

transaction and relationship as a whole.

To measure RQ one has to measure both transactional as well as relational

quality. This view has been also taken by Chiung-Ju Liang, Wen-Hung Wang

(2007)58

. They have classified relationship marketing efforts into financial

bonding tactics, social bonding tactics, and structural bonding tactics. Financial

bonding tactics refers to a kind of bond that stimulates customer consumption

motivation and facilitates knowledge of customers‟ intentions by use of price

73

decisions, such as price discounts, low advisory fees and a higher interest rate.

“Social bonding tactics” refers to personalized / customized service, customers‟

trust and satisfaction and understanding and learning about customers‟ needs and

wants. We can easily state that relationship quality refers to social bonding while

transaction quality refers to financial bonding. Structural bonds are not applicable

to B2C situations.

Pengi Choong (2008)59

studied various distribution intermediaries in US mutual

fund industry. He further labelled social quality (personal manner in which core

services are delivered) as a relationship quality. He identified factors responsible

for relationship quality such as personalized service, perceived quality of

investment advice, perceived quality of information. He took various factors like

Fees, convenience, efficient documentation, transparency to measure transactional

quality.

Figure 3.6 - Relationship building model for Indian financial services

industry

Source: - Vaibhav Shekhar, and Nitin Gupta (2008)60

TRUST

INVOLVEMENT

EMOTIONS

PERCEIVED VALUE

CUSTOMER

COMMITMENT

TOTAL OFFERING

SERVICE

CONVENIENCE

DEDICATION

BASED

MOTIVATION

LONG TERM

RELATIONSHIP

WITH SERVICE

PROVIDER

DEPENDENCY

CONVICTION

SERVICE QUALITY

CONSTRAINT

BASED

MOTIVATION

74

For our study researcher found factors suggested by Vaibhav Shekhar, and

Nitin Gupta (2008)61 which are total services offerings, trust, customer

commitment, customer involvement, service convenience, service quality,

emotions, and customer’s perceived value of services are most appropriate

considering this model is developed for financial services that to also in

Indian context. This model is shown in figure 3.6.

3.3 Understanding Relationship Marketing Outcomes

All relationship marketing activities are ultimately evaluated on the basis of the

company‟s overall profitability. However, as a firm‟s profitability is influenced by

a number of variables largely independent of relationship marketing activities, it

seems appropriate to conceptualize relationship marketing outcomes on a more

concrete level while investigating possible outcomes. Two RM outcomes are

referred to in the marketing literature as key relationship marketing outcomes:

customer loyalty and (positive) customer word-of-mouth communication.

Anna Walz (2009)62

defines loyalty as intention (or actual activity) by the

customer to perform a diverse set of behaviours that signal a motivation to

maintain a relationship with the focal firm, including increased share of wallet,

positive word of mouth, and repeat purchasing. Customer Loyalty can be

measured on seven dimensions i.e. As suggested by J. Clement Sudhahar, et al

(2006)63

Behavioural, Attitudinal, Cognitive, Conative, Affective, Trust and

Commitment through a specially designed SERVLOYAL scale.

Researcher would use this scale and limit customer loyalty measurement to

three set of behaviours only.

a) Maintain a relationship with the focal firm

b) Increased share of wallet

c) Positive word of mouth,

3.4 Applying Relationship Marketing to Financial services

As observed by Berry (2002)64

, the practice of relationship marketing is most

applicable to a service firm when each of the following conditions exists:

75

1. There is an ongoing or periodic desire for the service on the part of the

service customer,

2. The service customer controls selection of the service supplier,

3. There are alternative service suppliers and customer switching from one to

another is common,

Berry (1983)65

relationship marketing (RM) is recommended as a strategy to

overcome service intangibility and further Zeithaml (1981)66

found RM is

appropriate for services that are difficult for customers to evaluate even after

purchase and use. Jagdish Seth and Atul Parvatiyar (1995)67

observed that the

greater the need for information, knowledge and expertise in making choices,

greater will be the consumer propensity to engage in relational behaviour.

Many financial services especially investment services like mutual funds fit in

both these criterion.

Mutual fund is a complex service as Vroomen, Bjorn, et al (2003)68

found that

(complex) services are characterized by many items per attribute, are often tailor-

made, purchased infrequently, difficult to comprehend, and often require

assistance during the decision-making process. Being a complex service,

engaging advisors while buying mutual funds seems to be natural. That is why

researcher has decided to study relationship marketing phenomenon between

mutual fund sellers and buyers.

