CHAPTER 11

RELATIONSHIP MARKETING
Objectives:
At the end of the chapter, the students should be able to:
1. define what relationship marketing is and its value to the tourism enterprise;
2. differentiate between traditional and relationship marketing;
3. discuss how to retain and build customer loyalty;
4. explain the role of internal marketing in the building of relationships; and
5. identify what hinders relationship marketing.

Introduction
Berry (1983) first coined the term relationship marketing and defined it as
attracting, maintaining, and enhancing customer relationships. The American
Marketing Association reinforced the importance of relationship marketing in its
revised definition of marketing to include building relationships.
Traditional marketing (also called transactional marketing) ideas centered on
the acquisition of new customers and focused on transactional exchanges with
anonymous customers. However, marketers soon realized that securing the loyalty
of their existing customers and maximizing their lifetime value are integral to success
(Li and Petrick 2008).

RELATIONSHIP MARKETING DEFINED

Relationship marketing involves creating, maintaining, and enhancing long-
term relationships with individual customers as well as other stakeholders for mutual
benefit (Belch and Belch 2008).
Relationship marketing sees the customer as an asset. Its function is to
attract, maintain, and enhance customer relationships (Shoemaker et al. 2007). The
goal is not only to encourage guests to return but to get them to tell their friends and
relatives how good the product or service is.
Shoemaker et al. (2007) define relationship marketing as an ongoing process
of identifying and creating new value for individual customers for mutual value
benefits and then sharing these benefits over a lifetime of association.

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 According to Achrol and Kotler(1999),now is the time to shift from being an
agent of the seller to being an agent of the buyer and from being a marketer of
goods and services to being a customer consultant and manager of his/her products.
Morgan and Hunt(1994)asserted that “relationship marketing refers to all
marketing activities directed toward establishing, developing, and maintaining a
successful relational exchange."
Gummesson (1994) proposed that "relationship marketing is marketing seen
as relationships, networks, and interaction."
Table 11.1 Relationship versus Transactional Marketing

Relationship Marketing Transactional Marketing

Sales Orientation Repeat sale Single sale
Communication with
Constant contact Limited,episodic contact
clients
Emphasis on Customer
High Little
Service
Meeting Customer High commitment Limited commitment
Quality Concerns By all staff members By production staff only

As a tourism marketer, there is a need to maintain a good client database that

is regularly updated. From this list, one has to identify the top 20% of one's clients,
which can yield 80% of one's business. Then, focus 80% of one's time on cultivating
this top 20%. This is known as the Pareto Principle, very popular for its 80-20
concept. Applying this principle will make sense later on when one is out there in the
field. Not all clients are equal, some will yield bigger business than others. Hence,
one should be concentrating on clients who can give the highest returns by
developing relationships with them.
The popular Filipino term for regular clients is suki. What is the suki mentality?
If there is a regular stall in the market you buy your vegetables from, the tindera
(seller) would call you suki. On the seller's end, he/she normally gives you a good
price since he/she knows you are a regular customer. On your end, you normally do
not canvass or look at other stalls anymore, trusting that this particular stall offers the
best price and provides good quality products.
Applying the suki concept to the tourism industry is like establishing loyalty and
building relationships with your customers. When the buyer-seller relationship
deepens, trust and commitment are established. The seller commits to providing
quality service at a reasonable price while the buyer trusts that quality service and
reasonable prices are provided in turn. The service provider becomes top of mind as
far as the buyer is concerned.

