"Relationship marketing is a strategy designed to foster customer loyalty,

interaction and long-term engagement. It is designed to develop strong

connections with customers by providing them with information directly suited to
their needs and interests and by promoting open communication."

Relationship marketing was first defined as a form of marketing developed from direct
response marketing campaigns which emphasizes customer retention and satisfaction,
rather than a focus on sales transactions.[1][2]
Relationship marketing differs from other forms of marketing in that it recognizes the long
term value of customer relationships and extends communication
beyond intrusive advertising and sales promotional messages.[3]
With the growth of the internet and mobile platforms, relationship marketing has continued to
evolve as technology opens more collaborative and social communication channels. This
includes tools for managing relationships with customers that goes beyond demographics
and customer service data. Relationship marketing extends to include inbound marketing
efforts (a combination of search optimization and strategic content), PR, social media and
application development.

Contents

 1Development
 2Scope
 3Approaches
o 3.1Satisfaction
o 3.2Retention
 4Application
o 4.1Internal marketing
o 4.2The six markets model
o 4.3Live-in marketing
 4.3.1History
 4.3.2Premise
 5See also
 6References
 7Bibliography

Development[edit]
Relationship marketing refers to an arrangement where both the buyer and seller have an
interest in a more satisfying exchange. This approach tries to transcend the post-purchase-
exchange process with a customer to make richer contact by providing a
more personalized purchase, and uses the experience to create stronger ties. Relationship
marketing is different from other marketing techniques as it mainly focuses on the long-term
relationship with customers.
Relationship marketing was proposed by American marketing scholars Berry (1983) and
Jackson (1985). Berry (1983) argued in a conference on the field of service marketing that
relationship marketing is a marketing activity for enterprises to obtain, maintain and promote
effective relationships with customers. After a long-term follow-up study on the marketing
process of the service industry it was concluded that the ultimate goal of enterprise
marketing is not only to develop new customers, but also focus on maintaining existing
customers. Ultimately, the goal is to improve the long-term interests of both parties through
cooperative relationships. It also argues that the cost of maintaining an old customer is far
lower than the cost of developing a new customer, and that the marketing concept of
maintaining the relationship with old consumers is more economical than the marketing
concept of developing new customers. Jackson (1985) further modified the concept in the
aspect of industry marketing . He argued that the essence of relationship marketing is to
attract, establish and maintain close relationship with enterprise customers. The relationship
marketing scholars are found in obtains the profit obtained by keeping the customer review
rate than the profit obtained by developing new customers higher phenomenon, has
launched a research on the essence of relationship marketing, concluded that relationship
marketing is through the actual maintenance of existing customers, thus creating long-term
interests to maximize a way of marketing.This research conclusion has been generally
recognized later, but the research scope is only limited to the relationship with old
customers, which is easy to ignore the dynamic development of customers, because the
formation of customer loyalty customers are from the development of new customers, so we
should pay attention to the development of new customers.If the enterprise is limited to the
maintenance of existing customers, then it is impossible for the enterprise to achieve any
progress and cannot cope with the current market competition.
From a social anthropological perspective, relationship marketing theory and practice can be
interpreted as commodity exchange that instrumentalise features of gift exchange.[4] It seems
that marketers — consciously or intuitively — are recognizing the power contained in 'pre-
modern' forms of exchange and have begun to use it. This perspective on marketing opens
up fertile ground for future research, where marketing theory and practice can benefit from
in-depth research of the principles governing gift exchange.
According to Liam Alvey,[5] relationship marketing can be applied when there are competitive
product alternatives for customers to choose from; and when there is an ongoing desire for
the product or service.
Relationship marketing revolves around the concept of gaining loyal customers. Research
conducted to developing relationship marketing suggests that firms can best do this through
having one of the three value strategies; best price, best product, or best service. Firms can
relay their relationship marketing message through value statements.[6]
The practice of relationship marketing has been facilitated by several generations of
customer relationship management software that allow tracking and analyzing of each
customer's preferences, activities, tastes, likes, dislikes, and complaints. For example, an
automobile manufacturer maintaining a database of when and how repeat customers buy
their products, the options they choose, the way they finance the purchase etc., is in a
powerful position to develop one-to-one marketing offers and product benefits.
In web applications, the consumer shopping profile can be built as the person shops on the
website. This information is then used to compute what can be his or her likely preferences
in other categories. These predicted offerings can then be shown to the customer through
cross-sell, email recommendation and other channels.
Relationship marketing has also migrated back into direct mail, allowing marketers to take
advantage of the technological capabilities of digital, toner-based printing presses to produce
unique, personalized pieces for each recipient through a technique called "variable data
printing". Marketers can personalize documents by any information contained in their
databases, including name, address, demographics, purchase history, and dozens (or even
hundreds) of other variables. The result is a printed piece that (ideally) reflects the individual
needs and preferences of each recipient, increasing the relevance of the piece and
increasing the response rate.

