Relationship Marketing

Session 2

Relationship Marketing
Relationship Marketing is A philosophy of doing business, a strategic orientation that focuses on keeping and improving current customers, rather than on acquiring new customers. The development and maintenance of longterm, cost-effective relationships with individual customers, suppliers, employees, and other partners, perhaps even with competitors, for mutual benefit.

Why to study Relationship Marketing?

 

Companies changed their focus from TRANSACTION to RELATIONSHIP for longer term customer retention. In addition, they are concerned about OTHER MARKETS that includes
Suppliers Potential employees Opinion leaders & influencers Referrals Internal people

Integration of
Marketing activities, Customer Service and Quality Standards helps achieving stable Relationship Marketing orientation.

Goals of Relationship Marketing

To build & maintain a base of committed customers who are profitable for the Organization
Enhancing Retaining Satisfying Getting

 Attract them first through Market Segmentation, the loyal customers then will attract newer ones by their word-of-mouth,  Retain them by responding their changing needs, and constantly improving & evolving the product mix,


Enhance relationship by selling more products to them.

Benefits for Customers  Confidence Benefits: Feelings of trust in provider, reduced anxiety, great comfort in knowing what to expect.  Social Benefits: A sense of familiarity, social relationship with providers.  Special Treatment Benefits: Getting benefit of the doubt, a special deal or price, preferential treatment.

Benefits for the Organization

 Increasing

Sells  Free Advertising through word-of-mouth

Customer Satisfaction

Lower

Costs

Employee

Retention

Customer Retention And Increased Profits

Quality Services

Employee Loyalty

Transaction & Relationship Marketing

Transaction-based marketing involves limited communications between buyer & seller and little or no ongoing relationship between the parties.

Transaction vs. Relationship

Characteristic Focus orientation Time Customer service priority Customer contact quality concern Transaction Marketing Single-sell Product feature Short-term Relatively low Relationship Marketing Customer Retention Product benefit Long-term Key component

Low to moderate Moderate

Frequent High

Degree of customer commitment

Low

High

Four Dimensions Marketing Relationships

Bonding: Bonding: two parties must bond to one another in order to develop a long-term longrelationship. In other words, mutual interests or dependencies between the parties must be strong enough to tie them together.

Empathy: Empathy: the ability to see situations from the perspective of the other party. party. Empathy is another key emotional link in the development of relationships.

Four Dimensions Marketing Relationships

Reciprocity: every long-term relationship Reciprocity: longincludes some give-and-take between the give-andparties. This process, termed reciprocity, becomes a web of commitments among the parties in the relationship binding them ever relationship closer together

Trust: Trust: reflects the extent of one partys confidence in another partys integrity. When parties follow-through on followcommitments, they enhance trust and strengthen relationships. When parties do not follow-through on followcommitments, the opposite is true.

Lifetime Value of a Customer

Life-time Revenue and thus the Profitability of the Customer to the Organization.
 

Length of average lifetime

Average revenues generated per relevant time period over the lifetime
 

Sales of additional products over time

Referrals generated by the customer over time

Lifetime Value of a Customer

If 10-persons organization had Tk. 1000 per month business for the organization, assuming 10 year lifetime for a customer, the value of the customer to the organization will become:
Tk. 1000/month X 12/year X 10 years = Tk. 120,000

If the happy customer creates at least one new customer via word-of-mouth,
Tk. 120,000 X 2 new customers = Tk. 240,000

If an average sales person serves 50 customers each day,

Tk. 240,000 X 50 Companies = Tk. 12,000,000

Thus an average employee of the organization is managing a Tk. 12,000,000 portfolio of lifetime business for the organization.

Markets to Concentrate
 Customer

Markets (Satisfaction vs. DELIGHT)

 Referral Markets (insurance, real estate, law firms, both customers)  Supplier

Markets (vendorship partnership, coMarkets

makership, reverse marketing)

 Recruitment  Influence  Internal

Markets

Markets

Customer Relationship Management (CRM)

Establishing & Maintaining a Customer Information File  Blue-printing or Planning Customer Contact Points  Analyzing Informal Customer Feedback  Conducting Customer Satisfaction Surveys  Managing Communication Programs  Hosting Special Events Programs for Customers  Auditing and Reclaiming Lost Customers


Customer Information Files

The file will include information on: Current Customers Objective: Prospective Customers Customers are known, Lost Customers thus addressable (Conversion or Loss ratios Customers are acknowledged & can help setting targets) appreciated to build loyalty Customers are satisfied to become loyal & less price sensitive Benefits: Helps determining Lifetime Value of a Customer Helps identifying costs of acquiring & maintaining a customer Helps customer scoring or ranking More Effective & Efficient marketing effort Better use of IT to manage the vast information A dialogue to track & forecast their changing needs Results in new product development

Blue-printing or Planning

Customer Contact Points

  

Core Product/services Expected Product/services Augmented Product/services, with

Confidence Creativity Caring Consideration

Analyzing Informal Customer Feedback

Encouraging Informal Dialogue may:  Tell the marketer if something is wrong in the interaction process and how to resolve  Give marketer opportunity to produce new product ideas, and ways to present existing products in a novel way  Make the prospective customers more interested & less cautious  Make the customer feel more loyal, & committed to doing business with the marketer  Help advertising  Add value

Conducting Customer Satisfaction Surveys

A

deeper understanding of the buyerseller relationship  Focus on delivering high standard customer satisfaction (Delight!)  Front-line-employee judgment

Customer Communication Programs

Set of Priority Communication goals of an organization:  To position the Organization in a distinctive manner  To keep customers informed on what is new  To educate customers about the product/services & usage conditions  To communicate the privilege factors, a sense of individuality and importance  To reaffirm the purchasing decision, & lower post purchase dissonance  To stimulate cross-selling Mostly BY  Individualized letters on new product/service introductions  Special offers for affinity products

Special Events for Customers

 Newsletters  Corporate

Videos  Special Interest Magazine  Invitation to Cultural & Other Events  Affinity Product/Services Introduction

Affinity Programs
 Affinity

programs: a marketing effort sponsored by an organization that solicits responses from individuals who share common interests and activities programs, extra value is created for members and stronger relationships are encouraged cards, with the sponsors a name on the card itself and elsewhere, are a popular form of this marketing technique

 With affinity

 Credit

Lost Customer Programs

 Know

who the lost customers are  Find out why they left  Establish if the problem can be fixed  Apologize if its our own fault  If the problem can be fixed, fix it  If can not, monitor the situation to see if:
Our own abilities change Customers preferences or personnel change

Retention Strategies
Foundation to Retain:
 Quality  Careful

Offered in the Core Service Market Segmentation & Targeting Monitoring of Relationships

 Continuous

Integrated Information System Joint Investment Shared Process & Equipment IV. Structural Bonds

Volume & Frequency Rewards Bundling & Cross-selling

I. Financial Bonds

Stable Pricing

III. Customization Bonds

II. Social Bonds

Customer Intimacy

Retention Strategies

Customer is NOT Always Right

All customer relationship may not be beneficial, and that every customer is not right all the time:

from the Wrong Segment If the customer is NOT Profitable in long-run If the customer is difficult to work with, placing stress on organization and its employees by:
Refusing to follow policies of organization Verbal/physical abuse of employees

Customer