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Levels of Relationships
To further understand how relationships can develop between tourism
providers and their clients, let us discuss the five levels of relationships(Kotler et al.
2017):
1. Basic- sells a product and does not follow up after the sale.
2. Reactive-sells a product and encourages the customer to call if he/she has
concerns or questions but will not make the first move to ask.
3. Accountable-is when a representative gets in touch during and after the event
to solicit customer feedback.
4. Proactive-is when a salesperson phones customers from time to time to give
updates on product innovations in the prospect of future sales.
5. Partnership-is when a company works continuously with the customer to
discover ways to deliver better value.
DIMENSIONS OF RELATIONSHIP MARKETING
Customer Retention
In order to retain customers, the following elements have to be understood by
the tourism marketer:
1. The value of customer satisfaction. Customer satisfaction measures how
much a customer's expectations are met. Customers purchase products and
services with a level of expectation in mind. As discussed in Chapter 3,in the
decision-making process, there is a post-purchase evaluation. Customers
evaluate a product based on their level of satisfaction. This can lead to one of
these five options: extreme satisfaction, satisfaction, neutral, dissatisfaction,
or extreme dissatisfaction.
2. The cost of lost customers. Companies should know that when a customer
defects, the company loses the customer's lifetime value.
3. The importance of resolving customer complaints. This is a critical
component of customer retention. Unresolved customer complaints may result
in negative word of mouth and loss of future sales.

Customer Loyalty
Customer loyalty is the likelihood that customers are to return and are willing
to perform activities with the organization. Loyal customers spend more money while
within the company premises and tell management when things go wrong instead of
just walking away (Shoemaker et al. 2007).
Some satisfied customers do not become loyal for the following reasons:
1. They never return to the same area.
2. Customers like to experience different service providers when they return to
the area.
3. Customers are price sensitive and will shop for the best deal.
Is a loyalty program the same as a frequency program?

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 1. Frequency does not build loyalty. It is loyalty that builds frequency. Customers
can stay focused on the deal and not on the product.
A loyalty program is a strategy undertaken by a firm to manage the
three components of the loyalty circle (how the service works, value creation,
and communication) to create an emotional bond with customers so that they
give the firm a majority of their business, provide positive word of mouth, act
in partnership with the firm, and spend more with the firm than a non-loyal
guest would (Shoemaker et al.2007).
2. A frequency program is defined as any program that rewards guests with
points, miles, stamps, or punches that enable them to redeem free rewards or
discounted merchandise.
3. With frequency programs, sales may increase as they would with price
discounts. Repeat purchases may also increase, but the focus is on the
rewards and not on product superiority or brand relevance.

According to Aaker(2017)in a study conducted by the American

Marketing
Association, there are four factors that drive brand loyalty:
1. Dependability-Customers must know that they can depend on your company
for the products and services they need, so you will be first in mind over other
competitors.
2. Emotional connection-A company must create a connection with the
customers either by imparting a plot or interest to which customers can
correlate or by accomplishing customer satisfaction among its buyers.
3. Superiority-If your brand can show an advantage over competitors, customers
may become doubtful of other companies.
4. Social media presence-Nowadays, companies with a strong social media
presence can further develop a loyal customer base because customers are
more acquainted with social media as a source of information as it exhibits a
more personal way of communication. Social media allows companies a
chance to share their story intimately.

Referrals from Satisfied Customers

Positive word of mouth will be most likely generated by satisfied and loyal
customers. This amounts to a high level of positive reinforcement on the purchase
decisions of prospective customers. With the advent of social media, electronic word
of mouth creates a wider range of positive reviews. With the intangibility of the
tourism product, there is heavy reliance on the experience of others. What other
people say about a product, or a destination matters a lot in the pre-purchase stage
of would-be customers. Positive reviews make it seem that there is less risk involved
in the purchase of a product since other people have already tried it and were
satisfied. Hence, word of mouth is one of the most sought-after information by
prospective customers when evaluating alternatives.

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Complaint Management System
One of the most challenging tasks of a service industry is handling
complaints. The variability of the tourism product sets the precondition of
unavoidable differences in the delivery of the services. One cannot expect to deliver
tourism products and services perfectly every time. There will always be the
possibility that things could go wrong.
What should be the perspective when things do not go as planned and
customers begin to complain?
1. Always bear in mind the first rule in customer service: “The customer is
always right!”
2. If one thinks he/she is not, then rule no.2 is: "Go back to rule no.1."
3. Feedback is an important tool in knowing what our market wants. Complaints
are negative feedback from customers. Consider complaints as gifts.
In the practice of relationship marketing, customer feedback in the form of
complaints should be encouraged. Customers should know how they could file
complaints. Dissatisfied customers who complain can more easily be converted into
repeat and loyal customers than those who just walk away with no intentions of
coming back.
Research has shown that negative word of mouth spreads twice as quickly as
positive word of mouth. Hence, an effective complaint management system should
be set in place to manage customer complaints. Sincerely addressing customer
complaints will help establish good customer relations.

