Principles of Marketing - Relationship Marketing

Relationship Marketing

Module Overview

  • Module 2 focuses on relationship marketing.
  • Objectives:
    1. Define relationship marketing.
    2. 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.

Characteristics of Relationship Marketing (RM)

Option A (Long-term Focus)

  • Long term orientation.
  • Partners and customers are key.
  • Focus on customer retention and growth.
  • Cross-functional teams are utilized.
  • Relies on listening and learning.

Option B (Short-term Focus)

  • Short-term orientation.
  • Focus on company’s products.
  • Focus on customer acquisition.
  • Departmental level work.
  • Relies on talking.

Benefits of Developing and Implementing Customer Relationship Marketing

  • Improved customer experience.
  • Customers become advocates.
  • Increased customer profitability.
  • Source of innovation.

Customer Profitability Analysis

  • Customer 1: Very profitable, buys three profit-making products (P1, P2, and P4).
  • Customer 2: Mixed profitability, buys one profitable product and one unprofitable product.
  • Customer 3: Losing customer, buys one profitable product and two unprofitable products.
  • Action: Determine what to do with customers 2 and 3 to improve their profitability.

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, and convert customers for repeat business.

4. Prevents Negative Transition

  • Prevent customers from 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.
  • Focus 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 can lead to 25\%-125\% increase in annual profit.
  • Potential decrease of 10\% in marketing cost.

7. Identification with the Company

  • Brand Equity is enhanced.

8. Product Market Expansion

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

Post-Test Questions (Examples)

  1. The salesperson solicits product improvement suggestions and identifies disappointments to improve the company's offering.
  2. The salesperson calls the customer after the sale to check if the product is meeting expectations.
  3. The salesperson or others contact the customer with suggestions for improved product use or new products.
  4. The company works continuously with 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 the written exam for the week.
  • Summative exam link will be sent via GC on Monday.
  • Performance Task:
    • Select a brand you use.
    • Identify your level of relationship with the company.
    • Identify the characteristics of the company showing relationship marketing.
    • Give the benefits of relationship marketing done by the company to you as a customer.
    • Attach the file to Google Classroom.