A CONCEPTUAL EVALUATION OF THE MULTIPLE DIMENSIONS OF

RELATIONSHIP MARKETING

Adrian Palmer

Richard Mayer

ABSTRACT

Business managers have frequently been called upon to develop relationship marketing programmes, with little guidance about what relationship marketing means or of the resulting benefits. To some, relationship marketing is seen as little more than a tactical programme of database management, while to others, it is seen as an integral part of a customer care strategy which goes to the core of the marketing concept. This paper reviews alternative perspectives from which relationship marketing has been viewed and argues that not all types of relationship building activities can be expected to achieve similar returns on investment. Exploratory research is reported which seeks to evaluate the benefits resulting from different aspects of relationship development among a sample of UK travel agents. It is tentatively concluded that although relationship marketing at the tactical level may be relatively easy to implement, much greater benefits may arise where relationship marketing had been interpreted as an underlying philosophy of caring for customers.

INTRODUCTION

Many organizations have sought to redefine the pattern of exchange between themselves and their customers, from being predominantly transaction based to predominantly relational (Gronroos 1991; Mohr and Nevin 1990; Macneil 1980). Relational exchange is not a new concept, having been observed, for example, in the pattern of exchanges between textile manufacturers and intermediaries in Victorian England (Clegg 1956). Nor is it appropriate to take a western perspective in claiming that relational exchange is new, as this pattern of exchange has been the norm in many eastern cultures (Ohmae 1989). Interest in rediscovering the ability to know customers has come about for two principal reasons. Firstly, the increasingly competitive nature of markets has often resulted in good service quality alone being inadequate for a company to gain competitive advantage. Superior ongoing relationships with customers can replace service as a differentiator between companies, where the support provided by such a relationship creates value in the eyes of consumers (Christopher, Payne and Ballantyne 1991). Secondly, the emergence of powerful, user-friendly databases has enabled large companies to know more about their customers, recreating in a computer what the small business owner knew in his or her head (Treacy and Wiersema 1993). Developments in information technology have expanded the domain of relational exchange from large value, low volume industrial exchanges, into relatively low value consumer goods and services.

It is now widely accepted that reducing customer "churn" levels and increasing retention levels is beneficial to businesses, and many studies have shown the effects on profitability of increasing customer retention rates (Rust and Zahorik 1993, Reichheld 1993, Reichheld and Sasser 1990). However, beyond this general recognition of the benefits of relationship marketing, there has been little analysis of which aspects of relationship marketing are particularly important in contributing to business profitability. It has been observed that the term "Relationship Marketing" has become so widely used that it covers a disparate range of activities (Fisk, Brown and Bitner 1993). Rather than talking about relationship marketing as one tool of marketing management, it should be seen as comprising a range of tools which offer diverse contributions to marketing effectiveness.

This paper initially seeks to position relationship marketing by analysing the different perspectives from which it has been viewed and developing a basis for classifying the literature on the topic. It then develops a methodology for assessing the contribution of different approaches to relationship marketing to business profitability and tests this in the context of UK retail travel agents. While the empirical analysis is only exploratory in nature, the development of a methodology raises a number of issues for marketing managers seeking to develop a relationship marketing programme.

RELATIONSHIP MARKETING - A NEW MARKETING PARADIGM?

A wide body of knowledge has now emerged which has developed conceptual models for understanding exchange between buyers and sellers (Dwyer, Schurr and Oh 1987; Crosby, Evans and Cowles 1990); between distribution channel members (Anderson and Narus 1990); horizontal partnerships between firms (Bucklin and Sengupta 1993; Ohmae 1989) and internally between groups of internal customers (Ruekert and Walker 1987; Berry and Parasuraman 1991).

The increasing interest in relationship marketing has resulted in the subject being viewed from a number of perspectives. At one extreme, it has been observed that much activity that passes for relationship marketing is short-term and opportunistic, rather than being founded on attempts to build affective loyalty from customers (Barnes 1994). Berry (1995) has defined relationship marketing as comprising three levels of activity corresponding to points along this continuum. In the review of literature below, it is proposed that conceptualizations of relationship marketing can be defined in terms of three principal orientations: a tactical relationship orientation; a strategic relationship orientation; and a philosophical orientation which sees relationship marketing as going to the core of marketing.