Bhattacharya, C. B., Bolton, Ruth N.,(2000)69

came out with some service

characteristics which facilitate RM. These characteristics are as follows: -

a) Risk involved – Risk is nothing but probability of any loss that can be

occur as a result of an exclusion of an alternative from consideration

multiplied by importance of loss. It can be financial risk, performance risk,

physical risk and convenience risk. In case if MF / ULIPs financial risk is

higher and importance of loss is also larger. MF / ULIPs is high risk

category.

b) Switching Cost – It is one time cost that buyer encounter in switching

from one supplier to another. In addition to monetary cost, there are search

76

cost and non monetary cost. Non monetary cost includes mental

processing cost and social cost. Mental processing cost will be higher

when customers have little knowledge about the product. MF / ULIPs fall

under high switching cost side as both monetary and non monetary cost

while switching are higher.

c) Service category Heterogeneity – Heterogeneity is linked with various

factors like number of alternatives, complexity and differences amongst

alternatives for that category. Mutual Funds / ULIPs are heterogeneous as

there are many alternatives are available and these alternatives are

different from each other. Mutual Funds / ULIPs fall under heterogeneous

category.

Figure 3.7 shows position of MF / ULIPs on these three characteristics. It has

highest propensity of relational engagement.

Figure 3.7 – Service category characteristics facilitating relationship

marketing

Low Risk High Risk

Homogenous Heterogeneous Homogenous Heterogeneous

Low

switching

cost

Cellular

services Restaurants

Fixed Deposits,

Saving Accounts

Financial

Advisory services

High

switching

cost

DTH services Computers

DMAT

Accounts, Term

insurance,

Health Insurance

Housing Loan,

Financial

services like

Mutual Funds,

ULIPs

Red – highest propensity; Blue – Moderate propensity; Green – Low propensity

Researcher‟s adaptation from: - Bhattacharya, C. B., Bolton, Ruth N., (2000)70

,

Eisingerich Andreas, Simon Bell (2006)71

effective relationship selling will be

critical when 1) service is complex, customized and delivered over a continuous

stream of transactions 2) Buyers are unsophisticated about service 3) customer

face uncertainty regarding outcomes.

77

Financial services are highly intangible and complex service based offerings,

which vary enormously in context, consumption, delivery, duration, and

significance to the customer. Again lifetime nature and continuous nature of

transactions makes relationship marketing appropriate. Many customers exhibit

sense of ownership over their services like “my bank” or “my advisor” or “my

mutual fund company.”

Alexander, Nicholas and Colgate, Mark (2000)72

observed that the financial

services retailers are moving from a transactional approach to a relationship

approach that recognizes the lifetime value of the customer.

Mutual Funds and ULIPs are highly suitable case for studying relationship

marketing.

3.5 Reviewing various studies involving Relationship Marketing

While reviewing various studies pertaining to RM, researcher observed that

some of the scholars have used both the terms almost interchangeably Sin et al.

(2005)73

. Relationship Marketing and Customer relationship Management also

have strong similarities: both strongly focus on individual buyer-seller

relationships, accept that these relationships are longitudinal in nature, and that

both parties benefit in the process.

Along with these similarities both the concepts are different in terms its execution

and focus. These differences are showcased in the Table 3.5 below.

From the discussion so far, researcher formed opinion that CRM can

be regarded as, to some extent, a subset of RM. That is why CRM

studies are also reviewed by researcher.

78

Table 3.5 - Relationship Marketing (RM)

Vs Customer Relationship Management (CRM)

Relationship Marketing (RM)

Customer Relationship Management

(CRM)

More Strategic Tactical (implementing RM using

information technology )

Goes beyond the traditional customer-

supplier dyad and encompasses

building of relationships with the entire

range of stakeholders

Focused on building

relationships with profitable customers

Relatively more emotional and

behavioural, focusing on concepts such

as bonding, empathy, reciprocity and

trust

CRM is relatively more managerial per

se, focusing on how management can

make concerted efforts in attracting,

maintaining and enhancing customer

relationships

Source: - Ryals and Payn (2001)74

; Gummesson (1994)75

; Mitussis et al (2006) 76

;

Hunt et al (2006)77

; Payne et al., (2000)78

; Sin et al., (2005)79

; Yau et al.,

(2000)80

.

