Introduction 1980s. It was first introduced in the service


Relationship marketing is one of the most important marketing
concepts. It plays a significant role in the present market scenarios as it  explains the relationship between customers
and an organisation (Adrian Payne, 1998). Armstrong and
Kotler point out that relationship marketing is a process for creating,
retaining, and enhancing mutual value and connections between enterprises and
customers or other stakeholder groups (Armstrong, 2012). This type of marketing
evolved during the 1970s and 1980s. It was first introduced in the service
marketing by Leonard Berry in 1983 (Berry, 2005).
It then became one of the most discussed topics in the academic conferences in
Europe, Australia, Northern America and everywhere else around the globe. By
the early 1990s numerous relationship marketing  books had been written by academicians like
McKenna 1991, Christopher et al 1991, Payne et al., 1995, and so on (Egan, 2011).

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Relationship marketing and SMEs have taken a central
position in marketing in the past few decades. Both concepts have received a
great amount of study by practitioners in both theories and practical aspects.
Small and medium size industry is characterised by small firms with low funds
and a small number of employees which makes them vulnerable to competition from
big companies, hence the use of relationship marketing to promote their
products is mostly required because it is cheap and effective to small
companies (Coltman, 2007).

Relationship marketing was a theme for debate frequently  during the last two decades of the twentieth
century in numerous academic journals including, journal of marketing, journal
of service marketing, journal of strategic marketing, international journal of
bank marketing and the international journal of consumer relationship
management. On the other hand, there have been topics of the past decades
discussed on relationship marketing like service marketing, inter
organisational change relationship, new paradigm of relationship marketing, relation
channels, network relationship, role of networking in value chain and impact of
information strategy to relationship within the organisation there has been
less interest in the discussion of topic of “The impact of relationship marketing to the SMEs service sector”.

Literature review.

Background of the study


Relationship marketing refers to an arrangement where both
the buyer and seller have an interest in providing a more satisfying exchange (Donaldson,
This approach is meant to create contact with customer and a long-term
relationship by providing a more personalised purchase and uses the experience
to create stronger ties (Gronroos, 1994). It is different
from other marketing techniques as it mainly focuses on long-termrelationships
with customers. It can also be termed as a long-term database system
application by an enterprise to understand a customer’s profile and further
develop relationship through various communication channels to deliver value
and service (Coltman, 2007). Interestingly, the
effect of relationship marketing on service quality and customer satisfaction
is empirically confirmed to be insignificant or weak without service providers
demonstrating emotional intelligence in interacting with customers. The
earliest model that showed the positive effects of emotional intelligence on
customer relationship management was handed through by Goleman in 1995 (Frank .F,
model shows the effects of emotional intelligence on customer-organisation relationship. The aspects of the models are
self-awareness (ability to know the customers-strength emotions drivers etc and
use them to create a relationship), self-regulation (ability to change with
customers’ demands), social skills (shaping customers in a certain direction),
empathy (considering customers emotions when making decisions that will affect
them) and motivation (company’s drive to deliver) (Frank .F, 2014).

marketing in small and medium size enterprises.

Thus, SMEs need to identify, prioritize and minimize their
business challenges to be more competitive and relevant in the business world (Thorsten,
Additionally, small and medium service enterprises are facing great challenges
to survive and sustain in the market due to lack of resources and marketing expertise
(Siti ., 2014). Lack of financial resources also leads
to limiting the ability of SMEs service sector to grow as well as the inability
to secure additional of funding. Research has shown that marketing mix is too
restrictive for business to business and service sector (Egan, 2011).Which
means the other option is the use of marketing form that will be workable for a
long time and will also lead to profits in the organisation hence the use of
relationship marketing.

Currently, relationship marketing is widely accepted by
small and medium sized firms reason being it is cheap to handle. Relationship
marketing is used by small size and medium size firms as a strategy to increase
customers, create customers loyalty and rise in a faster pace than the
competitors (Siti., 2014). Small and medium size enterprises that deal with
marketing depend largely on the use of relationship marketing to achieve
service quality levels, commitment and trust and satisfaction (Frank. F, 2014).

Marketing in the Service Industry

In the service industry, particularly service provider such
as telecommunication industry, relationship marketing plays a very critical
role in enhancing customer retention. Attraction of new customers is an
intermediate step in the marketing process, but the question is what happens
after you have attracted the customer? Are they going to stay? What can you do
to make them stay?  The answer to this is
solidifying a relationship and transforming potential customers to loyal
customers (Gillies., 1990). Authors such as Don Peppers and Martha Rogers
discuss the transition from managing products to managing customers and
differentiating customers rather than just products (Dixit, 2014).

The core subject in the service marketing field has
developed service quality which has stimulated interest in relationship
marketing (Berry, 2005). The objective of
improving service quality is to increase customer loyalty. Since loyalty
increases due to the existence of relationship marketing, effective
relationships should help a company capitalise in its investment in services


To fulfil the objective of this study, an extensive review
of literature was carried out using secondary research. A total of six
international databases were selected as the major source of data comprising
articles related to relationship marketing and small and medium enterprises.
The database was accessed online via the website of Nottingham Trent University
library one search and google scholar. The keywords search of the six-major
online database Emerald, Science Direct, EBSCO, Sage Journal, Springer Link and
Wiley. These databases were chosen because they cover various issues related to
marketing, SMEs and services and other areas of business.

