The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0263-4503.htm
MIP
28,5
582
Received February 2009
Revised September 2009
Accepted September 2009
Marketing Intelligence & Planning
Vol. 28 No. 5, 2010
pp. 582-599
q Emerald Group Publishing Limited
0263-4503
DOI 10.1108/02634501011066519
Implementing relationship
marketing: supermarkets’
perspectives
Georgina Whyatt
Business School, Oxford Brookes University, Oxford, UK, and
Ralph Koschek
Fresh Start Bakeries, Berlin, Germany
Abstract
Purpose – There is a stream of literature which implies that for supermarkets, as organisations that
operate with low staff-customer interaction, within a price competitive environment and are dependent
on high economies of scale, the return on investment in a relationship marketing (RM) approach does
not justify the expense. The purpose of this paper is to explore how supermarkets select and
implement RM strategies and seek value from that investment.
Design/methodology/approach – In-depth, semi-structured interviews were undertaken with
senior marketing managers in German and UK supermarkets. The interview themes were drawn from
the RM literature. Loyalty frameworks provided guidelines for the data analysis.
Findings – The results suggest that definitions of RM have historically been too narrow due to
research having been focussed on the sectors with a high-service element and undertaken at a time
when customer data collection and analysis were more expensive than currently. In addition to those
already identified in the literature, further factors into which retailers could invest to build an RM
strategy are suggested.
Research limitations/implications – The marketing perspective of only seven supermarkets was
examined. Future researchers should undertake a more exhaustive approach in order to fully establish
how the management of RM in one sector differs from that in another.
Practical implications – A “retail RM mix” framework was developed and guidelines for the
cost-effective management of RM are provided.
Originality/value – This is the first study to examine supermarkets’ perspectives on RM
approaches, by seeking responses from the retailers rather than the customers.
Keywords Supermarkets, Relationship marketing, Customer loyalty, Retailing, Germany,
United Kingdom
Paper type Research paper
Introduction
Much has been written about the value of relationship marketing (RM) programmes and
the development of customer lifetime loyalty particularly in the business-to-business
and service sector as a means of gaining competitive advantage and improved
productivity from the marketing investment (Gronroos, 1994, 2000; Sheth and
Parvatiyar, 1995). This view is based on:
.
the premise that it is less expensive to retain a current customer than to recruit
a new one; and
 .
the claim that the longer a company can retain a customer, the better the Implementing
financial return (Reichheld, 1996; Reichheld and Sasser, 1990; Peppers and relationship
Rogers, 1995; Parvatiyar and Sheth, 2000).
marketing
In his book, Bruhn (2003, p. 11) comprehensively summarises RM literature into the
following definition:
Relationship marketing covers all actions for the analysis, planning, realisation, and control 583
of measures that initiate stabilise, intensify, and reactivate business relationships with the
corporation’s stakeholders – mainly customers – and to the creation of mutual value.
This definition informs our research into supermarkets’ perspective on RM. The
principles of RM encourage the retention of current customers as a priority over
the acquisition of new customers and the fundamental element of such a strategy is the
creation of a “dialogue” between customers and marketers in order to develop
long-term loyalty (Gummesson, 1999; Parvatiyar and Sheth, 2000; Kalafatis and Millar,
1998; Pine et al., 1995; Dwyer et al., 1987). This exchange of information leads to trust,
where one party has confidence in the other’s reliability and integrity, and
commitment, where the exchange partners endeavour to maintain the relationship
(Morgan and Hunt, 1994). The features of a long-term loyalty approach by retailers are
summarised by Pressey and Mathews (1998) as having a commitment to a quality
experience and a high level of trust between both parties, and an exchange of
information between them. These features can be applied in the retail context as a
means of customer retention and translates into higher sales, profits and shareholder
value (Egan, 2008; McGoldrick, 2002).
Care should be taken to distinguish between actions that aim to develop marketing
relationships and actions that would be more appropriately considered to be sales
promotions (Christy et al., 1996). This is particularly challenging in the supermarket
sector where, in order to gather customer data, “loyalty cards” are promoted and
accompanied by price discounts (Dawson et al., 2008). In the UK, only a dominant chain
with high levels of market share has been able to make this investment payoff,
while other stores, such as Asda and Safeway (the latter is now part of Morrisons), have
withdrawn from such schemes and invested the savings in sales promotions and other
price cutting initiatives (Tang et al., 2001). In Western Europe, “traditional” supermarket
retailers are facing intense competition from the “hard” supermarket discounters, chains
such as Aldi and Lidl have expanded their store portfolio and heavily discounted prices
into a number of European countries. The hard discount formula is most well
established in Germany where its growth has now stabilised and retailers there are
increasingly focussing on customer retention issues (Cleeren et al., 2008).
Investment in building RM is a business cost that should be managed to deliver
value to the business owners (Ahmad and Buttle, 2002; Doyle, 2000; Srivastava et al.,
1999). In the retail context, these costs usually include market research to determine
what consumers are seeking, analysis of electronic point of scale and other customer
data, and in-store and external promotional expenses (Christy et al., 1996; McGoldrick,
2002). Some writers have questioned whether, in consumer markets, this outlay can
generate a constructive return in all situations and conclude that a positive return on
this investment is not attainable in certain sectors. These sectors are defined as; those
where customers can switch readily (Dowling, 2002; Reinartz and Kumar, 2000), with
price-based competition (Pressey and Mathews, 2000), dependent on high economies
MIP of scale ( Johnson and Selnes, 2004) and with low levels of employee-customer contact
28,5 (Reynolds and Beatty, 1999). These are all factors in supermarket retailing.
This exploratory research aims to assess the supermarket sector’s perceived value
of investment in RM by seeking the views of marketing practitioner experts about the
selection and implementation of RM strategies in their retail organisation. As such, this
approach differs from earlier studies by focussing on the business’s assessment of
584 investment in RM, rather than the collection of customer data.
This paper is organised as follows. In the next section, the literature on the value of RM
to retail business and how it has been implemented is reviewed. The research design is
then presented. In the following section, the interviews with senior supermarket
marketing managers are discussed. The final section provides the conclusions, suggests
future research directions and considers the managerial implications of this study.

