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Relationship marketing focuses on developing long-term customer loyalty and engagement rather than short-term goals like sales. It aims to create strong emotional connections between customers and brands through ongoing communication and tailored experiences. This contrasts with transactional marketing which focuses on individual sales. Relationship marketing involves tracking customer behavior online and offline to provide personalized service and information to improve customer retention. It uses tools like CRM and social media to facilitate two-way communication and monitor customer sentiment. The goal is to transform prospects into advocates who will remain loyal, spread positive word-of-mouth, and act as brand representatives. This benefits both customers through increased value and trust in consistent relationships, and companies through a committed, profitable customer base.
Deskripsi Asli:
Its a File in which i have discussed about the relationship marketing
Relationship marketing focuses on developing long-term customer loyalty and engagement rather than short-term goals like sales. It aims to create strong emotional connections between customers and brands through ongoing communication and tailored experiences. This contrasts with transactional marketing which focuses on individual sales. Relationship marketing involves tracking customer behavior online and offline to provide personalized service and information to improve customer retention. It uses tools like CRM and social media to facilitate two-way communication and monitor customer sentiment. The goal is to transform prospects into advocates who will remain loyal, spread positive word-of-mouth, and act as brand representatives. This benefits both customers through increased value and trust in consistent relationships, and companies through a committed, profitable customer base.
Relationship marketing focuses on developing long-term customer loyalty and engagement rather than short-term goals like sales. It aims to create strong emotional connections between customers and brands through ongoing communication and tailored experiences. This contrasts with transactional marketing which focuses on individual sales. Relationship marketing involves tracking customer behavior online and offline to provide personalized service and information to improve customer retention. It uses tools like CRM and social media to facilitate two-way communication and monitor customer sentiment. The goal is to transform prospects into advocates who will remain loyal, spread positive word-of-mouth, and act as brand representatives. This benefits both customers through increased value and trust in consistent relationships, and companies through a committed, profitable customer base.
Relationship marketing is a facet of customer relationship
management (CRM) that focuses on customer loyalty and longterm customer engagement rather than shorter-term goals like customer acquisition and individual sales. The goal of relationship marketing (or customer relationship marketing) is to create strong, even emotional, customer connections to a brand that can lead to ongoing business, free word-of-mouth promotion and information from customers that can generate leads. Relationship marketing stands in contrast to the more traditional transactional marketing approach, which focuses on increasing the number of individual sales. In the transactional model, the return on customer acquisition cost may be insufficient. A customer may be convinced to select that brand one time, but without a strong relationship marketing strategy, the customer may not come back to that brand in the future. While organizations combine elements of both relationship and transactional marketing, customer relationship marketing is starting to play a more important role for many companies. Implementing a relationship marketing strategy Relationship marketing is based on the tenets of customer experience management(CEM), which focuses on improving customer interactions to foster better brand loyalty. While these interactions can still occur in person or over the phone, much of relationship marketing and CEM has taken to the Web. With the abundance of information on the Web and flourishing use of social media, most consumers expect to have easy, tailored access to details about a brand and even expect the opportunity
to influence products and services via social media posts and
online reviews. Today, relationship marketing involves creating easy two-way communication between customers and the business, tracking customer activities and providing tailored information to customers based on those activities. For example, an e-commerce site might track a customer's activity by allowing them to create a user profile so that their information is conveniently saved for future visits, and so that the site can push more tailored information to them next time. Site visitors might also be able to sign in through Facebook or another social media channel, allowing them a simpler user experience and automatically connecting them to the brand's social media presence. This is where CRM and marketing automation software can support a relationship marketing strategy by making it easier to record, track and act on customer information. Social CRM tools go further by helping to extend relationship marketing into the social media sphere, allowing companies to more easily monitor and respond to customer issues on social media channels, which in turn helps maintain a better brand image. RELATIONSHIP MARKETING
