Starbucks Relationship Marketing Strategy Sample

1.0 Introduction
While marketing activities can be linked back to 7000 BC (Carratu, 1987),
relationship marketing (!) is relativel" ne#, sur$acing in the late 1980s as
marketers transitioned $rom simpl" ac%uiring customers to keeping them (&heth
and 'ellstadt, (00())
While numerous de*nitions o$ ! e+ist, this essa" #ill use ,ummesson-s
(199., p) /0) suggestion that 0relationship marketing also includes relationships
#ith other stakeholders, both inside and outside the organisation1)
2ccording to &heth and 'ellstadt ((00(), three events sparked the interest in
relationship marketing) 3irst, the gasoline crunch in the late 1970s resulted in
reduced demand $or ra# materials and surplus inventories and business
globali4ation) 5hese events $orced companies to rethink their marketing approach
$ocus $rom transactional marketing (5!) to retaining customers or relational
marketing (!) (&heth, et al, 1988)) 6e+t, man" researchers began to di7erentiate
bet#een services and product marketing techni%ues resulting in the emergence o$ a
ne# term, 0relationship marketing1 (Berr", et al, 198/)) 3inall", product %ualit"
became a primar" $ocus and companies launched ne# programs to establish strong
supplier relationships to better manage, improve and control %ualit") 5his ne#
attitude inspired a vie# o$ suppliers as relational partners rather than a necessar"
evil (&heth, (00())
5hese events inspired a deepened interest and sudden increase o$ research
into ! (&heth and 8arvati"ar, (000)) 9o#ever, &heth ((00() believes another
transition is on the hori4on as the :nternet and related technolog" alter the meaning
and $uture direction o$ !)
5his paper #ill *rst, revie# research on ho# relationship marketing is vie#ed
toda", ne+t, evaluate its importance and relevance to businesses, and *nall", o7er
perspectives as to the potential $uture direction o$ relationship marketing)

2.0 Relationship Marketing Today
!easuring a compan"-s value and $uture success has t"picall" been
determined b" tangible assets re;ected on its *nancials) 9o#ever, value creation
and management tenets toda" concentrate on a compan"-s relationships and
customer li$etime value) Calculating an organi4ation-s customer li$e time value and
$uture success is more comple+ and has shi$ted to its stakeholder intangible assets
such as< established relationship customer net#ork , emplo"ees, suppliers and
alliance partners) =+perts suggest that companies *rst understand #hat comprises
value creation, then design and implement strategies capitali4ing on those
elements (,albreath, (00())
2lso, sustaining revenue and net income gro#th previousl" #as based on a
compan"-s abilit" to leverage it competencies and market opportunities) !an" no#
believe the ultimate ke" indicator o$ $uture net income is stakeholders as the
primar" driver o$ $uture value (>ev, (001)) Based on the ne# millennium rules $or
value creation and long?term customer retention, companies should recogni4e and
increase $ocus on their internal and e+ternal stakeholders)
2a. Valuing Customers
Customers should be vie#ed as strategic assets) 2ccording to ,albreath
((00() value creation begins #ith customers as the" have true economic value)
esearch sho#s attracting ne# customers costs up to seven times more than
maintaining them, shrinking customer loss b" @A could potentiall" increase pro*ts
up to 8@A, improving retention b" (A e%uates to reducing e+penses b" 10A)
3urther research illustrates that 1@?B0A o$ Cso called- satis*ed customers change
providers "earl", 98A o$ disappointed customers do not critici4e, the" Dust simpl"
change providers, and completel" content customers are si+ times more likel" to
purchase additional goods #ithin the ne+t one to t#o "ears (Bhote, 199.))
