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Relationship Marketing

Relationship Marketing

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Published by: samanthanayakarathna on Nov 02, 2009
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Relationship marketing
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MarketingKey concepts
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Relationship marketing
is a form of marketing developed from direct response marketing campaigns conducted in the 1970s and 1980s which emphasizes customer retention andsatisfaction, rather than a dominant focus on point-of-sale transactions.Relationship marketing differs from other forms of marketing in that it recognizes the long termvalue to the firm of keeping customers, as opposed to director "Intrusion" marketing, which focuses upon acquisition of new clients by targeting majority demographics based upon prospective client lists.
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[edit] Development
Relationship marketing refers to a long-term and mutually beneficial arrangement wherein boththe buyer and seller focus on value enhancement with the goal of providing a more satisfyingexchange. This approach attempts to transcend the simple purchase-exchange process withcustomer to make more meaningful and richer contact by providing a more holistic, personalized purchase, and use the consumption experience to create stronger ties.According to Liam Alvey
, relationship marketing can be applied when there are competitive product alternatives for customers to choose from; and when there is an ongoing and periodicdesire for the product or service.Fornell andWernerfelt
 used the term "defensive marketing" to describe attempts to reducecustomer turnover and increase customer loyalty. This customer-retention approach wascontrasted with "offensive marketing" which involved obtaining new customers and increasingcustomers' purchase frequency. Defensive marketing focused on reducing or managing thedissatisfaction of your customers, while offensive marketing focused on "liberating" dissatisfiedcustomers from your competition and generating new customers. There are two components todefensive marketing: increasing customer satisfaction and increasing switching barriers. Modern consumer marketing originated in the 1950s and 1960s as companies found it more profitable to sell relatively low-value products to masses of customers. Over the decades,attempts have been made to broaden the scope of marketing, relationship marketing being one of these attempts. Arguably, customer value has been greatly enriched by these contributions.The practice of relationship marketing has been facilitated by several generations of customer relationship managementsoftware that allow tracking and analyzing of each customer's preferences, activities, tastes, likes, dislikes, and complaints. For example, an automobilemanufacturer maintaining a database of when and how repeat customers buy their products, theoptions they choose, the way they finance the purchase etc., is in a powerful position to developone-to-one marketing offers and product benefits.In web applications, the consumer shopping profile is built as the person shops on the website.This information is then used to compute what can be his or her likely preferences in other categories. These predicted offerings can then be shown to the customer through cross-sell, emailrecommendation and other channels.Relationship marketing has also migrated back into direct mail, allowing marketers to takeadvantage of the technological capabilities of digital, toner-based printing presses to produceunique, personalized pieces for each recipient. Marketers can personalize documents by any
 
information contained in their databases, including name, address, demographics, purchasehistory, and dozens (or even hundreds) of other variables. The result is a printed piece that(ideally) reflects the individual needs and preferences of each recipient, increasing the relevanceof the piece and increasing the response rate.
[edit] Scope
Relationship marketing has also been strongly influenced byreengineering.According to (process) reengineering theory, organizations should be structured according to complete tasksand processes rather than functions. That is, cross-functional teamsshould be responsible for a whole process, from beginning to end, rather than having the work go from one functionaldepartment to another. Traditional marketing is said to use the functional (or 'silo') departmentapproach. The legacy of this can still be seen in the traditional four P's of themarketing mix.Pricing, product management,  promotion, and placement.According to Gordon (1999), the marketing mix approach is too limited to provide a usable framework for assessing anddeveloping customer relationships in many industries and should be replaced by the relationshipmarketing alternative model where the focus is on customers, relationships and interaction over time, rather than markets and products.In contrast, relationship marketing is cross-functional marketing. It is organized around processes that involve all aspects of the organization. In fact, some commentators prefer to callrelationship marketing "relationship management" in recognition of the fact that it involves muchmore than that which is normally included in marketing.Martin Christopher, Adrian Payne, and David Ballantyne |
 
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at the Cranfield School of Management claim that relationship marketing has the potential to forge a new synthesis between quality management, customer service management, and marketing. They see marketingand customer service as inseparable.Relationship marketing involves the application of the marketing philosophyto all parts of the organization. Every employee is said to be a "part-time marketer". The way Regis McKenna(1991) puts it:"Marketing is not a function, it is a way of doing business . . . marketing has to be all pervasive, part of everyone's job description, from the receptionist to the board of directors.
[edit] Approaches
[edit] Satisfaction
Relationship marketing relies upon the communication and acquisition of consumer requirementssolely from existing customers in a mutually beneficial exchange usually involving permissionfor contact by the customer through an "opt-in" system.
With particular relevance to customer satisfaction the relative price and quality of goods and services produced or sold through acompany alongside customer service generally determine the amount of sales relative to that of competing companies. Although groups targeted through relationship marketing may be large,accuracy of communication and overall relevancy to the customer remains higher than that of direct marketing, but has less potential for generating new leads than direct marketing and islimited toViral marketingfor the acquisition of further customers.
[edit] Retention

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