Relationship marketing Essay

Relationship marketing

Introduction

            Relationship marketing is a marketing strategy established from direct response of marketing campaigns which emphasis on retention and satisfaction of customers instead of having a dominant focus on the transactions. This type of marketing is different from others in that, it recognizes long term value of maintaining customers. Relationship marketing is a good and strong approach which improves marketing performance of organization’s marketing as well as its overall marketing standing. Managing of customer – organization relationship has been under limelight in the wake of globalization. Customers delight is the only key to organization success. The concept of relationship marketing is gaining acceptance and is being recognized as a powerful tool for business success. It has assumed top most significance in organizations with most organizations establishing direct relationships with their customers through continuous interactions. Relationship marketing establishes long-term profitable relationship with customers who are the main stakeholders of business (Sheth and Parvatiyar 2000, p. 102).

Objective of the Study

The main objective of this research is to examine the position of relationship marketing when taken as a strategic approach in improving marketing performance of an organization.

Research Questions

1.      Is relationship marketing a strong approach compared to other marketing strategies?

2.      Does relationship marketing achieve high customer satisfaction?

3.      Is relationship marketing a highly profitable strategy in improving organization’s performance?

Hypotheses

1.      Relationship marketing is a strong strategic approach of improving marketing performance of an organization.

2.      Relationship marketing approach achieves high customer satisfaction.

3.      Relationship marketing is a high profitable strategy in improving organization’s performance.

Statement of the Problem

Relationship marketing is a strategy used by customizing programs for individual customers. It emphasizes on continuous relationships that should be established and exist between organizations and their customers. It emphasizes on the importance of customer service and quality of developing transaction series with customers. Many organizations are working towards relationship marketing to retain their existing customers instead of recruiting new ones because recruitment of new customers is costly. Managers believe that by using relationship marketing they will be in a position to cater for their customers’ needs and improve market performance of their organization. Relationship marketing is a strategy that gains high customer satisfaction and it is highly profitable.

Significance of the Study

Relationship marketing is a good strategy which can be adopted by an organization to achieve its high performance. Relationship marketing is not all about having a strong relationship with customers but it uses event-driven strategy of customer retention marketing but treating marketing as a process over time instead of single unconnected events. Relationship marketing is a strategy that gains high customer satisfaction and it is highly profitable. Happier customers result in happier employees improving their performance thus high organization performance and profitability. Relationship marketing is a long-term and mutual benefit in which buyer and seller focuses on enhancement of values through more satisfying exchange.

Literature Review

Relationship Marketing

            Relationship marketing is a good strategy which can be adopted by an organization to achieve its high performance. This strategy originated from researchers and businessmen who focused on attracting customers to products and services and retention of existing customers. This strategy developed out of increased proportion of transactions with relationships which actually intensifies subsequent sales thus being the main focus in buyer’s choice. Relationship marketing is not all about having a strong relationship with customers but it uses event-driven strategy of customer retention marketing but treating marketing as a process over time instead of single unconnected events. Relationship marketing is a strategy that gains high customer satisfaction and it is highly profitable. It is a series of stages given different names depending on marketing perspective and kind of an organization. This strategy is used by customizing programs for individual customers. Relationship marketing emphasizes on continuous relationships that should be established and exist between organizations and their customers. It emphasizes on the importance of customer service and quality of developing transaction series with customers (Petrof, 1997, p. 26).

Applications of Relationship Marketing

            Relationship marketing is strongly related with business process reengineering in which organizations should be restructured in accordance to completed processes and work instead of functions. Relationships marketing together with traditional transactional marketing are mutually exclusive and they don’t necessarily conflict with each other. This strategy is more suitable under certain circumstances like; organizations dealing with industrial products, high value products and services, where customers prefer continuous relation, in situations whereby switching of costs is high, where products are not generic commodities and where there is involvement of customers in production phase (Gronroos 1996, p. 7).

