the relationship marketing process a conceptualization and application.pdf

The Relationship Marketing Process:

A Conceptualization and Application

Joel R. Evans Richard L. Laskin

Now that relationship marketing is gaining acceptance as

a valuable toolfor business-to-businessjrms, it is time to devise

and enact more systematic relationship marketing processes. In

this article, a comprehensive modelfor effective relationship mar-

keting is-discussed. It includes inputs (understanding customer

expectations, building service partnerships, empowering em-

ployees, and total quality management), outputs (customer satis-

faction, customer loyalty, product quality, andprojitability), and

assessment (customer feedback and integration). i’he model is

then applied to one industry: automated immunochemistry test-

ing products.

The authors would like to gratefully acknowledge Baxter Diagnostics Inc. and

the Business Research Institute at Hofstra University for their generous support

of this project. Address correspondence to Joel R. Evans, RMI Distinguished Professor of

Business, 134 Hofstra University, 222 Weller Hall, Hempstead, NY 11550-1090.

INTRODUCTION

Both manufacturing and service firms are finding it harder to establish sustainable technology-based advantages. To avoid commodity status, they must focus on strengthening the value-added features of their products. For firms that market to business customers to prosper, “the challenge is to determine what customers want and whether they are satisfied with the company, its products, and its service” [24]. This means customers should be integrally involved (consulted) in the design, development, manufacture, and sales of products.

With relationship marketing, a firm can exploit the total product concept and maintain stronger advantages. Accord- ing to Levitt [22], a generic product is a commodity; if customers feel a product is generic, they will buy solely on price. An expected product represents customers’ minimum expectations. For example, although a hospital may

Industrial Marketing Management 23, 439-452 (1994) 0 Elsevier Science Inc., 1994 655 Avenue of the Americas, New York, NY 10010

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0019~8501/941$7.00

Relationship marketing can help a firm escape commoditylike status.

buy disposable latex gloves on the basis of price, it would expect them to be sturdy and not to rip when a person han- dles hazardous materials. To be more competitive, firms need augmented products, which offer customers more than they think is needed or have come to expect. A firm could make gloves that would not rip even if pierced with a sharp object. In the long run, competitors may copy tangible augmented product features. So, relationship marketing can provide a more intangible, but stronger, long-term customer benefit that may be difficult to match. For instance, a firm marketing rip-proof disposable latex gloves could regularly present a course to new hospital workers on the proper han- dling of biohazardous substances, among other services. The purpose of this article is twofold. First, a theoretical model of effective relationship marketing is presented. The model is then applied in an actual business-to-business setting.

THE RELATIONSHIP MARKETING PROCESS

Defining Relationship Marketing

Because relationship marketing is a rather complex

concept, there is no commonly accepted definition. It is generally agreed that relationship marketing is a customer- centered approach whereby a firm seeks long-term business relations with prospective and existing customers [3, 9, 12, 15, 23, 361.

Here is the comprehensive definition developed by these authors. It is the foundation for the model presented in the next subsection:

JOEL R. EVANS IS the RMI DistInguished Professor of Business at Hofstra Unlverslty, where he also serves as co-director of the Business Research Institute and the Retall Management Institute.

RICHARD L. LASKIN IS in sales with Baxter Diagnostics Inc., where he concentrates on lmmunochemlstry testing products.

Relationship marketing is the process whereby a firm builds long-term alliances with both prospective and current customers so that both seller and buyer work toward a common set of specified goals. These goals are met by: (1) understanding customer needs, (2) treating customers as service partners, (3) ensuring that employees satisfy customer needs; this might require employees to exercise initiative beyond company norms, and (4) providing customers with the best possible quality, relative to individual needs.

Effective relationship marketing will lead to these positive outcomes: (1) a higher percent of satisfied customers, (2) greater customer loyalty, (3) a perception on the part of a firm’s customers that it is offering better quality products, and (4) increased profits on the part of the seller.

Relationship marketing is a continuous process, requiring a firm to: (1) have constant communication with customers to ensure that goals are being met, and (2) integrate the relationship marketing process into its strategic planning, enabling the firm to better manage its resources and meet future client needs.

A Model of Effective Relationship Marketing

Figure 1, derived from the authors’ definition of relationship marketing, shows a model of effective relationship marketing. The process consists of inputs, outcomes, and ongoing assessment.

Relationship Marketing Inputs

The four major relationship marketing inputs are understanding customer expectations, building service partnerships, empowering employees, and total quality management. UNDERSTANDING CUSTOMER EXPECTATIONS. This involves a firm’s ability to identify what customers desire and to market goods and services that are at or above the level that they expect [27]. Although the concept seems simple, many firms have trouble correctly identifying customer expectations. Zeithaml, Parasuraman, and Berry [36] state that this is the result of: the gap between what customers

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FIGURE 1. Effective Relationship Marketing

want and what they see the firm delivering (the customers’ point of view), and the gap between what the firm believes customers desire and what customers actually want (the firm’s point of view).

