Relationship Marketing
Relationship marketing was first defined as a form of marketing that evolved from direct response marketing campaigns, rather than a major focus on sales transactions, which emphasizes customer retention and satisfaction.
As a practice, relationship marketing differs from other forms of marketing in that it recognizes the long-term importance of customer relationships and extends communication beyond intrusive advertising and sales promotional messages. With the development of the Internet and mobile platforms, relationship marketing has continued to evolve and grow as technology and collaborative and social communication channels open up.
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What is Relationship Marketing in 2022 |
It includes tools for managing relationships with customers that go beyond simple demographic and customer service data. Relationship marketing extends to include inbound marketing efforts (a combination of search optimization and strategic content), public relations, social media, and application development.
Development
relationship marketing refers to an arrangement where both buyer and seller are interested in providing a more satisfactory exchange. This approach seeks to go beyond the simple post-purchase-exchange process with a customer to create more truthful and richer contacts by providing a more holistic, personalized purchase, and using experience to build stronger relationships. From a social anthropological perspective, we can explain relationship marketing principles and practices as commodity exchange that aids the features of gift exchange. It seems that markets—consciously or instinctively—have begun to recognize and harness the power inherent in 'pre-modern' forms of exchange. Future research, where this particular perspective on marketing theory and practice can greatly benefit from in-depth research of the principles governing gift exchange, Opens up fertile land According to Liam Alvi, relationship marketing can be implemented when there are competitive product options for customers to choose from; and when there is an ongoing and periodic desire for the product or service.
It found it more profitable for companies to sell products of relatively low value to masses of customers, as modern consumer marketing did in the 1960s and 1970s. Decades of effort have been made to broaden the scope of marketing, being one of these efforts is relationship marketing. Arguably, customer value has been greatly enriched by these contributions.
The practice of relationship marketing has been facilitated by several generations of customer relationship management software that allow tracking and analysis of each customer's preferences, activities, tastes, likes, dislikes, and complaints. For example, an automotive manufacturer maintains a database of how and when customers buy their products again, the options they choose, the way they finance purchases, etc. Provides one-to-one marketing and a powerful position to develop product advantage
Area
Relationship marketing has also been strongly influenced by reengineering. According to (process) reengineering theory, organizations should be structured according to tasks rather than complete tasks and processes. That is, cross-functional teams must be responsible for an entire process, instead of having work go from one task department to another, beginning to end. Traditional marketing is said to use the functional (or 'silo') department approach. The legacy of this can still be seen in the marketing mix of the traditional Four Ps. Pricing, product management, promotion, and placement. According to Gordon (1999), marketing mix approaches also provide a useful framework for assessing and developing customer relationships in many industries and for paying attention to customers over time,
Satisfaction
Relationship marketing relies only on communication and acquisition of consumer needs in a mutually beneficial exchange involving existing customers allowing for contact with customers, usually through an "opt-in" system.
Retention
An important principle of relationship marketing. This technique is now used as a means of balancing new customers and opportunities, by predetermining customers by satisfying needs above those of competing companies through a mutually beneficial relationship. Retention of customers through different means and practices to ensure the repeated business is maximizing profits and at the expense of new customers in which old direct marketing-oriented businesses gained or resulted with the loss of old customers. With current and existing customers as a means of counteracting the "Leaky Bucket Principle" of business. This process of "brainstorming" leads generation through all or new customers as it requires more investment to retain the majority of customers using both direct and relationship management,
Use
Relationship marketing and traditional (or behavioral) marketing are not mutually exclusive and there is no need for a conflict between them. The still position of a relationship-oriented market is the option at the exercise level, according to the variables. Most companies mix the two approaches to match their portfolio of products and services. Almost all products have a service component to them and this service component has grown in recent decades.
Internal Marketing
Relationship marketing also calls it internal marketing, is emphasized by using a marketing orientation within the organization itself. It is claimed that characteristics like cooperation, loyalty, and trust determine what many relationship marketers call "internal customers" do. According to this principle, every employee, team, or department in a company is simultaneously a supplier and a customer of services and products. An employee receives service at one point in the value chain and then provides a service to another employee further down the value chain. If internal marketing is effective, every employee will both provide and receive exceptional service to and from other employees.
