Key Concepts In Relationship Marketing Concepts

Relationship marketing is a facet of customer relationship management (CRM) that focuses on customer loyalty and
long-term customer engagement rather than shorter-term goals like customer acquisition and individual sales. The goal
of relationship marketing (or customer relationship marketing) is to create strong, even emotional, customer connections
to a brand that can lead to ongoing business, free word-of-mouth promotion and information from customers that can
generate leads.

Relationship marketing stands in contrast to the more traditional transactional marketing approach, which focuses on
increasing the number of individual sales. In the transactional model, the return on customer acquisition cost may be
insufficient. A customer may be convinced to select that brand one time, but without a strong relationship marketing
strategy, the customer may not come back to that brand in the future. While organizations combine elements of both
relationship and transactional marketing, customer relationship marketing is starting to play a more important role for
many companies.

Importance of relationship marketing

Acquiring new customers can be challenging and costly. Relationship marketing helps retain customers over the long
term, which results in customer loyalty rather than customers purchase once or infrequently.

Relationship marketing is important for its ability to stay in close contact with customers. By understanding how
customers use a brand’s products and services and observing additional unmet needs, brands can create new features
and offerings to meet those needs, further strengthening the relationship.

Implementing a relationship marketing strategy

Relationship marketing is based on the tenets of customer experience management (CEM), which focuses on improving
customer interactions to foster better brand loyalty. While these interactions can still occur in person or over the phone,
much of relationship marketing and CEM has taken to the Web.

With the abundance of information on the Web and flourishing use of social media, most consumers expect to have
easy, tailored access to details about a brand and even expect the opportunity to influence products and services via
social media posts and online reviews. Today, relationship marketing involves creating easy two-way communication
between customers and the business, tracking customer activities and providing tailored information to customers based
on those activities.

For example, an e-commerce site might track a customer's activity by allowing them to create a user profile so that their
information is conveniently saved for future visits, and so that the site can push more tailored information to them next
time. Site visitors might also be able to sign in through Facebook or another social media channel, allowing them a
simpler user experience and automatically connecting them to the brand's social media presence.

This is where CRM and marketing automation software can support a relationship marketing strategy by making it
easier to record, track and act on customer information. Social CRM tools go further by helping to extend relationship
marketing into the social media sphere, allowing companies to more easily monitor and respond to customer issues on
social media channels, which in turn helps maintain a better brand image.

Benefits of relationship marketing

Benefits of relationship marketing include:

 Higher customer lifetime value (CLV). Relationship marketing creates loyal customers, which leads to repeat
purchases and a higher CLV. In addition, loyal customers are likely to become brand advocates or ambassadors,
recommending products and services to friends, family and business associates.
 Reduction in marketing and advertising spend. Spending on marketing and advertising to acquire new customers
can be expensive. Relationship marketing causes customers to do the marketing for a brand, in what’s called buzz
marketing. Customers tell others about a brand’s products and services, which can drive sales. Brands with
exceptional relationship marketing programs spend little to no money on marketing or advertising.
 Stronger organizational alignment around the customer. Organizations that emphasize relationship marketing have a
stronger organizational alignment around an exceptional customer experience. The teams work together to create
satisfied and happy customers over the long term.

Examples of relationship marketing

 There are several types of activities brands can use to facilitate relationship marketing, including:
 Provide exceptional customer service, as customers who are consistently impressed by a brand’s customer service
are more likely to remain loyal to the brand.
 Thank customers through a social media post or with a surprise gift card.
 Solicit customer feedback through surveys, polls and phone calls, which can create a positive impression that
customer opinions are valued and help to create better products and services.
 Launch a loyalty program that rewards customers for their continued patronage.
 Hold customer events to connect with customers and build a community.
 Create customer advocacy or brand advocacy programs to reward customers who provide word-of-mouth
advertising on a brand’s behalf.
 Offer discounts or bonuses to long-time or repeat customers.

Promise:

Much like services marketing is the marketing of services or custom-made goods as opposed to finished tangible
products, promise marketing is the marketing of a promise related to these services.

Firms that provide intangible services to their customers are not selling features, but relationships. These firms are
selling their promise of satisfaction with a good or service that cannot be seen at the time of purchase. They are
promising satisfaction without the ability to show their potential customer the result of their work. Promise marketing
involves relationship marketing, public relations, advertising, and other methods of communication to help the business
differentiate itself from its competition.

The Commitment-Trust Theory of Relationship Marketing

The commitment-trust theory of relationship marketing says that two fundamental factors, trust and commitment, must
exist for a relationship to be successful. Relationship marketing involves forming bonds with customers by meeting
their needs and honoring commitments. Rather than chasing short-term profits, businesses following the principles of
relationship marketing forge long-lasting bonds with their customers. As a result, customers trust these businesses, and
the mutual loyalty helps both parties fulfill their needs.
Trust: Trust is the confidence both parties in the relationship have that the other party won’t do something harmful or
risky, according to the book “Relationship Marketing and Customer Relationship Management,” by Annekie Brink and
Adele Berndt. Businesses develop trust by standing behind their promises.

