Relationship Marketing

Session 2
 Relationship Marketing
Relationship Marketing is
A philosophy of doing business, a strategic
orientation that focuses on keeping and
improving current customers, rather than on
acquiring new customers only.
The development and maintenance of long-
term, cost-effective relationships with
individual customers, suppliers, employees,
and other partners, perhaps even with
competitors, for mutual benefit.
 Why to study Relationship Marketing?
Companies changed their focus from TRANSACTION to
RELATIONSHIP for longer term customer retention.
In addition, they are concerned about EXTERNAL
MARKETS that includes
Suppliers
Potential employees
Opinion leaders & influencers
Referrals
Internal people
Integration of
Marketing activities,
Customer Service and
Quality Standards
helps achieving stable Relationship Marketing orientation.
 Goals of Relationship Marketing
To build & maintain a
base of committed Enhancing

customers who are Retaining

Satisfying
profitable for the
Getting
Organization

Attract them first through Market Segmentation, the loyal

customers then will attract newer ones by their word-of-mouth,
Retain them by responding their changing needs, and constantly
improving & evolving the product mix,
Enhance relationship by selling more products to them.
 Benefits for Customers
Confidence Benefits: Feelings of trust in
provider, reduced anxiety, great comfort in
knowing what to expect.

Social Benefits: A sense of familiarity,

social relationship with providers.

Special Treatment Benefits: Getting

benefit of the doubt, a special deal or
price, preferential treatment.
 Benefits for the Organization
IncreasingSells Lower Costs
Free Advertising Employee
through word-of-mouth Retention
Customer Satisfaction

Customer Retention Quality Services

And Increased Profits

Employee Loyalty
Transaction & Relationship Marketing

Transaction-based marketing
involves limited communications
between buyer & seller and little or
no ongoing relationship between the
parties.
 Transaction vs. Relationship
Characteristic Transaction Marketing Relationship Marketing
Focus Single-sell Customer Retention

orientation Product feature Product benefit

Time Short-term Long-term

Customer service Relatively low Key component

priority

Customer contact Low to moderate Frequent

quality concern Moderate High

Degree of customer Low High

commitment
 Four Dimensions Marketing Relationships

Bonding: two parties must bond to one

another in order to develop a long-term
relationship.
In other words, mutual interests or
dependencies between the parties must
be strong enough to tie them together.

Empathy: the ability to see situations

from the perspective of the other party.

Empathy is another key emotional link

in the development of relationships.
 Four Dimensions Marketing Relationships
Reciprocity: every long-term relationship
includes some give-and-take between the
parties.

This process, termed reciprocity, becomes

a web of commitments among the parties
in the relationship binding them ever
closer together

Trust: reflects the extent of one partys

confidence in another partys integrity.

When parties follow-through on

commitments, they enhance trust and
strengthen relationships.

When parties do not follow-through on

commitments, the opposite is true.
 Lifetime Value of a Customer
Life-time Revenue and thus the Profitability
of the Customer to the Organization.
Length of average lifetime
Average revenues generated per
relevant time period over the lifetime
Sales of additional products over time
Referrals generated by the customer
over time
 Lifetime Value of a Customer
If 10-persons organization had Tk. 1000 per month
business for the organization, assuming 10 year
lifetime for a customer, the value of the customer to
the organization will become:
Tk. 1000/month X 12/year X 10 years = Tk. 120,000
If the happy customer creates at least one new
customer via word-of-mouth,
Tk. 120,000 X 2 new customers = Tk. 240,000
If an average sales person serves 50 customers each day,
Tk. 240,000 X 50 Companies = Tk. 12,000,000
Thus an average employee of the organization is
managing a Tk. 12,000,000 portfolio of lifetime
business for the organization.
 Markets to Concentrate
Customer Markets (Satisfaction vs. DELIGHT)
Referral Markets (insurance, real estate, law
firms, both customers)
Supplier Markets (vendorship partnership, co-
makership, reverse marketing)

Recruitment Markets
Influence Markets
Internal Markets
 Customer Relationship
Management (CRM)
Establishing & Maintaining a Customer
Information File
Blue-printing or Planning Customer Contact
Points
Analyzing Informal Customer Feedback
Conducting Customer Satisfaction Surveys
Managing Communication Programs
Hosting Special Events Programs for
Customers
Auditing and Reclaiming Lost Customers
 Customer Information Files
The file will include information on:
Current Customers Objective:
Prospective Customers Customers are known,
Lost Customers thus addressable
(Conversion or Loss ratios Customers are acknowledged &
can help setting targets) appreciated to build loyalty
Customers are satisfied to become
loyal & less price sensitive
Benefits:
Helps determining Lifetime Value of a Customer
Helps identifying costs of acquiring & maintaining a customer
Helps customer scoring or ranking
More Effective & Efficient marketing effort
Better use of IT to manage the vast information
A dialogue to track & forecast their changing needs
Results in new product development
Blue-printing or Planning
Customer Contact Points
Core Product/services
Expected Product/services
Augmented Product/services, with
Confidence
Creativity
Caring
Consideration
 Analyzing Informal Customer Feedback
Encouraging Informal Dialogue may:
Tell the marketer if something is wrong in the
interaction process and how to resolve
Give marketer opportunity to produce new
product ideas, and ways to present existing
products in a novel way
Make the prospective customers more
interested & less cautious
Make the customer feel more loyal, &
committed to doing business with the marketer
Help advertising
Add value
 Conducting Customer
Satisfaction Surveys

A deeper understanding of the buyer-

seller relationship
Focus on delivering high standard
customer satisfaction (Delight!)
Front-line-employee judgment
Customer Communication Programs
Set of Priority Communication goals of an organization:
To position the Organization in a distinctive manner
To keep customers informed on what is new
To educate customers about the product/services &
usage conditions
To communicate the privilege factors, a sense of
individuality and importance
To reaffirm the purchasing decision, & lower post
purchase dissonance
To stimulate cross-selling
Mostly BY
Individualized letters on new product/service
introductions
Special offers for affinity products
 Special Events for Customers
Newsletters
Corporate Videos
Special Interest Magazine
Invitation to Cultural & Other Events
Affinity Product/Services Introduction
 Affinity Programs
Affinity
programs: a marketing effort
sponsored by an organization that solicits
responses from individuals who share
common interests and activities
Withaffinity programs, extra value is created
for members and stronger relationships are
encouraged
Credit cards, with the sponsors a name on the
card itself and elsewhere, are a popular form
of this marketing technique
 Lost Customer Programs
Know who the lost customers are
Find out why they left
Establish if the problem can be fixed
Apologize if its our own fault
If the problem can be fixed, fix it
If can not, monitor the situation to see if:
Our own abilities change
Customers preferences or personnel change
 Retention Strategies

Foundation to Retain:
Quality Offered in the Core Service
Careful Market Segmentation & Targeting
Continuous Monitoring of Relationships
 Integrated Volume &
Information Frequency
System Rewards
Joint Bundling &
Investment Cross-selling

Shared IV. Structural I. Financial Stable

Process & Bonds Bonds Pricing
Equipment

III. Customization II. Social

Bonds Bonds

Customer
Intimacy

Retention Strategies
 Customer is NOT Always Right
All customer relationship may not be beneficial,
and that every customer is not right all the time:

Customer from the Wrong Segment

If the customer is NOT Profitable in long-run
If the customer is difficult to work with,
placing stress on organization and its
employees by:
Refusing to follow policies of organization
Verbal/physical abuse of employees