In discussing why such gaps exist, Hepworth [20] identifies three misconceptions. First, many firms think they already know what customers want. Yet, firms that do not interact properly with their customers may be perceived as disinterested. Second, some firms feel there is little pre- cision in ascertaining customer expectations. However, Zeithaml, Parasuraman, and Berry [36] state that these ele- ments can be planned in advance: tangibles are things customers see, such as physical facilities, equipment, and the appearance of personnel; reliability is a firm’s ability to act dependably and accurately; responsiveness is a firm’s willingness to help customers and give prompt service; assurance is the knowledge and courtesy of a firm’s employees and their ability to convey trust and confidence; and em- pathy is caring and individual attention provided to customers. Third, the cost of collecting customer expectation data can be high. Yet, a firm can gather data from its own

employees who have customer contact, including salespeople, deliverypeople, account managers, and servicepeople.

Via the recent International Quality Study (IQS), the American Quality Foundation and Ernst & Young jointly reviewed firms’ practices in four major industries (auto, banking, computer, and health care) in the United States, Japan, Germany, and Canada. It found that only 22 % of the U.S. firms used customer expectation data in designing new products. In contrast, 58 % of Japanese firms and 40% of German firms included such data in designing new products (just 14 % of Canadian firms follow this approach). These findings, along with the strong quality perceptions that consumers have for both Japanese and German products, provide a good argument that more U.S. companies should incorporate customer expectations into product design [6]. BUILDING SERVICE PARTNERSHIPS. Service partnerships are bred when selling firms work closely with customers and add desirable customer services to their traditional product offerings. These partnerships let firms both differentiate and increase the usefulness of product offerings, and devise specific customer-centered approaches.

Service partnerships are gaining popularity for several reasons: With the complexity of today’s products, users need more information and training. If products become more commoditylike in nature (e.g., PCs), the firms that provide their customers with better service gain market share. Good partnerships between industrial buyers and sellers turn the former into “walking testimonials” [3].

There are many considerations in building service partnerships:

They need to begin with both the buyer and seller having a clear mutual focus about the specific needs to be met. The buyer and seller must perceive the service part- nership to be “win-win.” They are collaborative, which means that both parties have to work together toward common goals. Industrial buyers must realize they are responsible for helping the relationship grow. They must anticipate that things will go awry. Good partnerships include action plans to be followed in the event of problems. They work if partners plan how they will handle price changes, expansion, consolidation, etc. Both parties must realize that instead of changes disrupting service relationships, they can be the impetus for discussion. They must be based on honesty and openness, not on superficial agreement. The parties must have regular communication [3].

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Empowerment means letting employees be creative in solving customer problems.

EMPOWERING EMPLOYEES. Empowerment generally means “turning the front line loose,” thereby encouraging and rewarding people to exercise initiative and imagination [3]. From a relationship marketing perspective, it means workers can strive to meet customer requirements and re- solve problems. That can lead to “spontaneous, creative rule breaking to turn a potentially frustrated or angry customer into a satisfied one” [5]. Some firms have been slow to embrace the concept. They have the attitude that “empowered employees will give the store away, trying to buy customer satisfaction at the expense of profit” [3].

The benefits of employee empowerment are as follows:

By doing something outside the norm, empowered employees can turn superficial contacts into long-standing relationships. Customers are more apt to perceive that organizations empowering their employees are truly committed to customer satisfaction. Highly motivated workers will flourish in this work environment . Giving employees more authority means less internal bureaucracy, because a firm does not need multiple lev- els of approvals [30].

For employee empowerment to work, four conditions must be met: It must be specified in relation to the firm’s mission. Workers must have the skills to solve problems and make decisions. Workers must have the responsibility and authority to make decisions that better serve the customer. The firm must foster a spirit that jobs will not be risked if empowered acts lead to-mistakes [14]. TOTAL QUALITY MANAGEMENT. TQM involves the fully coordinated effort of gaining competitive advantage by continuously improving every facet of the firm. Tobin [33] points out five areas where TQM differs from traditional management:

1. It calls for all business decisions to be made for the express purpose of providing increased satisfaction to the customer, rather than to the firm.

2.

3.

4.

5.

It calls for a quality-first approach vs. a traditional profits-first approach. TQM uses multiple quality dimensions rather than one dimension. Garvin [17] says there are eight customer- oriented quality dimensions: performance, features, reliability, conformance to specifications, durability, serviceability, aesthetics, and perceived quality. TQM calls for worker involvement vs. the traditional approach of no worker involvement. It empowers and urges every employee, regardless of level, to find better ways to act. IQM has a process orientation rather than a “big bang” one. With a process-oriented view, a firm has a long- term, incremental approach to improving quality.

Positive Outcomes of the Relationship Marketing Process

If a firm understands expectations, builds partnerships, empowers employees, and embraces total quality management, four positive outcomes will occur: customer satisfaction, customer loyalty, quality products, and higher profits. CUSTOMER SATISFACTION. A key goal of relationship marketing is to improve customer satisfaction: “A satisfied customer is one who receives significant added value from a supplier-not simply added products, services, or systems” [18]. The benefits of fully satisfied customers are repeat purchases, referrals of other customers, positive word-of-mouth, and the lower costs associated with serv- ing existing customers compared with attracting new ones.

