Gengler and Popkowski-relationship Marketing-2

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CHARLESE.GENGLERPETERT.L.POPKOWSKI

LESZCZYC

Using Customer SatisfactionResearch for RelationshipMarketing: A DirectMarketing Approach

CHARLESE.GENGLERis

anAssistantProfessorofMarketingatRutgersUniversityinCamden,NewJersey.He

receivedhisPhDinMarketingin1991fromtheUniversityofTexasDallas.

Dr.Genglerhasresearchandconsultinginterestsinpositioningstrategy,advertisingandpromotions,

persuasionandmotivation.


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Hehaspublishedinavarietyof

academicjournalsincludingJournalofConsumerResearch,JournalofAdvertisingResearch,and

InternationalJournalofResearchinMarketing.PETERT.L.POPKOWSKILESZCZYCisAssistant

ProfessorattheDepartmentofMarketingandBusinessEconomicsandLaw,UniversityofAlberta.HereceivedhisBSfromStateUniversityofNewYork,Geneseo,

anMBAfrom


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SUNYBuffalo,andaPhDinMarketing

fromtheUniversityofTexasatDallas.Heisamemberof

theAmericanMarketingAssociation,CollegeonMarketing,INFORMS,andCanadianInstituteforRetail

andServicesStudies.Hisresearchinterestsincludeempiricalandtheoreticalissuesofconsumerbrandandstorechoicebehavior,pricepromotions,pricingandadvertisingissues,and

short-andlong-runeffectiveness


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ofmarketingmixvariables.Hisresearchhas

appearedinMarketingLetters,EnvironmentandPlanningA,andCanadianJournalof

Economics.

CHARLESE.GENGLERPETERT.L.POPKOWSKI

LESZCZYC

ABSTRACT

Relationshipmarketinghasbecomeanimportantandnecessaryconceptintodaysbusinessworld.Duetotheimportanceofrepeat

business,itis


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inparticularvitalforretailbusinessesto

focusonlonger-termrelationshipswithcustomers.Inthispaperwedemonstratethat

customersatisfactionresearchisnotonlyatooltomeasureconsumerattitudes,but

canalsobeaproactivetoolformanagingcustomerrelations.

.1997 John Wiley & Sons, Inc. and Direct Marketing Educational Foundation, Inc.CCC 0892-0591/97/01023-07JOURNALOFDIRECTMARKETINGVOLUME11NUMBER1WINTER1997

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Fewcompanieshaverealizedtheopportunity

toimprovetherelationshipwithacustomerwhileperformingmarketingresearch.Any

directcontact,includingcustomersatisfactionsurveys,isanimportantopportunitytoimprovethe

relationshipwithcustomers.Inourpaperweshowthatconsumerresearchandrelationshipmarketingareintegratedcomponentsofanoverallcustomerorientation,andthatmarketing

researchcanbe


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usedasatooltoperformrelationship

marketing.Adirectmarketingapproachisused,contactingcustomersbytelephone.Our

resultsshowanincreaseinrepeatbusinessforautomobilerepairserviceswithcustomers

contactedbyphoneinacustomersatisfactionsurvey.

Personal relations are the important thing for ever

and ever, and not this outer life of telegrams and

anger. (E. M. Forster, Howards End, 1910)

Over the last decade, competitive forces haveprompted corporations to take an increased focuson knowing their customers better through improvedconsumer research (21). Better understandingof what consumers perceive as quality andvalue has been the key to the development ofsuccessful corporate strategies for the 1980s andearly 1990s. In an age when competition has increased,consumer research, and more specifically,

customer satisfaction research has become essentialfor a companys survival (12). In many product categories,where consumer research was once thought


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to be simply a source of competitive advantage, ithas now become a necessity (7).

Concurrent with this intensified focus on theconsumer, a relationship marketing orientation isemerging as central to designing organizationalstructure and strategy. Relationship marketing is becoming

pervasive in both industrial and consumermarkets (11,16,17,22), including automotive (15,25),banking (6,18,20,24,28), and a multitude of others(26). Under the relationship marketing perspective,firms view themselves as having an ongoing relationshipwith their customers, aimed at deliveringextra value and generating multiple transactionsover time. This is in contrast with a transaction orientationfocusing on a single sale at a time (9,29).