Relationship Management is a special field of its own, It is as
important as preserving and enhancing the intangible asset known as "goodwill" as the management of hard assets. . The fact that it is probably harder to do is that much more reason hard effort be expended to do it. - Theodre Levitt Modern marketing revolves around the Customer. It is an old and by-now universally accepted concept that the Customer is the King. Customers are treated as the eyeballs of all major companies in the world. The little-guy-the-customer is the person who has unique interests, needs, attitude preferences, issues and
opportunities, and most importantly the authority to spend the
money on the offerings of the company. Therefore the traditional approach of making one-time sales is being replaced with making long term commitment to the customer. The former approach is popularly known as transactional marketing, while making long term commitment is the basic of relationship marketing. Relationship marketing basically represents a paradigm shift within marketing away from acquisition- transaction focus towards a retention-relationship focus. Relationship marketing is a philosophy of doing business, a strategic orientation that focuses on keeping and improving the current customers, rather than acquiring new customers. This concept assumes that the consumer prefers to have an ongoing relationship with one organisation rather than switching organisations. Building on this assumption and also on the fact that retention is cheaper than acquiring new customers, the marketers of today offers prime importance in the strategy of acquiring-satisfying-maintaining customers. Marketing companies often ends up in doing lot more in getting new customers but often forget to do the precise little to find out what they should do to keep the customer in their hands. It is a well-known truth that loss of one's customer is the gain of the competitor. Regardless of the advertising budget, and efforts to lure customers to buy products through some other means like innovative and new-to-the-world promotional campaigns, and the best of the sales force, the customer is likely to spend considerable amount of his disposable income on the company which satisfies him most consistently. To satisfy a customer consistently over time the company should equip itself with the preferences of the customers to the greatest detail. The questions to be answered in the process may be What does he look for while buying a particular category of products? Who, among the competitors of the company, are in his active consideration set?
What does he want from a product (or from the producer of
the product)? Does he give importance to the product or to the producer of the product and so on?
A company must know what is relevant to the customer and must
work accordingly. One of the biggest disadvantages of mass marketing campaign is that the amount of money invested in the programme reaches out to all segments of the customers without any considerable differentiation in the exposure and thus in the investment level. When a company is interested in understanding the customers in great detail it is also easier for the company to differentiate profitable customers from less profitable ones. The next job will then be the selection of the segments of the most profitable customers, which are to be targeted. (A detail discussion on this is offered below.) And thus the company should try to begin a long standing commitment, rather than a one time or myopic bump-on-you and thank-you attitude. If the job of the traditional copywriter and creative directors of an ad agency is to create awareness, relationship marketing is to embrace the customer for the whole lifecycle.
Goals of Relationship Marketing
The primary goal of relationship marketing is to build and maintain a group of committed customers who are profitable for the organisation. Following methods exemplifies how the company may choose to segment and target particular group of customers for potential relationship marketing. Identify the customers who spend above average. Find out whether they are loyal to the company, if not find out ways to keep them with the company. The company should try to continuously lure them to buy its product, even by offeringloyalty discounts. Loyal customers can be even better customers if they buy more products and services from the company over time. Loyal customers not only provide a solid base for the organization; they may represent growth potential too. Find out the group of new customers, which hold better promise than the others do. One way of doing so is to tap the customers who are buying the companys product not in response to a price discount. Then the company should try to nurture such customers by finding out why they bought the product and by trying to strive to give the customer whatever they look from it. As customers move from one life cycle stage from another, needs evolve, buying pattern fluctuates and product choices shift. A smart and live relationship company should recognise such change of needs and wants, and should gear itself up to suit the advantage. Failure to do so might result in drifting of the customer. To achieve these the firm will focus on attraction and retention of the customer, and enhancement of customer relationship.
