This article provides a practical explanation of Relationship Marketing. After reading, you will understand the basics of this powerful marketing tool.
What is Relationship Marketing?
Nowadays it is very important for companies to not only attract customers, but also maintain them. Relationship Marketing plays a key role in this. After all, no company will survive if their customer base doesn’t increase. Relationship Marketing revolves around the fact that existing customers will make repeat purchases and thus contribute to the continuity of the company. Maintaining a customer is a lot cheaper than attracting new customers.
Rather than sales transactions, Relationship Marketing is a form of marketing that focuses on customer retention and satisfaction. Moreover, it specifically focuses on the value of long-term customer relationships. Naturally, a ‘life-time’ customer database is extremely valuable. Modern Relationship Marketing is not just about social media, however; instead, it is about the complete customer journey. This is the journey that (future) customers take before purchasing a product and/or service. During their travels, they pass several so-called ‘touch points’ before they make a purchase. For instance, think of an initial visit to a website, clicking on other products, requesting additional information, and so on.
History of Relationship Marketing
Relationship Marketing was first mentioned in the 1980s by the American marketing professor Leonard L. Berry and the American marketing guru Barbara Bund Jackson. According to Berry, Relationship Marketing is a marketing activity that generates, retains, and promotes effective customer relationships for companies. Jackson subsequently expanded on this idea. She stressed that Relationship Marketing is about attracting, establishing, and maintaining a close relationship with (mainly) business customers. Today, Relationship Marketing applies to both the business (business to business) and consumer market (consumer to consumer).
The American business magazine Forbes summarised Relationship Marketing as follows: “Relationship Marketing is a strategy designed to promote customer loyalty, interaction, and long-term relationships. It is about building a strong bond with customers by providing them with information that matches their needs and interests.”
Relationship Marketing is Long Term
As mentioned, Relationship Marketing focuses primarily on long-term relationships with customers. A one-off sale is fine, but Relationship Marketing goes one step further and promotes customer loyalty by offering products and services that provide added value. For this reason, Relationship Marketing is not linked to a single product. The way a company conducts business is refined in order to maximise the product value for the customer. In the short term, it is important that customers buy something. In the long term however, the focus is on retaining these same customers (customer retention). This only happens when customers are satisfied with their purchase.
In other words, branding is an important part of Relationship Marketing. Organisations can only build long-term relationships with customers if customers can fully identify with the product. The brand says something about them. This is the core of branding, and thus forms the basis for Relationship Marketing. If a customer is satisfied with the brand he buys and uses, he will not only make repeat purchases but also spread positive messages in his direct environment. In the long term, this results in a strong relationship. In addition, it creates opportunities to offer such customers more personalised products.
In order to implement effective and strategic Relationship Marketing, it is recommended to follow a marketing plan. Of course, it is also important to have demographic and historical data about customers and to have information about the products they bought and when they bought them in order to determine how this may benefit the company in the long term. The latter in particular is what relationship marketing is all about. It is therefore important for organisations to figure out and understand why customers return for repeat purchases. More often than not, it is not just because they liked the product. In fact, there are many other reasons; think of a store nearby, high-quality service, fast delivery, and friendly salespeople. A marketing plan can be best developed following a thorough analysis of the nature of customer loyalty. In Relationship Marketing, it is about the link between quality management, customers service, and marketing. By seamlessly connecting the processes of all these areas, one can create the basis for effective Relationship Marketing. Most importantly though; an extensive customer profile is essential for a suitable marketing plan.
Technology also plays a crucial role in Relationship Marketing. First of all, the Internet offers the possibility of collecting and analysing customer information. What websites have they visited? How long did they browse a website? What links did they click on? Using modern technology, customers receive personalised ads and offers and it creates to possibility to offer customers faster service.
The growth of the Internet and mobile platforms has served as an excellent way of managing customer relationships. Using social media, companies can involve their customers in an informal but permanent way—in everything they do. Moreover, technology makes it easier to automate marketing efforts. Social media websites such as Facebook and Twitter make it easier to communicate with customers. To build long-term relationships, companies must focus on their permanent followers of these social media profiles.
In addition, a clear and complete customer profile also makes it possible to provide targeted information and offers, which are more relevant to the customer. Technologies such as ‘site tracking’ (which sites were visited and for how long) and targeted content (target group-oriented information) allow companies to predict at what stage customers find themselves in the customers journey. Using this information, companies can create automated (email) campaigns with unique offers that are relevant to the customer. Also Referral Marketing can be applied. Any business can use referral marketing software to set up and manage their own referral programs to take their business to the next level.
Components of Relationship Marketing
In addition to the above, there are a number of components that form the basis of Relationship Marketing, including customer service, content marketing, social media, and email marketing. To use these components effectively, it is recommended that companies work with so-called ‘buyer personas’. These are predefined customer profiles that closely resemble the actual target group. This provides advanced insight into customer needs.
Customer service is essential and must form an integral part of both marketing and sales. Relationship Marketing emphasises a continuous investment in service departments, created to serve the customer and solve their problems. Relationship Marketing mainly revolves around improving internal business operations. Customers are unlikely to return when they are frustrated about customer service. If a company streamlines its internal activities and meets all customer service needs, this will result in a long-term relationship.
Content refers to all information about product specifications, offers, advertisements, and so on. This information must be of interest to the target group and provide further help in the customer journey. This means companies occasionally also give away free solutions through their website or newsletter. In the long term, these will create the desired customer relationship. Content marketing is all about companies giving something away for free before they actually try to sell a product or service. This powerful mechanism ensures visitors will eventually become customers.
Social media are considered effective tools when it comes to Relationship Marketing. The intention is to provide valuable content to (potential) customers. By communicating with them directly, companies gain insight into their lifestyles. Platforms such as Google, Facebook, and Twitter continuously change their algorithms and thereby determine what followers will see on their timeline. Companies have no control over this.
The main advantage of email marketing is that it gives companies a lot of control. It is therefore a powerful tool for addressing target groups. However, it is important that the correct information is communicated, at the right time, and to the right person. Just like with social media, the message must contain valuable information. Only then will customers remain interested in receiving, for example, their digital newsletters.
Now it’s your turn
What do you think? Do you recognize the explanation about relationship marketing? What does your organisation do to realise customer retention and a good customer satisfaction? Do you have any tips or additions?
Share your experience and knowledge in the comments box below.
- Berry, L. L. (1995). Relationship marketing of services—growing interest, emerging perspectives. Journal of the Academy of marketing science, 23(4), 236-245.
- Morgan, R. M., & Hunt, S. D. (1994). The commitment-trust theory of relationship marketing. Journal of marketing, 58(3), 20-38.
- Ravald, A., & Grönroos, C. (1996). The value concept and relationship marketing. European journal of Marketing, 30(2), 19-30.
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