Relationship Marketing is targeted at building stronger and
long lasting relationships with clients and other companies. The business 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 relationship, they are drawn closer. This marketing not only
focuses on building relationship 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 customer. Leonard Berry and
Jag Sheth originated this marketing, in 1982. It was started in B2B markets and
industries, which involved long term contracts for many years. Over the 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 selection decision. In such a kind of 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 attention on as the main attention was on
customer satisfaction. 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 to 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 sufficient number of existing customers is
retained, there will be no need of acquiring new customers.
Once the customer trust is gained his chances of switching
to other 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 he is
satisfied with the company he will recommend it to his 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 also and making them feel more satisfied with their
jobs. The customers are divided into groups based on their loyalty. This
procedure is known as relationship ladder of customer loyalty. The groups in
ascending order are prospects, customer, client, supporter, advocate and
partner.
Due to the advancement in computers and 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.
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