Marketing Nugget: SEA Games Food Fiasco

The Philippines hosted the 2019 South East Asian Games. Social media
comments about how the athletes from other countries were being hosted spread
like wildfire, triggering angered posts from different sources. The White Woods
Hotel fell into a dilemma when one of the coaches of the delegation posted a
breakfast meal of kikiam, egg, and rice.

Photo by: Miss Maricel Badilla

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The Response of Whitewoods Hotel on their official Facebook page:

On the Sea Games Issues

We waited for a few days to collect ourselves, respond with cooler heads,
gather facts, and to prioritize the service of our athletes and visiting delegations
during this time. We considered being silent about this issue, but we ultimately
decided to clarify and present facts, to address unfair news about our hotel, our
people, and our partner organizers.

The Facts

-We serve athletes a buffet that is part of a meal plan prepared by the organizers.
For the specific breakfast meal in question, chicken sausage (and not Kikiam),was
part of a wider menu that included an omelette station, other assorted sausages,
fruits, fresh fruit juices, bread, and rice.

-The coach who released a statement to the media has repeatedly apologized to
our staff and management for the erroneous Kikiam comment; however, the
statement had already gone viral before she could make corrections. This coach
admitted that she was not present during the breakfast buffet. She saw the chicken
sausage in a plastic container (which is not a hotel container, as we do not use
plastic for packed meals) and assumed that this was the full breakfast offering.

-The news circulating online on delayed check-ins are also exaggerated. An

athlete delegation arrived earlier than check-in time, and we gave them the option
to stay in our unairconditioned lobby or in our airconditioned conference room
during the almost 3-hour wait to make it more comfortable for them. They were
able to check-in a little later than expected due to another athlete delegation's late
check-out by 2 hours; for this we apologize and have taken measures to ensure
that it does not happen again.

-From initial negotiations with the organizers, the inclusions of the service include
accommodation, breakfast, lunch, dinner, laundry, and the use of our conference
rooms. We agreed to these inclusions and gave a discount of 40% on our
published room rates to accommodate the needs of the athletes because of our
desire to be part of this historic occasion.

Final Notes

At the height of this viral issue, our initial reaction was to be defensive, point
fingers, and pass on blame. We have, however, communicated to our staff, athlete
guests, and our partner organizers, that despite the negativity surrounding the
SEA Games, we will continue to put our best efforts for our athletes and our
country. We hope this statement is able to correct misrepresentations on Filipino
hospitality and that we are doing our best to ensure above-and-beyond service for
our athletes as well as our guests from
all over Southeast Asia.

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 In the spirit of fairness, we hope that those who were quick to share the
viral post on Kikiam can also take the time to correct these issues. We can say, in
all honesty and with conviction, that the Philippines did not feed its athletes only
Kikiam for the SEA Games, and we want to put an end to the circulation of this
wrong information.

This experience has only strengthened our love for country and our desire to
serve our athletes and international delegations as best as we can during their
entire stay with us. We hope our commitment to hospitality serves as a concrete
contribution to our country during this time, and we are filled with gratitude for this
opportunity.
Sincerely,
From all of us at Whitewoods Hotel

photo by:Miss Maricel Badilla

Shared with permission from WhiteWoods Hotel Management for academic purposes.
Points to Ponder:
 What are the possible effects of negative social media posts on tourism
establishments?
 In what ways can tourism establishments manage negative social media
posts that have gone viral?
 Do you agree with how WhiteWoods Hotel responded to the controversial
social media post? Why or why not?

