Principles of Marketing - Relationship Marketing

Relationship Marketing

Module Overview

  • Module 2 focuses on relationship marketing.
  • Objectives:
    • Define relationship marketing.
    • Identify and describe relationship development strategies.

Levels of Relationship Marketing (RM)

1. Basic

  • Definition: The company sells the product but makes no effort to follow up.
  • Example: A customer buys a snack at a convenience store – no follow-up or contact.

2. Reactive

  • Definition: The company sells the product and encourages the customer to call if there's a problem.
  • Example: A car dealership invites buyers to call for any service concerns.

3. Accountable

  • Definition: The company contacts customers after the sale to check satisfaction and get feedback.
  • Example: A furniture store calls customers a week after delivery to ask for feedback.

4. Proactive

  • Definition: The company contacts customers regularly with suggestions or new offers.
  • Example: A bank regularly updates clients about new financial products.

5. Partnership

  • Definition: The company works continuously with the customer to discover ways to deliver better value.
  • Example: A software company co-develops solutions with a major corporate client.

Examples of RM Levels

  • Proactive Level: A bank regularly updates clients about new financial products.
  • Partnership Level: A software company co-develops solutions with a major corporate client.
  • Reactive Level: A car dealership invites buyers to call for any service concerns.
  • Basic Level: A customer buys a snack at a convenience store – no follow-up or contact.

Characteristics of Relationship Marketing (RM)

  • Option A (RM):
    • Long term
    • Partners and customers
    • Customer retention and growth
    • Cross-functional teams
    • Relies on listening and learning
  • Option B (Traditional):
    • Short-term
    • Company’s products
    • Customer acquisition
    • Departmental level work
    • Relies on talking

Benefits of Developing and Implementing Customer Relationship

  • Customer Experience
  • Customer Profitability
  • Customer Advocate
  • Innovation

Customer Profitability Analysis

  • Customer 1: Buys three profitable products (P1, P2, and P4) - very profitable.
  • Customer 2: Buys one profitable product and one unprofitable product - mixed profitability.
  • Customer 3: Buys one profitable product and two unprofitable products - losing customer.
  • Action: Determine what to do with customers 2 and 3.

Benefits of Relationship Marketing

1. Understanding Customer Characteristics

  • Purchasing power
  • Frequency of Sales Transactions
  • Volume of Transactions

2. Delivery and Meeting Expectations

  • Helps reduce wastage due to trial and error methods.

3. Repeat Business

  • Attract, Retain, Convert

4. Prevents Negative Transition

  • Prevent switching to competitors.

5. Word-of-Mouth Marketing

  • Retention equity is improved.
  • It costs five times as much to attract a new customer as it does to keep a current one satisfied.
  • Main focus is on customer satisfaction to achieve customer loyalty.
  • Highly satisfied customers:
    • Less price sensitive
    • More likely to talk favorably about the product
    • More likely to refer the product to others
    • Remain loyal for long

6. Reduced Marketing Cost

  • 5\% increase in customer retention leads to 25\%-125\% increase in annual profit.
  • 10\% reduction in marketing cost.

8. Identification with the company

  • Brand Equity

9. Product Market Expansion

  • Employees must be ready to deliver beyond the company's boundaries on customer demand.

Post-Test

  1. The salesperson solicits from the customer any product improvement suggestions and any specific disappointments. This information helps the company continuously improve its offering.
  2. The salesperson phones the customer a short time after the sale to check whether the product is meeting the customer’s expectations.
  3. The salesperson or others in the company phone the customer from time to time with suggestions about improved product use or helpful new products.
  4. The company works continuously with the customer and with other customers to discover ways to deliver better value.
  5. The company salesperson sells the product but does not follow up in any way.

Tasks

  • The post-test is already your written exam for this week.
  • Summative exam link will be sent through GC by Monday.
  • Performance Task:
    • Select one of the brands that you use.
    • Identify what level of relationship you have with the company you have chosen.
    • Identify the characteristics of the company showing “relationship marketing”
    • Give the benefits of relationship marketing done by the company to you as their customer.
    • Attach file to Google Classroom.