Scope[edit]
Relationship marketing has also been strongly influenced by reengineering. According to
(process) reengineering theory, organizations should be structured according to complete
tasks and processes rather than functions. That is, cross-functional teams should be
responsible for a whole process, from beginning to end, rather than having the work go from
one functional department to another. Traditional marketing is said to use the functional (or
'silo') department approach. The legacy of this can still be seen in the traditional four P's of
the marketing mix. Pricing, product management, promotion, and placement. According to
Gordon (1999), the marketing mix approach is too limited to provide a usable framework for
assessing and developing customer relationships in many industries and should be replaced
by the relationship marketing alternative model where the focus is on customers,
relationships and interaction over time, rather than markets and products.
In contrast, relationship marketing is cross-functional marketing. It is organized around
processes that involve all aspects of the organization. In fact, some commentators prefer to
call relationship marketing "relationship management" in recognition of the fact that it
involves much more than that which is normally included in marketing.
Because of its broad scope, relationship marketing can be effective in many contexts. As
well as being relevant to 'for profit' businesses, research indicates that relationship marketing
can be useful for organizations in the voluntary sector[7] and also in the public sector.[8][9]
Martin Christopher, Adrian Payne, and David Ballantyne[10] at the Cranfield School of
Management claim that relationship marketing has the potential to forge a new synthesis
between quality management, customer service management, and marketing.

Approaches[edit]
Satisfaction[edit]
Relationship marketing relies upon the communication and acquisition of consumer
requirements solely from existing customers in a mutually beneficial exchange usually
involving permission for contact by the customer through an "opt-in" system.[11] With
particular relevance to customer satisfaction the relative price and quality of goods and
services produced or sold through a company alongside customer service generally
determine the amount of sales relative to that of competing companies. Although groups
targeted through relationship marketing may be large, accuracy of communication and
overall relevancy to the customer remains higher than that of direct marketing, but has less
potential for generating new leads than direct marketing and is limited to Viral marketing for
the acquisition of further customers.[citation needed]
Retention[edit]
A principle of relationship marketing is the retention of customers through varying means to
ensure repeated trade from preexisting customers by satisfying requirements above those of
competing companies through a mutually beneficial relationship[11][12] This technique is
counterbalancing new customers and opportunities with current and existing customers as a
means of maximizing profit and counteracting the "leaky bucket theory of business" in which
new customers gained in older direct marketing oriented businesses were at the expense of
or coincided with the loss of older customers.[13][14] This process of "churning" is less
economically viable than retaining all or the majority of customers using both direct and
relationship management as lead generation via new customers requires more
investment.[15]
Many companies in competing markets will redirect or allocate large amounts of resources
or attention towards customer retention as in markets with increasing competition it may cost
5 times more to attract new customers than it would to retain current customers, as direct or
"offensive" marketing requires much more extensive resources to cause defection from
competitors.[15] However, it is suggested that because of the extensive
classic marketing theories center on means of attracting customers and creating
transactions rather than maintaining them, the majority usage of direct marketing used in the
past is now gradually being used more alongside relationship marketing as its importance
becomes more recognizable.[15]
It is claimed by Reichheld and Sasser[16] that a 5% improvement in customer retention can
cause an increase in profitability of between 25 and 85 percent (in terms of net present
value) depending on the industry. However Carrol, P. and Reichheld, F.[17] dispute these
calculations, claiming they result from faulty cross-sectional analysis. Research by John
Fleming and Jim Asplund indicates that engaged customers generate 1.7 times more
revenue than normal customers, while having engaged employees and engaged customers
returns a revenue gain of 3.4 times the norm.
According to Buchanan and Gilles,[18] the increased profitability associated with customer
retention efforts occurs because of several factors that occur once a relationship has been
established with a customer.

 The cost of acquisition occurs only at the beginning of a relationship, so the longer the
relationship, the lower the amortized cost.
 Account maintenance costs decline as a percentage of total costs (or as a percentage of
revenue).
 Long-term customers tend to be less inclined to switch, and also tend to be less price
sensitive. This can result in stable unit sales volume and increases in dollar-sales
volume.
 Long-term customers may initiate free word of mouth promotions and referrals.
 Long-term customers are more likely to purchase ancillary products and
high margin supplemental products.
 Customers that stay with you tend to be satisfied with the relationship and are less likely
to switch to competitors, making it difficult for competitors to enter the market or gain
market share.
 Regular customers tend to be less expensive to service because they are familiar with
the process, require less "education", and are consistent in their order placement.
 Increased customer retention and loyalty makes the employees' jobs easier and more
satisfying. In turn, happy employees feedback into better customer satisfaction in
a virtuous circle.
Relationship marketers speak of the "relationship ladder of customer loyalty". It groups types
of customers according to their level of loyalty. The ladder's first rung consists of
"prospects", that is, people that have not purchased yet but are likely to in the future. This is
followed by the successive rungs of "customer", "client", "supporter", "advocate", and
"partner". The relationship marketer's objective is to "help" customers get as high up the
ladder as possible. This usually involves providing more personalized service and providing
service quality that exceeds expectations at each step.
Customer retention efforts involve considerations such as the following:

