Relationship Marketing Essay Research Paper Relationship Marketing

Relationship Marketing Essay, Research Paper

Relationship Marketing

“Relationship marketing is an approach to the market which emphasis a ‘relationship’ rather than a ‘transaction approach’ to business” (Tap, 1998)

Critically analyse this statement.

Recently there has been a shift from the more short-term traditional transaction approach to marketing, to long-term relationship between suppliers and customers especially within the service sector. (Buttle, 1996)

The significance of relationship marketing is that it is more about customer value and satisfaction than making a fast buck. (Kotler, 2000)(Refer to appendix, 1 for models for relationship marketing)

“The fundamental principle upon which relationship marketing is founded is that the greater the level of customer satisfaction with the relationship – not just the product or service – then the greater the likelihood that the customer will stay with us”.

(Payne, et, al 1998, p vii)

Relationship marketing concentrates on structuring relationships with customers and then having the advantage to target them with relevant parts of the marketing mix i.e. promotion. (http://www.eccs.uk.com, 1999) (Refer to appendix 2, for articles on relationship marketing, Financial Times article on relationship marketing by Barbara Kahn, Defining customer relationship marketing and management & ECCS- The European Centre for Customer Strategies)

The transaction approach is more likely to be a one off or short term approach where it finishes with point of sale. The relationship approach is much more likely to be long term where the company establishes potential and efficient relationships with a customer so that they can cater to the customers demands and needs. (Kotler,2000)

Differences are:

Marketing transaction approach Marketing relationship approach

Directed at individual sales Directed at customer retention

No customer contact Constant customer contact

More attention to product/service More attention to customer benefits

Not much regard for customer service High level of customer service.

No responsibility for meeting customers Very responsive to meeting

demands customers demands

Production staff are only concerned All staff are concerned with quality of

about quality of product/service product/service

(Payne, et al, 1998)

Transactional approach is to make profits by just selling and having little customer contact. Relationship marketing is much more customer orientated. Marketers focus and continuously give their attention to key accounts, which are highly profitable. (Kotler,2000) The Pareto effect points out that 20% of customers account for 80% of business. Companies should therefor identify their most important customers, provide them with a high quality service, and utilise marketing strategies and plans to implement this. (Brassington & Pettitt,1997)

There are different ways to build up relationship marketing with the customer.

Reactive marketing, this is where a customer buys a product and the salesperson persuades the customer to telephone back with their questions or complaints.

Accountable marketing is where the salesperson telephones the customer after they have purchased a product/service to see whether they are satisfied with their purchase/service. The customer is asked whether there are any improvements, which could be made to the product/service. This helps the product/service provider to improve their performance in the future. (Kotler,2000). BMW always phone you up shortly after they have serviced your car and ask you questions about the service to improve the quality of future services. Sometimes the customer can contact the suppliers i.e.

Kellogg’s provide a customer service telephone number that customers can phone up. This is common practice in America there is a toll free number on the package of many products. (Kotler, 2000) (Refer to appendix 3, (BAA, Achieving world class performance), article about customer satisfaction and long term relationships & for relationship marketing through banking, (First direct, Creating intelligent relationships with customers)

Relationship marketing can reap long term monetary benefits from customer retention. It costs five times more to attract a new customer than to retain an existing customer. (Buttle, 1996) Attracting new customers can be a costly expense for some small businesses. Organisations that use relationship marketing to build long-term relationships will have satisfied clients who will come back and repurchase goods or services. However it can take time i.e. a credit card company needs to retain a new customer for over two years before reaching the break-even point. If a customer is no longer happy with a company and defects to the competition and tells other customers of their dissatisfaction, the company could loose a lot of revenue. (Buttle, 1996) Reasons for defecting are lower priced substitutes; better service offered elsewhere and competitor products/services are superior. Companies should observe the rate of customer defection, why they have defected and then take measures to reduce it. (Kotler, 1996)

The transactional marketing mix approach is, in gaining revenue from any customer without having to for

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