In Figure 2 it is shown that the organization should focus on
converting prospects into advocate through creating and maintaining relationship with the customers. Thus the ultimate goal of relationship marketing is to create a band of Advocate customers, who would always be with the organization and not only spread good word-of-mouth, but also act as spokespersons when need arises. Obviously, as the pyramid suggests the number of advocate will be far less than the number of initial prospects. Benefits of Customer Relationship: Both parties in the customer/firm relationship can benefit from customer retention. That is, it is not only in the best interest of the organization to build and maintain a loyal customer base, but customers themselves also benefit from long-term associations. BENEFITS FOR CUSTOMERS: Customers will remain loyal to a firm when they receive greater value relative to what they expect from competing firms. Apart from this obvious benefit the customer may be inclined to stick to one product or organisation because of his/her believe that1. he will comfortable in the relationship, 2. he knows what to expect,
3. he has a good working relationship with the organisation
4. he knows he will be taken care of even for an unusual request. Research has uncovered specific types of relational benefits, of the sort just described, that customers experience in long-term service relationships including confidence benefits, social benefits, and special treatment benefits. Confidence Benefits: These benefits comprise feelings of trust or confidence in the provider, along with a sense of reduced anxiety and comfort in knowing what to expect. Across all the services studied in the research just cited, confidence benefits were the most important to customers. Most consumers (whether individuals or businesses) have many competing demands for their time and money and are continually searching for ways to balance and simplify decision making to improve the quality of their lives. When they can maintain a relationship with a service provider, they free up time for other concerns and priorities. Social Benefits: In some long-term customer-firm relationship a service provider may actually become part of the consumer's social support system. Hairdressers often serve as personal confidant of the customer. Less common examples include proprietors of local retail stores who become central figures in neighborhood networks. These types of personal relationships can be developed for business-to-business customers as well. The social support benefits resulting from these relationships are important to the consumer's quality of life (personal and/or work life) above and beyond the technical benefits of the service provided. Special Treatment Benefits: Special treatment includes such things as getting the benefit of the doubt, being given a special deal or price, getting preferential treatment etc. However, interestingly enough, special treatment benefits were less
important than the other types of benefits received in service
relationship. BENEFITS FOR THE ORGANISATION: The benefits for the organisation for developing and maintaining effective relationship with the customer are numerous. A few obvious advantages are listed below. Increase in Purchase: Researchers worldwide have reported that an effective relationship with a group of profitable customers results in more number of sales. As consumers get to know a firm and are satisfied with the quality of its services relative to that of its competitors, they will tend to give more of their business to the firm. Lower Costs: It is a well-known fact that retaining old customers is cheaper than luring new customers. Sometimes these initial costs can outweigh the revenue expected from the new customer in the short term. Even ongoing relationship maintenance costs are likely to drop over time. For example, early in a relationship a customer is likely to have questions and to encounter problems as he or she learns to use the service. As time goes by the customer will have fewer doubt or question and will make fewer mistakes (assuming that the quality or service is maintained at a high level) and the service provider will incur fewer costs in serving the customer. Good word-of-mouth: Services are normally complex and difficult to evaluate before actually buying it, consumers most often look to others for advice on which providers to be considered. Satisfied, loyal customers are likely to provide a firm with strong word-of- mouth endorsements. Further, researchers report those customers show up based on a referral tend to be better quality customers (in terms profitability, likelihood of being loyal) than the customers who are attracted through other promotional campaigns like price promotion and advertising.
Employee Retention: Employee retention may be an indirect
benefit of customer retention. It is easier for a firm to retain employees when it has a stable base of satisfied customers. People like to work for companies whose customers are happy and loyal. Figure 3 explains this with a causal loop diagram. The positive signs (within brackets) show a positive change in the dependent variable with one unit change in the independent variable. The overall changes on all the variables will be positive as well. Having discussed the benefits of Relationship Marketing let there be a discussion on one recent development in this field, which is helping popularizing the concept among practicing marketers.
Lifetime Value (LTV) is a concept through which the marketers
can find out the profitability of a customer in advance. Lifetime value of a customer is a concept or calculation that looks at customers from the point of view of their lifetime revenue and profitability contributions to a company. The lifetime value of a customer is influenced by the length of an average "lifetime," the average revenues generated per relevant time period over the lifetime, sales of additional products and services over time, and referrals generated by the customer over time. LTV sometimes refers to lifetime revenue stream only; other times, when costs are considered, LTV may truly mean "lifetime profitability."
Estimating Lifetime Value: Reichheld and Sasser, Jr observed
-"If companies knew how much it really costs to lose a customer, they would be able to make accurate evaluations of investments designed to retain customers. Unfortunately, today's accounting systems do not capture the value of a loyal customer." One way of documenting the money value of loyal customers is to estimate the increased value or profits that accrue for each additional customer who remains loyal to the company rather than defecting to the competition. During calculation, time (present) value of money may be considered for the future transactions those are expected from the customer, from the new customers generated through referrals of the customer under consideration. Following important aspects might as well be considered while calculating the LTV of a customer. i.
Importance of referrals to the new customers
ii.
The frequency at which existing customers refer the product
to new customers.
iii.
the size of the customer referred.
iv.
the LTV calculation of the new customers.
