Relationship marketing is "an old idea but with a new focus" (Berry, 1995, p.23). The importance of maintaining relationships in a commercial context has been recognized during the Middle Ages as the ancient Middle Eastern proverb illustrates: "as a merchant, you'd better have a friend in every town" (Grönroos, 1994, p.18). The concept of relationship marketing was first mentioned by Leonard Berry in 1983 (Sheth, 2002), which has captured the interest of many academic and practitioners in the 1990s due to the maturing of service marketing, with the focal point concentrating on quality, economic benefits for the firm and the customer, and technological advances (Berry, 1995).
Paradigm Shift
Numerous authors (for example, Kotler, 1992; Grönroos, 1994; Gummesson, 1997; Baker et al, 1998) suggest that there has been a "paradigm shift" in marketing. The phenomenon of "paradigm shift" was contributed as a result of the "emergence of the post-industrial society" (Grönroos, 1999, p.327). The author identified several factors which caused the change in the market situation, which include: mass markets are becoming more fragmented, customers are becoming more sophisticated, increase of maturing markets, fierce competition in the global marketplace, and new technology has made market offerings become less standardized.
Fundamental reshaping in field of marketing occurred as a result of the increasing interest in relationship marketing from both academic and practitioner during the 1990s. The theme of marketing mainly focused on short-term and often one off transactions (Harwood et al, 2008) and acquiring new customers as a method to increase market share in the 1980s but the focal point has shifted to the emphasis of customer retention in the following decade (Payne, 1994). This theory was supported by (Harwood et al, 2008, p.9), who proposed that the approach of marketing has developed from "traditional transaction-based towards a more relationship-orientated one". (Fornell and Wernerfelt, 1987) explained that the total marketing expenditure can be significantly lowered by switching the focus from the practice of offensive marketing strategies (e.g. advertising), in an attempt to obtain new customers and to recruit dissatisfied customers from competitors to the defensive marketing strategy approach (i.e. maintaining customer relationships), in order to minimize customer turnover and to maximize customer retention.
Marketing is no longer just about developing, selling and delivering products. It is increasingly more concerned with the development and maintenance of mutually satisfying long-term relationship with customers (Buttle, 1996).
However, some authors have questioned whether the shift of traditional marketing paradigm had actually occurred. (Worthington and Horne, 1998) argue that relationship marketing is purely presented as "an add-on to mainstream marketing management" which may have caused the emphasis to shift slightly. Explained by (Brodie et al, 1997), while marketing practices are pursuing the principles of relationship marketing, elements of the traditional marketing paradigm are still reflected and therefore may only be valuable for some marketers, the concept is also described as merely "an attempt to update the marketing mix, but it stills sticks to the toolbox of marketing" (Hougaard and Bjerre, 2003, p.40).
Tactics for Relationship Marketing
Relationship Marketing in Retail Financial Services
The concept of relationship marketing has a significant impact on service industries, as (Grönroos, 1995, cited in Harwood et al, 2008) suggested "service firms have always been relationship orientated. The nature of service business is relationship based."
Additionally, (Patterson and Smith, 2001, p.426) emphasize that it is important for service providers to forge strong relationships with their customers "due to the intangible, experiential and often highly personal nature (i.e. in high-contact services) of the delivered service".
In the 1990s, relationship marketing became the major trend in marketing and one of the most discussed topic in business management among academics and marketing practitioners (Egan, 2008). A considerable amount of literature has since been published on the subject and many researchers have examined particularly on the effects of relationship marketing on various service industries, for example: advertising (Patsioura et al, 2009); distribution (Nevin, 1995); retailing (Boedeker, 1997); entertainment (Rentschler et al, 2002); financial services (Heffernan et al, 2008; Colgate and Alexander, 1998); healthcare (Wright andTaylor, 2005); hospitality industry (Gilbert et al, 1999); insurance (Crosby and Stephens, 1987); marketing (Grönroos, 1994); public services (Mclaughlin et al, 2009); real estate (Low, 1999); tourism (Fyall et al, 2003); travel (Gilbert, 1996).