Obstacles can get in the way. First, some firms do not realize that customer satisfaction, unlike products, cannot be made in a factory and kept in inventory [34]. It requires the involvement of every company department and reseller support. The best firms organize themselves entirely to address customer satisfaction goals [26]. Second, customer satisfaction requires a commitment from top executives; and personal contact between them and customers can increase market share and profits. Third, firms sometimes

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promise more than they can deliver. There must be internal systems to back up promises. Fourth, some companies do not adequately study satisfaction. Yet, because many business-to-business firms lack the frequency of sales trans- actions that is normal for consumer-products firms, they must regularly monitor customer satisfaction to judge the effectiveness of the relationship marketing process. In industrial marketing, when a company loses a key customer, profits can drop dramatically. So, firms must have ways to identify as early as possible any fall in satisfaction [18]. CUSTOMER LOYALTY. These responses encompass industrial customer loyalty: (1) Making repeat purchases; (2) Pur- chasing across product lines; (3) Giving positive word-of- mouth referrals to others; and (4) Having an immunity to the pull of competitors [32]. To achieve these actions, a firm must have a companywide system that includes understanding customer expectations, building service partnerships, empowering employees, and TQM (process inputs).

Because relationship marketing fosters a one-on-one approach, buyer-seller relations and customer loyalty are fostered: “Companies that respond and listen to customer needs have satisfied customers, and develop strong relationships that lead to customer loyalty” [32]. Likewise, firms that lose contact with their customers may be unable to successfully differentiate their products. Ultimately, this would lead to a lower level of customer loyalty. QUALITY PRODUCTS. Another positive outcome of the relationship marketing process is that it constantly encourages a firm to improve product quality, and customers perceive these improvements.

The standards for the Malcolm Baldridge National Qual- ity Award are a good guide by which to study the product quality derived from a well-executed relationship marketing process. The Baldridge Award, created by Congress in 1987, recognizes the achievements of world-class Amer- ican firms (including large and small manufacturers and service organizations). It rates quality on seven factors: leadership, top management’s commitment to improve quality throughout the firm; information and analysis, the firm’s ability to define and understand customer expectations; strategic quality planning, the programs a firm uses to improve quality companywide; human resource use, the level of service that all employees provide to internal and external customers; quality assurance, the systems a firm has in place to measure conformance to quality standards within every department; quality results, the level of sustained quality; and customer satisfaction, how expectations have been met [ll].

INCREASED PROFITABILITY. Profitability is an element in most firms’ mission statements; executives want to be able to see how their actions will affect profits [13]. To succeed, the relationship marketing process must lead to higher long- run profitability.

Relationship marketing inputs may require sizable ex- penditures. Yet, the outcome of the relationship marketing process should be better sales performance, as well as cost efficiencies in both production and marketing (via TQM and lower customer turnover), thereby positively impact- ing on the profitability equation. This subsection has also noted that good relationship marketing will increase customer satisfaction, gain greater customer loyalty, and improve product quality. All of these will positively affect profitability.

Assessment Stage

As Figure 1 indicates, relationship marketing is a continuous process, requiring a firm to solicit customers’ feedback to ensure that their needs are being addressed and to integrate the relationship marketing process into its strategic planning framework. CUS-IDMER FEEDBACK. There should be ongoing feedback. This is the best way for a firm to keep in touch with customer perceptions of it [2]. A firm can get a “big-picture” view of customer attitudes, as well as review its ability to “micro-manage” individual accounts. A feedback system should: (1) Gather, analyze, and distribute information about customer needs, expectations, and perceptions; and (2) Let a firm communicate regularly with customers [24].

Traditionally, customer complaints have been the major feedback mechanism. Yet, “for every complaint received, there are twenty-six other customers who feel the same way, but do not air their feelings to the firm. One satisfied customer usually tells two or three people; a dissatisfied person tells ten or more. The potential for unwittingly de- stroying a customer base is great” [19].

A more comprehensive customer feedback system, not so reliant on complaints as the key information source, is needed for relationship marketing to flourish. Such a system is in place at Norand Corp., a maker of portable com- puterized data collections systems and handheld radio frequency terminals. It includes a customer feedback survey program, a customer data base, a customer call monitor- ing and management system, and surveys of competitors’ customers [24].

Norand benefits from its feedback system in many ways.

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More Japanese firms consider customer satisfaction as a primary goal.

Since 1990, telephone surveys have gathered data from l,OOO+ customers; because data are collected monthly, information is fresh. In-depth customer profiles give Norand knowledge on individual customers. The feedback system shows its commitment to learning about and responding to customer concerns, which has led to better customer loyalty. Executives can access customer data at any time. Customer ordering bottlenecks are reduced. The firm has enacted policies so that telephone surveyors contact the firm as customer complaints are made. The system provides a framework by which Norand can monitor and adjust relationship marketing inputs. INTEGRATION. According to William Siefkin, DuPont’s manager of sales development: “The biggest challenge is to really bring the voice of the customers into your company, so that they are at every meeting in some way and that guidance comes from them when you are trying to make decisions” [35]. To work properly, the relationship marketing process requires that a firm integrate a customer focus into its strategic planning framework.