3irst, companies should consider the costs to ac%uire (*rms lose mone"
ac%uiring, eichheld and &asser, 1990), maintain and to lose customers)
ecogni4ing the cost $actors to achieve customer li$etime value, companies should
invest considerable e7ort in locating and ac%uiring potentiall" lo"al customers) 2lso,
reducing customer de$ections, lo"alt" and retention are ke" $actors) 2 possible
solution is to implement e7ective programs to maintain these relationships long
term as that #ill accelerate purchase $re%uenc" and compan" revenues)
6e+t, as described above, high customer satis$action ma" not e%uate to lo"al
or lucrative consumers as the connection bet#een happiness and lo"alt" is #eak)
:nterestingl", a Euran :nstitute stud" sho#ed that 90A o$ managers believe
increasing satis$action is the ke" to ma+imi4ing pro*t and share o$ the pie (Bhote,
199.))
esearch also sho#s a clear association bet#een lo"alt" (calculated b"
retention data) and compan" pro*ts (Bhote, 199.)) ,iven this realit", customer
satis$action should not be the single strateg", but balanced #ith a compan"-s abilit"
to develop lo"alt" and retain the Ccorrect- set o$ pro*table customers) 3ocusing on
creating customer lo"alt" #ill develop long term relationship, resulting in customer
li$etime value and mutual value e+changes (,albreath, (00())
2b. Employees as value creating assets
9uman capital does a7ect compan" cash ;o#s, pro*ts and value creation)
6o matter the advancements in technolog", people remain the most important
asset (8rice#aterhouseCoopers, 1999)) =+ecutives $rom 2sia, 6orth 2merica, >atin
2merica and =urope #ere intervie#ed to pinpoint the core driver to $uture
competitiveness and the number one response #asF %ualit" people
(8rice#aterhouseCoopers, 1999)) 9o#ever, attract and retain %uali*ed sta7 is the
challenge and #ill become increasingl" more diGcult (Comeau?'irschner, 1998))
ecogni4ing the importance o$ this most valuable asset, companies should
%uantitativel" proDect $uture value and *nancial outcomes potentiall" generated
$rom its human resources) 3irms that are asset?centered can develop programs and
processes to attract and retain %uali*ed sta7, as #ell as, increase their economic
value to the compan"-s long term *nancial per$ormance (,albreath, (00())
2c. Suppliers as assets
&uppl" chains have become a competitive tool and one o$ the compan"-s
most valuable assets) 5he :nternet has dramaticall" improved the suppl" chain
e%uation providing real time in$ormation, creation o$ so$t#are driven processes and
given smaller *rms advantages onl" larger companies previousl" enDo"ed)
9aving a net#ork o$ competent, reliable supplier(s) can be a maDor
di7erentiator in creating a competitive advantage) 3or e+ample, Hell Computers has
enDo"ed and e+ploited all the *nancial bene*ts and the abilit" to deliver outstanding
customer per$ormance b" using e7ective suppl" chain management processes)
5oda", companies are not simpl" competing on their products, but man"
times on their suppl" chains (6e#ton, (000, p)e.)) &uppl" chains must be
supervised, not Dust $or eGciencies or cost reductions, but also to attain market
gro#th and value) =stablishing a net#ork o$ %ualit" suppliers and technolog"
managed suppl" chain is proving critical to sustainable competitive success
(,albreath, (00())
2d. Partners as valuable assets
Iarious partner relationships have value and should be vie#ed the same as
other compan" relationships) 3or e+ample, alliances #ith competitors globall"
account $or @0A o$ all alliance partnerships #ith the average compan" overseeing
/0 plus relationships providing . to 1@ percent o$ market #orth ('almbach and
oussel, 1999))
Strategic alliances are generall" shorter term, #ith eas" e+it and can
terminate #hen value and mutual bene*ts become unclear) 2lliances can accelerate
market entr", *ll gaps, and #ork together to create integrated productsJservices)
Joint ventures are longer term, contractual, comple+ and diGcult to e+it, but involve
sharing kno#ledge, assets, brands, skills, KH, costs and man" times creating ne#
technologies)
Distribution and indirect channel partners are ke" to e7ectivel" reaching the
end user) :n global markets, getting a product to the end consumer can involve a