Strengths/Benefits of Relationship Marketing to Organization’s Marketing Performance

            Relationship marketing is a strong marketing strategy that focuses on offering value to customers and it emphasis on retention of customers. This approach is an integrated marketing, quality and service strategy which provides better basis of achieving competitive advantage in an organization. According to study from different organizations, the cost of keeping existing customers is just a fraction of the cost of acquiring new customers. This makes economic sense often to pay more attention on the existing customers than new ones. Long term customers have the potential to initiate free promotion and referrals of word of mouth. Long term customers are less likely to switch to competitors making it more difficult for competitors to enter into the market. Those customers who are happier lead to happier employees improving their performance thus high organization performance and profitability (Rich 2000, p. 147).

Relationship marketing attracts, maintains and enhances relationships with important people. Professionals are being encouraged to aggressively market their organizations and programs. Extensions are the most significant marketing resource in terms of being a tool of establishing relationship with people. Organizations which wish to survive market competition they require media attention. According to market research, heightened public awareness of organizations is the main step in marketing. Establishment of constructive relationship with target audience is significant to extension of long term success in marketing than acquiring widespread and public awareness. This marketing relationships process applies to extension because funding is garnered from few sources and continuous education programs which are offered to certain audiences. Relationship marketing has various techniques which aid on its success. The main challenge facing Cooperative Extension is the state, county and federal legislators but quality educational programs that meet significant community needs are requirement for funding (Ferguson and Brown 1991, p. 138).

Targeted relationship marketing initiatives required for credibility of relationship marketing are no longer a luxury but they are necessary for public. Decision makers have a small opening to Extension programs. The main ideas towards successful communication to decision makers involve coordination of communications getting rid of effort duplication and maximizing effects of extensions. Relationship marketing deals more with retention of customers and satisfaction instead of focusing only on transactions. It is different from other forms of marketing in that, it has long-term value of keeping customers contrary to direct marketing that focuses on acquisition of new clients by targeting majority based on prospective list of clients. Relationship marketing is a long-term and mutual benefit in which buyer and seller focuses on enhancement of values through more satisfying exchange (McKenna 1991, p. 66).

Relationship marketing transcends simple purchase exchange process with customers making richer and more meaningful contact through more holistic and personalized purchase with experience on consumption to establish strong bond. Relationship marketing can be used in a competitive product alternative for customers to choose from with an ongoing and periodic desire for products and services. Relationship marketing reduces customer’s turnover increasing customers’ loyalty. The approach of customer retention contrasts with offensive marketing which involves acquiring new customers and increasing frequency of customer’s purchase. Relationship marketing reduces customer’s dissatisfaction from competition generating new customers. Relationship marketing is facilitated by several customers’ generations of customer relationship management software which enables tracking and analyzing of customer’s activities, preferences, like, dislikes, taste and complaints. It enables marketers to take advantage of technological ability of digital, personalized pieces for each recipient and toner-based printing presses to produce unique products. Marketers can personalize documents through database information reflecting on individuals needs (Schneider 1997, p. 53).

Reengineering has strongly influenced relationship marketing. Reengineering theory is whereby organizations should be structured in accordance to complete process and tasks instead of functions. Cross-functional teams must be responsible for whole procedure from start to end instead of having the work move from one functional department to another. Traditional marketing uses the approach of functional department. The approach of marketing mix is limited to offer a practical framework for evaluating and establishing customer relationships in various organizations. It focuses on customers’ interaction and relationship over time instead of products and marketers. Relationship marketing is a cross-functional marketing which is organized over processes that involves all aspects of the organization. It involves more than normally marketing. It enables an organization to have the potential to build new synthesis between customer service management, quality management and marketing (Reinchheld and Sasser 1990, p. 106).

Relationship marketing involves marketing philosophy in all sections of organizations. All organization’s employees are part-timer marketers since marketing is not a function but a way of doing business. There are various approaches of relationship marketing; satisfaction whereby relationship marketing depends on acquisition of requirements of consumers and communication only from existing customer in mutual beneficial exchange including permission for customer contact through “opt-in” system. In relevance to customer satisfaction with the quality of goods and relative prices which are produced and sold through organization together with customer service this is determined by general amount of sales relative to competing organizations. Those groups which are targeted through relationship marketing may be large with communication accuracy with overall customer relevance remaining higher than when there is direct marketing. Relationship marketing has less potential for establishing new leads compared to direct marketing and restricted Viral marketing for acquisition of more customers (Levitt 2001).