The value of a RM strategy as a worthwhile retail business growth activity

It is generally accepted that an organisation’s long-term success is essentially
determined by its ability to expand and maintain a large and loyal customer base
(Kandamully and Duddy, 1999; Slater, 1997). However, despite this positive association
between customer loyalty and profitability, Dowling and Uncles (1997) caution that
there is insufficient documented empirical evidence to support this association in all
business sectors. They claim that most examples have been drawn from a contractual
context where the customer is to receive the service over a predetermined period of
time and is not applicable to a low-service, low staff contact, “transactional” business
environment such as a supermarket.
Key outcomes of successful RM for retailers are loyalty factors such as: customer
satisfaction with the retailer’s service; willingness to buy other products and spend
more in the store; repeated store visits and positive word of mouth (Christy et al., 1996;
Gwinner et al., 1998; Reichheld, 1996; Reynolds and Beatty, 1999; Wong and Sohal,
2003). Such loyalty is commercially beneficial for the reasons summarised by Duffy
(2003) and Christy et al. (1996) as follows; there are lower costs in serving customers as
they are familiar with the operation, customers make referrals, customers will
complain rather than defect, customers are more likely to buy a firm’s product through
alternative channels, and the retailer gains increased share of each customer’s spend.
However, more recent research has demonstrated that the presence of loyal customers
does not necessarily create profitability; it is how they are managed that contributes to
the income generated and their cost effectiveness (Ryals, 2003; Reinartz and Kumar,
2002; Stone et al., 2003).
Little guidance is available to managers who are concerned with the long-term
strategic impact of their firm’s adoption of a RM programme (Morgan and Hunt, 1999),
and limited academic attention has been given to how the principles of RM can
contribute to informing managers as to how this “customer management” could
function in practice. Indeed, Bruhn’s (2003, p. 264) view is that academia needs to focus
on “providing companies with a system of selecting possible [RM] strategies with
appropriate methods” for implementation.
In seeking to explore the challenge of identifying a system for selecting and
implementing an RM strategy to create sustainable competitive advantage, there is a
need for research that compares the processes in which suppliers within differing
industry sectors create relationships with customers. Such research would contribute
to an understanding of which categories of market are appropriate for investment in Implementing
RM and the resultant costs and benefits (Ward and Lyals, 2001). Within retail, some of relationship
this work has already been undertaken and has focussed on the clothing sector
(De Wulf et al., 2001, 2003; Reynolds and Beatty, 1999). However, the literature that marketing
examines these principles in other retail sectors is extremely limited.