SERVICE RECOVERY
Complaints in the tourism and hospitality sector are inevitable. It is bound to
happen especially during peak season and the volume of customers becomes too
much. Customer service advocates strategize to ensure that complaints are handled
well. Service recovery suggests that there are ways wherein a customer who
complains can be converted into a satisfied and loyal customer through prompt and
efficient response to their concerns.

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 Frontline employees should be trained and empowered to respond positively
to dissatisfied clients. Here are some steps toward service recovery:
1. Accept, take responsibility, and apologize for the bad service.
Admit that your firm has made a mistake or a service oversight and
sincerely apologize for how it has made them feel. Empathize with the customer
by putting yourself in their shoes. Assure them that you will rectify the situation.
2. Respond positivelyand act quickly.
Ensure that you prioritize their concern by acting within 60 seconds.
Respond with a reassuring smile, openness, and concern. Do not act defensively.
3. Empower employees to offer low-cost but high-value compensation.
Employees should be able to offer low-cost but high-value items to make
up for the mishap. Frontline employees can offer room upgrades for errors in
room reservations, drinks at the bar for delayed service, or complimentary items
for service errors.
Service recovery strategies enable hotels, airlines, and restaurants to turn
a bad experience into a memorable experience for their clients. Doing so assures
customers that their satisfaction is important to the service provider, thus
establishing loyalty.

Marketing Nugget:Good Service Recovery Creates Satisfied Customers

Eating in a restaurant should be a delightful experience. Here are two
instances I have personally experienced with different service recovery strategies
used.
1. I ordered a salad in a restaurant. While I was mixing the salad, I saw a
small insect in the lettuce. I went to the counter to show my meal. The
personnel explained that they have washed the lettuce thoroughly and will
just replace the meal. When the replacement came, the waiter didn't have a
smile nor an apology but just placed the salad in front of me. I ate the meal
half-heartedly and left the restaurant telling myself never to return again.
2. I ordered my favorite yang chow fried rice in a Chinese fast-food chain. I
was almost done with it when I realized that there was too much oil at the
bottom of the bowl. After my meal, I went to the counter to show the bowl. (I
didn't have any intention of complaining or getting a refund but to just show
that it was poorly cooked unlike my previous experiences with the same
order).I was surprised when the manager acknowledged the oversight, said
he would inform their cook, and gave me back the money I paid for the fried
rice. I actually didn't want to take it as I had almost consumed the entire
meal except for a little portion that was soaked in oil, but he insisted that I
take the cash. So I did and I left the restaurant with a smile on my face,
affirmed that it was indeed my favorite order.

Points to Ponder:
 Who handled my complaint better?
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  What should the first restaurant have done to ensure that I left the
restaurant satisfied?

INTERNAL MARKETING
In relationship marketing, quality should be the concern of everyone in the
organization. Quality cannot be established by just the frontline or guest contact
employees; it should also be embraced by non-guest contact employees. The key to
building relationships with customers is the organization's employees. It is, therefore,
imperative for management to put in place a system where there will be very low
employee turnover and very high employee morale.
The principle of internal marketing is to market hospitality jobs to employees
just as they market hotels and/or restaurants to customers (Shoemaker et al.2007).
Some international hotels seek out the top graduates of universities and offer them
attractive employment packages in order to beef up their roster of employees.
Companies with low employee morale tend to provide the minimum service
requirements. They are not willing to go the extra mile. When employees are happy
and motivated, these attitudes reflect on how they perform in their jobs. The happier
and more content they feel, the more they will be willing to keep customers happy
and content.
DEFINING CONSTRUCTS OF RELATIONSHIP MARKETING
Relationships involve commitment and trust. Trust is the belief that an
individual or exchange partner can be relied on to keep his/her word and promise.
Trust is an antecedent to loyalty because the customer trusts the organization to
keep its word. Increased feelings
of trust will lead to commitment and commitment to loyalty.
Commitment is the belief that an ongoing relationship is so important that the
partners are willing to work at maintaining it and are willing to make short-term
sacrifices to realize long-term benefits. Opportunistic behavior will cause a lack of
trust.
Antecedents and consequences of commitment include trust, value (saving
time, experiential, and emotional), certainty that the firm will deliver benefits, and
switching costs. Other consequences include increased product usage and voluntary
activities such as strong word of mouth and business referrals.
The top 10 defining constructs of general relationship marketing are trust,
satisfaction/ experience, loyalty, commitment, service quality, communication,
empathy/customer orientation, relationship quality/value/duration, reciprocity, and
culture. These defining constructs should be duly taken care of by
firms/organizations to achieve success in the marketplace (Agariya and Singh 2011).
These constructs need to be evident in the company-client relationship so that
the company can really say that it practices relationship marketing.