1. Customer valuation – Gordon (1999) describes how to value customers and

categorize them according to their financial and strategic value so that companies
can decide where to invest for deeper relationships and which relationships need to
be served differently or even terminated.
2. Customer retention measurement – Dawkins and Reichheld (1990) calculated a
company's "customer retention rate". This is simply the percentage of customers at
the beginning of the year that are still customers by the end of the year. In
accordance with this statistic, an increase in retention rate from 80% to 90% is
associated with a doubling of the average life of a customer relationship from 5 to 10
 years. This ratio can be used to make comparisons between products, between
market segments, and over time.
3. Determine reasons for defection – Look for the root causes, not mere symptoms.
This involves probing for details when talking to former customers. Other techniques
include the analysis of customers' complaints and competitive benchmarking
(see competitor analysis).
4. Develop and implement a corrective plan – This could involve actions to improve
employee practices, using benchmarking to determine best corrective practices,
visible endorsement of top management, adjustments to the company's reward and
recognition systems, and the use of "recovery teams" to eliminate the causes of
defections.
A technique to calculate the value to a firm of a sustained customer relationship has been
developed. This calculation is typically called customer lifetime value.
Retention strategies may also include building barriers to customer switching. This can be
done by product bundling (combining several products or services into one "package" and
offering them at a single price), cross-selling (selling related products to current customers),
cross promotions (giving discounts or other promotional incentives to purchasers of related
products), loyalty programs (giving incentives for frequent purchases), increasing switching
costs (adding termination costs, such as mortgage termination fees), and integrating
computer systems of multiple organizations (primarily in industrial marketing).
Many relationship marketers use a team-based approach. The rationale is that the more
points of contact between the organization and customer, the stronger will be the bond, and
the more secure the relationship.