At a tactical level, relationship marketing can be seen as similar in concept to sales promotion activity. Very often, databases have been linked to sales promotions with little attempt to develop a personalised dialogue which induces affective loyalty from recipients (O'Brien and Jones 1995). For some consumer markets, especially those involving personal and financial services, it has been traditional to keep detailed records of each individual customer. However, the majority of transactions between sellers and private consumers have been undertaken anonymously with little opportunity to capture information cost-effectively. It is in this latter field that relationship marketing based on databases has found much recent support, closely linked to the development of information technology (Petrison and Wang 1993).

Like all sales promotion activities, the net cost of loyalty incentive schemes comes off a company's bottom line. While pioneers in a sector may introduce incentive schemes and gain additional profitable business from competitors, incentives can rapidly become a sector norm which buyers expect. In the case of airlines' frequent flyer programmes, a cycle of development has been described which began in the 1980s where the first companies to launch schemes achieved revenue benefits. By the end of the 1980s, the use of frequent flyer programmes had become more widespread and their revenue benefits marginal. By the 1990s, most major airlines had developed programmes, yielding little overall advantage from this tool (Gilbert and Karabeyekian 1995). Frequent flyer programmes had become part of travellers' expectations, resulting in heavy losses of revenue for airlines (Mowlana and Smith 1993).

At a more strategic level, relationship marketing has been seen as a process by which a supplier seeks to "tie-in" customers through a series of legal, economic, technological, geographical and time bonds (Liljander and Strandvik 1995). Structural bonds have been defined by Turnbull and Wilson (1989) in terms of investments that cannot be retrieved when a relationship ends, or when it is difficult to end the relationship due to the complexity and cost of changing relational partners. A structural bond between buyer and seller has the effect of tying one to the other, through the creation of barriers to exit, although such ties may be asymmetric. One way in which buyers can become tied to sellers is by designing services in such a way that transferring to another supplier involves significant switching costs (Jackson 1985). Customers may gain preferential treatment, or semi-automatic responses to requests for service (Marshall, Palmer and Weisbart 1979), thereby reducing their transaction costs (Williamson 1975). Within the commercial banking sector, it has been noted that one means by which banks increase their retention rate is to increase switching costs by such means as long-term mortgages with penalties for early closure (Perrien, Filiatrault and Ricard 1992). Frequent buyer programmes have a similar effect in seeking to make the cost of competitors' products appear more expensive by virtue of the opportunity cost of forgoing loyalty discounts.

It has been pointed out that a strategy to develop structural bonds may lead to customer detention rather than retention (Dick and Basu 1994) and that a company which has not achieved a more deep seated affective relationship with its customers may be unable to sustain those relationships if the legal or technological environment changes the nature of those bonds. What often passes as a relationship, therefore, is an asymmetric association based on inequalities of knowledge, power and resources, rather than mutual trust and empathy (Barnes 1994).

A recent conceptualisation of relationship marketing sees the process of relationship development as being essentially about seller' attempts to restrict the choice set of buyers. Restriction can come about consensually where buyers limit their choice set as a result of a history of satisfaction with their current supplier, or more non-consensually where bonds unwittingly lead to restricted access to alternative sources of need satisfying products. Summing up current developments in relationship marketing, Sheth and Parvatiyar have described firms' motivation to develop ongoing relationships as being based primarily on "choice reduction" (Sheth and Parvatiyar 1995).

Where the process of tying-in is achieved through a process of mutually rewarding co-operation, mutual dependence and shared risk, the relationship is likely to show greater stability and endurance (Han, Wilson and Dant 1993), coming closer to relationship marketing as a business philosophy.