Commitment: Commitment involves a long-term desire to maintain a valued partnership, according to Brink and
Berndt. That desire causes the business to continually invest in developing and maintaining relationships with its
customers. For example, a business might follow up after a purchase to ensure a customer was satisfied with her
experience. If not, the business might refund the customer or offer a discount on her next purchase. Further, the business
could incorporate the feedback to ensure that other customers don’t have the same bad experience. In other words,
through a series of relationship-building activities, the business shows its commitment to the customer.

Effect: The results of a relationship based on commitment and trust are cooperative behaviors that allow both parties to
fulfill their needs. Customers not only get the product or service they’re paying for, but they also feel valued. Your
business receives customer loyalty in return, which is valuable, because you won’t have to waste resources acquiring
new customers. In other words, investing money in excellent customer service actually can save you money, because
you won’t have to invest in, for example, numerous marketing campaigns to obtain new customers.

Considerations: Few businesses have the resources to develop long-term relationships with every customer. That’s why
it’s important to identify the customers who are most valuable to your business and focus your efforts on them.
Identifying and developing relationships with the right customers allows you to devote your resources to the customers
who mean the most to your business’s overall strategy, according to Brink and Berndt.

Satisfaction: Relationship marketing relies on the communication and acquisition of consumer requirements solely
from existing customers in a mutually beneficial exchange usually involving permission for 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 a company 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 relevance to the customer remains higher than that of direct marketing.
However, relationship marketing has less potential for generating new leads than direct marketing and is limited to viral
marketing for acquiring customers.

Conflict and Relationship Marketing

The existing and unresolved conflicts between the various markets and company play a pivotal role in determining long
term success of the company. If any conflict remains unresolved it can lead to complete breakdown of commercial
interactions between all market players. Therefore, it is necessary for the company to align its business process with
relationship marketing strategy. The company has to create culture and formal systems where conflict customer issues
are resolved.

A common understanding between all the players about their role and responsibility through relationship marketing
helps in long term value for the customer.

Customer Value: A customer buys from the firm that offers the highest customer perceived value – the customer’s
evaluation of the difference between all the benefits and all the costs of a marketing offer relative to those competing
offers.

Perceived value describes the buyer’s overall assessment of a product’s utility based on what is received and what is
given. It represents a trade-off between the “give” and the “get” components of a purchase transaction and plays a
critical role in purchase decisions.

Customer defection: Customer defection is also known as Customer attrition, also known as customer churn or
customer turnover is the loss of clients or customers or customers end their relationship with a company (1). Most
businesses classify a customer as churned after a certain period of time when the customer has not interacted with or
purchased from the company. Service-based businesses that are largely driven by promotional offers - like cellphone
and Internet service providers - are perhaps most affected by customer attrition. However, any business that depends on
revenue from continued relationships with consumers should give close scrutiny to this key growth metric.
Reasons for Customer Defection:

 Price: This one seems fairly obvious, but for a variety reasons can be difficult to understand why a customer would
choose someone over your product or service; especially, when, all things considered, you are both offering
comparable items or services.
 Inconvenience: Location of your business is critical in attracting and retaining customers. This holds true for you
and your employees as well.
 Product Failures: Not too surprisingly, this is a major reason for customers to stop coming to your company
completely. Quality control is critical in the opinion of most consumers.
 Employee Responses to Service Failures: How your employees (and you for that matter) handle mistakes,
shortcomings, or poor quality of a job performed will directly influence how your customers consider doing
business with you in the future.
 Ethical Problems: Fairness in your dealing with customers will always payoff in terms of customer satisfaction. Any
sleight perceived by your customers can be cause for defection.
 Involuntary Effects: Sometimes bad things happen for no good reason. Life is like that on occasion. Good luck and
continue on as best you can.
 Competition: Free enterprise has proven to be one of the greatest inventions of the modern world; however, it can
cause us to stay up at night.
 Service Failures: Delays in deliveries, misunderstandings, and a whole range of other mistakes fall into this
category.

Customer Loyalty

Customer loyalty indicates the extent to which customers are devoted to a company’s products or services and how
strong is their tendency to select one brand over the competition.

Customer loyalty is positively related to customer satisfaction as happy customers consistently favor the brands that
meet their needs. Loyal customers are purchasing a firm’s products or services exclusively, and they are not willing to
switch their preferences over a competitive firm.

Loyalty programs are structured marketing strategies designed by merchants to encourage customers to continue to
shop at or use the services of businesses associated with each program. These programs exist covering most types of
commerce, each one having varying features and rewards-schemes.