series o$ multiple direct and indirect channels) !anagement o$ these partnerships
$or value is not an eas" task, but do increase a *rm-s capacit" to create market
#orth and better economic results (,albreath, (00())
2lthough partnerships are proven to help create market value and generate
attractive *nancial returns, $or most *rms e7ectivel" establishing them is diGcult at
best) 5he guidelines to success$ul partnerships include care$ul partner selection,
coupled #ith continuous contact and management and, most importantl",
consistentl" $ostering a climate o$ trust and commitment throughout the
relationship (,albreath, (00())

3. 0 Importance of Relationship Marketing
!arkets are turbulent and e7ective business strateg" $ormulation re%uires
that management possess a thorough understanding its markets) 5his
understanding should have t#o dimensions, 1) an internal perspective in terms o$
resources, capabilities and competencies and () an e+ternal perspective that
identi*es $or e+ample< developing and maintaining lasting market value (9uber, et
al, (001))
2lthough both dimensions have e%ual importance to a *rm-s success, $or
purposes o$ this essa", under this model, the $ocus is on the e+ternal perspective,
particularit" the importance o$ establishing inner?compan" and e+ternal stakeholder
relationships)
2s mentioned, research sho#s attracting ne# customers is $ar more
e+pensive than keeping e+isting ones (osenberg and C4epiel, 198B< eichheld and
&asser, 1990< 9olmlund and 'ock, 199.< Buttle, 199.)) 2lthough the concept o$
customer li$etime value is a popular belie$ ?? bottom line returns remain
%uestionable and inconclusive) &urprisingl", man" times the largest revenue
customers simpl" do not provide the most pro*table returns (&heth, (00())
3a. Is RM important to customer lifetime value
While the debate rages on concerning the importance o$ customer li$etime
value and relationship marketing, in m" opinion and e+perience, relationship
e+changes bet#een bu"ers and sellers can help establish di7erentiation and create
barriers to s#itching) 3urthermore, establishing strong internal and e+ternal
stakeholder relationships based on trust, commitment and value are essential to
sustainable competitive advantages)
3b. Sta!e"olders# a uni$ue strategic tool
&takeholders could be considered a 0uni%ue strategic tool1 ('andampull"
and Hudd", 1999) in collaboration #ith and interlinked #ith ! strategies (Carroll,
1989, Honaldson and 8reston 199@, Campbell, 1997, 9arrison and 3reeman, 1999)
and relationship marketing literature has $ocused on stakeholder importance (e)g)
Buttle, 1999< Ho"le, 199@< ,rLnroos, 199B< ,ummesson, 199@< 9ennig?5hurau and
9ansen, (000< !Lller, 199(, 199B< !organ and 9unt, 199B< 8arvati"ar and &heth,
1997< &heth and 8arvati"ar, 199@))
&takeholder signi*cance inspired development o$ the Csi+ markets- model
(Christopher, et al, 1991) a proven and e7ective tool to anal"se internal markets<
customers and organi4ational processes and e+ternal markets< re$errals, in;uencers
and suppliers) 5his $rame#ork is considered the most comprehensive method to
evaluate stakeholder relationships to develop potential success$ul strategies (8a"ne
and 9olt, (001))
&tarbucks- ! activities and subse%uent strategies seem to re;ect the
principles outlined in this model) 3or e+ample, internall", relationships are enhanced
b" introducing a cooperative and goal oriented organi4ational structure #ith
e7ective control s"stems, retaining competent management, emplo"ing e7ective
operational processes and international e+pansion strategies) =mplo"ees are
re$erred to as Cpartners- #ith both part and $ull time sta7 treated e%uall" b" o7ering
both stock options and $ull medical coverage (&chult4 and Mang, 1997)))
=+ternall", &tarbucks- core strateg" is centered on building lasting customer
relationships through trust and commitment #ith its stakeholders) 5his is vie#ed b"
man" e+perts as essential to an" success$ul strateg" (!organ and 9unt, 199B, p)
(()) &pekman (1988) called trust the 0cornerstone o$ the strategic partnership1 and
!oorman et al (199() de*nes commitment as the 0enduring desire to maintain1)
:nitiall", &tarbucks connects b" developing a uni%ue status #ith customers
b" treating them as $amil" in an inviting and $riendl" environment (8log, (00@))
