Marina Marinova

Relationship marketing has been actively discussed by many scholars as an important determinant of attaining high customer satisfaction and customer retention in today’s high competitive global environment. Both are often seen as a key driver of a company’s improved competitiveness, long-term results and overall success. This study first reviews the concept of relationship marketing and its importance. Furthermore, all aspects of customer satisfaction and customer retention are discussed in details, as well as various relationship marketing strategies used by the companies to achieve them.

          A quantitative study of customers' perspective about this subject was conducted to find out their preferences of various relationship marketing tactics and what could be the main incentives for higher level of customer satisfaction, retention and repurchase behavior. Although relationship marketing is not very popular in the Bulgarian steel distribution industry, there is evidence that through a successful use of its mechanisms, superior customer satisfaction and customer retention can be achieved. The findings from the study show that all of the reviewed relationship marketing tactics are positively related with both objectives – customer satisfaction and customer retention. However, the results indicate that some of the customer services are found to be less correlated to them.


          Most industries are suffering from the outcomes of the financial and economic crisis, therefore companies are challenged to implement effective marketing strategies in order to survive and maintain competitiveness in the situation of an economic downturn (Kotler & Armstrong, 2010). According to Palmatier (2006) relationship marketing is now one of the most essential parts of a business strategy. The performance of any business is positively influenced by relationship marketing. Relationships are at the heart of human behavior and relationships are very important for businesses. Customer supplier relationships are very crucial for marketing professionals. Traditionally marketers used to reach out to their customers through mass promotion and distribution however this phenomenon does not match the reality of society based on relationship. Therefore, the focus has shifted to marketing where a business builds a relationship with individual customers (Gummesson, 2008).

          According to Egan (2008), traditional marketing mix techniques provide limited options and they are too restrictive for the services marketing and the business to business market. In the consumer goods market, the marketing mix is becoming an outdated approach because of increased emphasis on customer orientation and customer service, which is becoming a differentiation factor between the products. Thus the concept of relationship marketing is gaining more importance as it has become a basis for achieving competitive advantage for the businesses. Gronroos (2004) claims that consumer markets and business markets both benefit from relationship marketing. By adapting this concept they can foster closer ties with the customers, build trust and show commitment to their customers. Payne et al. (2003) have linked relationship marketing with customer value. They claimed that through relationship marketing customer value as well as customer satisfaction can be enhanced. Also, Reicheld and

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Sasser (1990) indicate that customer retention leads to increased profits. Payne and Frow (2005) argue that during the last few years there has been a growing interest in the customer relationship management however more research is required in this field. Murphy et al. (2007) argue that relationship marketing leads to strong social, technical and economic ties between all the stakeholders and it reduces the cost of transaction and enhances the exchange efficiencies. The relationship is not only between the seller and the buyer but also all the parties involved including all the business partners, strategic alliance and all the networks of cooperative marketing. According to Murphy et al. (2007) relationship marketing emphasizes not only economic ties but also emotional ones which eventually results in long–term relationship. Thus relationship marketing is a crucial part of marketing process.

          Bush et al. (2007) discussed relationship marketing and identified three different schools of thoughts regarding relationship marketing. The first one is the inter-organizational approach that refers to the relationship between different organizations. The second one is the customer relationship approach, which refers to the relationship between the customers and the suppliers or businesses. The third one is customer valuation, which refers to increasing the customer value through relationship marketing. Lambe et al. (2000) has listed various aspects of relationship marketing including: Trust, which is the belief that the partners would act in the benefit of each other, Commitment, which means that the partners are committed to each other, Cooperation, it’s a joint efforts with both the parties resulting into benefits for both, Communication, the sharing of information between the parties involved, Relational Norms, shared expectations between customers and the suppliers, Mutual Goals, partners working together to achieve these common goals, Social Bonds, various relational exchanges between partners, Interdependence, the belief that the relationship would create a greater benefit than working alone, Adaptations, altering or modifying products or services as per customer requirements, Structural Bonds, to make sure the continuous process of relationship and Performance Satisfaction, that is meeting the expectations of the customers.