In relationship marketing there is also retention approach which is the main principle. Customer retention through several means and practices ensures a repeated trade from already existing customers by satisfying their needs more than those of competing organizations through a common beneficial relationship. Relationship marketing is used as a means of offsetting new customers and chances with current and existing customers to maximize profit and offset “leaky bucket theory of business” whereby new customers acquires older and direct marketing orientation to businesses at expense of older customers. Churning is less economically practical that retention of most customer using direct and relationship management as lead generation through new customers requires more investment. Many organizations are redirecting large amounts of their resources or much of their attention towards retention of customers in markets with increasing competition which attracts more customers than retaining of current ones. According to classical marketing theories, relationship marketing focuses more on attracting customers and establishing transactions instead of maintaining them. This makes importance of relationship marketing more recognizable (Hunt and Morgan 1994, p. 19).

Retention of customers increases profits depending on organizations. Increased profitability associated with retention of customers occurs as a result of various factors that result after establishing relationship with customers. Acquisition of costs occurs only at the start of the relationship. The longer the relationship the lower the amortized cost. Maintaining account cost decreases with total percentage cost. Those customers who are long term are less inclined to change and they are sensitive to prices. This results in stable volume of unit sales with increase in volume of dollar-sale. Those customers who are long term initiates promotion and referral of free word of mouth are beneficial to the organization through relationship marketing.  They also purchase additional products and high margins of supplemental products. Customers who stay in an organization are satisfied and less likely to become competitors posing difficulty to competitors entering the market or gaining market share. Regular customers are less expensive to services offered by the organization because they are familiar with organization process. They require less education and they are regular in replacing orders. Increased retention of customers and loyalty makes recruitment of new employees easier and more satisfying. Happy employee they feed back to better satisfaction of customers in a virtuous circle (Christopher, et.al 1991, p. 48).

Relationship marketing ranks customers according to their level of loyalty starting with prospects who are the people who have not purchased yet are likely to be in future. The main objective of relationship marketers is to help customers in getting higher in the rank as possible. This can be achieved by offering more personalized service and offering quality service exceeding expectations. Retention of customers can be achieved through valuation of customers, using retention measurements, determining reasons for defections and formulating and implementing of corrective plan. Relationship marketing stresses internal marketing in which organization uses marketing orientation itself.  Many attributes of relationship marketing like collaboration, trust and loyalty determines what is said and done by internal customers. Every employee, department or team in an organization is a simultaneous supplier and customer of services and products produced. Employees acquire services at a point of value chain and then offer service to another employee along the chain. Incase internal marketing succeeds each employee both provides and receives exceptional services from another employee. This helps employees in understanding significant of their roles and how their roles are related (Mich 2003, p. 124).

If internal marketing through relationship marketing is implemented it encourages each employee to take this process as customer’s perception on value added with organization’s strategic mission. Relationship marketing results in value creation. Organizations realize that both their customers and suppliers establish value. This value can be manifested to access markets, technology and information. It also gives organizations sustainable competitive advantage. Value creation in an organization can be categorized into three. First is value creation through partnering with suppliers. Second through alliance partnering and third is through customer partnering. Value creation through suppliers is effective because suppliers offer organization with next-generational competitive advantage. The move towards supplier relationship will change the function, process and strategies of organization thus new areas of inquiry emerging. These comprises of understanding suppliers as customers, economic value of suppliers equity, cross-functional supplier teaming, supply experience curves, bonding with suppliers and cross-cultural values in purchasing (Levitt 2003, p. 63).

The value of relationship marketing promotes more win-win and less win-lose situation in which more equal parties will be created and all parties carry responsibility and become active. An organization benefits by having increased potential of customer retention and duration, increased market productivity thus increased profitability. Retention of customers is less expensive than acquisition of new customers and the longer customer stay the more profitable the organization. Relationship marketing creates illusionary loyalty which has a great impact on financial performance of organizations. Managers have the responsibility of balancing higher returns which are generated from customer-salesperson relationship. Managers usually measure customers’ loyalty to the organization leaving them with false sense of security among relational loyalty from the salesperson (George 2002, p. 65).