As this study endavored to compare various distribution channels, initially

resercher explored many studies to came across with two studies which are

similar on this aspect.

a) Gilbert, David; Choi, Karen (2003)81

research findings imply that different

ownership (based on culture i.e. Chinese, non Chinese and merged) of

bank will exert a different emphasis on RM practices. Cultural factors

pertaining to bank ownership plays an important role in RM practices.

Though this study is similar to the study undertaken; researcher found

some dissimilarities with Gilbert, David; Choi, Karen (2003)82

work on

following points.

- Instead of cross cultural comparison, researcher is comparing

business set ups i.e. individual Vs bank & corporate agents.

- Study undertaken is wider as it not only covers RM but also

aspects like investor education, emerging channels, etc.

- Study undertaken is customer centric as against the work of

Gilbert, David; Choi, Karen (2003) which was mostly supplier or

seller centric.

79

Importantly, by conducting this study in Indian context researcher is

endeavoring to fill this gap.

b) Peter C. Verhoef and Bas Donkers (2005)83

used data on 3,317 customers

of a financial-services provider concerning the acquisition channel, their

socio-demographics at the individual and at the zip code level, customer

loyalty and cross-buying. We used probit models to empirically establish

the effect of the acquisition channel on retention and cross-selling. We

then combined these two factors into a measure of total sales after the first

year. They found that customer loyalty differs among channels. They also

found the acquisition channels had some effect on cross-buying. However,

these effects are weaker than those for loyalty.

Our study is diffent as resercher is comparing customer loyalty and cross

selling amongst distribution channel as against acquision channel.

Das Kallol (2008)84

performed content analysis of 209 research paper (only in

high impact factor journals) and observed that contribution of services is largest

and within it, the relative contribution of the financial services was the highest.

She found that overall RM research has been largely concentrated in countries

like the UK, the USA and China. Interestingly not a single paper was published

from India during 1994-2006.

Figure 3.8: - Classification of RM literature

Source: - Lindgreen (2001)87

80

Das Kallol (2008)85

offered a comprehensive roster of RM studies which are

published in high impact journals during 1994 -2006. Researcher compressed this

roaster from 209 papers to 41 papers to make it a “roster of RM studies in banking

and financial services”. (Refer Appendix – F)

These 41 studies are further studied and classified into various categories as

suggested by Lindgreen (2001)86

. Researcher has applied this classification to RM

studies pertaining to banking and financial services. (Refer Table 3.6)

Table 3.6 – Classification of RM literature in financial services

Studying what? Number of studies

RM Objectives 7

Defining construct 9

Instruments / Tools 2

Issues 19

Industry Applications 4

Table 3.6 shows that most of RM research in financial services is focussed on

objectives, issues and defining construct. These studies have already reviewed by

the researcher in preceding sections. Researchers‟ attention is less towards RM

tools and industry applications. As present study is mainly pertaining to industry

practices; one can easily say this study is different from the herd.

Further researcher would analyse these studies from geographical scope

perspectives. Based on geographies, researcher classified these studies not only

country wise but also continent wise.

Table 3.7 – Continent wise distribution of RM studies in financial services

Continent Number of works

Europe 20

Asia 9

North America 6

Australia 2 Africa 1

81

Table 3.8 – Country wise distribution of RM studies in financial services

Country Number of works

United Kingdom 14

China 4

USA 4

Malaysia 3

Canada 2

Australia 1

Finland 1

Ireland 1

New Zealand 1 Singapore 1

Spain 1

Thailand 1

South Africa 1

Sweden 1

Based on Table 3.8 researcher can infer that majority of RM research in financial

services are concentrated in United Kingdom, China and USA. Further

comparison based on continents, shows that Europe is leading the pack followed

by Asia. It is surprising that Indian researchers have not taken inspiration from

other Asian countries in this regard. This study is novel as it has undertaken in

Indian context.

Researcher would further go in detail to find out within financial services which

services had attracter researcher most. This analysis is shown in Table 3.9.

Table 3.9 – Distribution of RM studies based on specific area in financial services

Scope Number of work

Banking 22

Insurance 1

Banking + Insurance 1

Financial advisory 1

Other Financial services 16

The entire focus of RM researchers within financial services is on banking

services. Only one study found on “advisory services”. Considering researcher

82

is focusing on various financial advisors in MF / ULIP, study undertaken is

novel one.

For getting some research methodological insights, researcher compared these

studies on research methods perspective. Based on research approach (Refer

Table 3.10) it was found researcher has emphasised both quantitative as well as

qualitative approach.