Consumer research and relationship marketingare inseparably intertwined aspects of an overall

customer orientation. However, it is seldom recognizedthat research is part of the relationship. In fact,a major difference between relationship-oriented

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marketing organizations and transaction-orientedorganizations is the content and maintenance of a

customer information system (12). In a relationshipmarketing environment, the whole corporate culturemust be devoted to serving the customer. Every customercontact is an opportunity to enhance (or damage)a customers perception of the firm. Althoughthis concept is broadly acknowledged by manyfirms, it is regularly forgotten when performing customersurvey research. A properly executed customersurvey interaction not only provides managementwith valuable information, but can leave customerswith the sense that the company really caresabout them. This both increases the loyalty ofhappy customers and can make the difference inkeeping disgruntled customers from switching to anotherbrand. On the other hand, a cold, impersonalmarket research interview can leave a customer feelingalienated and even defensive. This can have disastrouseffects on customer loyalty (14,27). As tradebarriers are lowered, consumer choices and brandcompetition will multiply. In this environment, noorganization can afford to miss any opportunity tostrengthen relationships with customers.

In this paper, we briefly review the use of relationshipmarketing. Then, a study of whether customer

satisfaction research through telephone callshas an impact on subsequent repurchase behavior(loyalty) is presented. The main emphasis of this


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paper is to demonstrate how customer satisfactionresearch can become a proactive tool for relationshipmarketing.

RELATIONSHIPMARKETING

The term relationship marketing was introduced byBerry (1). Relationship marketing is simply an orientationof treating all customer interactions as part ofan ongoing stream of interactions, rather than treatingeach customer interaction as an isolated incident.Relationship marketing focuses on a long-term relationshipand series of transactions with the customer.Many feel that this is so important that itredefines the marketing concept itself (19). Gronroos(10:53) states: The most important issue in

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marketing is to establish, strengthen, and developcustomer relations where they can be commercializedat a profit and where individual and organizationalobjectives are met.

The relationship marketing concept has continued

to develop (2). Calonius (5) dicusses the promiseconcept in terms of relationship marketing. Unliketransaction orientation, which would focus onmaking promises, relationship marketing must focusnot only on making but on keeping promises madeto the customer, ideally developing trust and loyaltybetween customer and supplier. Loyal customers areof obvious benefit to sellers (3,22,23). The trust in arelationship has value to the buyer in terms of reducedrisk, reduced stress, reduced search costs, anda generally simpler life (2,4). This component ofrelationship marketing is particularly important to

direct marketers.

Implementation of a successful relationship marketingorientation requires that personnel workingwithin the firm are sold on the concept themselves(11,13). Service quality cannot be treated as just aprogram or special campaign (6). It requires acontinuous commitment from the entire organization.Furthermore, it requires a commitment from allof the third-party vendors who support the organization(30). In an age where firms are increasing theiruse of outside services for many functions, they mustcontinuously take measures to ensure that these

firms share a common vision of customer relationships.Anything less can cause serious damage tothe firms reputation (30). Therefore, many firms areplacing an intensified focus on the implementationof full relationship marketing programs both withintheir firms and within the service firms they employ.

TheLexusCustomerFirstProgram

For example, in the auto industry Toyotas Lexusoperation prides itself on customer-relationshipmanagement according to J. D. Illingsworth, groupvice president of Toyota Motor Division in the U.S.(15). Toyotas creed is customer first, dealer second,and Toyota third. This illustrates Toyotas observationthat all members of the channel must beinvolved and committed to the relationship orientation.Illingsworth (15) states that the company wentthrough a very careful dealer selection process, initiallyallowing only about 7 percent of the candidates

that applied to actually become dealers. In addition,

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Lexus stresses that telephone follow-ups be madeby sales staff shortly after delivery, by the service

department after service visits, and even by employeesat corporate headquarters. Illingsworth comments,Every employee, from the newest secretaryto the vice-president, calls one owner a week, justto touch base and see if theres anything the companycan do for them. (15:51)

AlamosBestFriendsProgram

In another example, Alamo Rent-A-Car implementedwhat it refers to as a Best Friends Program. ChairmanMichael Egan described the program as follows(25:43):

Make your customers your best friends; treatthem that way all the time, and they will always beyour customers. And, they will always be your bestfriends. Extend this concept to your fellow Alamofamily members. Make each one with whom youcome in contact your best friend. What happensthen? Our work environment becomes a happy

place with a caring, family atmosphere. It becomesa pleasure to come to work every day. Moreover,because you have a caring attitude, because youhave created a family atmosphere, the customersenses it and responds accordingly.

The program results were impressive and immediate(25). Between 1989 and 1990, business transactionsincreased 30 percent. At the same time salescomplaints went down 15 percent and rudenesscomplaints went down 50 percent.

These examples illustrate that companies areadopting relationship marketing philosophies basedon interpersonal contact. Furthermore, the Alamoexample cites increased business transactions andreduced complaint behavior, attributing this activityto the relationship marketing program they haveadopted. Asking customers what can be done forthem or how they can be helped are ways of lettingcustomers know the company cares, and they arealso informal forms of customer satisfaction research.