e$erral business is based on #ord o$ mouth as the compan" does little i$ an"
traditional marketing (Bedbur" et al, (00()) 5he compan" $urther in;uences its
relationships b" enhancing its brand image #ith global social responsibilit"
programs, and b" assisting its co7ee bean suppliers obtain credit and improve their
lives (&tarbucks Compan" 8ro*le, !a" (00.), sta7 %ualit" and reliabilit", a #arm,
inviting environment and color scheme, co7ee smell, and consistent overall high
%ualit" (!itchell et al, 1998, p)1.0))
5he e7ectiveness o$ using the stakeholder strateg" is evidenced b" the
compan"-s consistent pro*tabilit" and rapid gro#th)
.0 Is Relationship Marketing Rele!ant to "ll #usinesses$
5oda", companies have come to reali4e their success is largel" linked to
their net#ork and ongoing maintenance o$ internal and e+ternal stakeholder
relationships ('andampull" and Hudd", 1999))
9o#ever, studies sho# that #hile ! ma" be practical and pro*table $or
some companies, it ma" not be appropriate $or all (!itchell, 1997, p /7)) 5he
primar" consideration is if the situation is right and the success $actors o$ ! are
present, then success #ill $ollo#) But simpl" adopting ! strategies because
management believes it #ill produce long term pro*ts is destined $or $ailure) 5he
suggested approach is to ask ho# implementedN, #ith #hom the relationships #ill
be establishedN and #hat $orm it should takeN (Barnes, 199B, p) @.())
%a. &"en is an RM strategy appropriate
5o determine i$ and #hen an ! strateg" is appropriate, a compan" can
elect to use the 5!J! continuum model (,ronnroos 199@, p) (@()) 5his model
proposes that companies develop a h"brid marketing strateg" port$olio emplo"ing a
combination o$ 5! and ! strategies) Choice and implementation o$ a strateg"
#ould be determined b" ho# important the product and or service is to that
particular segment) When customers in a segment are deemed unpro*table,
management could< shrink costs associated #ith them< increase their price
structure or< consider ending the relationship or outsourcing them to the
competition ('no#ledge O Wharton))
Pnder this port$olio approach ! #ould Dust be one o$ man" marketing
strategies to segment customer bases into 5! and ! categories to better anal"se
the *nancial investment and potential short and long?term returns (&heth and
8arvati"ar, 1997))
%.0 &uture of Relationship Marketing
,oing $or#ard into the ne# millennium researchers believe ! could shi$t
course and even be rede*ned, impacting the #a" business is conducted both at
home and globall") 5he $ollo#ing attempts to predict the $actors that #ill ultimatel"
impact !F
'a. (ec"nology
5he primar" antecedent to altering ! practices is technolog", speci*call"
the :nternet and :5 (in$ormation technolog")) Qver the past decade C! (customer
relationship management) and =8 (enterprise resource planning) so$t#are
programs have automated $unctions and changed the #a" companies operate,
especiall" in the area o$ back oGce (*nance, accounting, 9, manu$acturing etc))
and $ront oGce $unctions (sales, marketing, advertising etc))
:n an :5 marketing #orld, ac%uiring customers #ith an attractive #ebsite and
simple online purchasing is easier than retaining them (BeDou, 1997)) 2s the
computeri4ation o$ marketing $unctions removes it as a driver, similar to #hat
happened during the 5R! cra4e #hich distracted customers a#a" $rom the
importance o$ establishing marketing relationships) 2lthough C! has a rock" past,
researchers $eel it #ill reemerge and shi$t to deliberate marketing strategies as
lo"alt" programs, aGnit" marketing and campaign management #ill materiali4e
(&heth and 'ellstadt, (00())
Hata mining can also help companies a) identi$" common characteristics, b)
predict dissatis$action and substitute searching, c) identi$" #hich customers #ill
provide the best returns, d) predict #hat customers #ant to see on #ebsites, e)
provide a comparison o$ customer di7erences $rom month to month (BeDou, 1997))
Qverall, data mining can prove to be an invaluable tool to better understand
customers and develop ! programs to match e+pectations (!cCarth", 1997))
'b. )i$uid organi*ations
2nother $actor is the rapidl" changing landscape) 5oda", companies must
be ;e+ible and able to %uickl" adapt to the needs o$ its stakeholders) 6e# !
