Relationship marketing: Difference between revisions

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'''Relationship marketing''' is a form of marketing developed from [[Direct marketing#Direct response marketing|direct response marketing]] campaigns that emphasizes [[customer retention]] and [[customer satisfaction|satisfaction]] rather than sales transactions.<ref>{{Cite web|url=http://www.businessdictionary.com/definition/relationship-marketing.html|title=What is relationship marketing? definition and meaning|website=BusinessDictionary.com|language=en|access-date=2018-02-21}}</ref><ref>{{Cite journal|last=Berry|first=Leonard L.|date=2002|title=Relationship Marketing of Services Perspectives from 1983 and 2000|journal=Journal of Relationship Marketing|volume=1|issue=1|pages=59–77|doi=10.1300/j366v01n01_05|s2cid=167676460|issn=1533-2667}}</ref> It differentiates from other forms of marketing in that it recognises the long-term value of [[customer relationship management|customer relationships]] and extends communication beyond intrusive [[advertising]] and sales promotional messages.<ref>{{Cite book|url=https://books.google.com/books?id=QwJtPgAACAAJ|title=Relationship Marketing|last=Palmatier|first=Robert W.|date=2008-01-01|publisher=Marketing Science Institute|isbn=978-0-9657114-9-4|language=en}}</ref> With the growth of the Internet and mobile platforms, relationship marketing has continued to evolve as technology opens more collaborative and social communication channels such as tools for managing relationships with customers that go beyond demographics and customer service data collection. Relationship marketing extends to include [[inbound marketing]], a combination of [[search engine optimization|search optimization]] and strategic content, [[public relations]], social media and application development.

Relationship marketing refers to an arrangement where both the buyer and seller have an interest in a more satisfying exchange. This approach aims to transcend the post-purchase-exchange process with a customer in order to make richer contact by providing a more [[personalization|personalised]] purchase, and using the experience to create stronger ties. A main focus on a long-term relationship with customers differentiates relationship marketing from other marketing techniques.

The technique was first proposed by American marketing scholars Berry (1983) and Jackson (1985). Berry (1983) argued in a conference about the field of service marketing that relationship marketing is a marketing activity for enterprises to obtain, maintain and promote effective relationships with customers. After a long-term study on the marketing process of the service industry, it was concluded that the ultimate goal of enterprise marketing is not only to develop new customers but also to focus on maintaining existing customers. Ultimately, the goal is to improve the long-term interests of both parties through cooperative relationships. The study also argues that the cost of maintaining an old customer is far lower than the cost of developing a new customer and that maintaining a relationship with old consumers is more economical than developing new customers. Jackson (1985) further modified the concept in the aspect of industry marketing. He argued that the essence of relationship marketing is to attract, establish and maintain a close relationship with enterprise customers. Furthermore, other studies have concluded that the essence of relationship marketing is the actual maintenance of existing customers, which creates long-term interest in a product. This research conclusion has been generally recognised aftersince the original proposal offor relationship marketing. The research scope, however, is limited to the relationship with old customers, easily ignoring the dynamic development of customers because long-term customers are developed from new customers. If an enterprise is restricted to the maintenance of existing customers, it is impossible for it to achieve any progress or compete in the market since it cannot attract long-term customers in the first place.

From a [[Social anthropology|social anthropological]] perspective, relationship marketing theory and practice can be interpreted as [[Gift economy#Spheres of exchange and '"economic systems'"|commodity exchange]] that instrumentalises features of [[Gift economy|gift exchange]].<ref>Rus, Andrej (2008).[http://www.drustvo-antropologov.si/AN/PDF/2008_1/Anthropological_Notebooks_XIV_1_Rus.pdf "'Gift vs. commoditiy<!--sic-->' debate revisited". Anthropological Notebooks 14 (1): 81–102.]</ref> Marketers, consciously or intuitively, are recognizing [[Reciprocity (cultural anthropology)|reciprocity]], a 'pre-modern' form of exchange, and have begun to use it.

