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Ch-13

Relationship Marketing

Chapter

13

Relationship Marketing

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Ch-13 Introduction

Relationship Marketing

The use of the term relationship marketing suggests that deliberate efforts are being made to retain customers, provide effective communication with them and use different approaches to marketing that are:    Based on development of two way communication between suppliers and Affordable by technology Usually guided by highly technical analysis of customer purchasing and profitability. customers

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Definition of Relationship Marketing   The term relationship marketing was first coined in America in the early It has no single, agreed meaning, most definitions have common factors Association (1995). manage a or other 1980s. defined in

the dictionary of marketing terms of American Marketing 

Relationship Marketing is marketing with the conscious aim to develop and suppliers,

long-term and/or trusting relationship with customers, distributors, parties in the marketing environment.  Pathmarajah (1993) has defined relationship marketing as the process

whereby mutually profitable

the seller and the buyer join in a strong personal, professional and relationship over time.

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Relationship Marketing

Why Relationship Marketing? Because of the deregulation policies of the government and competition because of internationalization, many industries have faced far reaching effects on the competitive environment like:  The ability to replicate physical products at lower and lower costs has facilitated price undercutting by domestic and international competitors. This encouraged many manufacturers to augment their physical products with services in order to compete and even to survive. Many large firms have been transformed from predominantly manufacturing organizations into predominantly service organizations by bundling services with products.  The need to keep existing customers became a priority in the face of intense competition and the higher comparative marketing costs of acquiring new customers.  Increased competition and deregulation in many service-dominated industries has resulted in emphasis on service quality as a means of achieving a competitive advantage.

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Ch-13

Relationship Marketing

5 Es of Relationship Marketing
Relationship marketing is characterized as having the following properties:      Effective Efficient Enjoyable Enthusiastic Ethical.

Companies which are genuinely committed to the 5 Es are far less common than one may expect, but those who are aim to  Offer the most value, personally and professionally better  Become a unique source in helping the buyer build something better, e.g. peace of mind

 Become a partner with the buyer in his or her objective and establish a longterm trusting relationship with the buyer. Cont. Copyright 2010, S L Gupta
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Relationship Marketing

Levitt has opined that sale transaction should be regarded as a start rather than an end of relationship. As shown in the table below, even now, many firms reaction to a sale is the exact opposite of the customer.
Seller  Objective achieved  Selling stops  Focus goes elsewhere Buyer  Judgement postponed; applies test of time  Shopping continues  Focus on purchase; wants affirmation that expectations have been met  Tension released  Relationship reduced or ended  Tension increased  Commitment made; relationship intensified.

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Relationship Marketing

In fact, even today, many firms still practice transactional marketing rather than relationship marketing. Pathmarajah has provided a summary of the key differences in two approaches

Transactional Marketing  Do the deal and disappear  Push price  Short-term thinking and acting  Building the business on deals  Getting new customers  No structure for on-going business  Selling focused  Short-term empathy

Relationship Marketing  Negotiate a win-win sale situation and stay around, being a resource for better result  Promote value  Long-term thinking and acting  Building the business on relationships  Keeping all customers and clients  Structure created to support business relationship; special club and memberships for frequent users/buyers  Relationship focused for results  Long term empathy and rapport
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 Short-term empathy  Incentive for doing the deal  Foundation of sale telling and selling  Race for a sale result  After-sales support and service poor seen as cost  Product-service focused  Rewards-incentive for doing deals  The deal is the end. Pursuit of deals.

 Long-term empathy and rapport  Incentive for long-term relationships and revenue  Foundation for revenue trust selling  Swift, strong, safe and enduring in results through relationship building  After-sale support and service seen as an investment in the relationship  People expectations and perception focused  Rewards incentives for maintaining and growing relationship and revenue  The sale just the beginning. Pursuit of long-term relationship and result.

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Application of Relationship Marketing

The relationship marketing concept varies with the customer, as some are more disposed towards it than others. Jacksons identification of three type of customers was based on the time horizon within which a customer makes a commitment to a vendor and also the actual pattern that the relationship follows over time. The three types of customers identified are:    The lost-for-good customers The always-a-share customer The intermediate type.