strategies to re;ect and address the ever changing internal and e+ternal
environments (see section ()0 $or details)) 3or e+ample, the use o$ business blogs is
%uickl" becoming a recogni4ed and acceptable method to establish e7ective
customer relationships (9ill, (00@) (see section .)0 belo# $or details))
'c. +ybrid RM programs
2 third in;uence is determining the real value o$ ! and ho# it impacts
pro*tabilit") 2s previousl" mentioned, no research has conclusivel" endorsed that
the customer li$etime value, one?to?one marketing and li$etime #allet concepts
deliver long term value and pro*table returns particularl" in B(B marketing) 2s
previousl" mentioned, research sho#s that the largest customers are not the most
pro*table) 5his realit" is $orcing companies to create ! strategies in $avor o$
developing a h"brid port$olio o$ strategies to address both transactional and
relational customers (&heth and 'ellstadt, (00()) Pnder this scenario, ! is not Cthe-
marketing strateg" but simpl" one o$ man" (=l?2nsar", 1997) (see &ection Ba above
$or details))
'd. ,utsourcing
Companies have recogni4ed that potentiall" thirt" percent o$ their customer
base #ill be unpro*table and servicing them is not *nanciall" $easible) 5his has
been evidenced in service sectors such as banking, communications and utilities) 2s
a result, companies are outsourcing customers to other subsidiaries or even
competitors)

'.0 Relationship Marketing (ap ) #*+(S
2n obvious gap in ! research and academic Dournals are studies
concerned #ith the use and e7ectiveness o$ a blog) ,iven the lack o$ academic
research, the $ollo#ing in$ormation originates $rom business books, business press
articles and blog postings)
5he term Blog originated $rom the combination o$ Weblog) Blogs began as
personal online #ebsites to o7er personal in$ormation to $riends and an"one #ho
happened upon the site)
2 t"pical compan" #ebsite is considered a plat$orm to promote the compan"
#ith usuall" meaningless compan" rhetoric (>evine et al), (00()) Conversel", blogs
have an image o$ honest", openness and transparenc" (,ardner, (00@< 'a"e,
(00/))
-a. . revolutionary business trend
5oda", business blogging is a relativel" ne# phenomenon, but companies are
beginning to recogni4e their and value to relationship building and marketing (9ill,
(00@)) 3or e+ample, Fortune maga4ine placed blogs at the top o$ its 010 5ech 5rends
to Watch $or1, stating that the" are impacting and altering business practices in
advertising, marketing and 8 ('irkpatrick and oth, (00@)) 2lso, the Harvard
Business Review placed blogs as one o$ the 0Breakthrough :deas $or (00@1,
commenting that 0blogs are the most conversational o$ all the $orms o$ media, and
marketers canSt a7ord to be le$t out o$ the talk1 (&a#hne", (00@)) 5hen, The
cono!ist (3ebruar"(00@" suggested that blogging might be the end o$ 8)
9o#ever, it #as !a" (00@ #hen blogs oGciall" entered the business #orld adorning
the $ront cover o$ Business #ee$ boldl" claiming 0Blogs #ill change "our business1)
2lthough blogs have received much press and positive $eedback, the $ollo#ing #ill
provide an overvie# o$ its potential value to relationship marketing and businessF
-b. /etter customer communications
Blogs are capable o$ establishing trusting customer relationships that meet
the concept o$ one?to?one marketing1 and are a vehicle to reach niche markets
('a"e, (00/, p) B)) 2ccording to ,ardner ((00@, p) (0), a blog has the capacit" to
