What Is Relationship Marketing and Why It Should Be Used by the Modern Business?

Today, companies that have achieved success, are doing everything possible to preserve their customers. To win a place in the modern market, companies must focus on the consumer and provide their target consumers with the highest value. Most markets are already quite stable, and not many new consumers of goods are added to the main categories. Competition is intensifying, and the cost of attracting new consumers is growing. In addition, consumers themselves are becoming increasingly independent and demanding. To remain competitive, a modern company must be well informed about its customers. To do this, new business models are being developed and non-traditional solutions are offered. Customer relationship marketing is one of these approaches.

Definition Relationship Marketing

The term was introduced in 1983 by Leopard Berry in the context of service marketing to describe a new approach to marketing, focused on longer-term relationships with consumers. Creating relationship marketing is the process of creating, maintaining and expanding strong, full-fledged relationships with consumers and other partners of the company. Its goal is to provide the customer with long-term values, and a measure of success is the high level of customer satisfaction for a long time. It includes the establishment of relationships at the economic, social, technical, legal levels.

Marketing of relationships are often built on the fact that the consumer is most widely attached to the company's activities, getting the maximum benefit, and the company, in turn, benefits from a strong "binding" to the consumer. This is a promising concept of service entrepreneurship, focused on the coverage of all resources and activities in the process of organizing, planning and managing communications with all entities of the market network at each stage of the product's lifecycle. Marketing relationships are designed to ensure a long-term relationship with the client, the achievement of the goals of the parties involved in the agreement.

Traditional marketing refers to relationship marketing in such an aspect that it is the method of organizing marketing on the principle of distribution, increasing the responsibility for understanding and performing marketing functions between the entire staff of the firm from the employee directly serving the client to its top management.

Firms that adopt a relationship marketing strategy attempt to:

  • establish relationships with the most important target groups;
  • maintain and take care of established relationships;
  • quantify the effectiveness of relationships.

Let's single out five different levels of relationships that can arise with the consumer.

  1. The basic level of relations. The seller of the company sells the goods and then does not take any action.
  2. Reactive level of relations. The seller sells the goods to the consumer and asks to call in case he has any questions.
  3. Responsible level of relations. After a short period of time after the purchase, the seller himself calls the buyer to check the situation and answers his questions. During and after the transaction, the seller requests from the buyer proposals for improvement and possible improvement of the goods, as well as any of its shortcomings. This information helps the company continuously improve its offers.
  4. Proactive level of relations. The seller or other employees of the company from time to time call the customer with suggestions for product improvements that have been made, or about creative proposals for the future.
  5. Level of partnership. The company continuously works with this and other consumers to achieve a better consumer value proposition.

What special marketing tools can a company use to achieve stronger customer relationships and better meet his needs? For this, the company can apply one of three approaches.

  1. The first involves primarily introducing additional financial benefits into the relationship with the consumer.
  2. The second approach is to introduce along with financial additional social benefits. At the same time, the company's staff is working to strengthen social ties with consumers by examining the needs and desires of each of them and then individualizing and personalizing their goods and services.
  3. The third approach to creating a strong relationship with the consumer is to connect the structural links along with financial and social benefits. For example, airlines offer special reservation systems for travel agents.

What Is the Relationship Between Marketing and Utility

Now in the history of marketing, a complete circle is completed: it started from trading "one on one" with the buyer, from "his" baker and greengrocer through an impersonal world of impersonal mass advertising to modern personalized personal service. The consumer has an "own" brand or store, and the store has a "regular" and loyal customer.

The opportunity to count the total cost of all repeated purchases of a regular customer for the average time of communication with him, which arose in the early 1980s, gave rise to a burning desire for various companies to reliably establish a relationship with the client. A well-known pattern of 80/20 has been confirmed: 20% of the most loyal buyers make 80% of purchases. After confirming this fact, the desire to identify and retain this gold twenty has become even stronger.

It is about programs for forming loyalty to a store, a firm, a brand, creating a club where the general desire is to use the services of a firm, to buy goods from a particular store or a particular brand. The company that created such a club gets great benefits. It knows her best customers, knows what they are buying and how much they spend. It can be sure that a member of the club will bring his friends and acquaintances. It will be able to produce or order goods in the light of the future interests of buyers. Members of the club are constantly being stimulated financially and morally.