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With finite resources, is it better to attract new customers or try to hold onto the ones they already have? No company can survive and grow if they are not constantly adding to their customer base. Many companies separate the two functions and dedicate different areas of their marketing department to work on one or the other.
New customers are considered transactional because the goal is to get them to buy, while existing customers require different strategies. To retain current customers, businsses engage in relationship marketing strategies to continually attract repeat business. While both types of customer must be acknowledged and respected, the goal, ultimately, is to turn every new customer into a returning customer. What is Relationship Marketing? Relationship marketing is about forming long-term relationships with customers.
Rather than trying to encourage a one-time sale, relationship marketing tries to foster customer loyalty by providing exemplary products and services.
This is different than most normal advertising practices that focus on a single transaction; watch ad A and buy product B.The Relationship Block
Relationship marketing, by contrast, is usually not linked to a single product or offer. It involves a company refining the way they do business in order to maximize the value of that relationship for the customer.
Respect that feedback and incorporate it into the company's business practices. Use any and all social media outlets to connect with customers.
Have effective customer monitoring technologies in place. Use clear policies to dictate how all company employees should interact with customers in both positive and negative situations.
Leverage the value of warm leads — customers who have already expressed an interest in the company. Have a comprehensive customer relationship management strategy. Conduct regular training sessions for all members of staff. Stay on the cutting edge of product offerings.
5 Reasons Why Relationship Marketing is Important in Business
Do not sacrifice quality for innovativeness. Maintain a high customer satisfaction rate in all areas of the company. Make an effort to inform customers how much they are appreciated. Relationship marketing mainly involves the improvement of internal operations. Many customers leave a company not because they didn't like the product, but because they were frustrated with the customer service.
Chances are the answer is a big NO. However, as business owners, this means that we MUST go that extra mile to consistently create our know, like and trust factor.
To do this, it is important that we are consistently active on our social media platforms, website, and offline networking. Ask a fellow entrepreneur to look at your social media postings and rate them for content, connection and consistency. The feedback can help you take your Know Like Trust Factor to a whole new level! Word of Mouth Referrals When it comes to owning your own business, word of mouth referrals are gold. This is key to remember because customers rarely purchase products or services solely based on the products intended result.
The answer includes all of the feelings and desires that come with that product and the results. By building your relationship marketing skills, you fulfill those additional needs.
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 desire for the product or service. Relationship marketing revolves around the concept of gaining loyal customers.
Research conducted to developing relationship marketing suggests that firms can best do this through having one of the three value strategies; best price, best product, or best service.
Firms can relay their relationship marketing message through value statements. For example, an automobile manufacturer maintaining a database of when and how repeat customers buy their products, the options they choose, the way they finance the purchase etc. In web applications, the consumer shopping profile can be 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, email recommendation and other channels. Relationship marketing has also migrated back into direct mail, allowing marketers to take advantage of the technological capabilities of digital, toner-based printing presses to produce unique, personalized pieces for each recipient through a technique called " variable data printing ".
5 Reasons Why Relationship Marketing is Important in Business
Marketers can personalize documents by any information contained in their databases, including name, address, demographics, purchase history, 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 relevance of the piece and increasing the response rate. Scope[ edit ] Relationship marketing has also been strongly influenced by reengineering.
According to process reengineering theory, organizations should be structured according to complete tasks and processes rather than functions. That is, cross-functional teams should be responsible for a whole process, from beginning to end, rather than having the work go from one functional department to another.
Traditional marketing is said to use the functional or 'silo' department approach. The legacy of this can still be seen in the traditional four P's of the marketing mix. Pricingproduct managementpromotionand placement. According to Gordonthe marketing mix approach is too limited to provide a usable framework for assessing and developing customer relationships in many industries and should be replaced by the relationship marketing 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 call relationship marketing "relationship management" in recognition of the fact that it involves much more than that which is normally included in marketing.
Because of its broad scope, relationship marketing can be effective in many contexts. As well as being relevant to 'for profit' businesses, research indicates that relationship marketing can be useful for organizations in the voluntary sector  and also in the public sector.
Satisfaction[ edit ] Relationship marketing relies upon 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. 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 is limited to Viral marketing for the acquisition of further customers.
Research by John Fleming and Jim Asplund indicates that engaged customers generate 1.
Relationship Marketing | What is Relationship Marketing?
According to Buchanan and Gilles,  the increased profitability associated with customer retention efforts occurs because of several factors that occur once a relationship has been established with a customer. The cost of acquisition occurs only at the beginning of a relationship, so the longer the relationship, the lower the amortized cost. Account maintenance costs decline as a percentage of total costs or as a percentage of revenue.
Long-term customers tend to be less inclined to switch, and also tend to be less price sensitive. This can result in stable unit sales volume and increases in dollar-sales volume.
Long-term customers may initiate free word of mouth promotions and referrals. Long-term customers are more likely to purchase ancillary products and high margin supplemental products. Customers that stay with you tend to be satisfied with the relationship and are less likely to switch to competitors, making it difficult for competitors to enter the market or gain market share.
Regular customers tend to be less expensive to service because they are familiar with the process, require less "education", and are consistent in their order placement. Increased customer retention and loyalty makes the employees' jobs easier and more satisfying.
In turn, happy employees feed back into better customer satisfaction in a virtuous circle. Relationship marketers speak of the "relationship ladder of customer loyalty ".