What is Relationship Marketing?

Description

Relationship Marketing is an approach which emphasizes the continuing relationships

that should exist between the organization and its customers. It emphasizes the
importance of customer service and quality and of developing a series of transactions
with consumers. The terminology was first described by Theodore Levitt in 1983.

Origin of the Relationship Marketing Approach. History

Already in 1980, B. Schneider wrote: What is surprising is that researchers and

businessmen have concentrated far more on how to attract customers to products and
services than on retaining customers. In 1983 Levitt wrote: In a great and increasing
proportion of transactions, the relationship actually intensifies subsequent to the sale.
This becomes a central factor in the buyer's choice of the seller the next time.

Relationship Marketing is strongly linked to Business Process Reengineering. According

to this reengineering theory, organizations should be structured according to complete
tasks and processes. Rather than functions.

Usage of Relationship Marketing. Applications

Relationship marketing and traditional transactional marketing are not mutually exclusive
and they are not necessarily in conflict with each other. Relationship Marketing may be
more suitable in the following circumstances or situations:

• High value products or services.

• Industrial products.
• Products are not generic commodities.
• Switching costs are high.
• Customers prefer a continuous relation.
• There is customer involvement in the production phase. See: Co-Creation.

Steps in the Relationship Marketing Process

1. Chart the service delivery system. Set standards for each part of the system,
especially the 'encounter points'.
2. Identify critical service issues.
3. Set service standards for all aspects of service delivery.
4. Develop customer communication systems.
5. Train employees on building and maintaining a good relationship with clients.
6. Monitor service standards, reward staff for exceeding service levels, correct sub-
standard service levels.
 7. Ensure that each employee fully understands the importance of quality and
relationships in the marketing philosophy.

Strengths of Relationship Marketing. Benefits

• Focus on providing value to customers.

• Emphasis on customer retention.
• The method is an integrated approach to marketing, service and quality. Therefore
it provides a better basis for achieving Competitive Advantage.
• Studies in several industries show that the costs to keep an existing customer are
just a fraction of the costs to acquire a new customer. So often it makes economic
sense to pay more attention to existing customers.
• Long-term customers may initiate free word of mouth promotions and referrals.
• Long-term customers are less likely to switch to competitors. This makes it more
difficult for competitors to enter the market.
• Happier customers may lead to happier employees.

Limitations of the Relationship Marketing model. Disadvantages

Relationship Marketing is less appropriate in the following circumstances:

• Relatively low value products or services.

• Consumer products.
• Generic commodities.
• Switching costs are low.
• Clients prefer a single transaction to relationships.
• No / low customer involvement in production.

Customer relationship management is a broadly recognized, widely-implemented

strategy for managing and nurturing a company’s interactions with clients and sales
prospects. It involves using technology to organize, automate, and synchronize business
processes—principally sales activities, but also those for marketing, customer service,
and technical support. The overall goals are to find, attract, and win new clients, nurture
and retain those the company already has, entice former clients back into the fold, and
reduce the costs of marketing and client service. [1] Once simply a label for a category of
software tools, today, it generally denotes a company-wide business strategy embracing
all client-facing departments and even beyond. When an implementation is effective,
people, processes, and technology work in synergy to increase profitability, and reduce
operational costs

Find out how the CRM process works

The CRM process is the most influential customer oriented strategy of the decade.
Despite its humble origins it has evolved into a relatively complex strategy. The
essentials of a CRM program include focus,
commitment to CRM goals and above all a desire to be customer focused.
Here's how the CRM process actually works in an organization.

A look at the steps in the CRM process

1. Establishing CRM goals
2. Educating other departments
3. Assembling customer information
4. Designing the data model
5. Vendor study
6. Selecting the CRM solution
7. Establishing authority & responsibility
8. Pilot projects
9. Communication with customers through direct mail , electronic
10. mail etc
11. Customer surveys
12. Customer satisfaction program
13. Collection of customer information
14. Provision of customer information to employees
15. Usage of customer information in the business activities
16. Feedback
17. Analyze
18. Documenting a new process
19. Implementing final methodology