585
Loyalty principles and frameworks
As loyalty is regarded as a key outcome of RM, it is important to briefly summarise
the loyalty literature. It is widely acknowledged that loyalty is made up of two key
components: behaviour and attitude (Dick and Basu, 1994; Knox, 1998). Where the
number and frequency of purchases is being measured, behaviour is being assessed.
Attitudinal loyalty considers the consumers’ “preferences and disposition” ( Javalgi
and Moberg, 1997, p. 165) towards stores and brands. For the purposes of this paper,
the definition of loyalty in the attitudinal context is where customers are deeply
committed to re-patronise a product, brand or store in the future despite factors that
may cause switching behaviour as summarised by Oliver (1999) and customer
retention is the behavioural aspect of loyalty which is easier and cheaper to measure
(Dekimpe et al., 1997). For Uncles et al. (2003), in addition to “attitude” and
“behaviour” there is a third dimension to customer loyalty in which the buying is
moderated by the individual customer’s characteristics and circumstances and/or the
purchase situation.
Many writers have defined the various stages through which customers progress as
they move from being new customers to loyal ones and eventually becoming advocates
for the supplier by recommending it to their friends or associates (Dwyer et al., 1987;
Kotler, 1997; Payne et al., 1995). They claim that companies should aim to move their
customers up this “loyalty ladder” and as a result customer loyalty and commitment will
be increased. Johnson and Selnes (2004, p. 5) also assume that customers can be moved to
different states, “progressively from stranger, to acquaintances, to friends to partners”
and acknowledge that where customers have greater lifetime value, the supplier has a
greater incentive to move customers to closer relationships. It follows that as RM
activity progresses customers up the “ladder”, the probability of switching suppliers
decreases, and loyalty (both behavioural and attitudinal) increases.
Johnson and Selnes (2004) developed a typology that has implications for customers’
propensity to be loyal. It shows how value is created for the different types of customer.
For “acquaintances”, satisfaction reinforces the decision to buy from this supplier and
reduces the need to search for information about alternative suppliers. If they trust that
supplier, “friends” will continue to buy, even if they do not have perfect market
information. In that case, the suppliers’ sources of competitive advantage are based on
the customers’ satisfaction and trust (Morgan and Hunt, 1994). Many studies
(Andersen and Sullivan, 1993; Boulding et al., 1993; Fornell, 1992; Yu and Dean, 2001)
have confirmed the link between customer satisfaction and loyalty.
In summary, customer loyalty could be manifested as either an attitude towards a
supplier, a level of re-purchase or both and it may be moderated by customer
circumstance. Suppliers can cultivate these aspects of loyalty by investing in RM to
encourage the customer to progress from a “new customer” position to “partnering” the
supplier for mutual benefits.
MIP Managing RM in the retail sector
28,5 Retail sales staff play a key role in developing RM with customers and, as a result,
encouraging repeat visits and positive word of mouth (Arrondo et al., 2002; De Wulf et al.,
2003; Reynolds and Beatty, 1999; Selnes and Hansen, 2001). Where it is not possible for
retail customers to have a relationship with a salesperson (for example, in the
supermarket sector), marketers should invest in developing customers’ satisfaction and
586 trust in the store as this can lead to loyalty through a relationship with the retailer
(Macintosh and Lockshin, 1997; Too et al., 2001; Wong and Sohal, 2002) and the retailer’s
brand personality (Zentes et al., 2008). Additionally, RM can be built on dimensions such
as perceived value for money, convenience, and reliability that drive the customer’s
product choice (Fredericks and Salter, 1998; Gronholdt et al., 2000) or when consumers
perceive that they are benefiting from special treatment (Wong and Sohal, 2003);
this could be an economic benefit or take the form of a customised offering. Confidence in
the retailer’s offer was found to be a significant element in successful RM and its effect on
loyalty occurs primarily through customer satisfaction (Hennig-Thurau et al., 2002).
Satisfaction is believed to occur through a matching of expectations and perceived
performance (Gwinner et al., 1998; Oliver, 1980).
Therefore, as part of an investment in RM, retailers must manage customers’
satisfaction with the store (Bloemer and de Ruyter, 1998). Clearly customer
commitment to the retailer is a necessary pre-condition to effective RM. If a retail
customer is not committed, his or her loyalty to the store is merely “spurious” in Dick
and Basu’s (1994) terms, that is, it is driven by expediency rather than true loyalty.
Service quality in a retail setting positively influences satisfaction (Rust and Oliver,
1994) and that positive attitude in turn increases the likelihood of the store being
recommended to others. The act, in itself, of recommending a store to others increases
the intention to repurchase (Sivadas and Baker-Prewitt, 2000).
In summary, the literature to date has indicated a range of factors into which retailers
should consider investing to create an RM approach. These could be seen to form a
“retail RM mix” made up of: service (staff-customer contact) quality (Rust and Oliver,
1994; Sivadas and Baker-Prewitt, 2000); store image and brand personality (Bloemer and
de Ruyter, 1998; Zentes et al., 2008); customer confidence (Hennig-Thurau et al., 2002);
consistency of offer (Gwinner et al., 1998); direct mail and similar communication,
preferential treatment and tangible rewards (De Wulf et al., 2003); a high trust