Steps in the Relationship Marketing Process

            Relationship marketing process follow certain stages. This includes charting service delivery system with set of standards for every part of the system particularly “encounter points”. This is followed by identification of service issue then set of standards on services for all aspects necessary for service delivery. There is establishment of customer communication system. This is followed by training of employees on building and maintaining of good relationship with clients. There is monitoring of service standards, staff rewarding for exceeding level of services and level of correct sub-standard services. Finally relationship marketing process ensures that every employee fully understands significance of quality and relationship in marketing philosophy (Kolter, et.al 1999, p. 482).

            For successful relationship marketing some steps has to be followed. In good or bad time business focuses on customers. It is cost-effective to sell more services to existing customer than funding acquisition of new customer. This develops long-lasting relationship by keeping in touch with the customers. Relationship marketing offers various benefits to organizations both big and small. It reduces marketing expenses, establishes referral and business grows in steps with customer needs. The first step of successful relationship marketing is change of perspective from here’s what you do to what you need. The basis of successful relationship marketing is precise discovering what customer need and want. May be customer may require a manager to create organization Website. What they mean is that they need to increase revenues from sales. Managers can develop this site if only they understand basic needs of their customers. The second step is recognizing organization’s vulnerability. Managers may be in touch with customers for several times within a week. This time is important to establish relationship. Once something is done in the organization, then managers drop out desirable awareness position of top-of-mind. Customers may not think of managers being solution to their problem making organization vulnerable to competitors. Affordable solutions help in retaining those customers whom managers have worked hard to get (Buchanan and Gilles 2001, p.129).

            The third step is keeping in touch. This is just but a simple concept with the easiest way of keeping in touch being publishing of email newsletter. Managers should ask customers to subscribe on the organization’s site to capture addresses of prospects who like what the organization is doing. The secret to a good newsletter is avoiding obvious self-promotion rather than important information to subscribers. Managers are in a position to drop news, FAQs, case studies, tips and other relevant information in customers’ emails every month. This promotes services, educates customers, reinforces organization’s brand and establishes trust. The fourth step is, managers positions themselves as experts. Prospective customers look for more than thumbnail images in organizations’ websites. The work of managers is to inform them how the organization can meet their needs. Organization’s website is the perfect start but it should focus more on the existing customers. Once an organization is perceived as being an expert on certain products and services then it becomes attractive to prospects since they view the organization as something that can answer their questions and solve their problem. This site not only creates relationship but also improves search engine ranking for the organization (Berry 1983, p. 146).

            The fifth step is growing to meet customer’s needs. For most organizations, websites require occasional updates. They are just but a means of building brand and unease revenues thus minimizing costs. If organization offer more tools that are helpful to customers in achieving their goals then it becomes more useful. Organization through managers should establish relationship with photographers, copywriters, search engine marketers and other specialist benefits customers helping in customer-retention. The benefit of relationship marketing goes both ways. Customers views managers of that particular organization as a valuable consultant instead of cost center and the organization through the manager has the potential to increase revenues and a real long-lasting relationship (Gale and Chapman 1998, p. 127).

            Programs such as social-relationship-marketing programs convey a special status which entails social engagement. These programs results in a strong relationship between salesperson and customer. Value added benefits which are difficult for customers to supply themselves are characterized with structural relationship marketing. Structural programs results in customer-selling organization relationship if the customer don’t perceive these as benefits being allocated based on discretion of salesperson (Gordon 1999, p. 336)

Maintaining Relationship Marketing

            Relationship marketing in an organization has to be maintained for success of the organization in marketing performance. This can be maintained by having openness or disclosure in the organization, having access, positivity, networking, assurance of legitimacy, task sharing, being unconditionally constructive, cooperating and saying win-win or no deal. Managers should try to keep promises to their customers, being attentive, creating personal relationships with customers, educating customers and employees on the importance of the relationship, having organizational credibility, having visible leadership in the organization by managers, managers being responsive and listening to their clients, respect to customers, having continuous dialogue with customers and having face to face communication (Peter 1991, p. 246).