The International Quality Study (IQS) noted earlier was the first attempt to evaluate the extent of quality practices across industries and national borders. It discovered that fewer than half of responding firms had elevated the goal of customer satisfaction to “primary” status on the strategic-planning level. Approximately 25 % of the firms in Canada, Germany, and the United States had that goal in their strategic plans. In contrast, 95 % of Japanese firms had customer satisfaction as a primary goal in their strategic plans [4].

Benchmarking is a way to integrate relationship marketing into strategic planning by “continuously measuring products, services, and practices against the company’s tough- est competitors or those known as industry leaders” [8]. Benchmarking requires a firm to know its operation, as- sess its strengths and weaknesses, know industry leaders and other competitors, and incorporate and go beyond the strengths of key competitors in an effort to gain superiority.

Customer benchmarking measures customer satisfaction and the gaps between company performance and customer

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standards. The latter entails four steps: (1) Identifying at- tributes that influence customer value perceptions; (2) Bat- ing company performance; (3) Analyzing competitors’ performance; and (4) Closing the gaps between company performance and customer expectations [29].

Benchmarking pushes a firm to review how relationship marketing affects customers. It also gives the firm an op- portunity to further incorporate customer desires in its strategic planning.

AN APPLICATION OF THE RELATIONSHIP MARKETING PROCESS

The relationship marketing model just presented is next applied in a business-to-business setting. The U.S. automated immunochemistry diagnostic testing marketplace is examined via a case study approach.

As noted below, the physical products in this industry- as in many other industries- have become quite similar. Thus, well-executed relationship marketing would be an excellent way for a firm in the automated immunochemistry diagnostic testing industry to distinguish itself from competitors. Otherwise, the emphasis would have to be on price cutting and much smaller profit margins.

The application presented in this article is especially rele- vant for firms in industries where the basic product offerings have taken on commoditylike status and it is hard to differentiate products in terms of tangible features. These firms should be looking for ways to build relationships with their customers.

Relationship Marketing and Its Usefulness for the Automated Immunochemistry Diagnostic Testing Marketplace

Automated immunochemistry analyzers and test kits are used in medical laboratories to aid the diagnosis of patient illness. The industry has certain traits that make it a good candidate to test the relationship marketing model. Firms that make automated immunochemistry analyzers and re- agent test kits in the United States must adhere to stringent

Hypothesis 1: Customers feel makers of automated immunochemistry testing products have implemented the four inputs of relationship marketing. This hypothesis will test whether firms have set the inputs of the relationship marketing model into motion. These subhypotheses will ex- amine if there is a correlation between customer perceptions regarding relationship marketing inputs and customer satisfaction, loyalty, and product quality (outcomes of the relationship marketing model):

Hla:

Hlb:

Hlc:

Firms that understand customer expectations will have customers who are satisfied and loyal and perceive that the$rms market quality products. Do customers believe that firms understand their expectations and actively solicit their opinions? If firms were to do this, do customers feel there would be positive results? Building service partnerships with customers will lead to firms having customers who are satisfied and loyal andperceive that the firms market quality products. Do customers believe that selling firms are treating them as a service partners? If such partnerships were to be used, do customers feel this would have positive results? The empowerment offront-line employees will lead to firms having customers who are satisfied and loyal andperceive that the firms market quality products.

guidelines imposed by the Food and Drug Administration (FDA). As a result, the FDA has made it harder for them to differentiate product offerings on the basis of traditional product features.

Manufacturers in this industry usually seek technologi- cal advantages, with responsibility for developing innovations delegated to in-house R&D departments comprised of technical people. After products are devised, marketing and sales specialists try to sell them to diagnostic labs. There are problems with this approach: it is not customer- centered. By leaving product differentiation to scientists, no long-term customer relationships are built. The costs of new-product development are enormous, whereas the risks of failure remain high. The relationship marketing process may offer a way for makers of automated immunochemistry testing products to differentiate their offerings. Unlike technology-based innovations, superior customer relationships will be more difficult for competing firms to

copy.

Hypotheses

The research study covers three main hypotheses, with Hypothesis 1 having five subhypotheses.

Hld:

Hle:

Do customers believe that manufacturers’ employees regularly go out of their way to address customer needs? If such employee empowerment were to occur, do customers feel this would have positive results? Firms that seekproduct improvements via a total quality management program will have customers who are satisfied and loyal andperceive that the$rms market quality products. Do customers believe that manufacturers do not need to make major quality improvements in their products? If TQM were to be uti- lized, do customers feel this would have positive results? Customers view the four inputs to the relationship marketingprocess with equal importance. This tests whether customers believe that sellers’ understanding customer expectations, building service partnerships, empowering employees, and utilizing TQM have the same importance to the customers. In planning a relationship marketing strategy, it is valuable to know whether one or more factors have a greater or lesser impact than other factors.

Hypothesis 2: Customers for automated immunochemistry testing products want a high-involvement relationship with the makers of theseproducts. This hypothesis will address the assessment (integration) stage of relationship marketing: Do buyers want long-term relationships with sellers? Do they want to give feedback about products, both positive and negative?