At the more philosophical level, relationship marketing goes to the heart of the marketing philosophy. Traditional definitions of marketing focus on the primacy of customer needs and relationship marketing as a philosophy refocuses marketing strategy away from products and their life cycles towards customer relationship life cycles. Recent conceptualisations of marketing as being the integration of a customer orientation, competitor orientation and inter-functional co-ordination (Narver and Slater 1990) stress the key features of a relationship marketing philosophy; using all employees of an organization to profitably meet the lifetime needs of targeted customers better than competitors.

Customer retention does not necessarily imply that buyers remain loyal to a relationship through an emotional involvement with the seller. Those who see relationship marketing as a process of creating exit barriers for their customers overlook emotional feelings that are generally associated with other human relationships. In fact, many relationships are created in a non-consensual manner where a seller unilaterally decides to build a relationship with its customers. Recent work by Bagozzi (1995) has conceptualised reciprocity between exchange partners as being crucial to the sustenance of ongoing relationships. Reciprocity refers to exchange of tangible goods and facilitating services as well as the more abstract social exchange. In many cases, a relationship may exist because the buyer has no alternative source of supply, or because they are tied into a frequent purchaser programme, which may be followed by disloyalty following completion of the programme. Although the customer buys regularly from the seller, they cannot be said to be loyal to it or emotionally involved with it.

Relationships which are not based on deeper caring emotions may break up rapidly in the event of external environmental change, for example through the appearance of a new competitor or deregulation of a market. It is therefore important to understand the quality of interaction which forms the basis of a buyer-seller relationship. A number of dimensions of relationship quality have been identified in the literature on human relationships. Trust has been cited as crucial to the sustaining of relationships between buyers and sellers (Schurr and Ozanne 1985, Swan and Nolan 1985), building upon models of trust used in social psychology (Pruitt 1981, Rotter 1967). The development of trust results in an exchange of promises which each party expects the other to keep (Gronroos 1990). It has been suggested that relationship quality is higher where sales personnel are customer-oriented rather than sales oriented (Saxe and Weitz 1982, Michaels and Day 1985). A relationship where a buyer feels trapped through being tied in for any of the reasons described above is qualitatively different to one where both parties are engaged as willing participants (Rusbult and Buunk 1993). Finally, a deeply-rooted relationship can lead to partners showing forbearance where a service failure occurs (Boulding et al 1993).

RELATIONSHIP MARKETING AND PROFITABILITY

To suppliers of services, the development of strong relationships helps to facilitate loyalty from customers whose loyalty is challenged by competing brands. By developing relationships with their customers, suppliers add to the differentiation of their products and give customers a reason to remain loyal (Day and Wensley, 1983). In highly competitive markets, suppliers may only be able to attract new users to their products at a high cost in terms of promotional activity and price incentives. There is much research to show that the cost of establishing contact with a potential customer and making the first sale often results in an initial negative return. It is only when a relationship is established that a customer becomes profitable to the seller (Reichheld and Sasser 1990, Reichheld 1993).

While the principle of developing long-term buyer-seller relationships has been widely recognized in the literature as being a desirable objective, a number of research questions remain. Relatively little attention has been paid to the processes by which customers' relationship potential can be assessed in terms of their continuing profitability. While customer retention has been shown to be more profitable than continual customer replacement, there has been little research into which aspects of customer retention activities are most cost-effective in contributing to this end. Previous major studies of the impacts of marketing strategies on profitability have not been conducted at a level of detail which would allow this type of analysis (Buzzell and Gale 1987). Although database marketing programmes may appear a very low cost method of improving customer retention rates, there has been little comparative assessment of this type of activity against more expensive, but possibly more rewarding activity such as the development of costumer care programmes which add to customers' perceived value.