          According to Gummesson (2002), a new mindset is required for the successful implementation of all aspects of relationship marketing. Morgan and Hunt (1994) argue that there are several factors that work towards making a relationship successful or a failure. Two of the most important factors are commitment and trust. These attributes ensure that marketers maintain relationship with exchange partners and invest in it. Alternative especially short term benefits would be avoided because of this and the exchange partners do not consider each other opportunistic.

Businesses employ various measures to build this relationship such as giving excellent customer service, devising customer loyalty programs and erecting switching barriers. According to Christopher, Payne and Ballantyne (2002), customer service adds to the value already created by a product while Verhoef (2003) points out that customer loyalty programs facilitate a strong relationship between a customer and the business and leads to customer retention. Positive switching barriers are also employed to create customer loyalty and retention (Julander & Soderand, 2003). One of the aims of the relationship marketing is to create customer satisfaction. Naumann et al. (2010) argue that the concept of customer satisfaction has gained importance in the last decade. It is argued that customer satisfaction leads to customer loyalty and loyalty in turn leads to more profitability, increased market share and growth for the businesses.

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          Luo and Homburg (2007) claim that customer satisfaction plays a central role in marketing strategies. Customer satisfaction increases sales of the company, moreover, satisfied customers are less price-sensitive and they are willing to pay a higher price compared to their competitors. In addition, a company’s future human capital performance is also affected by customer satisfaction. Cooli et al. (2007) argue that customer satisfaction has a non-linear and asymmetric effect on consumer behavior. It is argued that customer satisfaction is directly linked to the share of wallet; in other words when a customer is satisfied by a firm it spends disproportionately more on buying from that company. 

          Lam et al. (2004) conducted a study in the business to business market and they found that increased customer satisfaction resulted into increased customer loyalty. According to Gustafsson et al. (2005) customer satisfaction is one of the drivers of customer retention. Customer satisfaction is the overall evaluation of the company’s performance by a customer and this customer satisfaction has a strong relationship with customer loyalty.

          It has become important for the businesses to retain their customers. According to Gerpott et al. (2001) customer retention represents the relationship between the consumer and the business. Besides customer satisfaction Gustafsson et al. (2005) have listed two more drivers of retention: calculative commitment and affective commitment. Calculative commitment and affective commitment explain that customer remains retained due to many other factors even if the satisfaction level is low.

          Lewis (2004) carried out a study on the effect of customer loyalty programs on customer retention. The research suggested that customer loyalty programs positively influence customer retention. It was observed that the customers involved in the customer loyalty programs showed repeat purchasing behavior. Gounaris (2003) also conducted a study in the business to business market on the antecedents of the trust and commitment as part of relationship marketing, including the quality perceived by the customers and the relationship bonding techniques used by the businesses. According to Eriksson and Vaghult (2000) customer retention plays an important part in building relationships. It was also argued that a customer who buys more is also a satisfied customer. It was also claimed that different types of relationships have different effects on customer retention and the higher a customer perceives his the value of his relationship with the firm the higher will be the level of retention and repeat purchase behavior.

More and more business to business companies are turning towards relationship marketing. This study would focus on the relationship marketing in case of steel distribution industry, as it main purpose is to find out especially how Bulgarian steel distribution companies can achieve the goals of customer satisfaction and customer retention through relationship marketing practices.

          The Steel Industry and Its Challenges

          Manufacturers and distributors in the various industries including the steel industry are facing growing challenges in present day world economy. According to Malerba (2005), industries are evolving through innovations. According to Christmas (2007) since the early 1990s growth in the steel industry has considerably slowed, with many company closures in North America, Europe and Russia. However, in 2006 the scenario started changing with increased demand in China and steel industries devising new strategies. Other challenges which need to be addressed are climate change, availability of raw materials and the usage of the steel. In addition, Mathews (2010) reported in the Wall Street Journal a global trend in the fall of the steel prices.

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          Aims and Objectives of This Study

          The aim of this research is to investigate the impact of relationship marketing on customer satisfaction and customer retention in the business to business industry. More precisely, the objectives of this study are:

          - To investigate the impact of relationship marketing on customer satisfaction.
- To investigate the impact of relationship marketing on customer retention.

