The implications of relationship marketing - Marketing Management

There are far-reaching implications for the marketer associated with the emergence and growth of relationship marketing. RM heightens the need for a more effective two-way communication between the marketer and customers. In B2B markets, electronic data interchange (EDI) systems have facilitated the growth of RM. In consumer markets, direct on-line communications help in developing effective customer relationships.

Marketers and consumer can now communicate on a more personal basis through the Internet. We receive e-mails from organizations with whom we have had some contact and, annoyingly for many, sometimes from those with whom we have not. Most companies have extensive databases on their customers linked to, for example, loyalty card systems that they can ‘mine’ to reveal patterns and preferences in purchasing, giving a more detailed insight into the needs and wants of individual customers which can then be personalized for direct communications.

A second major implication is that everyone in the supplying company, not just marketing, needs to be concerned with generating customer satisfaction. This is an area where RM and customer service overlap and interact. Any failing in customer service inevitably leads to the loss of customers. Like customer service, RM needs an appropriate supportive organizational culture where everyone in the company is seeking to build relationships with customers. This heightens the importance of internal marketing in companies. The notion of total relationship marketing (TRM) is suggested by Zineldin who asserts that the main philosophy behind the TRM approach is to facilitate, create, develop, enhance and continuously improve all internal and external relationships with customers, employees and collaborators.

RM means an organization’s marketing effort should be designed around a series of contacts with customers over time, rather than focused on single transactions. This means that more non-marketing people are involved, and has led to the notion of what Gummesson18 terms the ‘part-time marketer’. Here, non-marketing people are increasingly brought into contact with customers at an operational level. This has always been the case in B2B marketing where, for example, engineers come into direct contact with customers, but with the growth of service industries and markets it is now true for many consumer products where the customer comes into contact with the service provider’s personnel.

Non-sales personnel need to be educated in marketing principles and this has led to the notion of internal marketing whereby all employees are encouraged to develop a customer-oriented perspective, whatever their function and role in the organization. Mele19 suggests TQM is an integrator between production orientation and marketing orientation while Mehra and Ranganathan suggest that TQM should focus on enhancing customer satisfaction.

Combining customer satisfactionand TQM requires new attitudes and approaches by both marketing and non-marketing personnel. In some companies, customers are still seen as being the sole responsibility of marketing, and customer contact by staff from other functional departments is sometimes seen as being counterproductive. RM, however, demands a move away from such rigid demarcations of responsibilities for customers. Some companies have moved to cross-functional multi-disciplinary teams to build relationships with customers.

In industries ranging from cars and computers to jet engines and industrial controls, this inter-functional team approach is useful and it uses RM in the process of developing new products, where close relationships with, and inputs from, customers are essential. A further implication of RM is the way the customer often leads the whole of the marketing process. This notion is central to the original marketing concept, but with RM the marketer makes a conscious effort to encourage customers to explain what is required and the marketer develops an appropriate marketing programme to respond to this.

This process is referred to as reverse marketing. This is prevalent amongst buyers in retail chains like Tesco and Sainsbury’s; buyers source appropriate suppliers and enter into contracts with them; they initiate and often help fund long-term commercial manufacturing relationships such as helping to set up a farmers’ co-operative in an overseas country to grow, process, pack and despatch agricultural products that cannot be grown in the UK.

RM puts greater emphasis on systems for enabling constant tracking and assessment of customer satisfaction and needs. Customer databases and other sources of information on customers are central to its successful implementation. Organizations can access extensive databases on customers. Such data can be analysed for patterns of behaviour and purchasing that help reveal insights into consumers and their needs. In addition, it is now possible to access external sources of information on customers ranging from their credit profile to their driving records and in some cases even their medical histories.

RM potentially affects every element of the marketing mix. As with customer care, the elements of the mix should be used carefully to encourage customers to become, and stay, loyal to the company.

The use of short-term tactics such as special promotional deals, while possibly encouraging new customers, may attract the wrong sort of customer who is not interested in long-term relationships with a supplier or brand. Of all the areas of the marketing mix, it is in the area and process of personal selling that we see some of the most far-reaching implications of a relationship as opposed to a transaction approach to marketing. The following represents just some of the shifts in emphasis and perspectives in the selling process when a company moves towards a RM approach:

  • The salesperson must take a longer-term perspective than that of simply making a one-off sale when dealing with customers.
  • Effective relationship selling requires much more of a team effort not only between individual embers of the sales force, but between the salesperson and other functions in the supplying company.
  • The salesperson must be proactive with customers, calling or visiting customers at times other than when they think the customer is ready to place an order.
  • The salesperson must act as an exchanger of information between his or her own company and the customer, and vice versa.
  • The emphasis must be much more on levels of customer service rather than simply on special deals and attempting to generate sales.