Six market models
Christopher, Payne, and Ballatin (1991) from Cranfield University go further. He identifies six markets that he claims are central to relationship marketing. They are as follows: internal markets, supplier markets, recruitment markets, referral markets, influence markets, and customer markets. Referral marketing is developing and implementing a marketing plan to encourage referrals. While it may take months before you see the effects of referral marketing, it is often the most effective part of an overall marketing plan and the best use of resources.
Events for personal marketing
- Communication with the media: participation in television shows, and interviews;
- Participation in conferences and seminars as an author-invited guest or expert;
- Participation in charitable events;
- Publications in thematic publications;
- Communication with fans through social networks (Twitter, Instagram, etc.).
Development of relationship marketing
The origins of modern relationship marketing can be traced back to a passage by Schneider (B. 1980), in which he said: "It is strange that researchers and businessmen are concerned with attracting customers to products and services, rather than How to retain customers". The first to study relationship marketing was Len Berry (1982) of the University of Texas A&M and Jag Sheth of Emory, both of whom were among the first to use the term "relationship". Marketing theorist Theodore Levitt (1983) of Harvard University was the first to broaden the scope of marketing beyond one-time transactions.
In practice, relationship marketing comes from industry and B2B markets, where long-term contacts have lasted for many years and are commonplace. Harvard scholar Barbara Blonde Jackson (Jackson, BB, 1985) re-examined the practice of industrial marketing and applied the concept correctly in marketing.
According to Lin Bailey (1983), relationship marketing can be applied in the following situations:
- Alternatives are available;
- Customers decide their options; and
- The market desires the product or service continuously and periodically
The main features of relationship marketing:
1) Low customer acquisition cost;
2) Easy to gain customer trust;
3) Timely feedback from users. Among them, the core is "customer acquisition cost", because most of our marketing work is invested in "customer acquisition".
Relationship marketing and Nurture Marketing
The term "relationship marketing" comes from the English "relationship marketing" and also corresponds to the translation of "nurture marketing" but it does not quite capture the nuance between the two.
In particular, the idea of "cultivating" a pool of prospects who will eventually become customers does not really come out in the French translation.
This nuance is important because a relationship marketing program focused on customers will take a very different form from a program seeking to convince prospects to become customers.
In the first case, the company offers its customers benefits aimed at encouraging their loyalty (invitations, preview or exclusive information, advice, etc.) as well as promotional offers designed on incentive sales models (products/ upscale services) or cross-selling (complementary products/services).
When combined with customer segmentation, a relationship marketing program helps focus marketing efforts on the "best" customers, i.e. those who contribute the most to the company's revenue. the company. The key idea behind this approach is the Pareto principle or 20/80 theory which states that in any business activity, 20% of the customers (“the best”) contribute 80% of the turnover. Marketing activities targeting customers generally result in a much better return on investment (ROI) than those seeking to recruit new prospects whose value is not assured. Quantitative marketing techniques, Uplift targeting makes it possible to identify the customers most sensitive to relational marketing, in particular for customer loyalty issues.
In the second case, the company seeks to maintain a certain level of communication with the prospect until the moment when the prospect is ready to buy. This can take the form of information (articles, whitepapers, case studies, webinars, etc.) or promotional product/service trial offers (for example a 30-day trial version of the software). The idea is to stay in the mind of the prospect until the moment of purchase.
Service marketing
Service marketing refers to a trend by which a company offers services in addition to the sale of other products or services. As part of a service-based approach, a travel agency can, for example, offer its customers shuttle service to go to the airport or a shopping center, or ca hildcare service. Even if the use of the term has recently developed, it is possible to note that the practice is not totally new. Luxury hotels have long since developed a service-based approach by offering concierge services.
A service-based approach can be the basis of a differentiation strategy. It is, for example, increasingly used by traditional distributors to try to fight against their e-merchant competitors.
Holistic relationship marketing
Customer relationships are subject to complex influences and can be designed and recorded most completely in a holistically aligned marketing system. This holistic approach combines qualitative and quantitative areas. The qualitative area includes all strategic preparatory work and measures to promote relationships that can be indirectly assessed. The quantitative area includes business tools with immediate measurability. Qualitative and quantitative areas are planned holistically, which means that relationship marketing is oriented towards the long term and is therefore not determined by short-term tactics.