RESEARCH PROPOSITION

This exploratory research sought to explore the notion that different levels of relationship building activity are associated with differing levels of business profitability. Exploratory research was undertaken using a sample of UK based travel agencies. There are strong grounds for justifying the use of travel agencies for this exploratory research. Businesses in this sector have been observed to practice a variety of customer relationship building activities which span the three categories of relationship building activities identified from the literature review. As a basic business philosophy, many travel agents have emphasised the quality of ongoing service to clients and the personalisation of service which comes from gaining knowledge through repeated business transactions. While personalisation has traditionally been a competitive strength of smaller travel agents, automation is increasingly giving larger operators an information base with which to personalise their service offers. At a strategic level, many travel agents serving corporate clients have sought to tie-in their clients through long-term supply contracts and the development of close working relationships. At a tactical level, many travel agents have sought to increase sales volumes by means of sales promotion activities and using direct mail as a non-adaptive means of communication with previous and potential customers.

Having justified the use of travel agencies in this study, reservations must be made about the extent to which it is possible to generalise from this sector to other business sectors. The sector may be quite unusual in a number of ways: the diversity of companies operating in it; the significant opportunities to sell complementary travel related products; and the level of data which has traditionally been held about each client.

METHODOLOGY

A sample of 150 travel agents located in England was selected for this study, from which 48 usable responses were obtained (a response rate of 32%). In view of the exploratory nature of the research, this was felt to be an adequate sample size. Because of the comparatively high response rate, no further test was carried out to investigate the possibility of non-response bias. Furthermore, it was conceptually difficult to determine which dimensions of respondents' profiles were most critical in determining responses to questions about relationship marketing activity and which should therefore be tested for non-response bias. The sample was randomly selected from retail travel agents based in the English East Midlands who were currently members of the Association of British Travel Agents (ABTA).

Concerns have been raised about whether it is appropriate to aggregate business-level data between independent business units and those which are part of larger enterprises (Pitts and Hopkins 1982; Rumelt 1974). In order to alleviate these concerns, the survey excluded large chains of travel agencies. All those selected for the sample had fewer than 10 outlets. It was felt that as there may be significant economies of scale within the retail travel sector, size of firm could have affected firms' profitability. To reduce the extraneous effects of size, the research framework allowed this factor to be held reasonably constant. While this action is likely to increase the reliability of the results of this study, it could be expected to reduce the ability to generalise the findings both within the travel sector and to other sectors.

Following an initial qualitative survey of a sub-sample of 5 companies, a questionnaire was mailed to the marketing manager or owner/manager of the remaining members of the sample. Consistent with findings and recommendations in the literature, these key informants were identified as appropriate sources for providing valid data about marketing strategies (Golden 1992; Huber and Power 1985). No attempt was made to assess whether the views of these key informants were reliable indicators for their organisation as a whole. Many of the respondents were owners or managers of their business and it was doubtful whether validation would be as useful as in an organisation where a key informant's views needed to be tested against the possible diversity of all board members' views.

The first part of the questionnaire sought information on the company's policies which relate to concepts of relationship marketing. The second part sought information about the financial consequences of its policies with regard to relationship marketing.

Measurement of variables

A review of literature revealed no previously validated scales which would be of direct applicability to the current study. Therefore in developing scale measures for the three dimensions of relationship development, guidance was taken from the principles proposed by Churchill (1979). Following a search of the relevant academic and practitioner literature, a series of exploratory in-depth on-site interviews were conducted with a sample of 5 firms drawn from a related retail sector. These activities enabled the development of "a set of items that tap each of the dimensions of the construct at issue" (Churchill 1979, p68).

Relationship marketing as tactics. From the literature, scale items were based on the following: whether a respondent gave discounts for frequent customers; the regular use of direct mail as a promotional medium; tailoring of messages to meet the needs of individual targets; routine collection of supplementary information about customers; and routine analysis of sales information by category of customers. While each of these could also form important elements of a company's marketing strategy, it is suggested in the literature that these activities are frequently used in an essentially tactical manner, thereby yielding little strategic benefit. The tactical rather than strategic orientation of these techniques was confirmed in the initial qualitative research (for example, although three of the five routinely analyzed sales information by category of customer, none used this information to target direct mail at customers within specific categories).

Relationship marketing as a strategy of "tying-in" customers. Scale items were based on: the use of exclusive supply contracts with business customers; the extent of switching costs for customers switching to other suppliers; the effects of procedures for handling after-sales issues for extending the company's relationships with its customers; reliance of customers on the agent's knowledge of their specific needs; and having in place systems for identifying and extending relationships with its most profitable customers.