          - To investigate various antecedents in building customer relationship.

          - To investigate the importance of relationship marketing in the business to business industry.


          Using the guidelines of Thomas and Burgess (2001) I created a questionnaire involving various questions developed according to the relevant literature. The first part is focused on obtaining general information about the company, its buying behavior and the importance of different purchasing factors. The second part of the questionnaire aims to evaluate the importance of different services and conditions, as well as to measure and investigate customers’ purchase intentions, perceptions and attitudes in terms of commitment, loyalty, overall satisfaction, trust in the supplier, etc. Finally I have included different statements presenting different aspects of buyer-seller relationships, using five-point Likert-type response scales. The method of allocation of questionnaires was proportional sampling.  Since my survey is focused on steel distribution and service industry, my population includes all kinds of steel customers: trade, construction, end-users and public companies. I chose the greatest number of trade and construction companies, because they keep the highest proportion of the total customers of our steel distribution center, following by end-users: manufacturing of industrial equipment and consumer goods and finally smallest percentage for public companies, as they are very few.

          The sample of respondents is from the Bulgarian steel distribution industry. I used non-probability sampling.

          The industry profile of the final sample is shown in Figure 1.

Figure 1: The industry profile of the final sample

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          I received 87 responses from which 86 reliable to use and 1 poorly completed.


         Frequency and Method of Purchase

Respondents were asked how often they purchased per quarter with a choice from zero to over 7 and the results showed that 59 (69 %) companies are buying over 7 times per quarter, which means that companies were involved in frequent purchases, so their suppliers should keep regular contacts with them.

Figure 2. Frequency of Purchase

When asked about the method of organizing their purchase 1 (1 %) chose through tender, 31 (36 %) through basic enquiries sent to all of the possible suppliers and 54 (63 %) stated they organized their purchases through only selected suppliers. This trend shows that the customers were selecting the suppliers who they already knew and they trusted them.

Figure 3. Number of Suppliers

The pattern shows that although businesses were buying from selected suppliers as stated in the previous question, they were keeping a number of suppliers on their list. This could be an indication that Bulgarian steel suppliers could not retain their customers.

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          Purchase Decision Factors

Respondents were asked about the most important factors while making a purchase decision including price levels, product quality or conditions, availability of materials, contract, delivery time, technical support and competence, after sales service, payment terms, reliability of the supplier, long term relationships and individual attention. Participants were asked on a scale on 1 – 5, 1 being most important and 5 being inconsiderable while 2 as important, 3 as moderately important and 4 as less important. The results were as follows:

Table 1 Purchase Decision Factors

Purchase Decision Factors Most important Inconsiderable Range Mean Standart Deviation

Price levels







Product quality / conditions







Availability of materials














Delivery time







Technical support and competence







After sales service







Payment terms







Reliability of the supplier







Long term relationships







Individual attention







This means that respondents were well divided between various options. Surprisingly, only 30 % respondents thought that long term relationship was most important which is not congruent to the findings in the literature review. However most of the respondents thought that long term relationship is somewhat important and the standard deviation was less (10.60) as compared to other variables considered important by the respondents. My results are in contrast to the results of Lee – Kelly et al. (2002) who reported highest scores for sales contract. However it has been implicated that this result “is more likely to reflect the importance that steel customers place on the necessity of the contract to represent accurately their order conditions and product specifications” (Kelly et al., 2002).

Figure 4 : Most Important Purchase Decision Factors

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The above figure depicts how customers selected the most important factors while making purchase decisions.

Figure 5: Most Inconsiderable Purchase Decision Factors

          The above figure depicts 2 tall structures which were considered least important while making a purchase decision as compared to other factors. It shows that contract conditions and individual attention were not very important in the eyes of the respondents.

          Consumer Trust, Loyality and Switching Behavior

          An important question regarding the trust on suppliers while making decision was asked. 58 % agreed that the trust was important in order for them to form a decision, only 9 % disagreed. On the other hand a considerable number of respondents (33 %) said that they were not sure.