Hypothesis 3: Customers for automated immunochemistry testing products view the relationship marketing process similarly, regardless of whether they work in small, medium, or large hospitals or in private laboratories. This hypothesis deals with these questions: Is the relationship marketing process perceived differently by customer category? Do customer categories differ in their desire for long- term relationships with sellers?

THE AUTOMATED IMMUNOCHEMISTRY DIAGNOSTIC TESTING INDUSTRY

Automated Immunochemistry Products

Immunochemistry analyzers perform tests on patients’ fluid specimens (blood and urine), such as infectious dis- ease testing, therapeutic drug testing, hormone testing, drugs of abuse testing, oncology testing, allergy testing, serum protein testing, and anemia testing. Most analyzers are automated and require little effort by technicians. The

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Any industrial firm can perform better by using relationship marketing.

current generation of analyzers was introduced in 199 1 and is known as “random access analyzers.” They can perform a variety of tests on several patient specimens at one time and give results in 45 minutes.

Makers of immunochemistry analyzers do not make a profit on the analyzers but on the accompanying test kits that are used each time tests are performed. Most firms place their analyzers in labs at no charge. Labs keep the analyzers as long as they purchase test kits from the manufacturers placing the analyzers.

1991 sales of immunochemistry test kits and reagents were $5 to $6 billion [21]. This is the most profitable and fastest- growing segment of the $14.8 billion in vitro diagnostic market. Spectrum Decision Resources [31] estimates the 3-year growth rate of the automated immunochemistry testing market at 12 % . The industry is dominated by a hand- ful of firms. This situation is the result of both government regulation and the hefty R&D costs associated with immunochemistry analyzers and test kits [21].

Customer Categories

Testing is done in both hospitals and specialized laboratories. Hospital labs perform tests for hospital patients, as well as patients of doctors affiliated with the hospitals. Ref- erence labs perform tests for patients of any doctor; they aggressively solicit physicians to send patients for their tests.

Hospital labs usually run tests as soon as patient specimens are received. This is because hospital patients may be in immediate life-threatening circumstances. On the other hand, doctors who send people to reference labs are not treating those in life-threatening situations; the doctors use the results for longer-term patient care. Thus, reference labs may wait until all samples are received and then perform tests (in large batches, often at night).

Hospitals vary according to size, with a common descrip- tor being the number of patient beds. For example, a hospital in a rural town might have 75 patient beds, whereas one in a large city might have 950 beds. Typically, hospitals are divided into three categories: small, medium, and large. The distinction is made for these reasons. First, the

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usage of testing products varies according to hospital size. With increased usage, many other factors come into play (e.g., purchase discounts, and the speed and reliability of equipment under heavy use). Second, the layers of internal hospital bureaucracy go up with size. The added bureaucracy makes it tougher to get quick purchase authori- zations. Third, the complexity of medical conditions and procedures is greater for large hospitals. These hospitals might perform more specialized tests than smaller facilities.

For this study, four respondent groups are used: Group One, reference labs; Group Two, small hospitals of 100 beds and under; Group Three, medium hospitals of 101 to 299 beds; and Group Four, large hospitals of 300 beds and over. According to the American Hospital Associa- tion, there are 5,800 U.S. hospitals; the College of Ameri- can Pathologists estimates that there are 2,100 U.S. reference labs [l, lo]. No breakdown by hospital size was available.

STUDY METHODOLOGY

The Sample

Special chemistry supervisors at hospital and reference labs are decision makers for and users of automated immunochemistry testing products. Thus, the authors desig- nated these individuals as the ones to whom a questionnaire on relationship marketing would be sent. These are the qualifications for a special chemistry supervisor: (1) the person must hold a master’s degree with a major in one of the sciences, (2) after graduation, the person must work at least 2 years in the special chemistry area of a laboratory, and (3) the person must be a qualified lab technolo- gist [16].

The authors obtained a mailing list from a leading maker of automated immunochemistry analyzers and test kits. The list included all of the firm’s 2,292 U.S. customers: Group One, 509 reference labs; Group Two, 508 small hospitals; Group Three, 757 medium hospitals; and Group Four, 5 18 large hospitals. Because Groups One, Two, and Four were

similar in size, it was decided to survey them in full. Be- cause Group Three had many more potential respondents, 518 of these hospitals were randomly chosen, to balance the four groups, bringing the total mailing for this study to 2,053 laboratories. The firm supplying the mailing list had no role in devising the study or analyzing the data. After the study was completed, it received the same summary of results that was made available to respondents.

Survey Procedures

As a result of the sample’s size and geographic disper- sion, a mail questionnaire was devised. All questions in the four-page survey were close-ended, most Like&type scales. For each relationship marketing input factor, a se- ries of questions was preceded by a description of that factor so respondents were clear as to what was being asked. For example, this preceded the empowerment questions: “Employee empowerment occurs when firms encourage front-line workers to use initiative so as to satisfy customer requests and address their problems. Employees are re- warded accordingly.”

The cover letter was on university letterhead and identified the university’s Business Research Institute as the spon- sor. As an incentive, respondents were told that a summary of the results would be sent at their request.

