Relationship Marketing Will Increase Customer Ranking

Terry Detty

March 19, 2008


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Relationship Marketing is done with a strategic orientation, where the relationship is improved with existing customers rather than finding new customers. It is meant to cater to the needs of individual customers. Its major part involves studying the need of the customer and how it changes in different circumstances.

Relationship marketing applies techniques like marketing, sales, customer care and communication. The relationship is not only enhanced, but its life period is increased by these strategies. And as the customer realizes the value of this relationship, they are drawn closer. This type of marketing not only focuses on building relationships and attracting customers to their products and services, but also how to retain them.

A raw form of Marketing came into existence in the 1960s. But, organizations were still facing difficulty in selling products, so a system was developed to sell low cost goods to larger group of customers. Leonard Berry and Jag Sheth originated this marketing system in 1982. It was started in B2B markets and industries, which involved long term contracts for many years. Over a period of time, various marketing strategies were improved and relationship marketing was one of them.

Relationship marketing is applicable where the customers have many options in the market for the same product or service and the customer is entitled to make a selective decision. In such a market, businesses try to maintain their clients by providing comparatively better products and good service and hence, achieving customer loyalty. And once it is achieved, it becomes difficult for competitors to do well in the market. The customer turnover wasn't paid as much attention to, as the customer satisfaction was. This kind of marketing was initially named as defensive marketing. Offensive marketing is the marketing strategy where not only new customers are attracted, but also the sales are stepped up by increasing the purchase frequency. This kind of marketing concentrates on freeing dissatisfied customers and acquiring new customers.

According to a research, the cost of retaining an old customer is only ten percent of the cost of getting a new customer, which makes sense not to run around to get new customers in relationship marketing. And according to another research done by cross-sectional analysis, says that, a five percent improvement in customer retention is responsible for twenty-five to eighty-five percent of the profit. Usually high cost is incurred when getting new customers, so if a sufficient number of existing customers is retained, there will be no need of acquiring new customers.

Once the customer trust is gained, their chances of switching to another company becomes relatively less. He buys goods in bulk, he buys other supplementary goods and he starts neglecting average price variation. This maintains the unit sales volume and there is an increase in dollar-sales volume. The existing customers will be like a living advertisement. If they are satisfied with the company, they will recommend it to their friends and acquaintances.

Since the existing customers are familiar with the process, it will take less time and money to educate them about the procedures, putting fewer burdens on employees and also making them feel more satisfied with their jobs. The customers are divided into groups based on their loyalty. This procedure is known as the relationship ladder of customer loyalty. These groups in ascending order are prospects, customer, client, supporter, advocate and partner.

Due to the advancement in computers and the Internet, software has been developed to facilitate customer relationship management. With the help of this software, the tastes, activities, preferences, and complaints of customers are tracked. Almost all the companies have this software in their marketing strategy, which benefits the customer as well as the company.

Thus the main aim of relationship marketing is to construct and maintain relationship with committed clients who are meant to bring profit to the company. The other benefits achieved are confidence building and social benefits.