Impacts of relationship marketing to small and medium
enterprises service sector

Organizational performance

Small business and medium enterprises service sector need to
use relationship marketing as a core business strategy in integrating internal
processes and external networks to create and deliver value to targeted
customers and increase profits (Donaldson, 2002). Performance for an organisation can be
assessed in financial and non-financial or tangible and intangible. The
performance measured can be  net profit,
net sales, reduced costs, market share, customer share and cash flow (Siti ., 2014). Additionally, relationship
marketing involves building long term interactive relationships, especially
with customers, which in this case these customers end up being advocates and
pass out a word of mouth to other people about your company hence increase of
customers and awareness about the existence of your company. Having strong
relationship marketing helps in relationship development, fosters trust, and
provides the information and knowledge needed to undertake cooperative and
collaborative activities (Buttle, 1996). Even though this
may seem to work well, on the other hand the same customers that are expected
to be loyal due to the relationship marketing of the organisation can also be a
problem to the organisation. Due to frustrations and delays customers can turn
bitter. The same customers could pass by negative message to the others. A
small mistake in handling a customer could be the downfall of the organisation.

customer commitment and Loyalty

Loyalty can be defined as an act of satisfaction that makes
a customer of a preferred product/service rebuy consistently in the future,
thereby causing repetitive same-brand or same brand-set purchasing, despite external
and situational influences and marketing effort having the potential to cause
switching behaviour (Mihaela, 2013). According to Gronroos 1994
relationship marketing is an act of establishing, maintaining and enhancing relationships
with customers and other partners, at a profit, so that the objectives of the
parties involved are met through mutual exchange and fulfilment of promises (Gronroos,
These relationships are of two types in the marketing field. First one is for
attracting the customers and another one is to develop the relationships with
customers for achieving maximum profits in the organizations (Gronroos, 1994). Commitment and trust are key to an
organisation because they encourage marketers to work at a preserving
relationship investment by cooperating with exchange partner, resist attractive
short-term alternatives and commit to the long term existing customers which
are the keys to promote efficiency, effectiveness and productivity (Hunt., 1994). Not only do loyal
customers generate more revenue over the years than new customers, but also the
cost of maintaining them is lower than a cost required to acquire new customers (Berry, 1995). So, we can safely
say that organisations use relationship marketing to increase retention and
customers loyalty (Doern, 2009).
It should be noted that loyalty of the customers requires facilitation of
several actions including generating of customer relationship management
software that allow tracking and analysing of each customer’s preferences,
activities, tastes, likes, dislikes, and complaints (Coltman,

Most studies on customer loyalty have focused primarily on
product or brand loyalty while customer loyalty to the service providers
remained unexplored (Hunt, 1994). It should be noted
that loyalty does not only strive to ensure a constant number of customers over
time but also to develop customer relationships with business by encouraging
the future purchases (Alexandru, 2016). Also customer
loyalty requires a long-term commitment from the parties in order to ensure the
maintenance of a business relationship.


Since 1970, both academics and practitioners have recognized
the importance of customer satisfaction (Mihaela, 2013). Achieving a certain
level of customer satisfaction is the first sign of business – customer
relationship, and it should be noted that from a customer-centred perspective,
customer satisfaction is a key indicator of a successful business exchange (Berry, 1995). Overall
satisfaction is the result of the quality assessment of all past interactions
between customer and a company and it be a function of all episodic
satisfaction (Mihaela, 2013). This allows shaping customer
expectations concerning the quality of future interactions. Use of relationship
marketing in SMEs service companies help them to gain customer satisfaction . By
using methods like  personalised messages
and direct emails, recommendations and providing sufficient and quality
services, satisfaction is created. Therefore, we can say that the level of
satisfaction perceived by a customer varies over time, as new interactions
occur between customers and the business.


The emergence of relationship marketing paradigm has
contributed to highlight the importance of trust in business (Mihaela, 2013). Trust is considered a key attribute of
a customer-business relationship (especially service-oriented business) and a
pivot of the successful outcomes associated to it that ensures the long-term
maintenance of the relationship. To achieve a certain level of cognitive trust
it is necessary to accumulate an amount of knowledge about the partner (Mihaela,
A business website should be like an open book with all the important details
that the customer’s needs. Most potential customers tend to look at the ratings
given by other people to the business before they engage in any kind of trade.
Normally with great relationship between the customers and business comes
trust. When the interaction between the two parties is intensive, trust
relationship deepens, involving mutual emotional investment in relationship (Mihaela, 2013).