A more general definition of relationship marketing expands the perspective to include relationships with other stakeholders in the company: although the customer is still the focus of attention, the exchange with suppliers, employees, society, and the competition is also given greater consideration.
To include the diverse aspects relevant to relationship marketing, a methodical approach is recommended. For example, the relationship equity method can be used. Relationships with existing customers are analyzed, developed, and expanded in a goal-oriented manner, designed in a customer-specific manner, and managed systematically. Customer relationships improve as a result in terms of number, satisfaction, and profitability. The added value as a whole ultimately increase
Basic understanding
Long-term customer relationships ( customer loyalty ) are to be built through relationship marketing. These can only develop if the customers' needs and demands are recognized and appropriate marketing measures are developed. This qualitatively oriented relationship marketing takes into account interdisciplinary findings, for example from relationship psychology. So-called "soft" factors such as the positive basic feeling in a customer relationship are taken into account.
Dynamic design marketing
Dialogic communication with the customer via all channels is a decisive aspect of relationship marketing and can assume a pioneering role for the entire corporate culture.
In contrast to classic marketing, relationship marketing no longer occupies a management-related position.
In a dynamic process, the customer has the opportunity to help shape the relationship. Pointing beyond purely instrumental marketing measures, customers can identify with the company and develop an emotional bond. Relationship values have formed that increase the impact and effectiveness of marketing.
Individual customer relationship
Regular and thus well-established purchase processes require less information and coordination effort and can stabilize the course of business. The main advantage, however, is that they create an individual relationship between the company and the customer, which competitors can only disrupt with considerable effort. The individual customer relationship makes it possible to enter into a very targeted dialogue with the customer and thus design marketing measures efficiently.
Business starting point and goal
The necessary proceeds to cover the costs and to make a profit can come from new customers or from existing customers. Especially in the early phase of a product/company life cycle, when the customer base is still small or even non-existent, but also in a later phase, when the sales potential of existing customers has been exhausted, the focus is on acquiring new customers.
In economically difficult times, with dynamically changing market conditions, with increasing competition, and the pressure to grow due to the costs of the fight for market share, expanding relationships with existing customers is becoming increasingly important.
In addition, acquiring new customers is usually more expensive than expanding business with existing customers.
The economic goal of relationship marketing is to bind customers to the company profitably in the long term. Customer contribution margin or customer lifetime value is e.g. B. possible control mechanisms. The prerequisite for this is on the one hand the development of a regular customer base and on the other hand their loyalty to the company, which should reduce/prevent a change of provider or brand and increase the repeat purchase rate.
Business-oriented marketing measure
In relationship marketing, the marketing focus is on the entire business relationship with the customer.
On the one hand, these are variants of the classic marketing tools and, on the other hand, customer-oriented management concepts. Some forms of relationship marketing should be listed here as examples: Product development in cooperation with customers, integration of customers into the value chain, customer-specific product adjustments, value-added services, performance guarantees; Price concessions for regular customers, loyalty discounts, bonus programs, price guarantees, price escalation clauses; Customer advisory boards, regular customer service (number), customer magazines, regular customer events, subscriptions; cross-selling, post-sale marketing, customer recovery; Customer clubs, customer cards, regular customer-friendly complaint management.
In addition, key accounts are treated specially by key account managers in the case of major customers.
Increased operational efficiency
The benefit of a high-quality relationship with customers is multifaceted: on the one hand, if a customer relationship goes well, willingness to pay, error tolerance, and the sales volume per customer increase. With better knowledge of the needs of the individual customers and with the customer's growing knowledge of the company's internal processes, the support effort is reduced. Third, a company can react more quickly to changing demand and potential for improvement through intensive customer dialogue. Finally, high customer loyalty can – under certain circumstances – be seen as a barrier to entry from potential competitors.
Data management/CRM
Effective relationship marketing is made easier by the growing availability of individual data. CRM ( Customer Relationship Management) software provides this customer data to Relationship Marketing). The CRM software can access databases with all customer data. The customer-specific evaluations from such high-performance customer databases enable very promising relationship marketing. However, the use of CRM systems alone is no guarantee for successful relationship marketing.
In many cases of the practical application of CRM, the successes fall short of expectations, which is often due to a one-sided application with poor integration into the company. A holistic embedding in relationship marketing is required here.