Table 3.10 – Research approach used in financial services‟ RM studies

Approach Research Method Number of times

Quantitative Survey Research 22

Experimental Research

1

Qualitative Case study 8

Other Qualitative Research Methods

10

Based on which party surveyed, it was found that both suppliers and consumers

are studied equally. (Refer Table 3.11)

Table 3.11 – Classifying RM studies in Financial Services based on elements

studied

Elements studied Number of times

Sellers / Suppliers/ service providers

15

Buyers / Consumer 15

Both buyer & seller 1

secondary data / case based 10

Surprisingly, researcher found only one study in which both seller and buyers are

studied. This research is different as researcher would study both retail investors

as well as distribution intermediaries.

Further, based on data collection methods, researcher found that majority of the

researchers had employed mail survey and interviews method. (Refer Table

3.12)

83

Table 3.12 – Data Collection Methods used in

RM studies pertaining to financial services

Data Collection Method Number of times it is used

Mail Survey 16

Interviews 10

Depth Interviews 8

Observation 6

Documents 4

Telephonic survey 3

Focus Group 1

Take home assignment 1

With all these deliberations, researcher came across with multiple studies and

understood how these studies are either similar or dissimilar to the one

undertaken. During this discussion we got vital cues for research methodology

which helped researcher to develop research methodology as such. Further

researcher would move towards making research variables operational for the

study in remaining sections.

3.6 Making Relationship Marketing operational for the study

Relationship marketing is possible when both the buyer and sellers are ready to

develop / engage in long term relationships. In this regards, buyer – seller

relationship grid will come into the fore which was developed by Lindgreen,

Adam and Pels, J. (2002)88

.

To understand buyer – seller paradigm in the context of our study, researcher has

developed constructs (Refer Table 3.13).

84

Figure 3.9 - Buyer – seller relationship grid

Buyer’s Paradigm

Transaction

Marketing

Relationship

Marketing

Sel

ler’

s P

ara

dig

m

Tra

nsa

ctio

n

Mark

etin

g

Transaction

Marketing

Hostage situation

Rel

ati

on

ship

Mark

etin

g

Free rider

situation

Relationship

Marketing

Adapted from: - Lindgreen, Adam and Pels, J. (2002)89

Table 3.13: - Establishing buyer’s as well as sellers’ relational paradigm

Item Statements Variables

1 I am ready to develop long term relationship with MF /

ULIP agent.

Buyer‟s

Paradigm

2 I / We try to develop long term relationship with our

customers.

Seller‟s

Paradigm

3 My / Our business focus is on the products & services

offered by us.

4 My / Our business is focused on retaining the existing

customers.

5 My / Our business focus is on quality interactive (two

way) communications with the customers.

6 My / Our business focus is on developing customer

relationships for mutual benefit.

Leonard L. Berry (2002)90

the common element in all relationship marketing

strategies is the incentive the customer is given to remain a customer. The

incentive may be extra service (service augmentation) or a price break

85

(relationship pricing) or something else but in each case the customer is given one

or more reasons not to change suppliers.

Table 3. 14 - Relationship Marketing Strategies

Sr. No Strategies Explanation

1 Core Service

Strategy

Design and marketing of a „„core service‟‟ around which

a customer relationship can be established. This will

attract new customers, cements the business through its

quality, long-term nature, and provides a base for the

selling of additional services over time

2 Relationship

Customization

By learning about the specific characteristics and

requirements of individual customers, service firms can

more precisely tailor service to the situation at hand.

3 Service

Augmentation

Involves building „„extras‟‟ into the service to

differentiate it from competitive offerings

4 Relationship

Pricing

Pricing services in such a way to encourage

relationships. In effect, customers are given a price

incentive to consolidate much or all of their business

with one supplier. E.g. Frequent flyer programmer

5 Internal

Marketing

Quality of services sold is determined in large measure

by the skills and work attitudes of the personnel

producing the services. So service firms can use

marketing to attract, keep, and motivate quality

personnel, they improve their capability to offer quality

services.

Source: - Leonard L. Berry (2002)91

, “Relationship Marketing of Services--

Perspectives from 1983 and 2000”, Journal of Relationship Marketing, Vol.

1(1) 2002, Page 59 - 70

If researcher would relate these strategies in the context of the study, first three

strategies i.e. core service strategies, service augmentation and relationship

customization is appropriate. In the context of study relationship pricing (mostly

pricing is governed by regulators) and internal marketing (this is only applicable

to large organizations – in our case only for corporate agents & banks) strategies

are inappropriate.

