Wednesday, November 10, 2010

Relationship Marketing

Companies in developed countries and many businesses in developing countries aim to satisfy customer needs and build lasting relationships. The issue focuses on reliability and trust between customer and organisation. As a result of this customer focus, a whole new subject, customer relationship management is now studied in marketing courses. 

According to Jagdish N. Sheth and Rajendra Sisodia, the term ‘relationship marketing’ refers to long-term and mutually beneficial arrangements wherein both buyer and seller focus on value enhancement through the creation of more satisfying exchanges. This approach attempts to transcend the simple purchase exchange process with customers to make more meaningful and richer contacts by providing a more holistic, personalised purchase, and use or consumption experience to create stronger ties. The new approaches to marketing such as experiential, permission, and one-to-one marketing can all be seen as means of creating stronger relationships with customers. 

The emphasis is on developing long-term bonds with customers by making them feel good about how the firm interacts or does business with them by giving them some kind of personal connection to the company. Real relationship-marketing programme is much more than the use of database marketing to target customers more precisely. Its purpose is that each customer must feel she/he has received something in return for being a
member of the partnership. Firms have found that Internet is an inexpensive, efficient and more productive means to extend a firm’s customer services. 

Internet permits firms to ask consumers if they permit the company to send them targeted e-mail ads, promotions, or messages, before actually doing so. Some airlines, hotel chains, credit card businesses, and big retailers, etc., use relationship marketing techniques by awarding points to committed customers that can be used to obtain additional goods or services from the concerned company. To put it differently, relationship marketing is all about building trust between the company and its customers and keeping promises. These factors increasingly strengthen the customer dependence on the organisation, as a result of which the customer’s confidence grows, while the company better understands the customer and her/his needs and wants. Ultimately, this helps in cementing the relationship and encourages cooperative problem solving. 

Relationship marketing is based on the principle that current customers are the key to long-term business success. According to Frederick F. Reichheld, the importance of customer retention can be judged by observing some of the following benefits it provides: 

* Acquiring new customers can be five times more expensive than the costs involved in satisfying and retaining existing customers.

* The average company loses 10 per cent of its customers each year.

* A decrease of 5 per cent in the customer defection rate can increase profits by 25 per cent to 85 per cent, depending on the industry.

* The customer profit rate tends to increase over the life of retained customer.

Jagdish N. Sheth and Atul Parvatiyar are also of the opinion that it is to a company’s advantage to develop long-term relationships with current customers because it is easier and costs less to make an additional sale to an existing customer than to make a new sale to a new customer. Neighbourhood grocery shop owners frequently reassure their frequent customers that if they are not satisfied with a consumable product, they can return it, even after some use and get the full replacement. They practice relationship marketing based on conventional marketing wisdom obtaining in India.