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Marketing Strategy Continuum

Transaction marketing is common to the consumer packaged goods sector but as a company is forced to become more service oriented in approach, relationship marketing increasingly displaces transactions based marketing. The driving force behind this displacement are     Better or more diverse technologies Growing consumer satisfaction Customers access to more options Competition.

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Marketing Strategy Continuum Marketing strategy continuum Dominating marketing function Quality dimension most important for competitive advantage Price sensitivity Interface between marketing and other functions e.g. operations and personnel Typical marketing situations continuum Transaction Marketing Traditional marketing mix dominated Outcome-related technical quality dominating Customers very price sensitive Limited or nonexistent; interface of no significant strategic importance Relationship Marketing Interactive marketing dominated Process-related functional quality dominating Customers less price sensitive Substantial interface of strategic importance

Consumer packaged marketing

Consumer durables marketing

Industrial goods marketing

Services marketing

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Customer Relationship Management

Customer Relationship Management is mainly oriented towards customer loyalty. CRM helps customers to get information at any time from any source. Implementation of CRM helps in getting feedback from customer whether it is positive or negative. Providing all the information to the customers is a complicated process but essential part of CRM. Customer Services Capabilities  Call Center Management:    Provide automated, end-to-end call routing and tracking Capture customer feedback information for performance Measurement, quality control, and product development
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Field Service Management:  Allocate, schedule, and dispatch the right people, with the right parts, at the right time     Log materials, expenses, and time associated with service Orders View customer history Search for proven solutions

Help Desk Management:    Solve the problem by searching the existing knowledge base Initiate, modify, and track problem reports Provide updates, patches, and new versions
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Objectives of CRM  The main objectives to increase the volume of business between seller and buyer for

the performance of marketing strategies and tactics. CRM is a beyond increasing sales volume.  

business strategy that goes

Its objectives are to ease profitability, sales volume, and customer loyalty. CRM is a business process strategy which is use to achieve the greater
Customer

customers

satisfaction and loyalty. CRM consists of three components:   

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customer, relationship
Relationship CRM Management
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Basic questions that CRM tries to answer are: 1. 2. 3. 4. Customer Identification Customer Differentiation Customer interaction Customization/Personalization

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Principles of CRM

Relationship Marketing

The Applications of CRM are based on the following basic principles.  Treat Customer Individually: CRM is based on philosophy of behaviour. Continuous personalization.

Personalization means the 'content and services to customer preferences and 

customer should be designed based on

Acquire and Retain Customer Loyalty through Personal Relationship:

contacts with the customer especially when designed to meet create customer loyalty. 

customer preferences - can

Select "Good" Customer instead of "Bad" Customer based on Lifetime

Value:

Find and keep the right customers who generate the most profits.
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Customer Relationship Marketing Customer Relationship Marketing (CRM) is the foundation of relationship marketing. In Extension, the goal of CRM is to convert the target audience into loyalists and loyalists into enthusiasts, advocates, and donors. Here is a useful strategy:  Step 1 Identify the diverse customers to whom you would like to establish a  Step 2 relationship.

Find out the customers who are favourable towards your organization then you will have to keep maintaining a good relationship with that customers by keeping in touch with them through impersonal marketing techniques like mailings, etc.

Cont.

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Ch-13
Step 3

Relationship Marketing

Actively solicit the increased participation and involvement of community which will foster greater loyalty to the program.  Step 4 Encourage greater support from community members. Loyal individuals are to advocate for the program and/or donate resources to the takes time and attention, Relationship marketing must be nurtured.

members,

more likely

program. Each of these steps

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1. 2.

Ch-13

Relationship Marketing

Customer Relationship
There are higher marketing costs associated with generating interest in new customers. Close and long-term relationships with customers imply continuing exchange opportunities with existing customers at a lower marketing cost per customer (Gronroos, 1990b). Reichheld and Sassier observe: compendium of

3. Viewing customer exchanges as a revenue stream, as opposed to a isolated transactions.

4. Strong customer relationships with a high degree of familiarity and communications on both sides can generate more practical new product ideas from customers and contact personnel (Kiess-Moser and Barnes, 1992). 5. Good relationships with customers can result in a good word-of-mouth from successful exchanges and minimal bad word-of-mouth in the event of unsuccessful exchanges.

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