Relationship marketing as a fundamental business philosophy. Scale items were based on: whether the company undertook routine after-sales monitoring of customers' satisfaction; whether it had procedures which made it easy for customers to contact the company's managers in case of dissatisfaction or query; the extent to which some form of routine marketing research is undertaken to establish the quality of the interaction between the company's employees and its customers; the importance of staff training aimed at improving the quality of employee-customer interaction; and whether customer feedback on quality issues forms an important part of managers' appraisal.

It is recognised that overlaps occur between the three categories defined above. Whether a particular item is classified as tactical, strategic or part of a fundamental business philosophy can only be determined by the use to which a company puts an item. Thus routine post-service monitoring of customer satisfaction only contributes to a fundamental business philosophy if a company acts on the findings. Without this, it may merely be a short-term promotional tool.

For each of the 15 scale items, Likert type scales were used, with response options ranging from 1 "Not at all important to this organisation", to 5 "Extremely important to this organization". To reduce response bias, certain questions were reverse scored.

Financial performance

Developing a methodology to measure the financial implications of relationship marketing strategies posed greater difficulties. Conceptual problems arise in developing a linkage between a relationship marketing strategy and financial performance. A relationship marketing strategy, by its nature, would be expected to yield greatest benefits over future time periods. Therefore, it could be argued that observed financial performance today is a reflection of relationship marketing strategies adopted in previous financial periods. Furthermore, these linkages may not be consistent across the different dimensions of relationship development activity, with the possibility that the lagged effect of tactical development activity is less than that associated with the development of a core relationship philosophy. It could also be argued that the causative link between relationship marketing and business profitability is not unidirectional, as the behaviour of some businesses may suggest that they only develop relationship marketing policies when they can afford them. This study was cross-sectional rather than longitudinal and the possible distortion caused by time lags between strategy implementation and profitability should be recognised as a limitation of this methodology.

A second problem is the difficulty in isolating the effects on profitability of relationship marketing from all other marketing strategy. It was argued earlier that at a philosophical level, relationship marketing becomes indistinguishable from marketing and financial performance was used as a very broad proxy for the effectiveness of marketing strategy.

A third problem lay in the identification of comparable indicators of financial performance and the ability of respondents to accurately assess the financial performance of their organizations. Finally, a lower response rate could be expected when respondents were requested to submit confidential financial information.

The measure of financial performance adopted for this study was based on respondents' subjective assessments. Key informants were asked to provide an estimate of how the overall financial performance and average profit per customer of their business compared with the average for their sector. The estimates were scored using 5 point Likert scales ranging from lowest 20% to highest 20%. Subjective measures are frequently used in strategy research as indicators of business profitability (Gupta 1987; Miller 1988; Narver and Slater 1990) and have been shown to be closely correlated with their objective analogues (Dess and Robinson 1984). However, problems inherent in the use of subjective measures of performance must be recognized, particularly the extent to which the key informant is able to give accurate answers to both marketing and financial questions.

Data Analysis

To confirm the reliability of the scale items in explaining the three hypothesized underlying constructs of relationship marketing, an exploratory principal components factor analysis with varimax rotation was carried out. This approach was preferred to one based on a simple summation of the scores of each group of scale items, as, if validated, the emerged constructs would give justification for the literature-based classification of relationship marketing dimensions.

The analysis was constrained on an a priori basis to three factors to correspond to the hypothesised constructs. The use of an a priori determination of the number of factors can be justified on the basis that this stage of the analysis was exploratory in nature and the aim was to assess the extent to which scale items gave a valid representation of three underlying constructs whose existence had been justified by a review of published literature (Iacobucci 1994; Sharma 1996). The initial factor solution did not reveal a simple structure of underlying constructs about relationship orientation; thus items with low loadings (less than .5) were deleted from the scale, and the factor analysis was conducted on the remaining items.

