Relationship Marketing - Term Paper Example

Relationship Marketing Table of Contents Relationship Marketing Table of Contents 2 Introduction 3 Nature of Relationship Marketing 4 Why Organizations use Relationship Marketing? 4 6 is of Relationship Marketing 6 Factors that Manipulate Success of Relationship Marketing 7 Conclusion 9 References 10 Bibliography 12 Introduction Relationship marketing is an evolving trend in modern marketing practices. Relationship marketing seeks to comprise and incorporate consumers, merchants and other business associates into a company’s progressive and marketing activities. It is a strategy which is aimed to raise customer loyalty, collaboration and long run commitment. In relationship marketing organizations emphasize on developing strong associations with customers through providing information which match their requirements and desires. In the business viewpoint, relationship marketing is concerned with appealing, developing and retaining customers’ relations. Relationship marketing is based on developing a mutually advantageous exchange between industry associates (Sheth, n.d.). Nature of Relationship Marketing The growth of relationship marketing was accelerated by the literatures of management advisors. The present concept of relationship marketing drifted from ‘organizational behavior’ and ‘industrial marketing’ where reliance among organizations has been the basis for successful business to business coalitions. According to Iacobucci and Hibbard (1999), relationship in commerce can be of three kinds, which are: “Business Marketing Relationships” (BMR), “Interpersonal Commercial Relationships” (ICR), and “Business to Customer Relationships” (B-to-C). In BMR the business associations are characterized by long-standing, close and deep connections between fairly symmetric associates. BMR requires assurance, faith and reliance in understanding business relations. ICR is characterized by the relationships between service organizations and end users. ICR can occur between two relatively balanced associates and it is long-term in nature. The consequences of effective ICR include increased satisfaction and productivity. Finally, B-to-C is demarcated by technology oriented relations among business and individual consumers (Sorce, 2002). Why Organizations use Relationship Marketing? Customer relationship is the life force of any organization to sustain. Positive relationships within organization with the customers, suppliers, workers, are significant for sustainable development and constancy. Loyal relationships with those worthy individuals can help to develop a competitive advantage for any company. Several business proprietors concentrate less on fostering relationships with the existing customers and attempt to acquire newer customers, but the reality is, obtaining new customers can cost five to ten times more compared to holding present customers. Several customer relationship management experts stated that organizations can boost their ultimate revenue by 84% if they increase 5% customer retention rate. Making existing customers feel acknowledged, celebrated and valued can help them to be loyal to the company and also they can talk about the company’s products or services to others, which in turn increase the customer base of that organization. Therefore, through relationship marketing organizations can gain several benefits such as high perceived worth for both company and customers as a whole, increased attractiveness of the organization, reduced operation expenses, enhanced financial performance, and better marketing efficiency (Ramkumar & Saravanan, n.d.). 6 is of Relationship Marketing Relationship marketing has become a crucial part of successful business and in present days the traditional thought of generating sales has been swapped by long term relationships with customers. Relationship marketing is evolving as essential marketing activity for organizations that operate in aggressively competitive business environments. There are six principles of relationship marketing which are also known as “6 is” of relationship marketing. The 6 is are as follows: Information: The first principle for successful relationship management is to get reliable information regarding customers, such as, their preferences, needs, and requirements among others (Hennig-Thurau & Hansen, 2000). Investing: Every customer does not hold equal importance for organizations, thus it is vital to identify and choose those customers who are worth investing. It is essential for organizations to offer priority to specific customers who are deemed to be valuable for business. In relationship marketing, assessing the worthiness of customers plays a vital part for organizations’ effectiveness (Hennig-Thurau & Hansen, 2000). Individuality: Organizations need to maintain distinctiveness of business deals for particular customers or segments. Individuality with respect to customization of offers and schemes can help to develop effective relationship with customers (Hennig-Thurau & Hansen, 2000). Interaction and Integration: Successful relationship