Int. j. econ. manag. soc. sci., Vol(4), No (2), February, 2015. pp.

221-224

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International Journal of Economy, Management and Social Sciences

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2306-7276

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A Study of Relation-Oriented Marketing on Banks' Customer Loyalty

Sepide Paidari
Department of Business Management, College of Humanism, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran.

Farshid Namamian *
Department of Business Management, College of Humanism, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran.
*Corresponding author: Farshidnamamian@gmail.com

Keywords

Abstract

Relationship-Oriented Marketing
Trust
Obligation
Communications
Conflict Management
Loyalty

The intensity of competition in markets and significance of customer retention for organizations have obliged them
to take actions to attract, maintain and enhance relationship with customers. Achieving knowledge on the
significance of customers' satisfaction, organizations gradually are distancing from traditional marketing and
moving toward relationship-oriented marketing, and based on the findings of researchers relationship-oriented
marketing is one of the best methods.
Given the importance of this approach for today's organizations, the
present paper attempts to examine the impact of relationship-oriented marketing on bank customers' loyalty. This
research is a document-analytic study, and the study results indicate that some variables including trust, obligation,
communications and conflict management as the foundations of relationship-oriented marketing play significant
roles in enhancing relationship between organization and customers and finally making customers loyal.

Introduction
With extensive changes in marketing, relationship-oriented marketing now has replaced traditional marketing which is mainly based on four
elements of marketing mix. Marketing strategy is a relationship based on generating, developing and maintaining relationship with buyers. To
achieve this goal, organizations have to identify elements of creating and maintaining inter-firm relationships and by measuring and evaluating
such elements, take necessary and effective actions to enhance their relationships with customers (Habibi, 2006). Nowadays, companies with
better performance and efficiency have paid special attention to customers and utilized a variety of strategies to attract them. This is because
many companies have achieved puberty in their long term development process. Customers are the only profit generating sources for companies
in the present and future time. However, it is always possible to lose a good profitgenerating customer because there is severe competition to
achieve a highly good customer (Garry, 2001). In this regard, only the organizations can achieve a good status in such competitive environment
which focus mainly on fulfillment of customers' demands and needs because high levels of satisfaction can give rise to more loyalty of
customers (Lovelock & Wright, 2002).
Today, in banking industry, the establishment of a long term relationship with customers is a critical strategy. Banks are required to establish a
profitable and long term relationship with their customers in order to maintain their survival in contemporary banking competitive environment.
A variety of studies have indicated that profitability of a bank is completely dependent upon loyalty and retention of customers (Klems, 2010).
Nowadays, bank manager are required to recognize that their destiny is heavily influenced by customers and attempt to understand their wants
and aspirations in an utterly competitive environment and act in a way that customer is completely satisfied with company or organization. In
today's marketing, losing a customer means missing service required by customer during his life. As the resources of an organization are
limited, it is not possible to concentrate on all factors influencing customers' satisfaction in organizations. Therefore, classification and
prioritization of such factors can help organization focus better on influential and significant factors. It is recommended that firms are able to
achieve confidential information on the needs of customers by penetrating into the minds of customers and so provide them with more satisfied
service than their competitors (Moreman, 1992).Therefore, the current paper mainly aims to examine the impact of relationship-based marketing
on banks customers' loyalty and to provide some strategies to utilize them successfully.

