Relationship marketing refers to using marketing tools to attract potential customers, establish communication, and create and develop relationships. Relationship management moves the customers up the loyalty ladder by maintaining and enhancing relationships and retaining customers.
Relationship Marketing Defined
‘…the union of customer service, quality and marketing.’ (Bateson)
‘…the dual focus of getting and keeping customers.’ (Christopher, Payne and Ballantyne)
‘…keeping and improving customers.’ (Zeithaml and Bitner)
Implicit in each of these definitions are several key points:
- Relationships are about interactions between people
- A relationship implies several successive interactions
- Relationships involve mutual benefits
- The customer, as well as the service provider, must desire a relationship
Therefore, the essence of effective relationship marketing lies in recognizing and understanding what it entails, and in investing appropriate time and effort in it. A valued relationship is one in which both parties find value because the benefits received significantly exceed the cost of obtaining them.
Customer’s motives (benefits) for staying in service relationships have been found to be confidence benefits, social benefits and special treatment benefits.
Figure 6.10 shows how customer relationships may be viewed as going through various relationship stages.
Customer Relationship Management (CRM)
Some consider CRM to be a sophisticated software system that permits a company to gain a “360 degree” view of their customers. The position this text takes on CRM is that it can be seen as customer retention and relationship marketing enhanced by technology.
Database driven CRM systems allow firms to integrate their call centers, billing information and customer databases to target key customer groups more effectively with customized offerings. Figure 6.4 depicts the five imperatives of relationship management and shows where CRM fits in.
Differentiating Relationship Marketing Emphasis with Traditional Marketing Emphasis
Benefits of successful customer relationships
All business is about relationships. Consequently, relationship building and nurturing, with employees, suppliers and agents as well as with customers, is vital to any business, regardless of its size.
Furthermore, the benefits of successful relationships can accrue to organizations of any type and size. These benefits include;
- Trust in brand
- Loyal and consistent patronage
- Customer bonding
- More efficient and productive transactions
- Increased sales and profitability
- Positive word-of-mouth
- Referrals and recommendations
Traditional Marketing Emphasis
Relationship marketing is distinguished by its focus or emphasis on the cultivation and maintenance of long-term customer relationships. Much of what has been written about relationship marketing has its genesis in the marketing of services and sales and service contact between business organizations.
In the latter context, the importance and value of any single sales transaction is given greater meaning with reference to the long-term value of the client or customer relationship. By contrast, the emphasis in the marketing of consumer goods, fast moving packaged goods, tends to be more on immediate or short-term turnover, sales volume and market share.
This is not to say that consumer/brand relationship building, and loyalty are ignored in this context. Rather it is the case that the nature of consumer goods marketing, traditionally at ‘arm’s length’ via a frequently lengthy channel of distribution between manufacturer and end consumer.
And traditionally with limited means of direct contact between the two, has meant that opportunities for relationship building have been limited and less available than they are in a business-to-business or service setting.
Pathways to Growth in Service Organizations
Service businesses can grow in one or more ways. These include:
- Attract new customers
- Reduce the extent of customer defection or turnover
- Regain lost customers
Note: Four of these involve some form of relationship management. This means that a well managed service organization must work hard to retain and grow its existing customers/customer base by carefully managing its valued customer relationships.