(PDF) Thinking about relationship marketing: Where are we now
Relationship marketing requires tech, tools & hands-on interaction. Here's what you need to create an effective relationship marketing strategy. Relationship marketing was first defined as a form of marketing developed from direct response marketing campaigns which emphasizes customer retention and . PDF | Relationship marketing (RM) has emerged as a new marketing idea for many firms in Western countries. The aim of this paper is to review the evolution of.
This usually involves providing more personalized service and providing service quality that exceeds expectations at each step. Customer retention efforts involve considerations such as the following: Customer valuation — Gordon describes how to value customers and categorize them according to their financial and strategic value so that companies can decide where to invest for deeper relationships and which relationships need to be served differently or even terminated.
Customer retention measurement — Dawkins and Reichheld calculated a company's "customer retention rate". This is simply the percentage of customers at the beginning of the year that are still customers by the end of the year. This ratio can be used to make comparisons between products, between market segments, and over time.
Determine reasons for defection — Look for the root causes, not mere symptoms. This involves probing for details when talking to former customers. Other techniques include the analysis of customers' complaints and competitive benchmarking see competitor analysis. Develop and implement a corrective plan — This could involve actions to improve employee practices, using benchmarking to determine best corrective practices, visible endorsement of top management, adjustments to the company's reward and recognition systems, and the use of "recovery teams" to eliminate the causes of defections.
A technique to calculate the value to a firm of a sustained customer relationship has been developed.
This calculation is typically called customer lifetime value. Retention strategies may also include building barriers to customer switching. This can be done by product bundling combining several products or services into one "package" and offering them at a single pricecross-selling selling related products to current customerscross promotions giving discounts or other promotional incentives to purchasers of related productsloyalty programs giving incentives for frequent purchasesincreasing switching costs adding termination costs, such as mortgage termination feesand integrating computer systems of multiple organizations primarily in industrial marketing.
Many relationship marketers use a team-based approach. The rationale is that the more points of contact between the organization and customer, the stronger will be the bond, and the more secure the relationship. Application[ edit ] Relationship marketing and traditional or transactional marketing are not mutually exclusive and there is no need for a conflict between them. In practice, a relationship-oriented marketer still has choices, depending on the situation.
Most firms blend the two approaches to match their portfolio of products and services. Social bond refers to the relationship established through the collective blood relationship between people.Relationship Marketing in a nutshell
Relationship marketing is to establish and strengthen these two kinds of bonds, especially the structural bond, so as to strengthen the relationship with clients and lock them in. Morgan and Hunt made a distinction between economic and social exchange on the basis of exchange theory and concluded that the basic guarantee of social exchange was the spirit of the contract of trust and commitment.
The traditional marketing concept of one-time transaction begins to transfer to the concept of relationship marketing. This is the transition from economic exchange theory to social exchange theory. The theoretical core of enterprise relationship marketing in this period is the cooperative relationship based on commitment.
They define the concept of relationship marketing from the perspective of exchange theory, and emphasize that relationship marketing is an activity related to the progress, maintenance and development of all marketing activities.
Relationship Marketing | What is Relationship Marketing?
Shows that trust and commitment is a trading enterprise and the basis of marketing activities to establish a long term good relations, also is the factors affecting the basis of cooperation for both sides, moreover the relationship effect of other factors include: Coptics and Wolf believe that relational marketing is the marketing of databases.
They think, the enterprise want to be able to continue to improve the effect of relationships with customers, when access to the data and information to improve the effect of relationship with the customer's cost is low, enterprises will pay the cost to improve relations with customers, at present, due to tell the development of communication technology and Internet technology, makes the information costs have dropped substantially, so the argument that relationship marketing is for database marketing is increasingly valued, this view emphasizes the relationship marketing is through the Internet technology database data lock with the customers, to establish and maintain good relationship with customers.
Liker and Klamath introduced the relationship between enterprises and suppliers into the scope of relational marketing, believing that in the marketing process, manufacturers make suppliers assume corresponding responsibilities, and enable them to give play to their technological and resource advantages in the production process, which can improve the marketing innovation ability of manufacturers.
Lukas and Bryan a. Ferrell believe that the implementation of customer-oriented marketing concept can greatly promote the innovation ability of marketing, and at the same time encourage enterprises to break through the traditional relationship model between enterprises and customers and propose new product Suggestions with technical feasibility.
Lethe through the observation of the benchmarking customer research, to confirm the relationship between enterprises and customers to enterprise's product innovation capacity there is a positive correlation, the enterprise can in the development and in the process of benchmarking customer good relationship, to identify those more market potential for development of new products, it can save a lot of for the enterprise cost of new product development and market acceptance of this kind of product is high.
In addition, he also proposed that all the relationships established with relevant parties to enterprise marketing activities are centered on the establishment of good customer relations, that is, the core relationship of relationship marketing is the relationship with customers.