If communication techniques can be incorporated

into traditional customer satisfaction research toachieve the same caring effect, then two importantresearch issues must be addressed. First, it is important


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to know if this interaction translates into customerbehavior, i.e., whether customer satisfactionsurveys conducted by telephone have an impact on

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customer behavior. Secondly, it is important to assesswhether interacting with customers to maintaina relationship will bias responses to customer satisfactionsurvey data. Basically we are looking at theextent to which a direct marketing approach can beused to perform relationship marketing while collecting

survey data.

STUDY:DOESCUSTOMERSATISFACTIONRESEARCHAFFECTREPURCHASE?

A

StudyofAutomobileDealerServiceRepurchases

Here, we analyze the effects of a telephone customersatisfaction survey upon subsequent customer repurchasebehavior for automobile dealer service. Itmust be emphasized that the telephone survey wasconducted by professional interviewers specifically

trained in relationship marketing techniques. Aswith Lexus and Alamo, the techniques are designedto communicate the perception of caring about thecustomer. This means that rather than maintaininga strict script in the interview process, which canseem cold and uncaring to customers, the interviewersare trained to respond sympathetically and reassuringlyto customer concerns and complaints.

For example, when customers responded particularlynegatively to any of the questions, the interviewerwould respond with apologetic commentssuch as I am sorry to hear that, or other similarstatements as appropriate. At the end of the survey,separate closing statements were used for satisfiedand dissatisfied customers. Satisfied customers weresimply told, . . . thank you for your answers andfor coming to [dealership name]. Goodbye. Dissatisfiedcustomers were told, . . . let me apologizefor the problem(s) youve had and the inconvenienceyouve been caused. Ill make sure this informationgets back to the dealership management.In cases of a serious complaint, subjects are askedfor their daytime phone number so that the dealershipcan contact them. There was no corporate policy

of incentives to promote repurchases for dissatisfiedcustomers. Each individual dealership handledcustomer problems individually as appropriate to


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the level of severity.

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Sample

In this study, only customers who had visited adealer for service in the first quarter of 1992 wereincluded in the sample. A total of 124,195 subjectswere identified nationwide. Telephone contact wasmade within two weeks after a service visit. A totalof 64% of the subjects were contacted, and the remainderwere used as a control group. At the end

of the year, customers were then cross-referencedwith service visits made throughout the rest of theyear to assess postcontact behavior and determinethe impact of telephone contact.

It is to be expected that some of the 36% who werenot contacted may have moved during the time periodbetween service and contact, thereby impacting theirability to return for future service. Analysis of demographicand model ownership data indicated no significantdifference between those contacted and notcontacted. Although within the not-contacted groupthere may have been some sample attrition from those

who had a service visit in the first quarter of the year,this could not reasonably account for the large differencesfound between the groups. According to DeAre(8), 18.1% of the population moved residences betweenMarch 1985 and March 1986. Using this figure,and assuming a uniform distribution of moves acrossthe year, we estimate that 0.70% of the populationmay move within a given two-week period. (Afterthe two-week period, we expect that those who weresurveyed and those that were not would move at thesame rate.) Adjusting the 36% figure by 99.3% givesus a control group size of 35.74% of the population.Hence, comparisons of behavior are based upon a64% group that was contacted, a 35.74% group thatwas not contacted, and a 0.26% group of the populationthat could not repurchase because they hadmoved. If anything, this adjustment is overly cautious,since many of these moves may have been local ratherthan inhibiting the individuals from revisiting thedealer.

Results

Table 1 shows that telephone contact significantly

improved customer loyalty; 55.6% of those whowere contacted after their first visit returned for additionalservice visits, whereas only 48.7% of those not


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contacted returned for visits. A chi-square test ofwhether the patterns in Table 1 differed from whatwould be expected as random chance was signifi-

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TABLE1

Impactof

CustomerContactonRepurchaseBehaviorforDealerAutomobileService

Total

NumberCustomersAverageofWhoNumberofCustomersRepurchasedRepeatVisits

100%satisfied48,77928,0771.14customers(39.8%)(57.6%)

Medium-18,7559,5820.94Satisfied(15.3%)(51.1%)Customers

At-riskor10,3095,5991.04dissatisfied

(8.4%)(54.3%)customers


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Totalcontacted77,84343,2581.08