Relationship marketing is meant to bring about the retention
of customers through varying means, ensuring repeated trade from pre-existing
customers, satisfaction, and strengthen the companies through a mutually
beneficial relationship (Buttle, 1996). The use of
different forms of relationship marketing techniques to make current customers
permanent customers in the organisation and retaining of potential customers
into loyal customers at the same time maximizing profit for the company (Arnett, 2006). In the marketing
literature there are many conceptualizations of relationship marketing, most of
them stressing the importance of establishing, developing and maintaining
long-term relationships with customers and sometimes with other stakeholders of
the organization (Gronroos, 1994). Relationship marketing has also
migrated back into direct mail, allowing marketers to take advantage of the
technological capabilities of digital form i.e. printing presses to produce
unique personalized pieces of message for each recipient through a technique
called “variable data printing” (Vargo, 2006). Marketers can
personalize documents of any information by the use of their portfolio data
information including name, address, demographics, purchase history and other
to bring about personalised messages that will make the customers feel their
value in the company hence retention (Palmatier., 2008).


The main idea behind relationship marketing theory is the
identification of key drivers which influences important outcomes for the firm
and a better understanding of the fundamental relations between service
providers and customers and end results is profit (Donaldson,
According to a study by (Gillies., 1990) the increase in
profitability related to relationship marketing is a result of several factors
including, loyalty of the customers (less customer switch, price sensitivity
and focus on value), existence of word of mouth (strong relationships are
essential to a high Net Promoter Score, the chance that a customer will happily
refer your business to a friend.), familiarity with the regular customers and
so on.

Financial Outcome is one of the most important expectations
of the company when involving themselves with relationship marketing. Financial
performance metrics (seller-focal) is influenced by the customer’s relational
behaviours and generally consist of four categories (Palmatier.,
The most common metrics is sales-based outcome which measures recognize that
relational behaviours example reciprocation, last look and so on can either be
a factor for increase or decrease in company’s sales revenues. It can be
checked through annual sales growth, number of different products and services
sold to a customer, variability in sales over time, and share of wallet by
customer (Palmatier., 2008).


Networking is a naturally aspect of SME owner/manager decision
making, particularly those decisions relating to marketing reason being, the
owner or manager of the business goes outside the business physically to create
connections meanwhile doing business marketing led activities. Thus, SME owner/managers are doing relationship marketing
through all their normal communication activities, such as interacting and
participating in social, business and trade activities (Toker, 2012). Through these
networking activities companies create a new group of customers, acquire
knowledge on their line of business, getting new contacts which in the long run
it helps them in reaching the goals of the business.


Service SMEs are increasingly seeking to implement relationship
marketing to find a competitive advantage on which to base business prospects
for longevity. In this competitive world market. Relationship marketing involves
all aspects of identifying customers, creating customer knowledge, building
customer relationships and shaping their perceptions of the organization and
its products (Levitt, 2009).

The concept of relationship marketing emerged as an opponent
to traditional marketing theories since early 1990s, when the paradigm shifted
from transactional to relational marketing (Egan, 2011). This strategy is
used to learn more about customer ‘s mood and behaviours to develop stronger
relationship with them. Marketers have realised
that that a long-lasting relationship is more profitable than a onetime
transaction (Gronnroos, 1997).  Apart from that, the reality of many services
being consumed in an ongoing term such as insurance and telecommunication
coupled with the reality of customers forming relationship with people rather
than goods paves the way for relationship marketing (Dixit, 2014). In fact, repeat
interaction between customers and service providers offered wide opportunity
for relationship marketing to exist (Dixit, 2014).

On the other hand, it should be understood that relationship
marketing is not applicable to every service situations, as emphasized by
Barnes 2002 in (Dixit, 2014).
For academicians it is a paradigm shift in marketing philosophy urging the
importance of long term relationship and retaining existing customers over
getting new customers because “a bird in hand is better than the two in a bush”.
For practitioners relationship marketing is a competitive advantage, a tool to
overcome service failures, an opportunity for marketing additional services to
a more receptive customer base (Gupta Ashish, 2012). (Berry, 1995)
suggested that for relationship marketing to be applicable there must be the
following conditions,

the customer must have an ongoing
or periodic desire for the service

the service customer must control
the selection of the supplier

there must be alternate suppliers.

Beyond doubt the concept of relationship marketing is not completely
developed even after two decades of existence. The future survival and its
status depend on development of a solid theoretical framework based on
empirical research (Dixit, 2014).


The above literature review on relationship marketing stated
that relationship marketing is the most important marketing technique for  organizations to maintain the balance between
the customer and managers or sellers (Berry, 2005). Every organization
wants to increase profits and establish a good name in the world market, so
they are implementing relationship marketing into their organizations (Buttle, 1996). From the study we
have observed that relationship marketing and service delivery are the factors
responsible for the performance and the growth of service companies (Gupta Ashish,
Relationship marketing is the key to business success, specifically in a
service industry. In addition, there is a general need for more research on
this topic. Study should be conducted to go in greater depth on this topic. Too
little is still known regarding the nature of relationship marketing in SMEs
service sector, what modern customers expect from their service provider relationships,
what forms these relationships take, and how they differ between profitability
segments (Gupta Ashish, 2012). In addition, more
in-depth studies are needed to understand differences between service provider
and customer views of relationships, and to gain better knowledge of how
front-line employees cope with having to develop different types of
relationships with different customer groups (Dixit, 2014).