Thus, relationship marketing revolves around gaining loyal customers. According to Liam Alvey, relationship marketing can be applied where there are competitive product alternatives for customers to choose from and an ongoing desire for that product.<ref>{{cite book|title=Relationship Marketing|last=Berry|first=Leonard|publisher=American Marketing Association, Chicago|year=1983|isbn=978-0-87757-161-2|location=|page=146|doi=10.1177/009207039502300402|s2cid=167253869}}</ref> Research studying relationship marketing suggests that companies can do this through one of the three value strategies: best price, best product or best service. Hence companies can relay their relationship marketing message through value statements.<ref>{{Cite book|title=Marketing The Core|last=Kerin|first=Roger|publisher=McGraw-Hill Ryerson|year=2018|isbn=978-1-259-71236-4|location=|pages=12}}</ref>

The practice of relationship marketing has been facilitated by several generations of customer relationship management software, which track and analyze each customer's preferences and activities. For example, an automobile manufacturer maintaining a database of when and how repeat customers buy their products, including data concerning their choices and purchase financing, can more efficiently develop one-to-one marketing offers and product benefits. Moreover, extensive use of such software is found in web applications. A consumer shopping profile can be built as a person shops online and is then used to compute his likely preferences. These curated and predicted offerings can then be presented to the customer through cross-sell, email recommendation and other channels.

In contrast, relationship marketing is cross-functional, organised around processes that involve all aspects of an organization.<ref>{{Cite journal |last=Hutt |first=Michael D. |date=1995 |title=Cross-functional working relationships in marketing |url=http://link.springer.com/10.1007/BF02893875 |journal=Journal of the Academy of Marketing Science |language=en |volume=23 |issue=4 |pages=351–357 |doi=10.1007/BF02893875 |s2cid=189888025 |issn=0092-0703}}</ref> In fact, some commentators prefer to call relationship marketing 'relationship management' because it involves much more than that which is included in normal 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<ref>Bussell, H., &and Forbes, D. (2006). "[https://www.tandfonline.com/doi/abs/10.1300/J054v15n01_08 Developing relationship marketing in the voluntary sector]". ''Journal of Nonprofit & Public Sector Marketing'', 15(1–2), 151–174. {{doi|10.1300/J054v15n01_08}}.</ref> and in the public sector.<ref>Gillett, A. G. (2015). "[https://pure.york.ac.uk/portal/en/publications/remarkor(633e88dd-c498-4034-925c-7f24c62693ab)/export.html REMARKOR: RELATIONSHIPRelationship MARKETINGMarketing ORIENTATIONOrientation ONon LOCALLocal GOVERNMENTGovernment PERFORMANCEPerformance]". ''Journal of Services Research'', 15(1), 97.</ref><ref>Gillett, A.G. (2016). MULTIPLEMultiple RELATIONSHIPSrelationships WITHwith MULTIPLEmultiple STAKEHOLDERSstakeholders: THEthe SCOPEscope OFof RELATIONSHIPrelationship MARKETINGmarketing FORfor PUBLICpublic SERVICESservices. Journal of Services Research, 16(2), pp. 1–28.</ref>

Martin Christopher, Adrian Payne and David Ballantyne at the [[Cranfield School of Management]] claim that relationship marketing has the potential to forge a synthesis between quality management, customer service management and marketing.<ref name="Christopher M., Payne, A. and Ballantyne, D. 1991 264">{{cite book | title = Relationship Marketing | publisher=Butterworth-Heinemann, Oxford | year = 1991 | page = 264 | author last1= Christopher |first1=M., |last2=Payne, |first2=A. and |last3=Ballantyne, |first3=D. | isbn=978-0-7506-4839-4 }}</ref>

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.<ref name="gale_1">Gale, B.T., Chapman., R.W. (1994) ''Managing Customer Value: Creating Quality and Service That Customers Can See'' New York: Free Press</ref> 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.{{citation needed|date=June 2016}}