relationship (Johnson and Auh, 1998; Reynolds and Beatty, 1999); creating a “small store
ethos” (even in a large store; Too et al., 2001) and policies (often using data gathering
technologies) that are formed from a sound knowledge of the customer (Bloemer et al.,
1999; Stone et al., 2003). It should be noted that if stores decide to withdraw such benefits
customer ill will could cause considerable commercial damage (Bendapudi and Berry,
1997).
Retailers must do more than rely simply on their products’ price and quality mix
(De Wulf et al., 2003) and must be seen by customers to be more proactive in building a
relationship with customers because it is “customer perception rather than the reality”
that drives the effectiveness of loyalty management (Too et al., 2001, p. 310). Depending
on their positioning within the marketplace, retail managers may choose to build a
perception of empathy and reliability in consumers’ eyes so that the customers are less
sensitive to higher prices (Bloemer et al., 1999). This can be achieved with the
introduction of policies that appeal to the target market, e.g. warranties, returns policies,
personalised services, etc. but requires a sound knowledge of the customer. When Implementing
customers trust the provider, their list of acceptable alternative suppliers is reduced relationship
(Sheth and Parvatiyar, 1995) as customers move from problem solving to more routine
behaviour ( Johnson and Auh, 1998). This would be an effective outcome of a well marketing
managed RM approach. The following primary research aims to explore whether an
investment in RM is considered worth the costs in the supermarket sector.
587
Research method
The aim of the primary research was to explore supermarket retailers’ perspectives on
the value of RM in order to assess whether they see this as a profitable investment.
We asked them about the selection and implementation of the factors (the commitment
to quality and high levels of trust for both parties and a dialogue between them) that
make up an RM strategy. To explore these factors, our interviews were designed to
assess how much the supermarkets actively encouraged their customers to move up
the “loyalty ladder”, and to compare our nascent “retail RM mix” with the activities
and priorities of their marketing strategies.
We considered it vital to seek the opinions of experts who understood the costs and
benefits of investing to influence the attitude and behaviour of their customers. We were
able to gain access to a sample of seven senior marketing managers in supermarkets
with a range of positioning strategies; from those offering a wide product range to
the more price focussed hard discounters in both the UK and Germany and as such
represented the full range of “RM maturity” in European supermarket retailing.
Within the UK, customer RM strategies are amongst the most mature in Europe.
Major UK supermarkets have invested significant sums in data gathering using
loyalty card schemes; some programmes continue and others have been withdrawn in
favour of other elements of RM (Dawson et al., 2008; Tang et al., 2001). Although the
German market represents the largest, most affluent in Europe, it is immature in terms
of investment in RM strategies; this is due to a tradition of restrictive legislation
regarding consumer promotions and strict data protection laws (Wray, 2000). Drawing
our sample from the UK and Germany provided the opportunity to examine the
approaches to RM in two market places with very different levels of RM maturity: the
main players in the UK are full range supermarkets and in Germany the limited range
discounters are more commonplace (Dragun and Howard, 2003).
All informants were responsible for the marketing strategies of their retail
organisations and as such they had the required knowledge and experience (Rubin and
Rubin, 1995). As the research was being conducted across seven sites, it was considered
vital that the collection of evidence be systematised, in order to enable comparisons to be
made during the analysis phase (Remenyi et al., 1998). The semi-structured interview
technique was chosen and because it allowed the respondents to articulate their
perspective on RM issues and to express their opinions freely. Rather than asking
specific questions, the researcher used an interview guide (drawn from the literature
reviewed above) to ensure that the necessary topics were covered. In this way the
researcher was free to change the order of the questions and ask additional questions.
This enabled a systematic approach, while allowing for differing settings
(Blumberg et al., 2005). The questions were open in order to avoid any possibility of
“prompting” answers (Saunders et al., 2007). All interviews were held at the retailer’s
place of work. They were tape-recorded, transcribed and analysed by categorising the
MIP responses under the headings as defined below (Kvale, 1996). The interviews with
28,5 German experts were conducted in German and later translated into English.
The data collected were analysed using theoretical frameworks that focus on loyalty
as outlined in literature review. A process of “open coding” was used in order to
discover, name and develop categories, from the data generated by the seven
interviews. In this way, themes and relationships were identified in the data and it was
588 possible to refine sets of generalisations and to recognise anomalies (Denscombe, 2003).
These were compared with the extant literature. It is acknowledged that the building of
theory (in this case around RM) is an ongoing and iterative process (Silverman, 1994).
In the secondary analysis the authors mapped the results of the data collection with
the literature in order to explain emerging phenomena, as recommended by
Remenyi et al. (1998), and then developed conclusions (Table I).