This means that RM requires different skills and attitudes for successful selling. The relationship salesperson must be skilled at listening to customers and interpreting their problems. Moreover, systems for managing and motivating salespersons may need to change. For example, remuneration may need to be geared much more to developing customer loyalty and trust, rather than on immediate one-off sales.

The notion of customer retention is central to the practice of RM. Kotler and Keller discuss three ways in which a company can attempt to build and maintain stronger relationship with existing customers thereby helping to retain them over time:

  1. Adding financial benefits: Essentially this involves rewarding customers financially for being loyal. Loyalty schemes mentioned earlier, such as reward points or air miles, are examples of these types of benefits. There is some debate about the extent to which such schemes actually encourage truly loyal customers, or simply encourage customers who are looking for the best deal or value. The supermarket group Tesco was amongst one of the first retailers in the UK to introduce a loyalty card system. At first, competitors thought that this was a throwback to the 1960s when consumers were offered trading stamps with their purchases which they could later trade in exchange for products from a catalogue. Many of these competitors felt that customers would not be bothered to collect their reward points let alone be induced to shop at Tesco because they were available. They very quickly changed their attitudes when they found they were losing market share to Tesco partly as a result of Tesco’s loyalty scheme. Needless to say many of these competitors were quick to follow Tesco’s example when they saw how successful the scheme had proved to be.
  2. Adding social benefits This involves company personnel increasing their personal and social bonds with customers e.g. by learning about customers’ individual and specific needs and requirements, and by giving more personal service, ‘customers’ are turned into ‘clients’, thereby strengthening the ties and the loyalty they have to the supplier. The salesperson can play a key role in this approach to building customer loyalty, but in addition, the use of more sophisticated databases to analyse individual customer needs and tailor specific marketing programmes to individual customers is growing in importance with developments in IT.
  3. The banking industry has increasingly been using the notion of social bonds to improve customer retention rates. At one time, up to the 1970s and early 1980s, many banks had personal relationships with their customers, with customers often knowing and dealing with a bank manager on a close personal basis. During the late 1980s and early 1990s the banks moved away from this personal approach in an effort to reduce costs and become more like retailers than bankers. Recently, however some of the banks have been making determined efforts to rebuild bonds with individual customers by learning about their customers’ individual and specific needs and by giving personal care. NatWest Bank introduced a product for its current account holders who may, for a fee, be given access to a range of banking services which are specifically designed to meet their individual banking needs, thus returning personal service to part of the UK banking system.
  4. Adding structural ties: There are ways in which this approach to building customer loyalty and relationships can be implemented. Essentially, it involves providing customer support in the form of expertise or equipment. This provides helps to ‘lock’ the customer into the supplier. In other words, this approach increases switching costs for a customer. Examples include companies providing computer software to a customer which helps the customer run production schedules, but which is specific to the supplier. Another example would be the supply of electronic data interchange systems for purchasing.

Research by Dodourova22 concludes that behavioural characteristics such as commitment, coordination and communication are found to play a more significant role in explaining overall partnership success compared with organizational characteristics like structure and control mechanisms. Hewlett Packard provide comprehensive technical and after-purchase support systems for their customers. This is so comprehensive that customers do not need to turn to other suppliers for this service.

The implications of relationship marketing

Systems must be in place with RM to enable constant tracking and assessment of customer satisfaction and needs. Customer databases and the introduction of total quality management are important in implementing an effective relationship marketing approach.

RM, as we have seen, is based on developing long-term relationships with customers and hence heightens the need for building and maintaining customer loyalty. Although there are many reasons for their introduction, customer loyalty schemes, as introduced by many retailers, are examples of how companies are concentrating on customer retention.

Similar inducements through ‘frequent flier clubs’ in the airline industry also illustrate this approach. Such benefits tend for be largely, but not exclusively, financial in nature. Obviously, if a customer feels they can purchase the same brand every time this can substantially help reduce the time and effort required to purchase. Similarly, having a trusted brand reduces the risks to the customer of making wrong or ill-advised purchase decisions. more and more companies are involved in collaborative ventures with regard to developing new products with their suppliers. Clearly this requires effective long-term relationships.

These are just some of the ways in which a company can build and maintain stronger relationships with their customers. In turn, the application of some marketing mix elements is affected by the adoption of a relationship marketing approach., personal selling in particular requires a fundamentally different approach under the relationship marketing concept compared to transaction marketing.

Overall, and together, customer care and relationship marketing are changing the way in which marketing is practised.

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