Most items loaded as expected on their respective factors (Table 1). However, a number of items loaded on the "philosophy" factor which could have been expected to load on the "tactical" and "strategic" factors. Reliability analysis was conducted on the summated scale of these constructs using alpha reliability coefficients (Cronbach 1951). Their coefficients were .87 (TACTIC); .76 (STRAT), and .77 (PHILOS). These reliabilities exceed the minimum acceptable cutoff of .75 for exploratory research (Nunnally 1978). These results are shown in Table 1.

Taken together, the factor analyses and scale reliability tests suggested that the scales developed for each measure are reliable and unidimensional. However, reservations must be made about the validity of the constructs. It was noted above that many of the items used in this research could belong to scales other than those to which they were hypothesised to belong. Also, a number of items failed to load on their expected constructs. It should be emphasised that this research was exploratory in nature and merely identifying a number of reliable dimensions of relationship marketing may in itself be seen as significant.

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Table 1: Factor analysis of relationship marketing orientation

Item Factor Factor Factor

1 2 3

(PHILOS) (TACTIC) (STRAT)

Routine after-sales monitoring

of customers' satisfaction is

undertaken .8753

Some form of routine marketing

research is undertaken to establish

the quality of the interaction between

the company's employees and its

customers .8972

Staff training programmes are offered

for the specific purpose of improving

the quality of employee-customer

interaction .7509

Customer feedback on quality issues

forms an important part of staff

appraisal, ranking as importantly as

the achievement of short-term

financial goals .7554

We routinely study sales

information in order to establish

the profitability of individual

clients .6972

Additional information is routinely

collected about customers (eg their

occupation, age, family status)

and stored in a database .6319

The company rewards frequent customers

with loyalty bonuses (eg gifts, special

offers, preferential service) .8658

We make regular use of direct

mail as a promotional medium .6887

The company has procedures which

make it easy for customers to contact

the company's managers in case of

dissatisfaction or query .6795

Promotional messages in our direct

mail are specifically differentiated

to match the circumstances of

individual customers .6509

Procedures for handling after-sales

matters (eg refund and insurance claims

against tour operators and insurance

companies) are designed with a view to

extending the company's relationship

with its customers. .7753

Our customers come to rely quite

heavily on our understanding of their

specific needs, and our ability

to recommend appropriate solutions .7234

This company has entered into

long-term exclusive supply

contracts with a number of its

business customers .6227

Eigen values 7.3241 2.0171 1.4300

Percent of variance 48.8 13.4 9.5

Coefficient alpha .77 .87 .76

Cumulative variance explained by 3 factors = 71.8%

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The next stage of the analysis was to develop a methodology for linking business profitability with indices for the three emerged constructs. For this purpose, mean factor scores for each of the constructs were computed for use as independent variables in a multiple least squares regression model. The dependent variable was level of perceived profitability in relation to the sector average. The regression model took the form:

P = a + b(TACTIC) + c(STRAT) + d(PHILOS)

The results of the regression are shown in Table 2.

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Table 2: Results of Multiple Regression Analysis

Independent Standardized t Significance

Variable Beta

TACTIC -.252 -2.381 .021

STRAT -.485 -4.586 .000

PHILOS .544 5.140 .000

(Constant) 2.875 27.421 .000

Overall F = 17.708 Significance = .000 R2 = .5469

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The regression indicated that the greatest contributor to perceived financial returns was represented by the construct of PHILOS, while the constructs of STRAT and TACTIC were observed to be associated with a negative impact on perceived profitability. It should be noted, however, that the R2 value of the equation (.5469) was not particularly significant and a higher value would have improved the validity of the results. It should also be noted that while three constructs with acceptable levels of reliability were derived from this analysis, their meaning is somewhat ambiguous as not all measurement items loaded on their expected factors. However, the fact that three factors emerged suggests that there are a number of significant dimensions to relationship marketing.