Stephen Shaw, the Executive Editor, CRM Journal observed that
the following information are needed to figure out the LTV of an average customer. Attrition Curve: Attrition curve indicates how many customer become inactive as a percent of total base every year. Attrition curve may decay at a steady rate or may be "kinked" higher in some initial period, then gradually stabilising. An attrition curve is derived by analysing the activity of multiple cohorts- customer groups that started at different times- to see how many survived with each successive year. Attrition rates are influenced by many factors, ranging from population age and mobility in product life cycle, and will differ from one business sector to another.
LTV Horizon: Average life time of a customer based on the
attrition curve. For example a steady 20% attrition means that the average life time is about five years Average Spending: Average annual spending by the customers Direct Cost: Includes merchandising, operating and fixed costs. Selling Costs: Includes the costs of advertising and promotion, and cost of maintaining a marketing database system. Discount Rate: The value of future earnings expressed in todays money value, which is typically the current market rate of interest. It is well appreciated that the first step in relationship marketing is the retention of the customer. Unless the company is able to retain the customer, it is meaningless to talk about relationship marketing. For this the company as well as the products under sale must meet certain criteria. These are, A consistently good quality product, so that the consumer satisfaction is assured for a long time. Proper market segmentation is done and right target is selected. If more than one segment is targeted the segments must be compatible with each other. The product should be competitive in the target market. That means the product must be very best among the competitors. Thorough monitoring and evaluating relationship quality over time. Basic market research in the form of annual customer relationship survey may be carried out for this evaluation. Retention Strategies: Berry and Parasuraman, two early advocates of relationship marketing have developed a framework for understanding the type of relationship strategies. The framework suggests that retention marketing can occur at
different levels and that each successive level of strategy results
in ties that bind the customer a little closer to the firm. At each successive level, the potential for sustained competitive advantage is also increased. Building on the levels of the retention strategy idea, Figure 4 illustrates four types of retention strategies, which are discussed below. Level-1 : Financial Bond: At level I, the customer is tied to the firm primarily through financial incentives- lower prices for greater volume purchases or lower prices for customers who have been with the firm a long time. Examples of level 1 relationship marketing are not hard to find. Airline industry and related travel service industries like hotels and car rental companies are following this type of incentive for a long time. Frequent flier programs provide financial incentives and rewards for travelers who choose their airline for long time. Hotels and car rental companies do the same. Long-distance telephone companies in the United States have engaged in a similar battle, trying to provide volume discounts and other price incentives to retain market share and build a loyal customer base. One reason of these financial incentive programs' proliferation is that they are not difficult to initiate (and to be copied from competitors) and frequently result in at least short-term profit/gains. Unfortunately, financial incentives do not generally provide long-term advantages to a firm since, unless combined with another relationship strategy, they don't serve to differentiate the firm for a long period. Many travelers belong to several frequent flyer programs and don't hesitate to trade off among them. While price and other financial incentives are important to customers, they are generally not difficult for competitors to imitate, since the primary customized element of the marketing mix is price. Other types of retention strategy are cross selling of services, like the tie up of airlines industry with hotel chains and credit card companies. Level 2- Social Bonds: This strategy bonds the customers to the firm through more than financial incentives. While price is still assumed to be important, level 2 retention marketers build long term relationship through social and interpersonal as well as
financial bonds. Customers are viewed as clients rather than mere
customers. The clients are the individuals whose wants and needs the firm tries to understand and design the product accordingly. Services are customised to fit individual needs, and the marketers find ways of sticking to the customers, thereby developing social bonds with them. Social, interpersonal bonds are common among professional service providers (e.g., -lawyers, accountants, and teachers) and their clients as well as personal care providers (hairdressers, counselors, and healthcare provider) and their clients. A dentist who takes a few minutes to review his patient's file before coming in to the exam room is able to jog his memory on personal facts about the patient (occupation, family details, interests, dental health history). By bringing these personal details into the conversation, the dentist reveals his genuine interest in the patient as an individual and builds social bonds. Interpersonal bonds are also common in business-to-business relationships where customers develop relationships with salespeople and/or relationship managers working with their firms. Sometimes relationships are formed with the organization due to the social bonds that develop among customers rather than between customers and the provider of the service. Over time the social relationships they have with other customers are important factors that keep them from switching to another organization. While social bonds alone may not tie the customer permanently to the firm, they are much more difficult for competitors to imitate than are price incentives. In the absence of strong reasons to shift to another provider, interpersonal bonds can encourage customers to stay in a relationship. In combination with financial incentives, social-bonding strategies may be very effective. Level 3-Customisation Bonds: Level 3 strategies involve more than social ties and financial incentives, although there are
