Full Project – THE EFFECT OF RELATIONSHIP MARKETING ON ORGANIZATIONAL PERFORMANCE

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CHAPTER ONE

INTRODUCTION

1.1       Background to the Study 

The survival, success and continuity of service organizations depend on effective relationship marketing. The effectiveness of relationship marketing in service organizations determine to a great extent the performance of the organization as well as the satisfaction customers can derived from services rendered by the organization (Kotler, 2006).

Relationship marketing (RM) is meriting an increasing amount of attention in marketing research, and has already become a key enterprise marketing activity in recent decades. The term ‘relationship marketing’ was coined more than twenty years ago and since then it has been receiving considerable attention from both researchers and practitioners (Yang and Wu, 2007; Sharker, 2009). Mulki and Stock (2003) discuss several environmental factors that have facilitate the rise for this concept such as the trends for firms to be service and information-oriented, be niche-oriented, global in nature and of course, to adopt information technologies.

The concept of “relationship marketing” is at the very heart of the study of marketing management and work organization. The issue of relationship marketing is a current topical issue in marketing management that is presently attracting the concern and attention of marketing organization and company’s services (Achumba, 2002).

For any organization to survive the on slough of competition, it must define clearly its relationship marketing which is a strategy adopted to create a cordial relationship between the marketing company and its customers. This will ensure the achievement of the company objectives and set goals that will invariable yield positive results (Weitz and Sandy, 1995).

In spite of its importance, not everyone appreciates its in-depth meaning, perhaps, the reason for this is because it is difficult to define and apply in organizations. Relationship marketing therefore, is concerned with the creating and maintaining mutually beneficial exchanges and relationship between the marketing organization and the target markets to achieve organizational objectives (Berry, 1995)). This can only be possible by providing quality services, ensuring the availability and provision of after sales services.

The role of Relationship Marketing in Competitive Marketing Strategy includes: guide moments of truth, improve profitability, build partnering, address ‘Customer Better’, buy in of customer attention, protect emotional well-being, understand consumer psyche, build trust with customer (Morgan and Shelby, 1994). Relationship marketing serves as a moderator for the sustenance of positional advantages and influences the impact of competitive and market conditions on the formulation of the marketing mix. In service industries, there is always some form of direct (social) contact between the customer and the service firm. This direct (social) contact or ‘service encounter’ is so important a part of service delivery that it is frequently called ‘the moment of truth’ (Johns, 1999).

One of the major objectives of competitive marketing strategy is to improve the long-term financial performance. Relationship marketing by working towards improving profitability based on exploiting its relationships serves this financial performance objective of marketing strategy.

In fact, relationship marketing pays off handsomely when products or services have high switching costs e.g. office automation system. Relationship Marketing is profitable when customers are willing to stay with suppliers for a long period of time. Transaction marketing on other hand pays when there are low switching costs. According to Egan (2001), relationship marketing fosters external partnerships that cater to the mega-marketing needs of a business. It fosters external partnerships through networks (individual relations); collaborations (organizational relations) including alliances. These sets of external relations bring together market elements synergistically. Importantly, for relationship marketing to be effective it must take customer behaviour into consideration.

Moreover in the present business world, marketing is no longer just about developing, selling and delivery of products and services (Gilbert and Choi, 2003) rather it concerns attracting, developing, maintaining, and enhancing customer relationship. By implication, organizations need to treat their customer base as individual assets in themselves bearing in mind that the costs of acquiring customers are generally higher than the costs of retaining them and this difference is particularly in evidence in the service sector (Ennew and Bink, 1996).

In order to serve customers better, the company must give consumer real satisfaction. Consumer should be able to derive utility, which is the satisfaction derived from the consumption of a given service (Berthon, Leyland, Michael and Gunnar, 2003). This research study would throw more light on the effect of relationship marketing on organizational performance in service organizations.

1.2       Statement of the Problem

The study unveiled the numerous problems an organization could face if relationship marketing is not effectively carried out and its impacts on customers’ loyalty. What is the implication of this effect on the organizational products/ services and profitability? The problems of lack of patronage, unfavorable attitude, no repeat purchase, absence of customer royalty, lack of quality service and low profitability level is’ as a result of not putting in place effective relationship marketing.  For firm to implement this strategy, the challenges include complex array of technologies, shortages of skills and resources, couple with huge amount of time and effort, rapidly changing markets as well as more demanding customers’ present service organization. With these unprecedented set of problems, many marketing scholars and practitioners recognized that building relationships is essential to compete effectively especially in this turbulent and challenging business environment.