Findings
The results of the data collection and the themes that emerged from the evidence are
summarised under the following headings:
.
whether and how supermarkets select and implement RM;
.
how supermarkets measure customer loyalty (behavioural and attitudinal) as an
outcome of their RM investment; and
.
supermarkets management of factors that build RM to improve profitability.

It is intended that this research will contribute to the body of RM literature and will
offer a direction to retail managers who select and implement loyalty strategies.

Supermarkets’ selection and implementation of RM

Although none of our respondents used the term “relationship marketing” they all
claimed to invest in customer retention (a key outcome of effective RM) and stressed
that it is crucial to their business. They see themselves as building a relationship with
their customers in a range of different ways and are concerned with creating a level of
trust and commitment between both parties (retailer and customer). Their expenditure
in this area focussed mainly on a variety of aspects of their offers, including: location,
convenience to customers, pricing structures and consistency, perceived value for
money, extent of the product range, product availability, clear store layout, in-store
staff response, in-store theatre and store environment. The feedback part of the
dialogue, between the retailer and its customer, that is a key element of RM (Morgan
and Hunt, 1994; Pressey and Mathews, 1998) takes a wide variety of forms: surveying

Retailer Retailer type Interviewee Base country

A Supermarket chain Managing Director Germany

B Supermarket chain Customer Relations Director Germany
C Grocery hard discounter Regional Managing Director Germany
D Grocery hard discounter Marketing Director Germany
E Supermarket chain Customer Cards Operations Director The UK
Table I. F Supermarket chain Marketing Director The UK
Interviewee details G Grocery hard discounter Managing Director The UK
brand strength, focus groups, the use of redeemable coupons, purchase of customer Implementing
data, club and customer magazine, sales responses to in-store and external marketing relationship
communications. These feedback mechanisms listed here are arguably flawed as the
effectiveness of the channels of communication is questionable and the value of marketing
information obtained depends on the quality of analysis. Only one retailer respondent
runs a loyalty card scheme and believes that “due to customer data management
and mining, our approach is almost one to one direct marketing” (Retailer E). 589
The retailers’ marketing positioning strategies prioritise relationship building with
current customers over acquiring new ones. Our respondents outlined their focus on
building relationships with objectives such as, “to build strong bonds with current
customers” (Retailer C). Another retailer had firmly rejected the use of customer
“loyalty” cards as means of data gathering or retaining customers: “[. . .] we are
building for the long term, loyalty is about the total brand offer – not just the price and
that takes time for customers to understand. By abandoning our card and favouring
promotions, we have achieved three positive results: over 1.3 million new customers,
a broader customer base (virtually every social class) and lower prices. When we had
the card, we accumulated far more data than we could effectively use and diminishing
returns set in. The data tell you what your customers are doing but not why they are
doing it” (Retailer F).
Although Christy et al. (1996, p. 185) would see the supermarket’s activities as “sales
promotions” rather than “relationship initiatives”. The respondents see these activities
as designed to build a RM approach with customers. Only one of the respondents
(Retailer E) actively seeks “to learn more about customers in [. . .] [their] [. . .] scheme”
and invests in gathering such data and as such is, in Christy et al.’s (1996) terms,
investing in RM. The other respondents have chosen to collect less detailed customer
mapping information and to opt, instead, for profiles of larger customer segments.