Guinness believes that relationship marketing is essentially a consciousness that regards the marketing process as the interaction between enterprises and various aspects of relationships and networks. According to his research, relationship is the relationship between two or more subjects, network is a larger set of relationships, and interactive interaction between people in the relationship or network process. It is claimed that many of the relationship marketing attributes like collaboration, loyalty and trust determine what "internal customers" say and do.
According to this theory, every employee, team, or department in the company is simultaneously a supplier and a customer of services and products. An employee obtains a service at a point in the value chain and then provides a service to another employee further along the value chain.
If internal marketing is effective, every employee will both provide and receive exceptional service from and to other employees. It also helps employees understand the significance of their roles and how their roles relate to others'.
If implemented well, it can also encourage every employee to see the process in terms of the customer's perception of value added, and the organization's strategic mission. Further it is claimed that an effective internal marketing program is a prerequisite for effective external marketing efforts.
Referral marketing is developing and implementing a marketing plan to stimulate referrals. Although it may take months before you see the effect of referral marketing, this is often the most effective part of an overall marketing plan and the best use of resources[ citation needed ].
Marketing to suppliers is aimed at ensuring a long-term conflict-free relationship in which all parties understand each other's needs and exceed each other's expectations. Such a strategy can reduce costs and improve quality. Influence markets involve a wide range of sub-markets including: These activities are typically carried out by the public relations department, but relationship marketers feel that marketing to all six markets is the responsibility of everyone in the organization.
Each market may require its own explicit strategies and a separate marketing mix for each. Live-in Marketing[ edit ] Live-in Marketing LIM is a variant of marketing and advertising in which the target consumer is allowed to sample or use a brands product in a relaxed atmosphere over a longer period of time. Much like product placement in film and television LIM was developed as a means to reach select target demographics in a non-invasive and much less garish manner than traditional advertising.
History[ edit ] While LIM represents an entirely untapped avenue of marketing for both big and small brands alike it is not an all that novel an idea.
With the rising popularity of experiential and event marketing  in North America and Europe, as well as the relatively high ROI in terms of advertising dollars spent on experiential marketing compared to traditional big media advertising, industry analysts see LIM as a natural progression.
Premise[ edit ] LIM functions around the premise that marketing or advertising agencies go out on behalf of the brand in question and find its target demographic.
From that point forward avenues such as sponsorship or direct product placement and sampling are explored. Unlike traditional event marketing, LIM suggests that end-users will sample the product or service in a comfortable and relaxed atmosphere.
Nevertheless, they might indicate the beginning of some social bonding in the form of trust and commitment Pelton, Strutton and Lumpkin, That is, these repeat transactions can be seen as an opportunity to convert repeat purchases into meaningful, ongoing relationships Gronroos, ; Webster, However, these transactions are still one-way in that there is no structural adaptation for particular customers.
In contrast, soft relationships box 4 in figure 3 are normally developed from repeated transactions without the existence of contracts, where individual heterogeneous firms make specific investments in adaptations for particular customers.
Next, contractual long-term relationships can be developed into strategic alliances that involve more than just shipments and the resolution of disputes — they are comprehensive, contractual relationships similar to those of a vertically integrated firm. Thus economic interdependence is high but social interdependence may be low because legal rather than social sanctions enforce cooperation.
The levels of both economic and social interdependence in the exchange processes noted in section 3 of networks are higher than those in other types of relationships.
5 Reasons Why Relationship Marketing is Important in Business
It is a structural bond building process that follows or is accompanied by the forming of social bonds as noted above Buttle and Ahmad, This adaptation occurs in the relationship development of both contractual and non-contractual relationships. Adaptation is important because the relational partners may need to adapt their needs or capabilities to achieve initial compatibility or the relational partners may need to adapt to changing business conditions in order to preserve ongoing relationships Hallen, Johnanson and Seyed-Mohamed, In brief, these six types of relationships evolve through time as each party makes investments in and adapts to the other as structural and social bonds emerge and evolve.
This six-fold classification captures many of the issues discussed earlier about structural and social bonds and the differences between transactional and relational marketing. But there is no generally accepted position about its impact on the practice of marketing - some argue it is merely a new tactic added to marketing activities Davis, ; Larson,or a strategic focus shift Li, Greenberg, and Li, or even a paradigm shift or worldview that overturns most previous marketing thinking Gronroos,; Sheth and Parvatiyar, a.
For example, Palmer noted that the world of marketing used to be based on relationships before mass markets made those relationships difficult, but recent advances in information technology may permit a return to a marketing world of relationships. Thus, relationship marketing, while powerful in the theory described above, is somewhat troubled in practice Fournier, Dobscha and Mick, and the appropriateness of relationship marketing needs to be considered Coviello and Brodie, ; Low, ; Yau et al.
Various types of goods and services can be placed along a continuum from industrial commodities to industrial services, as illustrated in figure 4.