To establish what level of core services intermediaries are offering to retail

investors, researcher designed 20 statements to understand various facets about

86

core services like explaining basics of product, transactional services, advisory

services and information services (Refer Appendix H – statements labelled E1 to

E5 & S1 to S15).

Again based on discussion made in earlier sections researcher has designed

constructs as follows: - (Table 3.15, 3.16, 3.17, and 3.18)

Table 3.15 – Measuring Customer commitment and involvement

Item Articulation Variable (Sources)

R 1 is one that I am very committed to Involvement

Emotions

(Jaebom Suh,

2001)92

R 2 Is very important to me

R 3 is one that I really care about

R 4 is one toward which I can develop a warm feeling

R 5 Has a great deal of personal meaning to me

Table 3.16 – Assessment of Relationship Quality

Item Articulation Variable (Sources)

R 6 He (advisor) is very honest / truthful. Trust / Honesty

Shekhar Vaibhav,

Gupta Nitin ,(2008)93

;

Jaebom Suh, (2001)94

R 7 He can be trusted completely

R 8 He can be trusted sometimes

R 9 He has high integrity

R 10 He can be counted on to what is right

R 11 I am satisfied with total services offered by

him

Satisfaction

Service Quality

(Pengi Choong,

2008)95

R 13 He provides quality services

R 14 He gives more benefits in comparison what I

pay

Perceived Value

Shekhar Vaibhav,

Gupta Nitin ,(2008)96

;

Zeithaml, (1988)97

R 16 I get personalized services from him Personalized Service

Pengi Choong,

(2008)98

R 22 He is responsive Overall Perception

R 23 He is reliable

87

Table 3.17 – Assessment of Transactional Quality

Item Articulation Variable

(Sources)

R 19 He charges me the lowest possible fees / commission. Transactional Quality

Pengi Choong,

(2008)99

R 20 He is very efficient in documentation.

R 21 He maintains high level of transparency in every

aspect of the transaction

Table 3.18 – Measuring Customer Loyalty

Item Articulation Variable

(Sources)

L4 I would continue with MF / ULIP financial service

provider

Customer Loyalty

J. Clement

Sudhahar, et al

(2006)100

L5 I would like to recommend your MF / ULIP advisor

to my relatives, friends

3.7 Exploring Technology aspect of Relationship Marketing

Sharma, Gagan Deep, Mahendru, Mandeep and Khanna, Nidhi (2011)101

Technology has been a major driving factor for CRM and therefore, is bringing

radical changes. The developments in several technological areas are likely to

have a major impact on CRM. Integration of process, people, technology and

information will offer a greater value to the customers, Verma, Bigyan (2005)102

.

These views prompted researcher to explore technology aspect of relationship

marketing.

Susi Geiger and Shane Martin (1999)103

studied Irish businesses and observed that

Internet marketing can be ornamental, informational, and relational. There are

various benefits in using internet as a relationship building tool such as reduction

in transaction cost, frequent exchange of information, interactivity, enhanced

service delivery, Network of network, ease with which information can be

captured in real time with unprecedented detail. They also underlined the fact that

88

interactivity is most important aspect for using web as a relational tool. Various

web based relational tools like e mails, personalized interface, interactive games,

browser compatibility options, presence of complaint mechanism were suggested

by them.

A study was set out by Opara, Bright C., Olotu, Ayopo O. , Maclayton, Darego

W. (2010)104

to investigate technology impact on Relationship marketing

Orientation (RMO) and Business Performance (BP) of the Nigerian banks.

Quantitative and qualitative data were generated from 123 different bank branches

in Port Harcourt, with 565 as target respondents. Study reveals that technology as

a moderating factor, and appreciate its (technology) importance in influencing

RMO for enhance performance.

Gilbert, David C., Powell-Perry, Jan and Widijoso, Sianandar, (1999)105

opined

that both RM and the World Wide Web combined together can offer a powerful

competitive advantage for hotel companies at a time when there is increasing competition

over a reduced customer base. Various web based tools suggested by them is tabulated

below. (See Table 3.18)

Table 3.19 – Using web at various stages of relationship development

Sr.

No. Stage to develop relationship Web tools

1 Identify more about the customer

through database analysis.

Incentivized online questionnaire

2 Improve and make the

product/service more attractive.

E mails, Customized online

questionnaire

3 Inform to build customers‟

knowledge of the company.

