“It's not the consumer’s job to know what they want, it’s our job to provide it for them”
- Steve Jobs
This is the mentality of most businesses when dealing with marketing and customers. It is common to hear business executives discussing how to trick customers into purchasing their product.
How many of us have dealt with the woes of cancelling our T.V. subscription only to come out of the call having bought another package of unnecessary television channels? These are all examples of conventional marketing which is transactional in nature.
(Read more on Telemarketing)
The concept of Relationship Marketing focuses more on the consumer aspect of business rather than the sale. Relationship Marketing as defined by Murphy and Murphy is the process of retention of current customers through revamp of internal mechanisms.
It involves building consumer loyalty and trust in a brand such that the value of the brand is retained or increased throughout a consumer’s lifetime.
When running a business, one of the biggest questions that run through any business owner’s mind is “will my product sell?”. Why is it that many producers, despite producing brilliant and innovative products, do not sell? The answer lies in marketing. It is commonly known that as a business, you do not just sell a product, you sell an idea and that’s the job of the marketing department.
Relationship marketing refers to the practice prioritising customer retention and provision of exemplary products and services over marketing directed at convincing a customer to buy. It simple terms, it refers to Service over Sales.
(Speaking of Sales, check out the role of Data Science in Sales)
Relationship Marketing has seen its applications in many top companies. The concepts of first three services free, Specialised service centers, warranty and replacement or refunds are all instances of Relationship Marketing and its applications.
Features of Relationship Marketing
The fundamental aim of a marketing department is primarily transaction based. Advertisements are targeted at convincing consumers to purchase products. The relation is transactional. See the ad and buy the product.
With Relationship marketing, the focus of marketing is establishment of a relationship with the consumer.
Lifetime value of consumers
Marketing departments often focus on consumers as one time buyers and focus more on acquiring market share over consumer satisfaction.
According to Murphy and Murphy, the cost of retaining a consumer is one fifth the cost of acquiring a new consumer. With Consumer satisfaction and the value of lifetime consumer business taking precedence, Relationship marketing is the ideal form of marketing for firms with large existing market capitalization.
Requirement of Internal mechanisms
Relationship marketing requires organisations to develop separate internal mechanisms to provide maximum consumer satisfaction.
A company based on traditional marketing would fund their sales department and choose to spend more on advertisements and business psychology directed at acquiring new consumers.
A company based on Relationship marketing would require companies to establish service departments and customer helplines as well as look at providing Service after Sales. The aim is retention of consumers.
It is said a retention rate of 2% can cut costs and boost profits by 10%. When companies choose relationship marketing, they commit to investing more into their current consumers and prioritising service over sales.
In this manner, Relationship Marketing provides an entirely new aim to the company itself.
Personalisation and consumer first policy
Companies undertaking Relationship Marketing often have to go the extra mile for their customers. The policy of Customer First is a form of Relationship Marketing.
Relationship Marketing requires companies to center their products and their marketing scheme around what the consumers need and want. Instead of a sales pitch, it intends to develop a connection with the customer.
This often requires personalisation. Many companies offer special birthday discounts. An example would be Starbucks. During a customer’s birthday, Starbucks offers customers a free drink. In the event of a mess up of an order, employees remake the order free of cost.
All these are practical applications of relationship marketing where the company both provides personalisation and a Consumer First feeling.
Due to the personalisation aspect of relationship marketing, Consumer Demographics become very important. In the modern digital age, what a consumer wants, feels or thinks becomes extremely important. Without this knowledge, companies cannot construct campaigns or invest in new products.
An example would be Subway. Subway provides a free cookie on a customer’s next purchase if they fill out a survey. This is one way by which companies collect data that helps them make their products and services tailored to their audience.
This aspect can also have insidious aspects.
With the incursion of social media and the emergence of Algorithm marketing, many social media companies have been accused of using user data and selling it.
On the lighter side, social media algorithms often take into account a user’s tastes and preferences based on their comments and engagements for particular types of content. This information is used to present “targeted” ads.
Targeted ads are advertisements that are shown to consumers based on their usage and history online. If a person seems particularly into sports and the same is seen on their social media, there is a high chance that this person will see ads on sports equipment or jerseys.
(Now that we mentioned social media, check out our blog on Social Media Marketing)
5 Steps involved in Relationship Marketing
Relationship Marketing requires a business to have an established consumer base. Until a company can acquire a consumer’s business by making a sale, Relationship marketing has no value.
Therefore, to begin with, relationship marketing must involve basic marketing. Customers must be convinced of their need for a product and a sale must occur for the rest of the process to begin.
Reactive Marketing refers to the process of collecting consumer feedback post consumption or purchase of the commodity. A common example of reactive marketing would be a feedback card given to restaurant patrons along with the bill.
This allows the restaurant to know what the consumer feels exactly after consumption of the product. Reactive Marketing gives companies a chance to understand their consumer base better as well as the effect of any testing of products done.
(Suggested Read - Market Research Analysis)
The next step post receiving survey feedback is reaching out to the customers themselves for suggestions on how to improve their business.
Since the end user of any product on the planet is a consumer, a consumer will know best how to make the product more appealing. In the manner that a bank asks a thief how safe their vault is, so should a business ask a consumer how good their product is.
Only a consumer will know how a consumer will feel hence only they can truly give suggestions that will have meaningful impact. In the case of a new product, businesses often use focus groups and test subjects as exposing their product to the market for feedback can diminish their value in a consumer’s eyes.
A product that has not been tested has no business being on a market in the eyes of a consumer. This point also highlights the fact that Relationship Marketing only applies to businesses that have products that consumers can buy again and again.
A phone company or a fast food chain will have use for Relationship Marketing but an oil refinery will not. Relationship marketing only applies to consumer industries and not capital industries
Proactive marketing refers to marketing where businesses input suggestions received from consumers into their next line of products. This process is vital as the extent of consumer suggestions incorporated will be how well the product does when it is released or rolled out.
An extra step to proactive marketing, it is the use of inter-business cooperation to provide better services to consumers.
For example, popular speaker and headphone company Harman Kardon have partnered with Apple as their exclusive resellers and a special relationship between the two to create a better music experience for consumers.
(Speaking of Apple, check out our blog on AI and Big Data in Apple)
Ultimately, Relationship marketing can be called the practice of going above and beyond. In the modern, highly competitive world where every producer is looking for an edge over a competitor, relationship marketing provides the way forward. It is common knowledge that human beings enjoy a personal touch.
When a company’s products cannot compete with a competitor based on the product alone, it is the emotion that wins. Relationship marketing is one of the reasons that consumers would rather buy an Apple laptop over any other. The sheer service factor alone is a huge plus point for most consumers.
Using Relationship Marketing can help cut costs, improve consumer retention and bolster an enterprise’s ledger by a significant amount, but the requirement for an existing consumer base makes it a monopoly of the largest firms.
Therefore, it is only through basic marketing that one can reach relationship marketing. Looks like old is gold after all!