How supermarkets measure customer loyalty (behavioural and attitudinal)

as an outcome of their RM investment?
While acknowledging the importance of customer loyalty to their business, the
respondents clearly interpreted the construct in a variety of ways. Some interviewees
appreciated that there is a difference between attitudinal and behavioural loyalty as
described by Dick and Basu (1994) and understood the difficulties of measuring the
former; for example: “loyal customers are distinguished from repeat buyers by their
positive attitude, its loyal customers who keep our business concept alive” (Retailer A).
However, they had no requirement to identify those customers who spent significantly
high amounts. They see the total costs of serving two customers as no more than the
costs of serving one customer who spends the same as two.
Although our respondents all claim to invest in acquiring and maintaining loyal
customers, none of them know who their high-spending and committed customers are.
Supermarkets cannot then identify which customers are to be managed in a way that
moves them up the “ladder of loyalty” (Payne et al., 1995) to become advocates for the
retailer, and, it seems are not prepared to invest in this level of commitment to RM
activity. Retailer D talked understood this construct: “we cannot say exactly when
people reach a certain level of loyalty, we try to minimise switching, the more reliable our
customer base and the incoming revenues, the more secure our expansion decisions”.
MIP None of the respondents had an RM strategy in place that had quantifiable
28,5 objectives. Retailer B’s was a typical response: “no quantifiable customer relationship
strategy in place” with retailers A, B and C (German retailers) being particularly
mindful of business targets based on short-term profitability.
Respondents’ comments indicate the retailers’ difficulties in setting objectives for
the development of customer loyalty. Without such objectives it would not be possible
590 to select and implement an RM strategy. However, Retailer D acknowledged that this
was something that needed to be addressed, and Retailer E was positively working
towards “a mechanism for measuring attitudinal loyalty”. The other respondents have
chosen not to make this level of investment.

Supermarkets management of factors that build RM

to improve profitability
Our respondents saw location (and the related convenience) as key to satisfying
customers – in fact five out seven saw it as the most important part of their investment
in satisfying customers to generate profitability. “Location is most important, followed
by assortment, staff and services” (Retailer A) was a typical response. Other factors
cited were: “quality”, “price”, “value for money”, “staff training” and “product and
assortment”.
Even from the hard discounters, the focus was on value for money rather than low
price alone; a key objective for these retailers is to gain consumers’ trust in their
pricing, e.g. “our pricing policy has earned customers’ trust” (Retailer C). All our
respondents saw trust as key to minimising customer switching; “our pricing policy
has earned customers’ trust, so they rarely make price comparisons with competitors”
(Retailer C). There is also an emphasis on building the customers’ trust in the retailer’s
product offer, in the appropriate assortment of goods, reliable value and availability
and positive reputation (appearance, tone and style of presentation) in the target
customers’ eyes.
In examining these ideas further, it is interesting to note that despite this relatively
low-service environment the few points of customer-staff contact were seen as a vital
part of this relationship and managed accordingly: for example: “staff who offer good
service are key to our business” (Retailer E).
The importance of supportive discourse between staff and customer (Rust and
Oliver, 1994; Sividas and Baker-Prewitt, 2000) was understood by some respondents to
be effective in generating a positive customer attitude towards the store. Opportunities
for staff to interact with customers are checkouts, home delivery, advice and assistance
if needed. These retailers believe that consumers want to see familiar staff faces and
appreciate well-trained and empowered staff who communicate in an appropriate style.
As Retailer E put it, “We believe that a lot of customers do their shopping at regular
days and times. Full-time staff and fixed schedules enable staff and customers to build
relationships themselves”.
Different store formats and regional products are seen as an important part of
satisfying local needs and lead to customer loyalty at differing locations. For example,
“we offer specialist regional foods and often an in-store baker and butcher” (Retailer D)
and “this approach is underscored by adjusting the offer to suit varied regional tastes”
(Retailer G). The assortment had to reflect the retailer’s strategic positioning,
“the assortment, especially our own-label and our strengths in fresh food encourages
customers to return to the store” (Retailer A) and is closely linked with the physical Implementing
availability of the expected range. relationship
Retailers A and B emphasised the importance of the own label assortment as a tool
for differentiation, “assortment especially our own label and our strengths in fresh food marketing
are vital in building customer loyalty” (Retailer A) and the response of Retailer C shows
how an appropriate, even if limited, product range links to competitive positioning –
“We only supply 80-95 per cent of the assortment which households need in terms of 591
grocery products. Limited assortment is convenient and saves the customers’ time and
implies a high quality level”.
The “small store ethos” was one of the loyalty drivers identified in the literature.
None of our respondents specifically mentioned this phrase or similar, however,
Retailer D saw “in-store baker and butcher” as vital in the creation of customer loyalty
and a focus on building staff customer relationships as both part of an independent
small store approach. Customers’ sense of belonging was another factor identified by
our respondents, but not evident in the literature themes to date. Retailer B saw this as
a vital part of their investment in customer loyalty; “we aim to create a sense of
belonging through the club and the customer magazine”.
Typical expressions for describing ways of creating a positive store image
(a communication within the RM dialogue) were appearance, tone and style, design, the
right people and store layout. “Customers want a certain store ambience, design and
‘their sort of people’. Customers want to be treated as equals. We have to understand
them. Tone and style are important. We need to provide a clean and orderly environment
that makes them feel important and valued” (Retailer F). This is directly interrelated
with store services and the performance of staff. At least one of these grocery retailers
seems to be aware that a certain degree of promiscuity is built into customers’ behaviour.
“We know that most of our customers shop in at least two locations – with us and with
somebody else” (Retailer E).
The RM or loyalty objectives seemed to be expressed as mantras:, e.g. “We have
established four key values” (Retailer F); “To build strong bonds with customers”
(Retailer C); “Surprise customers and earn their trust” (Retailer D). There was a range
of emphasis here: from brand values to trust and similar bonds, with one retailer
focussing on future success and another on short-term profitability.