Statement of problem
In the recent years, banks have been faced by various challenges and the most important one was the intensification of competition between
them and increase in knowledge and understanding of customers. Nowadays, due to the increasing knowledge of customers toward market and
their prompt access to information, customers have shown less loyalty to firms (Dobisty, 2005). Nowadays, marketers are looking for effective
ways and strategies to attract loyal customers. This is because this process can reduce marketing and operating cost and also increase of
profitability. If a firm find a way to prevent the loss of customers up to five percent, its profitability will be increased by 25 to 85 percent (Cutler,
2007). Today, marketing strategies in banking industry has been dramatically changed. In the past, banks top managers mainly aimed to attract
new customers and providing them with various products, while contemporary managers are more inclined to maintain profitable long term
relationships with their loyal customers (Davir, 1987). Due to the intensive competitions between banks globally, relationship-based marketing
is regarded as a very effective method to create and maintain long term relationship with customers, because service presented in commercial
banks is relatively uniform and it is a challenging task for many of banks to make their service distinct from competitors. Therefore, a variety of
global banks have tended to use a relationship-based marketing approach and to implement its foundation (Su & Space, 2000). The foundation of
Iran banking system is customer orientation. In the meantime, maintaining and enhancing a long time relationship with customer is only a one
side path which banks have to pass it when using defensive strategies to maintain their customers (Alexander, 1998). Today, traditional productorientated banks have adopted a customer-oriented approach in proportion to relationship-based marketing principles and seek to achieve a
competitive advantage by pursuing their customer-orientated strategy. Using relationship-oriented marketing, i.e. recognizing customers'
demands and requirements and creating long term relationships with customers, banks are able to make customers more loyal and so take
advantage of benefits of loyal customers. Therefore, while utilizing benefits of customer loyalty, firms can enhance their situation in the market
(Morgan & Hunt, 1994). In this regard, Iranian banks have always tried to present some strategies and programs to establish and maintain long
term relationships with customers and ultimately make them loyal. However, planning in this regard entails banks' understanding of their
weaknesses and shortages in creating a long term relationship with customer and making them loyal and also a study of the significance of
actions taken from customers' view. So in the present study, the impacts of the foundations of relationship-oriented marketing on customers'

Sepide Paidari, Farshid Namamian *

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International Journal of Economy, Management and Social Sciences Vol(4), No (2), February, 2015.

loyalty in Kermanshah Province are examined. Also, the priority of the variables from customers' view and success of each one in relation to
such principles are analyzed.

Research background
Given that service presented in commercial banks is relatively the same and it is challenging for many banks to present more distinct service
from competitors, a variety of banks in the world have inclined to use relationship-oriented marketing approaches. Marketing concept was first
used by Barry (1983) in the area of service and it is regarded as a strategy to attract, maintain and enhance customer relationships (Ranjbaran,
2009, 85). There are different definitions of relationship-oriented marketing which some of them are presented as follows. Tisseng (2007)
reinstates that during last decade of twentieth century, relationship-oriented marketing has been defined as a solution to marketing strategic
planning, industrial planning and consumer marketing (Haqiqi, 2011). Based on the theory of Morgan & Hunt (1994), relationship-based
marketing include all marketing activities to establish, develop and maintain a long term and successful relationship with customers (Hosseini,
2012). Horgard&Bijer (2004, 40) regard relationship-oriented marketing as a firm's behavior in order to generate, maintain and develop
relationship with customers on the basis of a mutual competitive profitable relation. They have also claimed that relationship-oriented marketing
management should consider three objectives including customer relationship management, maintaining and enhancing the existing relationships
and determining to end such relationship (Emami, 2012, 5). Kutler (1999) considers relationship-oriented marketing as a strategy to strengthen
and maintain lasting relationships with customers and other beneficiaries (Ranjbaran, 2009, 85). Also, Gronrose (1994) introduces relationshiporiented marketing as a process to identify, maintain, enhance and, if necessary, to terminate customer relationships and other beneficiaries in a
mutual profitable relation (Bari, 2009, 69). Wolf & others (2001) have claimed that the difference in duration of relationship of customers with a
firm is influenced by times of consumption, experiencing different products and different levels of satisfaction and loyalty resulted from
relationship-oriented marketing tactics (Emami, 2013, 6). In comparison with traditional marketing, in relationship-oriented marketing,
establishment of relationship with customers to achieve mutual benefits is of the utmost significance. In general, relationship-oriented marketing
unlike traditional approach attempts to regard customers as a partner.Cutler (2003) describes loyalty as a long term obligation to family, country
or friends, and believes that this term has first entered marketing literature by an emphasis on loyalty (Ranjbaran, 2009, 86). In addition, Oliver
(1999) considers customer loyalty as a deep-rooted obligation to intention to re-purchase of a similar product with a preferable service. Customer
loyalty is conceptually consists of three dimensions: behavioral, attitudinal and combinational. The first aspect underlines frequent purchase of a
product by the same customer; the second aspect emphasizes having a satisfactory tendency to a service provider. And the third one combines
the definitions presented by other two aspects. Regarding customer loyalty, Kutler (1990) believes that to achieve customer loyalty, a distinction
should be made between different customers, and it is not possible to have the same expectation of profitable customers as non-profitable ones
(Hosseini, 2009, 4). Dubisti& others (2007) examined the impact of relationship-oriented marketing foundations and customers' loyalty, and a
questionnaire was distributed among bank customers in Malaysia which indicated that marketing strategies are related to loyalty (Lajevardi,
2012, 4).Chio& et al., conducted a study entitled relationship-oriented marketing-customer value and loyalty. The study model is based on the
assumption that relationship-oriented links including financial, social and structural ones can enhance operational values and satisfaction
perceived by customers and when customer understands perceive higher level of this satisfaction, so probability of its loyalty will be increased
(Emami, 5, 2013).
Table 1. Research background
Row

