CHAPTER 2: LESSON 1

RELATIONSHIP MARKETING

LEARNING OBJECTIVE:

The learners shall be able to define Relationship Marketing.

Today, most organizations turn to view customers as equal partners in the buying and selling
transaction. Through encouraging customers to enter a long term relationship with repeat
purchases or buy multiple brands at a time from the hrms, marketers are able to get an
apparent understanding of customer needs.

RELATIONSHIP MARKETING DEFINED

Relationship Marketing includes activities aimed at developing and managing trusting and long-
term relationships with larger customers. In relationship marketing, customer profile, buying
patterns, and history of contacts are maintained in a sales database and an account executive
is assigned to one or more major customers to fulfill their needs and maintain the relationship.

Relationship Marketing is a strategy designed to foster customer loyalty, interaction and long-
term engagement. This customer relationship management (CRM) strategy focuses more on
long-term customer retention than acquiring large numbers of new and potentially single-
transaction customers.

Relationship Marketing is designed to develop strong connections with customers by providing

them with information directly suited to their needs and interests and by promoting open
communication. This approach often results in increased word-of-mouth activity, repeat
business and a willingness on the customer's part to provide information to the organization.

Relationship Marketing in contrast with transactional marketing is an approach that focuses on

increasing the number of individual sales. Traditional transaction marketing (TM) tended to
ignore relationships and relationship building. The company was viewed as an independent
agency always maneuvering to secure the best terms. The company was ready to switch from
one supplier or distributor to another if there was an immediate advantage. The company
assumed that it would normally keep its current customers, and it spent most of its energy to
acquire new customers. The company neglected the interdependence among its main
stakeholders and their roles in affecting the company's success. Most organizations combine
elements of both relationship and transaction marketing strategies.

Relationship Marketing (RM) marks a significant paradigm shift in marketing a movement from
thinking solely in terms of competition and conflict toward thinking in terms of mutual
interdependence and cooperation. It recognizes the importance of various parties such as
suppliers, employees, distributors, dealers, retailers that are cooperating to deliver the best
value to the target customers.

Here are the main characteristics of relationship marketing:

1. It focuses on the long-term rather than the short-term.

2. It focuses on partners and customers rather than on the company's products.

3. It puts more emphasis on customer retention and growth than on customer acquisition.

4. It relies on cross-functional teams rather than on departmental-level work.

5. It relies more on listening and learning than on talking.

6. Relationship marketing calls for new practices within the 4Ps.

a. Product

More products are customized to the customers' preferences. New products are developed and
designed cooperatively with suppliers and distributors.

b. Price

The company will set a price based on the relationship with the customer and the bundle of
features and services ordered by the customer

In business-to-business marketing, there is more negotiation because products are often

designed for each customer.
c. Place

RM favors more direct marketing to the customer, thus reducing the role of middlemen.

RM favors offering alternatives to customers to choose the way they want to order, pay for,
receive, install, and even repair the product.

d. Promotion

• RM favors more individual communication and dialogue with customers. RM favors more
integrated marketing communications to deliver the same promise and image to the customer.

RM sets up extranets with large customers to facilitate information exchange, joint planning,
ordering, and payments.

The shift toward relationship marketing does not mean that companies abandon transaction
marketing altogether. Most companies need to operate with a mixture of the transactional and
the relational marketing approaches. Companies selling in large consumer markets practice a
greater percentage of TM while companies with a smaller number of customers practice a
higher percentage of RM.

BENEFITS OF RELATIONSHIP MARKETING

Retaining customers for the long-term offers many benefits. The aim is for the company to
obtain life time customers. In the world of business and management, the cost of retaining a
customer is at least eight times lesser as compared to acquiring a new one. Thus, this
marketing capitalizes on the same fact and is beneficial to the company in several ways.

1. Understanding customer characteristics - Relationship marketing helps the company

understand its customers better. The company can segregate its customers into groups based
on their characteristics like purchasing power, frequency and volume of sale transactions. It
also helps the company get valuable feedback from its customers and understand their needs
and expectations. This subsequently helps in value addition to products and services based on
these demands and leads to happier customers as they get involved into the value creation
process.

2. Delivery and meeting expectations - If the company knows what its customers needs are, it
will help reduce wastage due trial and error methods. When required product features and
specifications are known, it is easier to make modifications that will please customers and
increase sales turnover. It also helps reduce costs incurred from the research and development
process.

3. Repeat business - People would not be interested in getting involved in any business
transaction with a seller who appears rude or indifferent to their needs. People buying wouldn't
feel any special need to resist switching sellers if they are not given an incentive to stay
bounded. Here, relationship marketing steps in and provides a positive reinforcement for them
to make a repeat purchase

4. Prevents negative transition - Trust and loyalty go hand in hand and it issuper beneficial for all
business. It will help prevent customers from turning to competitors. Enhancing and
maintaining relationship with existing customers will prevent the tendency of customers to
switch to other products/services for a better offer.

5. Word-of-mouth marketing-A happy customer will always promote business by telling ten
other people about the amazing services or performance received from a company. They will be
excited to recommend the business to other people around them so they can try it too. Also,
research suggests that people are more motivated to try a product/service based on reviews
from an existing customer they know than they will be from persuasion by advertisements.
Hence, this marketing is an effective strategy beyond