Limitations of Relationship Marketing

            Relationship marketing is a less appropriate circumstance in which there are relatively low value products and services, consumer products, switching costs are low, there is generic commodities, clients prefers a single transactions to relationships and there is no or low involvement of customers in production (Petrof 1997, p. 30).

Methodology and Research Design

This research was conducted to evaluate importance of relationship marketing to organization. In order to achieve the objective and test the hypothesis of the study, various data collection methods and experimental research design were employed. Secondary data collection method was extensively used to gather more information on relationship marketing as argued by other people. Primary data collection methods like questionnaires and interviews were also employed to gather information from individuals especially managers from different organizations both small and large. Questionnaires were administered to managers of chosen organization. Managers to be interviewed and administered with questionnaires and the organizations to be evaluated were chosen using random sampling method to give each manager from the chosen organization a chance of participating.

            Questionnaires were preferred because they offer a wide range of questions concerning effects relationship marketing to organizations and they gave respondent a wide spectrum of giving different opinions on the topic. The selected managers were interviewed using the same survey questions in the questionnaires so as to enable the researcher grasp first hand information from the sources and be able to judge the accuracy of the information being collected because questionnaires could not have fully served the purpose of collecting precise, accurate and enough information. Experimental research design was employed because is the most rigorous research design and if well implemented it is the strongest design that has an internal validity.

Results

            After collecting data it was found that most organizations are embarking on the concept of relationship marketing as a strategy of improving organization’s marketing performance. Most organizations have realized the importance of relationship marketing in retaining existing customers instead of recruiting new ones which is costly. According to different people, organizations can apply the strategy of relationship marketing to improve marketing performance with the value of relationship marketing promoting more win-win and less win-lose situation which is more equal and parties will be created and carry responsibility thus becoming active. Any organizations which use this approach benefits by having increased potential of customer retention and duration, increased market productivity thus increased profitability. In order for managers to establish relationship marketing in their organizations to improve on their marketing performance, they have to listen to their customers and they will tell them what they expect. Managers should ask effective questions which solve customers’ problems and meet their needs not selling their products. Managers should be honest to their customers and their help will be long remembered and customer will be more willing to come back. For organization to gain high visibility and a positive trusted position it has to establish quality relationships with more customers.

Discussion

            Organization’s improvement on marketing performance require use of strategies like relationship marketing giving business the potential to retain existing customer more than recruiting new ones. Retention of customers is less expensive than acquisition of new customers and the longer customer stay the more profitable the organization. Relationship marketing is of great importance to organization’s marketing performance. Organization’s establishment of constructive relationship with customers is significant to extension of long term success in marketing than acquiring widespread recognition and public awareness. Any organizations wishing to survive market competition require media attention and heightened public awareness.

Establishment of relationship marketing has to undergo some steps for it to succeed and be of help to the organization. In today’s customer-driven economy, organizations has to move from product-based marketing campaign to customer-focused personalized approach which can be only achieved through establishment of  relationship marketing. Customers want to feel more important and they really want to know that managers have expertise with their life. The more managers demonstrate their specific understanding to problems facing customers, the more quickly customers will buy from their organization benefiting the organization. Business is not only selling of the product but selling both the product and service as an experience. This selling approach helps organizations in establishing important element in the process which is relationship. Business value and customer experience is encompassed in management of the relationship with customer-focused strategy helping organizations in overcoming challenges hindering their success.

Conclusion

In the modern period of hypercompetition, retention of customers and their loyalty is significant to marketers. Many organizations believe that retaining of existing customers is more effective and cost-effective that recruiting of new one. As a result most organizations try to maintain long-term relationship with their customers than make one-time sales. Relationship marketing should be practiced by all organizations both large and small because it is a strategy which gains high customer satisfaction and it is highly profitable. This is achievable only through customer retention and through managers’ understanding of their customers’ needs and being in a position to solve problems. Regardless of relationship marketing benefiting organizations, it also has some limitations which hinder its effectiveness by being inappropriate in some situations. Managers should try to find means of overcoming the limitations to relationship marketing for improvement of marketing performance in their businesses.

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