(63.5%)(55.6%)Notcontacted44,75721,7850.93(36.5%)(48.7%)

cant at the .001 level. Further analysis broke the

surveyed customers down into three categoriesbased upon their satisfaction level. The majority ofcustomers surveyed (63%) were 100% satisfied withthe service visit, 24% were not 100% satisfied, butwere not strongly dissatisfied either, and the remaining13% were dissatisfied and designated as atrisk of taking their business elsewhere. For the at-risk customers, an alert notice was sent to the dealerso that any corrective action necessary could betaken. After being contacted by telephone, the 100%satisfied customers returned at a rate of 57.6%, themidrange satisfied customers returned at a rate of51.1%, and the at-risk customers returned at a rate

of 54.3%. It seems that the contact with the at-riskcustomers was particularly effective, since onewould a priori expect them to be least likely to return,yet they returned at a rate significantly largerthan the uncontacted groups rate of 48.7%.

Another issue analyzed was whether there was adifference in response between customers whosepurchases were in warranty and those not on warranty.For those on warranty who were contacted,62.9% returned for additional service, whereas thoseon warranty who were not contacted returned at arate of only 55.7%. For those not on warranty, 51.5%of those contacted returned for a second visit, comparedwith only 44.8% of those not contacted. Asone would expect, customers on warranty return

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with greater frequency; however, for both thosewith and without warranty coverage, contact by telephone

substantially increased the likelihood of subsequentvisits. The increase for those not on warrantyis especially important, since these customers


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will naturally be the most profitable segment.

The bottom line in this study is how the increasedcustomer repurchase frequency translated into increasedprofits. According to the research firm, annualparts profit was $21.17 higher for contactedcustomers than for noncontacted customers. Annual

service profit was $38.11 higher for contacted customersthan for noncontacted customers. Given thatthe telephone contacts cost $8 per year (for twoservice visit follow-ups), this is approximately a741% return on investment!

SUMMARY

Relationship marketing is one of the most importantcompetitive trends in business today. It requires acommitment to delivering quality to the customer

from the entire organization, not just from the salesstaff or customer phone representatives. Carryingthis philosophy through, it also requires that a firmensure that other service firms which interact withcustomers also keep the same commitment. This includesmarketing research firms. In this paper wehave demonstrated that telephone surveys are morethan just data collection, they are opportunities tostrengthen relationships with customers.

Therefore, customer satisfaction research is onearea where this philosophy can be successfully employedto turn a mundane data collection process

into a proactive promotional tool. All customer contactsare opportunities to make an impression onthe customer, and are part of the relationship withthat customer. The important point is not merelythat contacting customers after the purchase has apositive effect, but that this effect can be achievedsimultaneously with customer satisfaction data collection.

The fastest-growing companies of the next decadewill be those who establish and maintain aloyal base of customers. Any company that only focuseson new customers may lose customers as fastas it gains them. Relationship management firms area new form of specialized business destined to growin the future. Research firms that emphasize quality

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customer contact and support will displace thosefirms which do not. This is not only true for consumerproduct firms, but also for the third-party servicefirms working for them. Any customer contactis perceived as reflecting on the original firm,whether it is marketing research, an outside firm

managing frequent-flyer programs, a data processingfirm responsible for issuing monthly statementsto customers, or even the landscape servicehired to maintain the exterior of a retail location.

A strong commitment to customer orientationmeans one thing: the relationship comes firstalways.The first plateau of customer orientation iscaring about the firms customers and their needs.The second plateau can be characterized as the marketresearch era, when companies put a focus ongathering information about their customers. Yet,

caring only through marketing research may oftenseem to customers like the attention a small fishreceives as a larger predator eyes it over carefully.To avoid creating this sensation, the third plateautakes the customer orientation one step further, puttinga focus on a two-way ongoing communicationprocess between the customer and the firm: i.e.,the relationship. Companies must still care abouttheir customers needs. They must still use marketingresearch to track and understand those needs.But they must recognize that a relationship is morethan just mechanically collecting data, diagnosingit, and gradually responding. A relationship means

putting a focus on caring about customers andletting them know it. It means establishing andmaintaining channels of ongoing two-way communication.

Future research can progress in several directions.The study presents evidence that customer surveyresearch can enhance repurchase behavior, but doesnot address whether telephone or mail or a combinationof the two is best for relationship marketing.This is an important topic for future research. Aninvestigation of the optimal timing and frequencyof customer contact would benefit managementdecision-making. Qualitative research on howcustomers perceive marketing research, or particularlycustomer satisfaction research, is needed tounderstand the effects of this activity more fully.Furthermore, future research needs to understandwhat activities have effects on the firms image,and how negative effects can be avoided. Finally,a study of the variation in responses across market

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segments would significantly improve relationshipmanagement. .