Thus, the management of service organization should put in place an effective relationship marketing to promote cordial relationship between the organization and its customers.

It is against this background that this study seeks to examine the effect of relationship marketing on organizational performance at AIICO Nig Plc.

1.3       Objectives of the Study

The main aim of the research study is to critically examine the effect of relationship marketing on organizational performance. The specific objectives are:

i.            To examine the relevance of relationship marketing to marketing organization.

ii.          To determine the effect of relationship marketing on customers’ loyalty.

iii.        To examine whether relationship marketing promote cordial relationship between organization and its customers.

iv.         To examine whether management of organization encourage relationship marketing.

v.           To identify the problem faced by organization as a result of ineffective relationship marketing.

1.4     Background and Significance of the Study

The importance of developing and maintaining enduring relationship with customers of service, businesses is generally accepted in the marketing literature.

This study, therefore, shall be of immense benefits to the organization, practitioners, customers and all concerned stakeholders.

The essence of this study cannot be over-emphasized in industries. Although it is undertaken for academic purpose, it is pertinent to note that it will be of immense benefits to service organizations; it would reveal the relevance of relationship marketing and the various ways relationship marketing can help in enhancing customers’ commitment to organizational services. The study would also be of guide to business managers by directing them on how to go about creating good relationship with their potential customers to ensure high demand for their services.

1.5       Research Questions

The following research questions are generated for the study.

i.            What is the relevance of relationship marketing to marketing organization?

ii.            How does relationship marketing impact on customer’s loyalty?

iii.            How relationship marketing promote cordial relationship between service organizations and their customers?

iv.            How do marketing managers in service organization encourage good relationship marketing practices?

v.            How does ineffective relationship marketing affect marketing practices?

1.6       Research Hypotheses

The following research hypotheses were formulated for the study:

Hypothesis 1

Ho: Relationship marketing enhances the performance of marketing organization.

Hi: Relationship marketing does not enhance the performance of marketing organization.

Hypothesis 2

Ho: Ineffective relationship marketing affects customers’ loyalty.

H1: Ineffective relationship marketing does not affect customers’ loyalty.

Hypothesis 3

H0: There is no relationship between relationship marketing and organisational survival.

H1:  There is a relationship between relationship marketing and organisational survival.

Hypothesis 4

H0:    There is no direct connection between customer satisfaction and relationship marketing.

H1:    There is a direct connection between customer satisfaction and relationship marketing.

1.7       Scope of the Study

The scope of this study is limited to AIICO Insurance Plc located 36/38, Industrial Avenue Ilupeju, Lagos Nigeria. In this project, an attempt was made to consider topical issues relating to Relationship marketing and the effect on organizational performance, precisely AIICO Insurance Plc. in Nigeria. Hence opinion of members of this AIICO Insurance Plc in Illupeju, Lagos Nigeria was sampled to obtain the effectiveness or otherwise, Relationship marketing operating in the organization. The staff strength of this company is not less than 100 employees ranging from management to non-management staff. However, for the purpose of this study, only the management/ senior staff will be considered based on the know legibility in the area under study.  The research findings and recommendations was limited to AIICO.

1.8       Definition of Terms

This section of the study has to do with the definition of concepts and terms in the study. The followings are the key variables used in the study:

Marketing: Marketing is the totality of both social and societal efforts of business activities designed to satisfy both the present and potential customers.

Relationship marketing: Relationship marketing is a strategic orientation that focuses on keeping and improving on current customers, rather than acquiring new customers i.e. maintaining mutual relationship.

Organizational performance: Organisational performance is the level of success business organizations have achieved resulting from proper utilization of resources in the organization. Those parameters used in evaluating performance.

Planning: Planning has to do with anticipating trend and determining the best strategies to achieve organizational goals.

Strategies: Strategies are methods or plans which manager hopes to deploy in order to achieve its objectives.

Promotion: Promotionare all activities aimed at informing, educating, persuading and creating awareness for the company’s offerings.

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Full Project – THE EFFECT OF RELATIONSHIP MARKETING ON ORGANIZATIONAL PERFORMANCE