The survey was conducted in 1993. Because of the study’s magnitude and cost, a follow-up mailing to increase the response rate was not possible. Twenty-six surveys were returned as undeliverable by the Postal Service. The net sample size was 2,027: Group One, 497; Group Two, 503 ; Group Three, 5 13; and Group Four, 514.

STUDY RESULTS

Response Rate

In all, 276 usable questionnaires were received, a net overall response rate of 13.6 % . The group response rates were: Group One, 10.1% (50); Group Two, 14.5% (73); Group Three, 14.0% (72); and Group Four, 15.8% (81).

The number of usable questionnaires is large for a study of this type and permits the use of appropriate statistical tests. In comparison, the Morris and Davis study [25] on customer service in industrial firms had 90 usable surveys; because the study covered only Central Florida, they could do a telephone follow-up and get a response rate of 22 % . When Rosenbloom and Larsen [28] used a dispersed mailing list to research the perceptions of foreign companies with

direct U.S. investments, they had a 14.2 % response rate and 96 usable questionnaires.

Hypothesis Testing

Hypothesis 1: Customers feel makers of automated immunochemistry testing products have implemented the four inputs of relationship marketing. Table 1 shows how the overall respondent base rates makers of automated immunochemistry testing products. Clearly, the overall hypothesis must be rejected; respondents rate the actual relationship marketing performance of firms as mediocre. The most positive answer relates to the respondents’ willingness to participate in manufacturers’ TQM processes. Interestingly, respondents do feel that firms have done a better job of empowering employees than they have with the other factors.

Table 2 summarizes the data pertaining to the first four subhypotheses related to Hypothesis 1:

Hla:

Hlb:

Hlc:

Hld:

Firms that understand customer expectations will have customers who are satisfied and loyal andperceive that the jirms market quality products. Building sewice partnerships with customers will lead to firms having customers who are satisfied and loyal andperceive that thejirms market quality products. The empowerment offfont-line employees will lead to firms having customers who are satisfied and loyal and perceive that the$rms market quality products. Firms that seek product improvements via a total quality management program will have customers who are satisfied and loyal and perceive that the firms market quality products.

There is a marked distinction between the data in Tables 1 and 2. Whereas respondents rate the relationship marketing performance of firms as mediocre, they say their satisfaction and loyalty would be greatly affected and that better quality products would result if relationship marketing is conducted well. Hypotheses la to Id are all proven, with the lowest mean answer a high 3.72 (for customer loyalty resulting from a good understanding of customer expectations; even here, 66.6% say this input affects their loyalty).

Hypothesis le was examined separately:

Hle: Customers view the four inputs to the relationship marketing process with equal importance.

Because this subhypothesis relates to the overall sample, a repeat measures ANOVA was used to compare the projected impact of the four relationship marketing inputs in terms of customer satisfaction, customer loyalty, and

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TABLE 1 How Customers of Automated Immunochemistry Testing Products Rate Manufacturers’ Performance of Relationship Marketing Inputs

RelationshIp Marketing

Inputs Key Question Number Mean % Answenng

Topics Responding Answer 4 or 5

Understanding

customer expectations

Manufacturers understand

customer expectations Manufacturers actively

solicit customer opinions

215 3.35 43.8

275 2.19 29.5

Building

service

partnerships

Manufacturers treat

customers as business

partners Manufacturers voluntarily

offer extra customer

services without being

asked

275 3.12 34.2

214 3.02 34.3

Empowering

employees

Total quality

management

Manufacturers’ salespeople

and customer service

personnel regularly go

out of their way to

meet customer

needs

Manufacturers’ salespeople

and customer service

personnel do everything

possible to rectify

problems

Manufacturers do not need

to make major quality

improvements in their

products

Customers would like to

be consulted about

possible quality

improvements

215 3.37 46.2

274 3.55 56.2

274 2.65 20.4

274 3.97 73.0

In this table, the means are reported on a I to 5 scale, with 5 representing always, strongly agree, or definitely yes (depending on the question) and 1 represent-

ing never, strongly disagree, or definitely no (depending on the question).

quality products. As Table 3 shows, the subhypothesis is disproven. The inputs differ in their effect for all three of the outcome measures: Although the respondents have rated understanding customer expectations as important, they feel it is significantly less important than the other process inputs.

Hypothesis 2: Customers for automated immunochemistry testing products want a high-involvement relationship with the makers of these products. As noted in Table 4, three questions were asked to test this hypothesis. In general, respondents have a strong interest in an active, long-term relationship; they are eager to share both their positive and negative feelings with manufacturers.

Hypothesis 3: Customers for automated immunochemistry testing products view the relationship marketing process similarly, regardless of whether they work in small, medium, or large hospitals, or in private laboratories. Ta- bles 5 to 7 parallel to the presentations in Tables 1, 2, and 4; but they compare answers by respondent type: small, medium, or large hospital, or reference laboratory.