management calls for organized interaction and integration with customers into ‘value creation procedure’. More organized manner can result in better business relationships (Hennig-Thurau & Hansen, 2000). Intention: In order to pursue relationship marketing, it is essential for organization to have an intention of developing a unique business relationship which differentiates the company from its competitors (Hennig-Thurau & Hansen, 2000). Factors that Manipulate Success of Relationship Marketing Organizations benefit from relationships with customers through financial impact of retention and protection against competition. From the customers’ perspective, the advantages of positive relationships with organization comprise competency in trading with known sellers, low searching cost and ultimately low prospect of risk. There are certain necessary factors which need to be considered for organizations in order to maintain relationships. Customization: Relationship marketing necessitates organizations to provide unique benefits from differentiated products and services. Customization is possible by offering ranges of product categories, advancement in technology, improved brand image, or better branding. Customization is considered as a vital instrument to create customer loyalty when quality is not enough as a differentiator element for organization (Bhattacharya, 2000). Customer Affection: The key factor of relationship marketing is respect between organizations and customers which does not limit only within economic boundaries. The emotion, understanding, and affection with customers also play significant role in maintaining positive relationship between purchasers and merchants (Bhattacharya, 2000). Two-Way Communication: The actual idea of relationship management between organization and customer involves two-way communication. Organizations need to react quickly to any kind of queries of customers which can raise the relationship. Effective two-way communication can decrease the tendency of customers to shift to new company’s products or services and thus reduce the loss of switching cost (Bhattacharya, 2000). Comprehensive Time Intervals: Association between organizations and customers arises at a time interval which can cover several business interactions. Although time interval comprises a single financial transaction, the business exchange relationships often spread beyond a time interval. The reason is that business exchange involves emotional, cultural and economic resources and the interval of relationship includes numerous phases of the marketing procedures. At every phase, relationship building procedure can occur between customers and organizations (Bhattacharya, 2000). Conclusion Relationship marketing has appeared as one of the leading methods in marketing strategy. Through relationship marketing, organizations can improve their effectiveness. Relationship marketing has positive effect on the performance of the organizations as it can raise the customer satisfaction (Palmatier & Et. Al., 2007). From the above discussion, it can be observed that there are six key principles for effective relationship marketing which can result in improved sales. Besides, better customer attachment leads to better opportunities and better opportunities help to enhance competence while competing with rival companies and make a unique position in the market. As organizations in present days understand the benefits of maintaining relationships with existing customers, they are utilizing the thoughts of relationship marketing to augment the relationship with customers as well as effectiveness. References Bhattacharya, C. B., (2000). Relationship Marketing In Mass Markets. University of Maryland. Retrieved Online on November 25, 2011 from http://www.ruthnbolton.com/Publications/RelationshipMarketinginMassMarkets.pdf Hennig-Thurau, T. & Hansen, U., (2000). Relationship Marketing: Gaining Competitive Advantage Through Customer Satisfaction And Customer Retention. Springer. Iacobucci, D. & Hibbard, J., (1999). Toward an Encompassing Theory of Business Marketing Relationships and Interpersonal Commercial Relationships: An Empirical Generalization. Journal of Interactive Marketing, Vol. 13, Pp. 13-33 Palmatier, R. W. & Et. Al., (2007). Factors Influencing the Effectiveness of Relationship Marketing: A Meta-Analysis. Journal of Marketing, Vol. 70, No. 4, pp. 136-153. Ramkumar, D. & Saravanan, S., (No Date). The Dark Side of Relationship Marketing. Consumer Markets & Marketing. Retrieved Online on November 25, 2011 from http://dspace.iimk.ac.in/bitstream/2259/340/1/453-457.pdf Sheth, J. N., (No Date). The Evolution of Relationship Marketing. International Business Review. Retrieved Online on November 25, 2011 from http://www.jagsheth.net/docs/Evolution%20of%20Relationship%20Marketing.pdf Sorce, P., (2002). Relationship Marketing Strategy. Rochester Institute of Technology. Retrieved Online on November 25, 2011 from http://print.rit.edu/pubs/02_04_sorce.pdf Bibliography Shajahan, S., (2006). Relationship Marketing: Text & Cases. Tata McGraw-Hill Education. Read More