[[Fred Reichheld|Reichheld]] and Sasser (1990) claim that a 5% improvement in [[customer retention]] can cause an increase in profitability of between 25 and 85 percent in terms of [[net present value]] depending on the industry.<ref>Reichheld, F. and Sasser, W. (1990) "Zero defects: quality comes to services", ''Harvard Business Review'', Sept–Oct, 1990, pp 105–111</ref> However, Carrol and Reichheld dispute these calculations, claiming that they result from faulty cross-sectional analysis.<ref>Carrol, P. and Reichheld, F. (1992) "The fallacy of customer retention", Journal of Retail Banking, vol 13, no 4, 1992</ref> Research by John Fleming and Jim Asplund indicates that engaged customers generate 1.7 times more revenue than normal customers while having engaged employees and engaged customers returns a revenue gain of 3.4 times the normal return.<ref>{{cite web |title=Stage 4: How to Retain Your Profitable Customers |url=https://www.greenbook.org/marketing-research/stage-4-how-to-retain-your-profitable-customers-34754 |website=GreenBook |accessdateaccess-date=20 August 2019}}</ref>

* The cost of acquisition occurs only at the beginning of a relationship. The longer a relationship, the lower the [[amortization (accounting)|amortised]] cost.

Retention strategies may also include building barriers to [[customer switching]] by [[product bundling]] (combining several products or services into one package and offering them at a single price), [[cross-selling]] (selling related products to current customers), cross-promotions (giving discounts or other [[sales promotion|promotional incentives]] to purchasers of related products), [[Loyaltyloyalty program|loyalty programs]]s (giving incentives for frequent purchases), increasing switching costs (adding termination costs such as mortgage termination fees), and integrating computer systems of multiple organizations (primarily in industrial marketing).

Christopher, Payne and Ballantyne (1991) identify six markets thatwhich they claim tonote beas central to relationship marketing: internal markets, supplier markets, recruitment markets, referral markets, influence markets and customer markets.<ref name="Christopher M., Payne, A. and Ballantyne, D. 1991 264"/> They refer to Berry's work (1983), which drew attention to the need to engage with internal stakeholders such as employees to ensure that they are capable and willing to deliver the value proposition on offer.<ref>Berry, L. L. (1983), "Relationship Marketing", in Berry, L. L., Shostack, G. L. and Upah, G. D. (eds), ''Emerging Perspectives on Services Marketing'', Chicago, IL: American Marketing Association, pp. 25–8</ref> [[Referral marketing]] is the development and implementation of a marketing plan in order to stimulate referrals. Marketing to suppliers is aimed at ensuring a long-term conflict-free relationship in which all parties understand the others' needs and exceed their expectations. Such a strategy can reduce costs and improve quality. Meanwhile, [[Influencer marketing|Influence markets]] involve a wide range of sub-markets, including government regulators, standards bodies, lobbyists, stockholders, bankers, venture capitalists, financial analysts, stockbrokers, consumer associations, environmental associations and labor associations. These activities are typically carried out by the [[public relations]] department, but relationship marketers believe that marketing to all six markets is the responsibility of everyone in an organization. Each market may require its own explicit strategies and [[marketing mix]].

Live-in marketing (LIM) is a variant of marketing and advertising in which the target consumer is allowed to sample or use a product in a relaxed atmosphere over a long period of time. Much like product placement in film and television, LIM was developed as a means to reach select target demographics in a non-invasive and much less garish manner than traditional advertising. While LIM represents an entirely untapped avenue of marketing, it is not an entirely novel idea. With the rising popularity of experiential and event marketing in North America and Europe and the relatively high ROI in terms of advertising dollars spent on experiential marketing compared to traditional big media advertising, industry analysts see LIM as a natural progression.<ref>Ad, Marketing Spending to rise 3.9% in 2008, Media Post, Erik Sass 16 July 2008</ref>