Figure 6: Importance of trust

          This shows that trust is one important factor in building a relationship between the customer and the supplier. The respondents were also asked if they would recommend their supplier to someone else. The result showed that the majority of the people  - close to 59 % - say that they would recommend, 33 % said that they might recommend, while 8 % were not ready to recommend, their supplier to anyone else. In the literature review it was reported that when someone recommends a business to someone else he is considered loyal to that company and customer loyalty is maintained through relationship marketing. In this study a high number of people at 59 % accepted that they would recommend their suppliers to other. If we link this question to earlier questions it can also be observed that it’s the reliable and trusted suppliers who are recommended by the customers.
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Extending the same question to switching between suppliers, an interesting question was posed to the respondents. If they already had a reliable supplier and another supplier with a good reputation and reference offered them a lower price what would they do? The response was equally divided into 50 % saying that they would switch the supplier while 50 % saying that they would not switch the supplier.

Figure 7: Company Size vs Switching Suppliers

The result of this questions reveal that for some business bonds were more important than anything else however for some a low or discount price can erode these bonding. This question could be indicative for the companies in choosing their marketing strategy, as they should have in mind that big part of the customers are getting excited with the lower price offerings and not considering the switching costs in developing relationships with new supplier.

          Loyalty and commitment could be measured also through checking the continuance of the co-operation (Ford et al., 2009). Respondents were asked since how long they are working with their regular supplier and as shown on the below graph 38 % of the respondents in my research reported that they are working with their regular supplier for more than 5 years and 51 % from 3 to 5 years. Trade and construction companies seem to sustain longest relationships with their regular suppliers, however this question confirmed that suppliers should work more for building long-term relationships and retaining customers.

Figure 8: Industry vs Co-operation Continuance

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          Respondents were also asked that what approach they take in order to search for a new supplier:

Figure 9: Ways of Searching for New Suppliers

This finding is very interesting because it shows that fewer businesses were contacting the suppliers based on advertisement rather they were more relying on the industry catalogue and more importantly the referral of other suppliers (30% (52) of the respondents), as it was noted in the previous questions that Bulgarian steel customers not only ask for references, but also feel open to recommend their suppliers to other companies.

         Importance of Various Factors Related to Customer Service

          Respondents were provided with a list of customer services options and they were asked to rank according to the following: Not important, desirable but not essential and essential. The results were as follows:

Table 2: Customer Services and Conditions

Customer service and conditions Not important Essential Range Mean Standart Deviation

Speed of reaction to enquiry







Proccessing and conclusion of sales activities







Providing of complete and precise information on offered products







Providing of additional services







Availability of sales personnel for customer issues







Expertise of sales people in understanding of me and my cycling needs







Communication methods and levels







Speed of reaction to complaints and claims







Organized visits and regular meetings







Friendly and polite personnel







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          This particular question has revealed that most of the respondents believed that the various options of the customer service were only desirable and they were not considered essential. Exploratory factor analysis has shown that the above mention customer service variables had a positive influence on the customers. Three variables have shown a strong positive relationship with overall customer satisfaction. They include speed of reaction to inquiry (67 %), expertise of sales people (63 %) and the ability to deal with the complaints as soon as possible (74 %).

Figure 10: Customer Services Importance


         The above figure shows the trend in case of different customer services and
how respondents considered these factors essential or not important.

         Personal Relationships and Overall Satisfaction

          An important question was asked in regards to having a good relationship with a supplier. The strong relationship was deduced from the results between the relationship with suppliers and overall satisfaction. The values in the results show that 59 % of the customers considered it desirable and 33 % considered it essential hence it can be safely deduced that the customers of the Bulgarian steel industry expect more personalized treatment from their suppliers.