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BENEFITS OF BUILDING RELATIONSHIPS WITH CUSTOMERS
Building a relationship with customers should be the strategic focus of tourism
establishments. Research proves that a small increase in loyal customers can result
in a major increase in profitability (Kotler et al. 2010). Research has shown that a 5%
increase in customer retention can result in a 25-80% increase in profits (Agariya
and Singh 2011). Estimates suggest that it is six times more profitable to sell to
existing customers (Smith and Zook 2011). Some benefits of relationship marketing
include continued patronage of customers, reduced marketing costs, decreased
price sensitivity of loyal customers, availability of feedback, ability to create a
database asset, strengthened brand loyalty, and partnership activities with
customers.
- When competition is strong, companies should rely on their base of loyal
customers. They can provide continuous sales despite the advent of new products
and services and/or reduction of prices by the competition.
Loyal customers are also able to provide you with much-needed customer
feedback, both positive and negative. They are the ones who would tell you when
your product/ service quality is deteriorating. They are also the ones who would
recommend your product and services to others.
A customer's lifetime value is the net profit received from doing business with
a given customer during the time he/she continues to buy from you. This lifetime
value can be huge especially when referrals are considered.

Marketing Nugget: Attitudes and Perceptions of Hotel Practitioners on

Relationship Marketing

Research conducted by the University of the Philippines student Reggie

Gares(2012) on the attitudes and perceptions of hotel practitioners on the practice
of relationship marketing revealed the importance of relationship marketing in their
jobs. Using qualitative research methods such as in-depth interviews, focus
groups, and online interviews with local hotel practitioners from different Metro
Manila hotels, industry practitioners revealed that the hidden formula for overall
guest satisfaction includes:
1. proactivity of the hotel staff as service providers
2. treatment of guests as part of the family;
3. innovation;
4. good relational skills of all hotel employees; and
5. priority given to the guests.
Furthermore, respondents perceived that relationship marketing delves into
a mutual exchange of benefits for both the hotel and the guest. Relationship
marketing isa tool to achieve customer loyalty and should be part of the service
culture of the hotel.
Lastly, the study revealed that hotel practitioners perceive relationship marketing
as a means to retain customers. Hence, the study recommends that hoteliers
create and implement more customer-centered and satisfaction-driven marketing
strategies which are at the core of relationship marketing.
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 Source: Gares, Reggie P. 2012. “The Attitudes and Perceptions of Hotel
Practitioners on the
Practice of Relationship Marketing." Unpublished Undergraduate Thesis,
University of the Philippines Diliman, Asian Institute of Tourism.

Point to Ponder:
 What specific activities can hotel personnel do that will embody a culture of
relationship marketing?