Direct e mailing, online news letters,

online notice boards, Online

information center

4 Tempt customers to purchase more

regularly, try different products,

etc.

Direct e mailing, automated cross

selling, Special electronic promotion

leaflet

5 Retain the customer by developing

different forms of loyalty schemes.

Exclusive online support for members,

online member only magazine, Online

member only online services.

Source: - Gilbert, David C., et al (1999) 106

89

Considering role of technology in relationship marketing is becoming

larger and important, researcher would include some questions in research

instruments especially related with following aspects: -

- Use of technology in customer contact

- Perception towards using technology

- Emphasise on technology as compare to face to face interaction

3.9 Measuring Brand Image

Keller (1993)107

defines brand image “as perceptions about a brand reflected by

the brand associations held in consumer memory”. These associations of brand

image are multidimensional and consist of the affective dimension or the attitudes

towards the brand and the perceived quality dimension.

Brand image formation is a subjective learning process and is consequence of past

total experience. It consists of associations and attributes organized in some

meaningful manner that are activated from memory when recalled, Aaker

(1991)108

. Further Brand image is the perceptions and beliefs held by consumers,

as reflected in associations held in consumer memory Kotler & Keller (2005)109

.

Researcher came across with multiple definitions of brand image which are

classified based on emphasis given while defining it. (Refer Table 3.20)

After going through several definitions, researcher found clueless about

operationalizing brand image for the study undertaken. Fortunately, Dawn Dobni,

George M. Zinkhan (1990)110

also observed that the definition of brand image has

not necessarily remained stable and also discovered little agreement on

operationalizing brand image construct. Their literature survey revealed that

considerable variation exists among researchers in defining "brand image".

Dawn Dobni, George M. Zinkhan (1990)111

further summed up the concept of

brand image as 1) Brand image is the concept of a brand that is held by the

consumer. 2) Brand image is largely a subjective and perceptual phenomenon that

90

is formed through consumer interpretation, whether reasoned or emotional. 3)

Rather, it is affected and moulded by marketing activities, by context variables,

and by the characteristics of the perceiver. 4) Where brand image is concerned,

the perception of reality is more important than the reality itself.

Table 3.20 – Definitional Approaches for Brand Image Concept

Emphasis Description / Explanation

Symbolism Symbol which enhances person‟s worth in his

own eyes and in the eyes of others.

Meanings &

messages

Meanings connected with the brands. What the

brand connotes or means in the eyes of

consumers.

Personification Also refereed as brand personality. Describing

brand as if it were human being. Customer prefer

those things which match their self image

Cognitive or

psychological

elements

Sets of ideas, attitude and feelings that consumer

have about brand.

From above discussion, point which is emerging out is brand image factors are

relative and researcher has to explore the same for the study undertaken. Again

seminal work of Dawn Dobni, George M. Zinkhan (1990)112

came to the fore for

this purpose. There are various approaches for identification of brand image

attributes and construction of measurement instruments which are as follows: -

Table 3.21 - Techniques for measuring Brand Image

Typical approach Typical Techniques

Identification of brand image

attributes

Free responses, Focus Groups, Depth

Interviews, Kelly Repertory Grid

Creation of measurement

instrument

Semantic Differential, Staple Scale, Q –

Sort Technique, Thurston Scale

Adopted from - Dawn Dobni, George M. Zinkhan (1990)113

91

Researcher decided to use free responses in the pilot study to identify brand image

attributes. Again researcher also went through articles and statements of the

people closer to financial services industry. All these efforts helped the researcher

to spot following factors: -

1. Returns (Financial performance)

2. Clear Communication

3. Consistent Communication

4. Convenience

5. Range or variety of the products offered

Researcher further chose semantic differential scale to construct scale for brand

image measurement. Researcher went further and designed six questions relating

to brand image (Q.C1 – Q. C5 – see annexure). First two questions are free

response questions to find out which brands investors are highly preferred while

investing. Third question is asked to find out sources mainly responsible for

making investors familiar about particular brand. Remaining questions were

asked to seek investors‟ responses towards these brand image factors and

importance attached to these factors.

92

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1) Grönroos, Christian (1994)20

“From marketing mix to relationship

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3) Filip Alina and LaurenŃiu-Dan Anghel (2008). “Development of

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51) ibid

95

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54) Gummeson‟s (1999)54

, “Total Relationship Marketing”, second edition,

oxford: Butterworth-Heinemann.

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61) ibid

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106) Ibid

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112) Ibid

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