DISCUSSION AND CONCLUSIONS

Relationship marketing as a concept is currently poorly defined and its profitable use in business inadequately understood by academics and marketing managers alike. This paper has stressed the need to position the concept of relationship marketing in the context of widely differing interpretations of its role in marketing planning. At one extreme, relationship marketing has been seen as little more than a short-term tactical activity which may create loyalty to an incentive, but not necessarily to the service provider. This paper has argued that companies interpreting relationship marketing at the short-term tactical level are likely to achieve less financial benefit from their activities than those who interpret relationship marketing as a long-term philosophy of customer focus. This suggestion is tentatively supported by the research reported here. As a tactic, relationship marketing may share many of the characteristics of sales promotion, which frequently results in short-term increases in sales, but longer-term damage where core brand values are undermined by incentive-led promotions.

Relating business activities to profitability is very difficult on conceptual and practical grounds. The practical problems stem from the need to collect multi-variate data, much of which may be deemed by companies to be commercially confidential. Profitability analyses based on multiple variables, including actual financial performance are few and far between and few studies have, for example, been able to match the comprehensiveness of the PIMS studies of the 1980s.

The conceptual limitations of this type of study are more difficult to resolve. The first issue relates to the cross-sectional nature of the data collected. It could be argued that relationship marketing, unlike traditional transactional marketing, involves long-term orientation of business practices which will only pay off after relationships have been successfully established and built upon. In the case of travel services where purchases are made infrequently, it could take several years to establish a close, trusting relationship between a travel agent and its clients. The current business practices of an organisation may therefore affect profitability not so much today, but at some time in the future. Where relationship marketing is seen as a core business philosophy, the time lag between actions and resulting profits can be much longer than in the case of short-term tactics-based relationship marketing. This has implications for the monitoring and assessment of managers, whose performance is typically assessed using short term sales and profit figures.

This research has sought to reduce the complexity of relationship marketing to three dimensions, based on a review of literature. Analysis has been based on three constructs with an implicit assumption made that each independently contributes to overall profitability. However, this may be too simplistic, in that it may not be so much the strength of individual dimensions of relationship orientation which affect profitability as managers' abilities to intelligently combine the different dimensions to support each other. For example, a tactically based relationship building programme may succeed as a means of introducing buyers to a company which offers long-term customer value, but may fail where this long-term value is absent and customer retention can only be achieved by a series of further tactical measures.

The existence of overlap between the hypothesised dimensions of relationship marketing creates a research problem of classification. As an example, maintaining a database could be classified as essentially a tactical tool to operate a short-term incentive scheme; as part of a strategy which places greater emphasis on direct mail at the expense of broadcast media; or as part of a philosophy of customer orientation which uses the database to track customer satisfaction. The most appropriate classification must be based on the actual use which is made of a particular tool by a company, rather than some prescriptive determination.

Further limitations of this exploratory study must be recognized. The responses elicited in this study reflect the opinions of one individual within an organization. While the survey was aimed at marketing managers of the mainly small business organizations targeted, the individual actually responding could have prejudices based on his or her own responsibilities within the organization. Secondly, the concept of returns on relationship marketing activity is as yet poorly developed. More work is needed to develop a framework within which returns to specific aspects of relationship marketing activities can be measured and compared more rigorously, taking into account the time lagged effects of relationship development activities. Thirdly, this study was undertaken in one specific business sector, and within sub-set (small agencies with fewer than 10 outlets) of this sector. The ability to generalise may be limited, although the research issues posed during this study are likely to be similar.

Relationship marketing has become a mature area of academic research and new analytic techniques are needed in order to breathe renewed energy into the topic. This paper has highlighted the need to develop models which can show the returns from specific aspects of relationship development activity. In an era of short-term research, it has also highlighted the need to undertake comprehensive longitudinal studies which can isolate and understand the lagged effects of the different dimensions of relationship marketing. However, because a range of situational factors which impinge on relationship development affect industry sectors in different ways, it may be difficult to develop a general model of returns to relationship marketing activity which is of universal applicability. This study has highlighted the difficulties of holding "all other factors" constant and associating the implementation of a marketing plan in one period with returns in subsequent periods.

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