Relationship Marketing (RM) and Integrated Marketing Communications (IMC) work together to establish mutually satisfying long-term loyalty relationships among providers, customers, suppliers, employees, and other stakeholders. A key rationale for Relationship Marketing is the idea that it's more profitable to establish relationships with existing customers than to acquire new customers, as evidenced by figures showing how customers, as evidenced by figures showing how customer net profitability increases as shown rates decreases, as revealed in several studies. These figures are included on relationship and profitability continuums that tracks relationship over time through financial, social, and interactive stages. Nurturing growth along these continuums are Integrated Marketing Communications (IMC) strategies and tactics that make use of online and offline marketing channels working together as a unified force to ensure that all impressions received by customers or prospects are consistent overtime and encourage mutually beneficial interaction.
Relationship Marketing (RM)
According to the American marketing Association (AMA), Relationship Marketing is broadly defined as "marketing with conscious aim to develop and manage long-term and/ or trusting relationships with customers, distributors, suppliers, and other parties in the marketing environment. RM encourages frequent, mutually beneficial interactions with customers with products and services customized based on data generated during these interactions. In providing these customized, high-quality products and service, RM centralizes and shares customer information, and delegates authority to employees to help solve customer problems for the benefits of all parties.
Relationship Marketing Vs. Transactional Marketing
Relationship Marketing aims to produce mutual benefits including ongoing need for the seller's products and services, alternative providers from which to choose, and customer, responsibility for the purchase; perhaps as an influencer, decider, buyer, or user in a buying center. In this context, RM contrasts sharply with traditional transactional marketing, with its short-term goal of making the sale through simple purchase inducements (low price, convenience) and minimal communication or interaction.
Transactional Marketing is most appropriate when selling commodities or low-value consumer products, when costs associated with switching suppliers are low, and when customers are not particularly interested in building relationship with providers. Depending on products sold and customers served, both relationship and transactional marketing programs can coexistin a company's strategic plans.
The Technological Basis For Relationship Marketing (RM)
Relationship Marketing originatedin industrial and business-to-business markets, where long-term contracts, close personal provider - customers relations, and an emphasis on high customer retention rates through high-quality service have been common for decades. The significant development of the past decade was broadening the scope of RM to apply to consumer markets as well, an evolution largely facilitated by sophisticated computing and communicating products and processes. Examples include database mining software to identify trends and patterns pertaining to customer preferences, activities, tastes, likes, dislikes, and complaints, and model-based software that applies mined information to customized marketing mix components to customer/prospect wants and needs.
Other technological advances contribute to the growth of RM programs in consumer markets include satellite dishes, personal computers, e-mail, blogs, podcasts, websites, and Internet TV all combining to target markets and individual market members with persuasive, personalized marketing mixes.
For example, based on specific demographic and personal information, the Internet allows marketers to send e-mail directly to customers most likely to buy their products, like Apple and Amazon.com promotes books that might be of interest to prospective buyers. A variation on this process, called personalized marketing, builds consumer profiles as consumer shop on websites. This information is then used to project consumer's preferences in other categories, which are then bought to the consumer's attention through web cross-sell, e-mail recommendations, and other channels.
Benefits Of Relationship Marketing
In a study conducted by Reich and Sasser (1990), which indicated that a five percent improvement in customer retention rates can increase NPV profitability by between 25 and 85 percent, depending on the industry. Stressing the importance of high customer retention rates in successful Relationship Marketing (RM) programs. Another study conducted by Jill Griffin (2006), revealed that marketers, on average, have only a 5 to 20 percent chance of converting a prospect into a customer, compared to a 60 to 70 percent chance of selling again to the same customer. Other studies have shown that the cost of retaining an existing customer is only about 10 percent of the cost of acquiring a new customer, with RM costs associated with acquiring new customers now replaced by long-term customer maintenance costs which decline as a percent of total costs as customer revenue increases.
Other Relationship Marketing (RM) benefits include the fact that loyal long-term customers are less likely to loyal switch providers, less sensitive to price changes, more stable and predictable in purchasing procedures, and more likely to buy high-margin ancillary products. They are also more likely than short-term customers to generate free word-of-mouth recommendations and referrals, and are less expensive to service, in that they require less education about procurement procedures, which are usually more efficient under RM.
A number of studies indicate that the main benefits customers derive from Relationship Marketing (RM) are "confidence" generated by "trust" in the provider and reduced anxiety and discomfort in knowing what to expect in buyer-seller relations. Social benefits are also an important reason for customer satisfaction; in some situations, relationships with providers become an important part of the customer's social support system.
One good result of satisfied customers is satisfied employees, whose jobs are rendered more interesting and stimulating through working constructively and innovatively with customers. For example, most salesmen enjoy the friendly, social interaction of maintenance call on a long-time customer more than the frustration and problems to transactional missionary calls and works.
Growing The Relationship Marketing Base
According to R.L. Sandhusen (2000), there are two continuums that help this process:
1. The relationship continuum describes buyer-seller relationship at each level of association. The lowest level, financial, with its focus on price, is at least likely to lead to a long-term relationship. Hence, the seller's involvement is minimal, with marketing efforts relying on price and other financial incentives (such as rebates and no-interest financing offered by automobile dealers) to motivate customers toward higher continuum levels.
The second level describes buyer-seller relations at the social level, featuring deeper and less superficial links than the financial focus of the first level. At this level, which emphasizes service and communication, social interaction can take a variety forms: birthday cards sent to clients by insurance agents, follow-up calles by hospital administrators to verify outpatients's satisfaction, and restaurant cook-offs are good examples.
The third level, interdependent relations are structured to ensure that buyers and sellers are true business partners, developing a dependence on one another that continues to grow over time. At this level, the seller can customize products and services are based on data generated through buyer-seller interactions. As an example of this creative independence, the ALASKA PBA basketball team may adopt a loyalty card program to help the teamm better understand the fans by monitoring complaints and gathering information from customer interactions-buying tickets, attending games, visiting stands retail stores that sell Alaska merchandise. Information from these monitored interactions may help Alaska marketers address customer needs and increase fan participation in Alaska's basketball team activities.
2. The profitability continuum parallels the first continuum, with data mining analyzes using out NVP profitability figures associated with customers financial, social and interdependence relationship levels. These figures can assume a variety of configurations and be used in a variety of ways. NVP figures can also be assigned to individual customers as a means of defining their status (one firm categorizes them sequentially as "prospects," "customers," "clients," "advocates," and "partners") and taking actions to build long-lasting relationships. When applied to product or customer aggregates, these profitability figures can be used as a basis of comparisons between product groups and market segments, and overtime.