RESISTANCE TO RELATIONSHIP MARKETING

Some tourism marketers have expressed resistance to the shift to relationship
marketing mainly due to the following reasons, cited by Li and Petrick (2008):
1. Novelty-seeking behavior of tourists. The novelty-seeking behavior of
many tourists leads to their constant tendency to seek change and switch
brands. However, future research has been suggested to compare the role
of relationship-building and novelty-seeking in the purchase behavior of
tourists.
2. Challenge to work closely with customers. There is a need to focus on
better understanding the needs of the customers. However, with the
pervasiveness of technology, many functions of traditional intermediaries
are bypassed, and these roles are assumed by the customers using online
means. Thus, interaction between the seller and buyer becomes minimal.
3. Irrelevance of relationship marketing. Another argument raised that
counters relationship marketing advocates is the fact that service quality
and customer satisfaction are integrated into the core of the tourism
industry, it being a service industry. Hence, a discussion on relationship
building through better service and customer satisfaction is already a given
and should be a non-issue.
Relationship marketing does not disregard traditional marketing tools. In fact,
relationship marketing enhances and reinforces these traditional tools. Relationship
marketing does not seek to invalidate the traditional or transactional view. The
relationship paradigm incorporates, rather than invalidates, the traditional view (Li
and Petrick 2008). Acquiring new customers should not be disregarded just because
you have loyal customers. It is similar to a funnel wherein attracting new customers
and retaining as many old ones as possible will help increase your sales volume. For
any business to grow, there should be a steady flow of new customers and a solid
base of loyal customers.

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 Figure 11.1 The Funnel Model in Relationship Marketing

Reasons People Fail to Build Customer Relationships

Here are some things that organizations most often unknowingly do that
hinder the building of relationships with customers:
1. Ignore inquiries.
2. Ignore customer emails.
3. Do not return calls within a reasonable amount of time.
4. Fail to get to know the customers.
5. Fail to satisfy the customers.
6. Fail to deliver what was promised.
7. Do not act on complaints.
8. Find fault in the service delivery by pointing fingers at everyone else except
oneself.

Marketing Nugget: That Extra Value

Relationships with customers are built through that little extra. There are
well-,thought-of little things that define the value establishments give to their
customers. These, small things are of little value, but because they are thoughtfully
delivered, they give a, positive customer experience.

As an example, we often receive a fruit basket as a common welcome gift

when, we check into a hotel. In one of my hotel stays, instead of leaving it on the
table, the, hotel did something else. After five minutes of settling into the room, a
waiter knocked, on my door and brought the fruit basket with a small welcome card
and said, “Here is a, little something to welcome you to our hotel, hope you will
have a wonderful stay." That, gesture didn't cost more but the personalized service
made the gesture more impactful, than just leaving the same fruit basket on the
table.
Point to Ponder:
 What are the other ways where more personalized service can be practiced
in hotels, restaurants, and airlines?

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 Highlights of the Chapter
 Relationship marketing is defined as attracting, maintaining, and enhancing
long-term customer relationships.
 Transactional marketing focuses on a single sale, episodic contact, little
emphasis on customer service, limited commitment to meeting customer
expectations, and quality concerns that are by the production staff only.
 Relationship marketing focuses on repeat sales, constant contact, high
customer service, high commitment to meeting customer expectations, and
quality concerns that are by all staff members.
 There are five levels of customer relationships: basic, reactive, accountable,
proactive, and partnership.
 The goals of relationship marketing are customer retention, customer loyalty,
and referrals from satisfied customers.
 A loyalty program is different from a frequency program. It is loyalty that builds
frequency, not the other way around.
 Addressing customer complaints will help establish good customer relations.
 Service recovery steps include accept, take responsibility, and apologize for
the bad service; respond proactively and act quickly; and empower
employees to offer low-cost but high-value compensation.
 Benefits of relationship marketing include continued patronage, reduced
marketing costs, decreased price sensitivity of loyal customers, availability of
feedback, ability to create a database, strong brand loyalty, and partnership
activities with customers.
 Challenges to building relationship marketing include the novelty-seeking
behavior of tourists, the challenge to work closely with customers, and the
slight irrelevance of relationship marketing of some marketers.

Guide Questions:
1. What is relationship marketing? How important is it in tourism marketing?
2. What is the difference between transactional/traditional marketing and
relationship marketing? Which one is better?
3. Should we disregard transactional marketing and concentrate on relationship
marketing?
4. What are the benefits of relationship marketing?

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