establish a t#o #a" dialogue #ith the participants) 'a"e ((00/, p) 18) calls it
0customer relationship blogs1 because it allo#s companies to interact and connect
#ith customers in an immediate, convenient and personal #a")
-c. Reputation en"ancer
Blogs are e7ective at demonstrating special services or e+pertise in speci*c
business arenas) 3or e+ample, a la# *rm created a blog specialising in Brain :nDur"
>a# (,ardner, (00@) and #ell?kno#n leaders such as Eonathan &ch#art4, 8resident
and CQQ o$ Sun %icros&ste!s, and 2lan !eckler, C=Q o$ Jupiter!edia, created
blogs to establish themselves as industr" 0thought leaders1) :n addition, companies
that are innovators can %uickl" gain market attention and a reputation in their
particular arena) (&tone, (00B)) Qthers have similar perspectives, believing that
blogs help companies establish and manage a public pro*le and reputation o$
good#ill that allo#s even total strangers to establish trust to commit and per$orm
online activities (Crumlish, (00B)) 9o#ever, corporate users must be ver" care$ul
managing blogs because once credibilit" vanishes, it can never be recovered
(&coble, (00B))
-d. . more e0ective PR tool
5he 8 industr" has been reluctant to accept the value o$ business blogs as
the" $ear its popularit" might signal their demise ??? it-s not the *rst time 8 #as
marked $or doom (&tern, (00/)) 2lso, The 'luetrain %anifesto (>ev" et al, (000, p)
++iv) e+plains that 08ublic elations does not relate to the public) Companies are
a$raid o$ their markets1) !arket #atchers believe blogs could replace traditional 8
$unctions as blogging is necessar" because customers do not trust nor relate to
insincere compan" promotional data, nor representatives (&coble and :srael, (00@)
:n conclusion, although the business communit" has not totall" embraced the
concept o$ blogging, using a blog to establish closer customer relationships is
attractive) 5he bene*ts are illustrated in various articles as to its eGcienc" in
communications, immediate credibilit", proven marketing tool, establishing
customer connections and cooperation and managing kno#ledge (Ha$ermos, (00/,
p)8()) 5he ne+t logical phase is $or academic researchers to begin arduous research
and deliver anal"ses in order to $urther validate its value creating potential)

'.0 ,onclusion
5he maDorit" o$ the relationship marketing, value creation and management
literature discussing ! $uture trends seem to center on importance o$ developing
relationships and li$etime customer value) 5he" highlight the value o$ stakeholders
in terms o$ customers, sta7, suppliers, in;uencers and partners T constituting a
compan"-s most precious assets) ,lobali4ation has created an environment o$
intense competition, price #ars human capital issues, product and services
becoming commodities and technolog" invading ever" aspect o$ business) 2$ter all
is said and done, the core to a compan"-s real value and #orth are its relationships)
elationships are $undamental to ever" compan"-s long term success)
Companies that ackno#ledge and comprehend the value o$ relationships and ho#
to leverage them to enhance value #ill sur$ace as the market leaders and maintain
a competitive market advantage) 5here$ore, the development o$ e7ective !
plat$orms that demonstrate trust and commitment is crucial to pro*table relational
customers, ma+imi4ing overall customer li$etime value and bottom line results)

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