Relationship Marketing – Background and Theory

Introduction

The world of business has altered a great deal in the last few decades or so, globalization and information technology has produced a young breed of well-informed customers. And so the marketing theory has also undergone changes. Service based industry is now at the forefront in the economic evolution.

Therefore, to sustain a loyal customer base relationship marketing along with other marketing mix forms base of the new marketing world.

Today’s companies want to use relationship marketing to improve customer loyalty, and generate profits.

Scope and Definition

Marketing is defined as an organization function which creates set of process through which company creates, communicates, manages and delivers value to customers. The portion of customer management forms the foundation of the relationship marketing. Relationship marketing looks to utilize tools of traditional marketing in creating long term value for customers. Relationship marketing theory proposes that as company delivers value to customer, strength of its relationship with the customer will improve and increasing the customer retention.

Scope of Relationship marketing is as follows:

• Relationship marketing looks at creating an approach and strategy that will generate customer retention. It makes a shift from traditional marketing which had a single sales strategy.
• Relationship marketing treats sales as the beginning of relationship with the customer. The profit from this relationship is a measure of company’s success. Sale alone does not determine success of the company.
• Relationship marketing looks to create a continuous relationship with the customer. This could be through proficient after sales service or providing add on features.
• Relationship marketing talks about delivering value to the customer rather than highlighting the salient features of the product.
• Relationship marketing believes the customer is the center of the business rather than its product and offerings.
• Relationship marketing deals with customer by considering a long term perspective rather than a short term one.
• Relationship marketing looks to deliver a robust customer service which includes pre-sales, sales and after sales activities.
• Relationship marketing puts emphasis on understanding customer expectation. After understanding company shows high commitment in delivering to that expectation.
• Relationship marketing is committed towards total quality management. This commitment towards quality is displayed at each level and across functions.
• Relationship marketing believes pricing of product should not be determined by the competitive forces but through negotiation and consensus.
• Relationship marketing encourages marketing campaign to focus on the target customer market, tailoring to the specific needs of the individual.
• Relationship marketing prepares the company to launch products which serve problem solving capability addressing current as well as future needs.

Relationship marketing- A Collaborative Approach

From above it is clear that relationship marketing overlaps with other marketing strategies like service marketing, branding, channel marketing etc. However the differentiation comes in focus of other strategies for example service marketing focus is on intangible services, channel marketing looks at the interaction between channel partners. But relationship marketing looks at enhancing company performance by focusing on improving various relationships.

Relationship marketing’s focus is on improving relationships with supplier market, internal market, referral market, customer market and business market.

Internal markets: company’s culture, values and belief create the internal market. It includes people, process and groups.

Supplier Market: the various suppliers and vendor on which company is dependent to create its final product make up the supplier market.

Referral Market: Satisfied customer, professional advisors, etc. from the referral market. The satisfied customers are motivated bunch who through word of mouth promote the company.

Business Market: the external business environment forms business market for the company. They play a significant role in determining the success of the company.

Customer Market: this market consists of not only the end user, but also intermediaries who purchase products from the company.

The above mentioned markets form basis various relational exchanges around which relationship marketing is developed.

Conflict and Relationship Marketing

The existing and unresolved conflicts between the various markets and company play a pivotal role in determining long term success of the company. If any conflict remains unresolved it can lead to complete breakdown of commercial interactions between all market players. Therefore, it is necessary for the company to align its business process with relationship marketing strategy. The company has to create culture and formal systems where conflict customer issues are resolved.

A common understanding between all the players about their role and responsibility through relationship marketing helps in long term value for the customer.