common elements of level 1 and 2 strategies encompassed within
a customisation strategy and vice-versa. Two commonly used terms fit within the customization bonds approach: Mass customization and customer intimacy. Both of these strategies suggest that customer loyalty can be encouraged through intimate knowledge of individual customers, and through the development of one-to-one solution that fits the individual customers needs. Mass customisation has been defined as the use of flexible processes and organisational structures to produce varied and often individually customized products and services at the price of standardised mass-produced alternatives. Mass customisation, however, does not mean providing customers with endless solutions or choices that only make them work harder for what they want; rather, it means providing them through little effort on their part with tailored services to fit their individual needs. Level 4- Structural Bonds: Level 4 strategies are the most difficult to imitate and involve structural as well as financial, social, and customization bonds between the customer and the firm. Structural bonds are created by providing services to the client that designed right into the service delivery systems. Often structural bonds are created by providing customised services to the client that are technology based and serve to make the customer more productive. Tools of Relationship Marketing: Customer database: One of the most important and basic tools of relationship marketing is the customer database. For some organisations, the database is so huge and complex, it is often called as Marketing Warehouse or data warehouse. However, smaller version of the database is known as data mart. In all these types of database efforts are made to save, as many data about the customer as available and to retrieve them on demand. The database captures data regarding almost all aspects of the customer like their transaction habits, their life cycle stages, personal likeness and disliking, date of birth of the family
members etc. so that whatever information is required about the
customer can be retrieved almost without any effort. A complete and reliable database helps the company in many ways like deciding about the attrition curve, the average purchase of the customer, the brand switching habits, segmentation of the customer and the targeting etc. For example, a world-renowned chain of hotels makes it a policy to treat each and every customer in customised manner. One such customisation is delivering the customer his or her favourite newspaper in the morning. This information is stored in the central network of the chain and the housekeeping staff at any country can have access to the customer preferences database when the customer books himself or herself for that particular branch of the chain. This is possible only through a thorough database about the preferences of the customer, recorded when he/she had visited the hotel chain last. The customer remains satisfied with such individual attention and will in all probability be loyal to the chain. Data Mining: It is observed that even with the fastest microprocessors available for data warehousing serious problems are encountered in retrieving the required information on time. Data Mining is a development in Information Technology, through which required information is mined from the server. However, a detail discussion on this is beyond the scope of this material and hence no further discussion is offered. OLAP (online Data Processing) is another tool through which retrieval and storage are made faster than ever before. This tool stores data in hypercube format specially designed to summary values of each of the transaction points across all of the various dimensions. Source record are extracted from the relational database, aggregated and batch loaded into predefined dimensions on a dedicated multidimensional server. If any time a user needs to see a new dimension, it can be created with the next reload by the database administrator. The user may see the combination of dimensions at a time, say, past years sales by trading area and product category; go down immediately to see whats going on in a specific store by department and item; then roll right back up to a regional level, merely by clicking at the
appropriate dialogue boxes. This subject is also beyond the scope
of this material. It must be mentioned here that these tools may not be seen in isolation and all these are used at the same time by the same programme. RFM Model : This model is helpful in monitoring retention of a particular customer. This method tries to rank a customer relative to all other customers in terms of Recency, Frequency and Monetary Value. Recency is how recently a customer has visited for a purchase, which according to Jim Novo is the most important indicator of future behaviour. Frequency is the repeat rate, while monetary value means the volume of transaction in one go (or over a period of time). The RFM model suggests that a company should find out segments of customers on the basis of their recency, repeat rate and monetary value. The propagators of this model insist that each company might have different strategies to deal with the RFM segments, but such segmentation is a must for relationship marketing. Relationship marketing is essentially based on the skills of relationship building and maintenance between the firm and the customer. To make a customer loyal to the organisation the marketers must delight he customer each time he/she is visiting the firm. For this the firm must think ahead of its competitors and the customer himself. Every time some pleasant surprise should be offered to delight the customer.