Relationship Marketing and Customer Development Process

Relationship Marketing

Marketers need to establish long-term relationship with customers. Relationship marketing is an act of building of long term mutually satisfying relationship with the different kinds of customers to earn and retain their long-term loyally because they are good partners in creating value. Relationship marketing’s focus in not on immediate sales; rather it is directed at building a large group of satisfied and loyal customers. Customer retention and winning back lost customer are the key strategy in relationship marketing. This marketing uses sustained long-term efforts in delivering value to the customers and profit to the firm.

Now we can say that relationship marketing is a long-term partnership between marketers and customers in which both parties collaborate on identifying needs and developing as well as up-dating marketing mixed to satisfy needs. Besides these, in a competitive market, it is not enough to build relationship only with
customers; it is equally important to establish relationship with the vendors, intermediaries, and other influence groups.

Importance of Relationship Marketing

The major importance of relationship marketing can be listed as flows:
  • It maintains log term relationship with key customers.
  • It leads to develop loyalty and satisfaction, which in turn increases transactions with the same customers, again and again.
  • It supports for long-run business.
  • It focuses on customer retention. It can stop customers switching to another brand.
  • It results in positive image projection and enhanced brand equity on account of high degree of customer relation, loyalty and customer satisfaction.

Levels of Investment in Customer Relationship Building

A company needs to invest its time and money in building customer loyalty. How much should it invest in building loyalty so that costs do not exceed the gains? We need to distinguish different levels of investment in customer relationship building.

As following figure shows, the likely level of relationship marketing depends on the number of customers and the profit margin level.
Levels of Investment in Customer Relationship Building

  1. Basic marketing: The salesperson simply sells the product.
  2. Reactive marketing: The salesperson sells the product and encourages the customer to call if he or she has questions, comments or complaints.
  3. Accountable marketing: The salesperson phones the customer to check whether the product is meeting expectations. The salesperson also asks the customer for any product or service improvement suggestions and any specific disappointments.
  4. Proactive marketing: The salesperson contacts the customer from time to time with suggestions about improved product uses or new products.
  5. Partnership marketing: The company works continuously with its large customers to help improve their performance.
Most companies practice only basic marketing when their markets contain many customers and their unit profit margins are small. At the other extreme, in markets with few customers and high profit margins, most sellers will move toward partnership marketing. The best relationship marketing going on today is driven by technology. Companies are using e-mail, web sites, call centers, databases, and database software to foster continuous contract between company and customer.

Customer Development Process

The relationship marketing involves a long-term process of building satisfied and loyal customers. The process is explained below:

  1. Suspects: Most firms start from the pool of suspects. Suspects constitute of everyone who has the possibility of everyone who has the possibility of building the firm’s product or service.
  2. Prospects: From the pool of suspects the firm identifies customer groups who are mot likely to buy the product or service.
  3. First time users: They are those who buy a product for the first time. Then, the firm makes its maximum efforts to convert the first time customers into the repeat customers.
  4. Repeat customers: They are the first time customers who repeatedly buy the product or service. This group has the potential to be become loyal customers if the firm tries to build relationship in absence of the firm’s effort to build the relationship, the repeat customers may switch to competing firm’s product or service. They also move to the ex-customer pool.
  5. Clients: They are the loyal and satisfied customers who normally buy the firm’s product or service for a longer period of time. Firms need to work closely with clients so that they maintain long-term loyalty.
  6. Members: They are those clients who join membership programme to take advantage of benefits.
  7. Advocates: They are those clients who enthusiastically recommend the firm and its products and services to other prospects.
  8. Partners: The advocates may convert into partners, who work actively with the firm for mutual benefits.
There may be the possibilities, at each stage of customer development process, that some of the customers may become ex-customers, if they are dissatisfied. So, firm should try to satisfy the customers and to create strong customer loyalty.

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