Discussion
Although the literature states that investment in RM strategies is not worthwhile for
supermarkets because low staff-customer interaction, price competition and high
economies of scale are characteristic of this sector (Dowling, 2002; Pressey and
Mathews, 2000; Reinartz and Kumar, 2000; Reynolds and Beatty, 1999; Johnson and
Selnes, 2004) supermarket marketers clearly believe that building a relationship with
customers is the priority in their marketing activity. They have committed to building
trust and a quality perception and have invested in a dialogue with the customer; all
key characteristics of an RM strategy. In general, this dialogue took the form of an
“exchange of ideas and opinions”, rather than a one to one conversation, as retailers
collected customer feedback in a variety of ways. One of the supermarket respondents
claimed to have “an almost one to one direct marketing approach” (Retailer E),
the others work with more general feedback from larger segments. Nevertheless, this is
a dialogue.
MIP Within the principles of RM, this exchange of information is built on trust where the
28,5 parties endeavour to maintain the relationship. Our respondents evidently prioritise
investments that are designed to build customer trust in order to prevent them
switching to other stores. This sentiment is expressed at the same time as an
acceptance from each respondent that they cannot fulfil the customer’s every need.
In contrast to research by Gronholdt et al. (2000), none of our respondents focussed on
592 low price as a competitive weapon, however, for them this issue is more complex and
the key is to develop customers’ trust in the value for money offer.
Although this study was limited to an exploratory two-country study of seven
supermarkets, it demonstrates that relationship building is seen as a key part of the
marketing process in this sector. This indicates that RM strategies are considered
worth implementing in a wider range of business sectors than was previously believed.
Having said that it was a “traditional” supermarket that invested in collecting and
analysing customer feedback in the smallest segments and maintained a dialogue that
was almost one to one. The discounters had decided that this was not a cost they
considered worthwhile and obtained more general feedback from larger segments of
their target audience as part of their “dialogue” with their customer.
Further research is required to establish our understanding of the perception of the
value of RM in other retail sectors in order to assess how much RM principles can be
generalised.

Conclusions
This paper demonstrates that, contrary to earlier research, even businesses operating
in an intensely price based competitive environment, dependent on high economies of
scale and with low levels of staff-customer interaction invest in factors that are key
elements of RM. Although much of the literature states that investment in RM
strategies to generate loyalty and profitability is not worthwhile for businesses such as
supermarkets, we have found that the supermarkets do have a commitment to a
quality of experience and building of trust between both parties and the exchange of
information between them. All are key features of an RM strategy.
In terms of progression up a loyalty ladder (Dwyer et al., 1987; Kotler, 1997;
Payne et al., 1995; Johnson and Selnes, 2004), our respondents were clearly keen to
convert customers into more committed and loyal customers. However, they appear to
have little interest in moving them further up the ladder to become advocates or
partners of the supermarket. Perhaps, it can be concluded that although our retailers do
many things that have been described by writers as RM activities, they believe that –
as Dowling and Uncles (1997) postulate – the additional cost of intensifying and
maintaining relationships at this level (of the ladder) is not a worthwhile investment.
The loose framework that formed a nascent “retail RM mix” devised from the
literature provided a theme to analyse the supermarket marketers’ responses and to
categorise the activities described. We found that supermarket retailers did invest in
many of the elements identified in this literature to develop customer loyalty.
In addition, they valued other key relationship building drivers that have not been
identified in the earlier literature, these are: location and convenience, a “sense of
belonging”, product range and assortment. There is an opportunity for future research
to explore these areas in more detail in order to understand how they could drive a RM
approach and contribute to a “retail RM mix” framework.
 By examining the approaches taken by supermarkets, this paper contributes to the Implementing
body of research that informs a set of guidelines for companies on how to best select relationship
and implement appropriate RM strategies and as such contributes to filling the
knowledge gap identified by Bruhn (2003). It is now widely accepted that customer marketing
satisfaction leads to loyalty, however the challenge is to understand how to manage
RM in a cost effective way. Further research would be valuable to examine how this
can be managed in different retail settings. Such research will assist in establishing 593
whether, and how much, the theories of RM can be generalised.