Title

Relationship-oriented marketing and customer

loyalty
customer commitment and trust as a strategy for
banking sectors in Hong Kong

2
3
4
5

Author/Year of
Publication
Ndubis
2007
Adamson
2003

Correlation (regression
analysis)
correlation (correlation
coefficient)

Research Method

Results
significant impact of four variables on loyalty

relationhsip-oriented marketing: the impact of

emotional intelligence and trust on bank
performance.
factor and auditory analysis of the foundations
of relationship-oriented marketing and customer
satisfaction
effect of relationship-oriented marketing
approach on commercial performance of a
service-oriented economy

Heffernan
2008

correlation (correlation
coefficient)

customer-oriented strategy,long-term approach, benefits of relationship

between positive correlation and trust, communications, norms of
relationship between positive correlation and reputation, negative
correlation with commitment
Positive correlation between the independent variables and bank
performance

Ndubisi and Wah

2005

correlation (factor and

auditory analysis)

five foundations of relationship-oriented marketing based on the

quality of perceived relationship and customer satisfaction

Sin et all
2002

the significance of independent variables on growth of sale, market

share and ROI

the effect of the foundations of relationshiporiented marketing on customer loyalty, a

comparative study of public and private bank

Ranjbaran and
Berari 2009

correlation (correlation
coefficient)&
(regression analysis)
Correlation (regression
analysis)

.five foundations of relationship-oriented marketing between

customers and based on perceived relationship quality and
distinguished customer satisfaction.

In the present study, marketing key variables include trust, obligation, relationship and customer loyalty. Each variable will be explained later.

Trust
Trust is the building block of relationship-oriented marketing. From the view of Morgana and Hunt, relationship-oriented marketing requires
trust and obligation in relationship (Morgan & Hunt, 1994, 20). They believe that a trustful relationship requires honesty and fulfilling the
promises and obligations. Sinn et al. (2000) having the above mentioned definition in mind believe that high levels of trust between buyer and
seller guarantees a lasting relationship between them.

Obligation
Another aspect of relationship-oriented measurement is obligation which is also a critical factor in creating loyalty in customers. Organizational
obligation is an issue which has attracted less attention in existing Persian management literature. A variety of concepts such as conscience,
morality, interest and responsibility are interchangeably used instead of term obligation, even though they have some conceptual differences. On
the other hand, similar to many psychological concepts, obligation is differently defined and measured through various measurement scales
(Shekarzadeh, 2000, 6). Wilson (1995) expressed that in the studies on the relationship between seller & purchaser, obligation is the most

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A Study of Relation-Oriented Marketing on Banks Customer Loyalty

International Journal of Economy, Management and Social Sciences Vol(4), No (2), February, 2015.

common dependent variable. Reciprocal obligations between the parties to the transaction of business relations will have substantial interestsfor
organizations (Safaei, 2009. 6). Morgan and Hunt (1994) also consider commitment to relationship as sustainable tendency of partners to
maintain good relations and they believe that commitment will form only when parties have understood the importance of the relationship and
do their best to enhance or maintain that relationship.

Communication
Communication is the third variable of relationship-oriented marketing which is defined as a process of exchange and sharing of credible and
timely information either formally or informally between the parties. Anderson (1990) also believes that, today,in the modern concept,
communication will be occurred as an interactive dialogue between the company and customers in pre-purchase, purchase, consumption and
post-shopping (Barari, 2008,69).Dobisty(1990) believes that communication in relationship-oriented marketing is a tool to present reliable
information; to provide information when a problem occurs is to provide information about the problems of quality and commitment(Toilers,
2008,87).