Figure 11: Importance of Personal Relationship

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Figure 12: Overall Steel Customer Satisfaction

Customer Satisfaction, Customer Retention and Relationship Marketing

          To ascertain the relationship between the customer satisfaction, customer retention and relationship marketing a number of statements were presented to the participants and they were required to select from a scale of 5 options ranging from strongly agree to strongly disagree and the results were as follows:

Table 3: Customer Satisfaction, Customer Retention and Relationship Marketing Statements

Row Choice Strongly disagree
Disagree Undecided Agree Strongly agree
I am ready to pay a higher price for particular delivery, but support the mutual trust and long-term relationships with my supplier
8% 21% 21% 33% 17%
High reputation and good image of my supplier in the society are of great importance 6% 21% 11% 42% 20%
Personalized treatment received from my suppliers is valuable for me and my company
0% 12% 5% 5% 33%
There should be a high degree of mutual openness between me and my supplier in order to achieve good cooperation
0% 14% 11% 42% 33%
My supplier always aims to meet my needs, even if it will cost him higher price
5% 11% 24% 33% 27%
In order to change my regular supplier our company will compare all features of the new supplier (on acc. of product portfolio, price levels, company image, etc.)
5% 8% 9% 38% 41%
Changing the supplier is a long process that takes a lot of energy, time, efforts, and could create problems
12% 21% 17% 29% 21%
If I need to buy a new product, I would prefer to buy it from my regular supplier
0% 9% 23% 44% 24%
I intend to continue using my supplier for a long time 2% 11% 27% 39% 21%


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          Relationship Marketing and Repeat Purchase

          As shown in the literature review, one of the aims of the marketers that they want to achieve through relationship marketing is to encourage customers into repeatedly from the same supplier. It was noted that customers are responsible for the profitability of a company moreover this could be achieved through relationship marketing (Egan, 2008; Gummesson, 2008). In the survey conducted for this research, 2 very important factors among others were highlighted when customers make decision to buy something from a company. One is reliability of the supplier (40%) and second is the long term relationship (30%) that have positive effect on purchase intentions. A supplier is considered reliable only when customers trust them and trust can only be build over a period of time. Hence it shows how important it is for the suppliers to have lasting relationship with the customers. The second factor speaks for itself. Customers feel comfortable buying from a supplier with whom they have a long term relationship thus highlighting the importance of building relationship over long period of time. Furthermore this long lasting or long term relationship can be build by using various tools of the relationship marketing.


        Customer Trust

          In line with the above discussion where we highlighted trust as an important factor in building a long term relationship this study found that almost 60% of the respondents found trust to be a crucial variable in the relationship between a customer and a supplier and 33 % of the respondents agreed that trust and long term relationship was interlinked. This finding is also in line with the findings of Ford and Gadde (2009) who had identified trust as one of the most important factors in building close relationships. It confirmed also the results of Jacobson (2009) who used a similar 10 point scale and found a strong relationship between integrity and long term relationship.
Lages et al. (2007) has also emphasized on winning customers’ trust. This discussion shows the importance of trust in customer – supplier relationship. Thus it can be deduced that when a supplier successfully wins a customer’s trust, this process leads to encouraging customers to become loyal to this supplier.

           Customer Service

          This study found various factors of customer service which were considered desirable and important by the respondents. Based on the expressed opinions of the customers about different services, it could be noted that although all of the services are created to satisfy the needs of the customers, their preferences varied from service to service.

          The findings of this study regarding delivery are also showing the same trend as earlier studies. This has confirmed the importance of delivery. However the researcher has noted a difference in case of the availability of materials. It is observed that the respondents of this study have put more emphasis on the availability of materials as compared to the previous findings. On the other hand the Jacobson (2007) argues that the best rated satisfaction performers gain the most by better customer service and delivery time and through this have distinguished from other suppliers.

          A marked difference was observed in the perception of the quality of the products where the respondents of this research found it extremely important.

         Customer Satisfaction

          One of the objectives of this research was to find out how customer satisfaction can be achieved through relationship marketing. Gilbert et al. (1982)

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proved through a study that customer satisfaction results into repeat buying behavior.
Apart from the findings of services ratings, providing evidence also for the importance and impact of customer services, the literature has revealed, and this study tested, some other mechanisms that could be used to enhance customer satisfaction. The results from this study confirmed the importance of salesperson expertise in understanding their needs but in contrast to Jacobson (2009) results, their responsiveness and availability is just desirable (51%), but not essential. Presumably, this could be due to the fact that Bulgarian steel suppliers are not very customer- oriented.