REFERENCES

1. Berry, L. L. (1983), Relationship Marketing, in Emerging Perspectiveson Services Marketing, Leonard L. Berry, G. Lynn Shostack,and Gregory Upah, eds., Chicago: American Marketing Association,2528.2. Berry, L. L. (1995), Relationship Marketing of ServicesGrowing Interest, Emerging Perspectives, Journal of the Academyof Marketing Science, 23, 236245.3. Berry, L. L., and Parasuraman, A. (1991), Marketing ServicesCompeting Through Quality, New York: Free Press.4. Bitner, M. J. (1995), Building Service Relationships: Its AllAbout Promises, Journal of the Academy of Marketing Science,

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MarketingA European Perspective, Keith Blois and Stephen Parkinson,eds., Bradford, England: European Marketing Academy,University of Bradford, 86103.6. Calvert, J. (1990), Quality Customer Service: A MarketingWeapon for High Performance Banking, Industrial Engineering,22, 5457.7. Cravens, D. W. (1995), Introduction to the Special Issue onRelationship Marketing, Journal of the Academy of MarketingScience, 23, 235.8. DeAre, D. (1990), Longitudinal Migration Data From the Surveyof Income and Program Participation, in Perspectives on

Migration Analysis, Washington, DC: U.S. Department of Commerce,Bureau of the Census, 1323.9. Frazier, G. L., Spekman, R. E., ONeal, C. R. (1988), Just-in-Time Exchange Relationships in Industrial Markets, Journal ofMarketing, 52, 5267.10. Gronroos, C. (1989), Defining Marketing: A Market-OrientedApproach, European Journal of Marketing, 23, 5260.11. Gronroos, C. (1990), Relationship Approach to Marketingin Service Contexts: The Marketing and Organizational BehaviorInterface, Journal of Business Research, 20, 311.12. Gronroos, C. (1995), Relationship Marketing: The StrategyContinuum, Journal of the Academy of Marketing Science, 23,252254.13. Heskett, J. L. (1987), Lessons in the Service Sector, HarvardBusiness Review, 65, 118126.14. Hirschman, A. O. (1970), Exit, Voice and Loyalty: Responsesto Declines in Firms, Organizations and States, Cambridge, MA:Harvard University Press.15. Illingsworth, J. D. (1991), Relationship Marketing: Pursuingthe Perfect Person-to-Person Relationship, The Journal of ServicesMarketing, 5, 4952.16. Jackson, B. B. (1985), Build Customer Relations That Last,Harvard Business Review, 63, 118126.VOLUME11

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17. Levitt, T. (1983), After the Sale Is Over . . . , Harvard BusinessReview, 61, 8793.18. Lubin, P. C. (1992), Keeping the Bank Customer Satisfied,Bankers Monthly, 109, 2526.19. Morgan, R. M., and Hunt, S. D. (1994), The Commitment-Trust Theory of Relationship Marketing, Journal of Marketing,

58, 2038.20. Perrien, J., Filiatrault, P., and Ricard, L. (1993), The Implementationof Relationship Marketing in Commercial Banking:Building and Maintaining Relationships, Industrial MarketingManagement, 22, 141148.21. Peter, J. P., and Olson, J. C. (1994), Understanding ConsumerBehavior, Burr Ridge, IL: Irwin.22. Reichheld, F. F. (1993), Loyalty-Based Management, HarvardBusiness Review, 71, 6473.23. Reichheld, F. F., and Sasser, Jr. W. E. (1990), Zero Defections:Quality Comes to Services, Harvard Business Review, 68, 105111.

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24. Samson, S. C. (1988), Servicing: Staying Lonely Is a Sign ofSuccess, Mortgage Banking, 49, 7678.25. Santora, J. E. (1991), Alamos Drive for Customer Service,Personnel Journal, 70, 4244.26. Seroka, P. H., and LaPlante, L. V. (1993), Marketing for theLong Term, Mortgage Banking, 53, 8187.27. Stewart, K., and Butler, P. (1994), Exit, Voice and Loyalty

and Relationship Marketing: An Application in Retail Banking,in Relationship Marketing: Theory, Methods, and Applications,Jagdish N. Sheth and Atul Parvatiyar, eds. Atlanta,GA: Center for Relationship Marketing, Emory University,28. Tanja, L. (1993), Retail Banking: Not Just for SalespeopleAnymore, Bank Marketing, 25, 3034.29. Webster, F. E., Jr. (1992), The Changing Role of Marketingin the Corporation, Journal of Marketing, 56, 117.30. Wyatt, C. (1993), Trusting Third Parties With Customer Relations,Bank Management, 69, 5760.VOLUME11NUMBER1WINTER199729


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