Conflict
Conflict is the fourth foundation of relationship marketing. Anderson (1992) describes conflict as tension and disagreement between the parties
to the transaction that can be perceived or apparent. When the conflict in a relationship of mutual trust increases, it can reduce reciprocal trust
and interest in creating and maintaining the long-run relationship (Mir Rashid, 2009,5).Davir (1987) considers conflict management as control of
the overall level of disagreement in working relationships. Seller's capability to better manage conflict is a critical factor to maintain buyers. It
should also be noted that the suppression of conflict leads to the loss of credibility of a relationship, and parties to a relationship will be isolated
before committing to a long term and continuous relationship.

The proposed model

Nowadays, all organizations have found that customer satisfaction is a guarantee to the survival of organizations. The significance and
importance of this issue is so high that increase in the number of customers, attract and maintain them and achieve a higher rate of profit in
exchange for presenting high quality service is a continuous concern of service companies and institutions.
Management experts believe that one objective of establishing each organization is to meet customer needs, so if the organization fails to achieve
such critical requirement, customerswill be reduced with time and gradually that company will be eliminated (Massoudi, 2001). Nowadays,
maintaining existing customers and capability of establishing a good relationship with customers is necessary. So, competition and development
of markets, institutions are looking for a high quality strategy to maintain their customers and creating long term relationships with them. At
each service or production organization the most critical factor to maintain and survive organization is customers. If organization can attract
customers and then make them loyal it can pave the way for its long term development and survival. To achieve this goal, the first necessary step
is to recognize customers' requirements (Karvana&Berthon, 2000). In fact, loyalty of consumer can support organization and so it can have a
good control over its programs (Van Omar, 2004). Notably, loyal customers have a variety of benefits; for example, they can enhance
profitability, reduce marketing costs, increase organization sale and creating customers with low sensitivity. So, organizations with such
privileges can provide customers with more satisfactory service than competitors (Dobisty, 2005). Based on the studies conducted on the
proposed models, we have achieved an applied model which considers the impact of marketing activities and loyalty of customers. In the
following table, the proposed variables in three existing models along with the proposed model are presented.
Table 2. Comparison of proposed model with previous ones
Row

The main variables

1
2
3
4
5
6
7

Trust
Obligation
Communications
Conflict Management
Merit
Relationship satisfaction and quality
Loyalty

Ndubisi 2007

Wan omar 2007

Ranjbaran and Berari 2009

The proposed model

In this study, considering Dobisti model (2007) some variables including trust, commitment, communications and conflict management are taken
account as principal variables of relationship-oriented marketing.
So relationship-oriented marketing can make customers more loyal by the discovery of their requirements, and banks which are in a face to face
interaction with customers require marketing strategies to achieve loyalty and finally to fulfill organizational objectives in an utterly competitive
world. 1- The study conceptual model using Dobisti model (2005).

Trust

Obligation

Communications

Conflict Management

Figure 1. Relationship- Oriented Marketing; Ndubisi 2007

Loyalty

Sepide Paidari, Farshid Namamian *

224

International Journal of Economy, Management and Social Sciences Vol(4), No (2), February, 2015.

Conclusion
Nowadays, with continuously competing markets and frequent changes in environment, organizations have realized that they are no longerface a
growing economy and growing markets. Therefore, each client has its own special value and to gain a greater share of the market, they should
fight.In the present era, making customers loyal has found a special significance and developing effective relationships with customers and
makes the client a partner of organization within and outside of the organization. Therefore, only customers who have a sense of belonging to the
organization and have profitability and long-lived assets are considered capitals. In banking industry, customer loyalty is one critical factor to
maintain customers. To remain competitive and to achieve competitive advantage, bank managers can enhance their relationship and make them
loyal through managing each aspect of marketing. In other words, when some strategies are designed by bank's senior executives to make
customers loyal, they pay great attention to relationship marketing variables such as trust, commitment, communication and conflict
management. In fact, managers should consider relationship-oriented marketing as an investment rather than cost and make customers more
loyal by designing effective training programs and increasing bank employers' undemanding of the activities by which relationship-oriented
marketing could be fulfilled.

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