There are strong differences by respondent category as to how well manufacturers understand their customers (Ta- ble 5). Those working in small hospitals rate manufacturers lower than their counterparts at medium and large hospitals and at reference labs. The same situation occurs for one of the two key questions on service partnerships. Feel-

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TABLE 2 TABLE 4 How Much Effect Customers of Automated immunochemistry Testing Products Say There Would Be if Manufacturers Perform Relationship Marketing inputs Well

Customer interest in Long-Term Relationships with Manufacturers of Automated immunochemistry Testing Products

RelatIonship Marketing

Inputs

Relationship Marketing

Outcomes

Number o/o Respond- Mean Answering

ing Answer 4 or 5

Understanding

customer

expectations

Building

service

partnerships

Empowering

employees

Total quality

management

Customer satisfaction

Customer loyalty

Quality products

Customer satisfaction Customer loyalty

Quality products


Customer loyalty

Quality products


Customer loyalty

Quality products

213 3.86 12.9

276 3.12 66.6

271 3.82 69.4

275 4.24 89.8

215 4.10 82.9

213 3.91 74.7

275 4.35 92.8

275 4.23 86.5

275 4.16 83.3

275 4.35 88.8

275 4.15 82.9

275 4.23 86.9

In this table, the means are reported on a 1 to 5 scale, with 5 representing a great deal and 1 representing not at all.

ings about manufacturer performance in the areas of empowering employees and TQM do not differ statistically by lab type.

There is greater consistency among respondent categories as to how their behavior would be affected by good relationship marketing efforts (Table 6). In only two in- stances are there significant differences: customer loyalty resulting from understanding customer expectations and customer satisfaction resulting from TQM. In the first instance, the projected behavior of respondents from large hospitals would be less affected (because they already believe firms listen to them); in the second, the projected be-

TABLE 3 Comparing the impact of Relationship Marketing inputs on Customers’ Perceptions of Relationship Marketing Outcomes

Relationship Marketing Outcomes df F Value Probability

Customer satisfaction 3,813 36.92 0.00

Customer loyalty 3,822 34.48 0.00

Quality products 3,804 24.61 0.00

Similar questions regarding customer satisfaction, customer loyalty, and quality products were used with each of the four relationship marketing in-

puts. The results in this table are based on repeat measure ANOVAs for the

three outcome measures. That is why the degrees of freedom are so high.

Number Mean O/o Answering Relationship Questions Responding Answer 4 or 5

Would you like an active and

long-term relationship with

your current supplier of

immunochemistry analyzers

and assays? 274 3.94 12.6

Would you readily point out

to an immunochemistry

firm’s employees (e.g.,

sales and technical

servicepeople) the aspects

of products with which

you are satisfied? 215 4.57 94.2 Would you readily point out

to an immunochemistry

firm’s employees your

negative comments regarding products? 275 4.66 94.9

In this table, the means are reported on a 1 to 5 scale, with 5 representing

definitely yes and 1 representing definitely no.

havior of respondents from large hospitals would be more affected (because they have more interest in TQM).

There is no difference among respondent categories as to the interest in long-term relationships and the willingness to provide positive feedback (Table 7). But, there is a significant difference as to the willingness to pass on negative feedback. Although all respondent categories would readily make negative comments, those at small hospitals say they are less apt to do so.

In sum, the tests on Hypothesis 3 yield mixed results. There are some differences by manager category but many similarities as well.

Discussion

According to this study, there is a strong desire by the overall sample (customers of automated immunochemistry testing products) for manufacturers to engage in the relationship marketing process. Nonetheless, customers perceive that manufacturers have had a so-so record on the four input factors examined in the survey: understanding customer expectations, building service partnerships, empowering employees, and total quality management. Only in regard to salespeople and customer service personnel doing all possible to rectify problems do most respondents believe manufacturers are doing an above-average job.

The four relationship input factors do not have an equal

449

TABLE 5 How Customers Rate Manufacturers’ Performance of Relationship Marketing Inputs: by Laboratory Type

RelatIonship Marketing

Inputs Questlon Topics df f Value Probability

Understanding Manufacturers understand

customer customer expectations

expectations Manufacturers actively

solicit customer

opinions

Building Manufacturers treat

service customers as business

partnerships partners Manufacturers

voluntarily offer

extra customer

services without

being asked

Empowering Manufacturers’

employees salespeople and

customer service

personnel regularly

go out of their way

to meet customer needs

Manufacturers’

salespeople and

customer service

personnel do

everything possible to rectify problems

Total quality Manufacturers do not

management need to make major

quality improvements

in their products

Customers would like to

be consulted about

possible quality

improvements

3,272

3,271

2.77 0.04

5.45 0.00

3,271 2.12 0.10

3.270 2.99 0.03

3,271 1.55 0.20

3.270 0.26 0.85

3,270 1.35

2.22

0.26

3,270 0.09

impact on customer satisfaction, customer loyalty, or product quality. Although respondents say the effects of building service partnerships, empowering employees, and TQM are similar, understanding customer expectations does not have as big an effect. This does not mean that understanding customer expectations is unimportant. Rather, it prob- ably means that (a) this factor is really perceived by respondents as part of the expected product offered by manufacturers and, thus, is not an augmented product rea- son for satisfaction, loyalty, or quality; and (b) the other input factors are more concrete, so their imprint on performance is more clear.