Application[edit]
Relationship marketing and traditional (or transactional) marketing are not mutually exclusive
and there is no need for a conflict between them. In practice, a relationship-oriented
marketer still has choices, depending on the situation. Most firms blend the two approaches
to match their portfolio of products and services.[citation needed] Many products have a service
component to them and this service component has been getting larger in recent
decades.Social bond refers to the relationship established through the collective blood
relationship between people. Relationship marketing is to establish and strengthen these two
kinds of bonds, especially the structural bond, so as to strengthen the relationship with
clients and lock them in.Morgan and Hunt(1994) made a distinction between economic and
social exchange on the basis of exchange theory and concluded that the basic guarantee of
social exchange was the spirit of the contract of trust and commitment.The traditional
marketing concept of one-time transaction begins to transfer to the concept of relationship
marketing.This is the transition from economic exchange theory to social exchange theory.
The theoretical core of enterprise relationship marketing in this period is the cooperative
relationship based on commitment.They define the concept of relationship marketing from
the perspective of exchange theory, and emphasize that relationship marketing is an activity
related to the progress, maintenance and development of all marketing activities.Shows that
trust and commitment is a trading enterprise and the basis of marketing activities to establish
a long term good relations, also is the factors affecting the basis of cooperation for both
sides, moreover the relationship effect of other factors include: communication, power, cost
and benefit, opportunism behavior and so on, but the deal the relationship effect is mainly by
trust and commitment of the two dominant factors.Coptics and Wolf(1990) believe that
relational marketing is the marketing of databases.They think, the enterprise want to be able
to continue to improve the effect of relationships with customers, when access to the data
and information to improve the effect of relationship with the customer's cost is low,
enterprises will pay the cost to improve relations with customers, at present, due to tell the
development of communication technology and Internet technology, makes the information
costs have dropped substantially, so the argument that relationship marketing is for
database marketing is increasingly valued, this view emphasizes the relationship marketing
is through the Internet technology database data lock with the customers, to establish and
maintain good relationship with customers.Liker and Klamath(1998) introduced the
relationship between enterprises and suppliers into the scope of relational marketing,
believing that in the marketing process, manufacturers make suppliers assume
corresponding responsibilities, and enable them to give play to their technological and
resource advantages in the production process, which can improve the marketing innovation
ability of manufacturers.Lukas and Bryan a. Ferrell(2000) believe that the implementation of
customer-oriented marketing concept can greatly promote the innovation ability of marketing,
and at the same time encourage enterprises to break through the traditional relationship
model between enterprises and customers and propose new product Suggestions with
technical feasibility.Lethe (2006) through the observation of the benchmarking customer
research, to confirm the relationship between enterprises and customers to enterprise's
product innovation capacity there is a positive correlation, the enterprise can in the
development and in the process of benchmarking customer good relationship, to identify
those more market potential for development of new products, it can save a lot of for the
enterprise cost of new product development and market acceptance of this kind of product is
high.In addition, he also proposed that all the relationships established with relevant parties
to enterprise marketing activities are centered on the establishment of good customer
relations, that is, the core relationship of relationship marketing is the relationship with
customers.Guinness(1994) believes that relationship marketing is essentially a
consciousness that regards the marketing process as the interaction between enterprises
and various aspects of relationships and networks.According to his research, relationship is
the relationship between two or more subjects, network is a larger set of relationships, and
interactive interaction between people in the relationship or network process.They found, by
further empirical research activities in the enterprise faces four relations including its
relationship with macro environment, and micro environment, market relations and relations
with special market/in addition, the enterprises in the implementation of relationship
marketing is often able to "relationships, networks and interaction" mode to promote all
aspects of relationship coordination and progress.[citation needed]
Internal marketing[edit]
Relationship marketing stresses what it calls internal marketing, or using a marketing
orientation within the organization itself. It is claimed that many of the relationship marketing
attributes like collaboration, loyalty and trust determine what "internal customers" say and
do. According to this theory, every employee, team, or department in the company is
simultaneously a supplier and a customer of services and products. An employee obtains a
service at a point in the value chain and then provides a service to another employee further
along the value chain. If internal marketing is effective, every employee will both provide and
receive exceptional service from and to other employees. It also helps employees
understand the significance of their roles and how their roles relate to others'. If implemented
well, it can also encourage every employee to see the process in terms of the customer's
perception of value added, and the organization's strategic mission. Further it is claimed that
an effective internal marketing program is a prerequisite for effective external marketing
efforts.(George, W. 1990)
The six markets model[edit]
Christopher, Payne and Ballantyne (1991)[10] identify six markets which they claim are central
to relationship marketing. They are: internal markets, supplier markets, recruitment markets,
referral markets, influence markets, and customer markets.
Referral marketing is developing and implementing a marketing plan to stimulate referrals.
Although it may take months before you see the effect of referral marketing, this is often the
most effective part of an overall marketing plan and the best use of resources[citation needed].
Marketing to suppliers is aimed at ensuring a long-term conflict-free relationship in which all
parties understand each other's needs and exceed each other's expectations. Such a
strategy can reduce costs and improve quality.
Influence markets involve a wide range of sub-markets including: government regulators,
standards bodies, lobbyists, stockholders, bankers, venture capitalists, financial analysts,
stockbrokers, consumer associations, environmental associations, and labor associations.
These activities are typically carried out by the public relations department, but relationship
marketers feel that marketing to all six markets is the responsibility of everyone in the
organization. Each market may require its own explicit strategies and a separate marketing
mixfor each.
Live-in marketing[edit]
Live-in marketing (LIM) is a variant of marketing and advertising in which the target
consumer is allowed to sample or use a brands product in a relaxed atmosphere over a
longer period of time. Much like product placement in film and television LIM was developed
as a means to reach select target demographics in a non-invasive and much less garish
manner than traditional advertising.
History[edit]
While LIM represents an entirely untapped avenue of marketing for both big and small
brands alike it is not an all that novel an idea. With the rising popularity of experiential and
event marketing[19] in North America and Europe, as well as the relatively high ROI in terms
of advertising dollars spent on experiential marketing compared to traditional big media
advertising, industry analysts see LIM as a natural progression.
Premise[edit]
LIM functions around the premise that marketing or advertising agencies go out on behalf of
the brand in question and find its target demographic. From that point forward avenues such
as sponsorship or direct product placement and sampling are explored. Unlike traditional
event marketing, LIM suggests that end-users will sample the product or service in a
comfortable and relaxed atmosphere. The idea behind this technique is that the end-user will
have as positive as possible an interaction with the given brand thereby leading to word-of-
mouth[20] communication and potential future purchase. If the success of a traditional event
and experiential marketing is shared with LIM, then it could indicate a lucrative and low-cost
means of product promotion. However, this means of advertising is still in its infancy and
more research is required to determine the true success of such campaigns. The first
company to explicitly offer LIM services was Hostival Connect in late 2010.