         Customer Retention

          Another objective of the study was to find out how relationship marketing leads to customer retention. Most of the respondents of this study agreed that if they have a long term relationship with a company they would stay loyal to the company despite having better offers from the rival companies moreover they even agreed to pay higher prices and neglecting the lower prices offered by the competitors just because they do not want to break away from their present supplier.

          Another important finding was regarding the supplier always trying to meet the needs of the customer. The study showed that customers whose supplier was giving attention to all of their needs were more likely to stay with the same supplier. This finding is in congruence to the findings of Armstrong (2010) who also observed that suppliers attending to the needs of the customers increase the likelihood of their customers being more loyal.

          Relationship Markrting Leading to Customer Satisfaction and Customer Retentiont

          Respondents considered getting personalized treatment as a crucial factor in the relationship The research also proved that customers have very frequent interactions with their suppliers and although they are still not very keen on the idea of regular meetings and visits, the personalized treatment is quite important for them. In the opinion of the author the negative results of the meetings and visits as approach for improved relationships could be due to fact that companies do not perform them productively and of interest for the both sides, so it could be worked also in this direction.

          The impact of relationship marketing on the business performance is serious and it is obvious from the results that using its practices could create a competitive advantage for the companies, as especially in the Bulgarian market there is enough space for the companies to differentiate through them.


          Businesses should start building their marketing strategies around the concept of relationship marketing in order to attain higher levels of customer satisfaction and retention and use it as differentiator from their competitors.

          Marketers and salespeople should focus on building closer relationship with the customers because it will allow them to better understand the needs and wants of the customers, as well as their value perception.

          Companies should also try to achieve business growth through fostering closer relationship with the customers.

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          It can be recommended to the companies that if they want to remain the supplier of the choice for the customers and they don’t want to loose their customers to their competitors the best way is to have a relationship with the customers on individual level.

          It would also be recommended that the companies conduct surveys involving their customers to find out what makes them satisfied and what would they want from the company to make them satisfied. The results of this survey should be used by the marketers while making strategies as well as the results should be circulated among the employees in order for them to understand the requirements of the customers.

          Companies should have regular meetings to assess the customer relationship management process of their company and how the companies are dealing with their customers. The satisfaction level along with number of repeated customers should be closely monitored.

          Companies need to assess the way their competitors deal with their suppliers and devise strategies to serve the customers better than their competitors.

          Organization need to organize events for specific groups of customers, e.g. construction companies, producers of specific group of final goods, presenting new materials and techniques. The presentation could be done from product managers of steel mills enhancing at the same time their relationship with the suppliers.

          Based on the primary research of this study it is recommended for the suppliers to concentrate on keeping up their reputation, building close relationship with customers, swiftly resolve customers complaints moreover increasing communication with the customers and winning the trust of the customers.

          In case of the Bulgarian steel industry it is noted that they still employ traditional marketing methods. It is utmost important for them to adapt the concept of relationship marketing in order for them to distinguish themselves in the highly competitive local and global environment.


         Implications for Managers / Marketers

          This study has highlighted many implications of building long term relationships for the managers, as it provides a systematic overview on the key successful practices of relationship marketing. The managers despite the 4 Ps of marketing or the marketing mix need to emphasis on relationship marketing too. They need to win customer’s trust and erect switching barriers in order to solidify their relationship with the customers. One important aspect that managers need to focus on is customer satisfaction and its various dimensions.

          An important implication is that this analysis could be used as a guide for a company in the process of designing its marketing and business strategy and especially it could be very helpful for the managers to understand exactly which are the main factors and relationship marketing tactics that most affect customers’ attitude and to what extent.

Lastly, through relationship marketing managers can achieve customer satisfaction and customer retention, Satisfied and retained customers engage is repeat buying behavior, they are willing to pay higher prices and they create more profits for the company. Thus, contributing towards the growth of the company.



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