Further research
This research was exploratory and examined only seven supermarkets in two
European countries. Although our sample was small, it represented a range of
supermarket types: from hard discounter to those with large store formats and wide
product ranges. Further research could aim to test these findings with a much larger
sample of supermarkets in a range of countries and cultures.
It is important to further expand understanding of the range of industries in which
RM can be profitably implemented in a way that creates mutual value. In this way,
academia can, to paraphrase Bruhn (2003), provide companies with a system of
selecting, and methods of implementing, RM strategies. This further research would
provide an opportunity to compare the range of elements that make up our “retail RM
mix” and to assess whether they are sector specific or can be generalised. It would be
valuable if part of this research were to examine whether there is, for different
industries, an appropriate return when companies invest in increasing customers’
loyalty and commitment to a certain brand (and so encourage customers to up through
the stages of the “loyalty ladder”). There is, to date, very little empirical research that
tests this construct in a range of business sectors.

Managerial implications
Earlier writings indicate that to implement RM and other loyalty strategies, marketers
must appreciate the difference between attitudinal and behavioural loyalty and to be
able to measure both types of loyalty in a cost effective way. Our respondents
understood the differences and the benefits of measurement. However, they were
challenged by the difficulties in gathering the data and analysing it in a way that
guides the implementation of RM strategies. Although they all claim to aim to build
long-term relationships with customers, they have no mechanism for measuring the
success of their investments in RM (either the attitudinal or behavioural aspects of
loyalty). “No quantifiable customer loyalty strategy in place” was a typical response
with the notable exception of Retailer E who uses “customer retention as a measure for
customer loyalty” and acknowledges the benefits of measuring the “intangible”
attitudinal aspects of loyalty as part of an RM approach.
Previous research has identified a range of RM drivers within retail. These include:
the quality of staff-customer contact; store image and personality; customer confidence
and trust; a consistent offer; a “small-store” ethos and, in general, policies that are
formed from a sound knowledge of the customer. Our supermarket respondents
claimed to do all these in one way or another. They see location and convenience; range
assortment, width and availability; a sense of belonging for the customer; a regional
philosophy and atmosphere as additional RM drivers.
MIP Based on the research undertaken here, retail marketers would be well advised that
28,5 when investing in, selecting and implementing RM systems, the guidelines below will
enable them to focus appropriate resources in a cost effective way to managing
customer retention. They are as follows:
.
The optimisation of every opportunity for staff to be helpful, supportive and
build relationships with customers. This requires employee training and
594 empowerment.
.
All communications with customers should be designed to make them feel
important and valued.
.
Local linkages with events, regional sponsorships and product suppliers.
.
Ensure the offer is convenient for customers; this is likely to include parking,
public transport, appropriate location and/or on-line presence.
.
A consistency of offer and pricing structure that builds customers’ trust in the
retail brand.
.
The creation of a sense of belonging for the customer, and an “independent” store
atmosphere.
.
The appropriate width of assortment as expected and understood by the
customer and minimum stock-outs.
. Appropriate systems to continuously capture and analyse data on customer
shopping habits; suitable information technology systems are becoming
increasingly cost effective.

All retailers must debate whether and how to invest in RM in order to generate
profitability and competitive advantage. It appears from this research that now even
supermarkets are investing (in a variety of levels) in the key elements of RM: quality
expectations, trust and dialogue. In the anticipation that the cost of the required
technology will continue to reduce and its sophistication will increase, all retailers will
be able to take advantage of these mechanisms for data gathering and analysis. Those
with high economies of scale and in sectors where there is a higher service element and
less price competition should be at the forefront of those who invest in such technology
and in gathering data that will enable a customer relationship as close as is possible
(or affordable) to one-to-one marketing.

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About the authors 599

Georgina Whyatt is the Head of the Marketing and Operations Department and has commercial
experience and research interests in retail sector marketing. Georgina Whyatt is the
corresponding author and can be contacted at: gewhyatt@brookes.ac.uk
Ralph Koschek has professional experience in multiple sectors of the food and retail
industry. In his different roles, he has supplied retail, discount, foodservice and quick service
restaurants.

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