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As marketing enters the 21st century, a significant change is taking place in the way companies interact with customers. The traditional view of marketing as a simple exchange process—a concept that might be termed transaction-based marketing—is being replaced by a different, longer-term approach.
Traditional marketing strategies focused on attracting customers. The goal was to identi15 prospects, convert them to customers, and complete sales transactions. But today’s marketers realize that, although it remains important, attracting new customers is only an intermediate step in the marketing process. Marketing efforts must focus on establishing and maintaining mutually beneficial relationships with existing customers. These efforts must expand to include suppliers and employees, as well.
This concept, called relationship marketing, refers to the development, growth, and maintenance of long-term, cost-effective exchange relationships with individual customers, suppliers, employees, and other partners for mutual benefit. It broadens the scope of external marketing relationships to include suppliers, customers, and referral sources. In relationship marketing, the term customer takes on a new meaning. Employees serve customers within an organization as well as outside it; individual employees and their departments are customers of and suppliers to one another. They must apply the same high standards of customer satisfaction to intradepartmental relationships as they do to external customer relationships. Relationship marketing recognizes the critical importance of internal marketing to the success of external marketing plans. Programs that improve customer service inside a company also raise productivity and staff morale, resulting in better customer relationships outside the firm.
Relationship marketing gives a company new opportunities to gain a competitive edge by moving customers up a loyalty hierarchy from new customers to regular purchasers, then to loyal supporters of the company and its goods and services, and finally to advocates who not only buy the company’s products but recommend them to others. By converting indifferent customers into loyal ones, companies generate repeat sales. The cost of maintaining existing customers is far below the cost of finding new ones, and these loyal customers are profitable ones.
Programs to encourage customer loyalty are not new. Visa teams up with Holiday Inn resorts and hotels during peak vacation months. Holiday Inn advertisements target families, offering a “kids eat free, stay free” program. In addition, travelers who use their Visa cards to stay at one of over 1,000 participating hotels receive a Kids’ Activity Book with valuable coupons. Visa has a similar program with Best Western; vacationers who use their Visa card to purchase a Summer Adventures Fun Plan also receive a Fujifilm QuickSnap camera with free film processing, a DC Comics activity book, and Internet software from AT&T WorldNet Service. Best Western lodgers can also enter a sweepstakes using their Visa card.
Effective relationship marketing relies heavily on information technologies such as computer databases that record customers’ tastes, price preferences, and lifestyles along with the increase of electronic communications. This technology helps companies become one-to-one marketers that gather customer-specific information and provide individually customized goods and services. The firms target their marketing programs to appropriate groups, rather than relying on mass-marketing campaigns. Companies who study their customers’ preferences and react accordingly gain distinct competitive advantages.
Firms in the service industry, from retailers to hotels to airlines, are among the leaders in relationship marketing. Their staff members have many opportunities to meet customers personally and build loyalty and repeat business. Rewards for frequent buyers of a firm’s goods or services, such as hotel programs that reward frequent visitors with free
room stays and other travel discounts, are another form of relationship
marketing.