The strongest overall survey answers deal with the two questions on whether respondents would readily commu-

TABLE 6 How Much Effect Customers Say There Would Be if Manufacturers Perform Relationship Marketing Inputs Well: by Laboratory Type

Relationship Relationship Marketing Marketing

Inputs Outcomes df f Value Probability

Understanding Customer satisfaction 3,269 0.38 0.76

customer Customer loyalty 3,272 2.92 0.03

expectations Quality products 3,267 2.03 0.11

Building Customer satisfaction 3,271 0.32 0.81

service Customer loyalty 3,271 1.70 0.17

partnerships Quality products 3,269 0.47 0.71

Empowering Customer satisfaction 3,271 0.14 0.94

employees Customer loyalty 3,271 0.06 0.98


Total quality Customer satisfaction 3,271 3.96 0.01

management Customer loyalty 3,271 0.56 0.64


nicate the positive and negative aspects of products to manufacturers. The mean answers were greater than 4.5 (on a 5point scale), and more than 94 % of respondents expressed an above-average willingness to share their feelings. These results are the surest indication that respondents want a close interface with manufacturers and that they would not hesitate to be honest with them. Therefore, better new products and improved existing products would result from such relationships. The value of this feedback as a long-term competitive advantage should not be un- derestimated.

In general, each of the respondent groups (reference labs and small, medium, and large hospitals) wants strong re-

TABLE 7 Customer Interest in Long-Term Relationships with Manufacturers: by Laboratory Type

Relationship QuestIons df F Value Probability

Would you like an active and long-term

relationship with your current

supplier of immunochemistry

analyzers and assays? 3,270 0.98 0.40

Would you readily point out to an

immunochemistry firm’s employees

(e.g., sales and technical servicepeople) the aspects of products with

which you are satisfied? 3,271 1.57 0.20

Would you readily point out to an immunochemistry firm’s employees

your negative comments regarding

products? 3,271 4.22 0.01

450

lations with manufacturers and rates the manufacturers’ actual performance on the relationship marketing inputs as so-so. But respondents from smaller hospitals are less pleased than their counterparts at other labs on some measures and less apt to make negative comments to manufacturers. This finding is quite consistent with the fact that many companies tend to place less emphasis on smaller customer accounts and that salespeople spend less time with those accounts. It also represents another potential competitive advantage for firms that decide to focus on the small account niche.

RECOMMENDATIONS

To succeed in today’s tough marketplace, it is impera- tive for firms in any business-to-business situation to engage in relationship marketing. To do this properly, a well- integrated and systematic process-like the one shown in Figure l-must be devised and enacted.

Here are several specific recommendations:

1.

2.

3.

4.

5.

Relationship marketing should be conducted as a continuous and systematic process that incorporates the needs of both buyers and sellers. Relationship marketing needs top management support; its principles should permeate a firm’s corporate culture. At a minimum, relationship marketing should center on these inputs: understanding consumer expectations, building service partnerships, empowering employees, and total quality management (from buyer and seller perspectives). A firm should (a) build in customer expectations at all stages of product development and marketing planning. Clear performance goals should be set. (bj add more high-contact customer services to its core products as a means of strengthening service partnerships. (c) empower front-line employees to exercise initiative beyond stated policies, without the risk of being overruled or criticized. (d) implement a IQM program to enhance the specific product features (including services) that customers deem as needing improvement. Customers should be surveyed, by customer type, to determine which aspects of relationship marketing should be emphasized for them. Although increased profitability is a desirable result from relationship marketing, other important measures

6.

7.

8.

9.

of success are customer satisfaction, customer loyalty, and product quality. The relationship marketing process should be continuously assessed by obtaining regular customer feedback and integrated into strategic plans. Both positive and negative feedback (that goes far beyond just passively receiving customer complaints) can provide meaningful information to an open-minded, customer- oriented firm. Benchmarking would be useful here. Sellers need to communicate to their customers that relationship marketing involves responsibilities, as well as benefits, for both parties. This requires an unam- biguous signaling strategy (such as the one used by Norand). Mutually agreeable (by buyers and sellers) contingency plans should be devised in case anything goes awry. Although the model in Figure 1 has proven quite ap- plicable for the automated immunochemistry diagnostic testing industry, it should be studied in more settings.

As progressive firms such as Siemens Components Inc. (an independent operating company of Siemens Corp.) recognize:

It’s more than just, “here’s the product. Here’s the sell sheet.” We’re doing more and more relationship building as the number of suppliers in our field grows and the competition in- tensifies. To win a contract, you first need a good salesper- son. Secondly, you need a technical marketing person to solidify the design with technical information. Another team member is the factory or the applications laboratory. And the materials control people make sure the product is built and available when the customer needs it. Once you’ve won the business, you have your customer service people, who actually book the orders and make sure things ship on time. More and more customers have individual requirements on how they want the product shipped or what they want the boxes to say. The whole process is very integrated. If there’s one weak link in the chain, there’s going to be a problem [7].

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I.

2.

3.

4.

5.

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