What is relationship marketing
Relationship marketing is a business strategy aimed at building long-term relationships with key business figures, – customers and business partners. Customer Relationship Marketing (CRM) is about developing relationships with customers and potential buyers in such a way that they they would like to become regular customers.
The essence of relationship marketing is to make a relationship mutually beneficial: each party benefits from cooperation and seeks to preserve the relationship and develop it. This marketing concept has appeared only recently, at the end of the 20th century, and is becoming more and more relevant, because marketing relationships help to significantly reduce spending on customer attraction. The concept of partnership marketing allows you not to spend money on getting people to pay their attention to your company, but to increase sales through the purchases made by those who are already interested in the product.
Among many factors contributing to the popularity of relationship marketing, high competition for the attention of consumers goes first. As customers are overwhelmed with offers, it becomes more difficult to attract their attention to your products. At the same time, a regular customer is much more likely to make a purchase than a random person. According to research conducted by Bain & Company, a company can increase its profit by 25% if it increases its customer retention rate by at least 5%. Why does it happen? Because regular customers are willing to make more expensive purchases. They also tend to buy more.
Relationship Marketing concept
At its core, the concept of relationship marketing (also known as partnership marketing) is based on the same activities as conventional marketing: finding and meeting customer needs. The difference is that relationship marketing is much more focused on building relationships with customers. Relationship marketing can be used as a core principle for a company's marketing strategy as well as a tool to improve customer relationships.
Relationship marketing is based on the idea that retaining an old customer is more important than attracting a new one. To retain a customer, you need to offer them the best terms of cooperation. The first step is to know and be able to close the needs of your customers. You also need to change the way you are running your business. To do this, follow the basic principles of relationship marketing listed above:
- long-term interactions are preferable to single transactions, even if the latter are large;
- retention of old customers is preferable to attracting new ones;
- relationships with the consumers who are supposed to make expensive purchases over the long term must be focused on in the first turn;
- you need to be attentive to your partners and try to receive feedback from them.
To implement these principles, various relationship marketing strategies can be used.
Relationship marketing strategies
Few companies can afford to work with each customer individually. In most cases, customer focused policy in relationship marketing is about handling large data arrays and building relationships with the mass consumer. In relationship marketing, three strategies are most commonly used for this:
- Mass personalization. Using special software, a company collects customer data and information about their behaviour. Based on the data obtained, the types of buyers are distinguished and recommendations are formed for each type of buyer.
- Mass adaptation of products to customer requirements. In a consumer group, there are always customers who are willing to pay more: for the expanded functionality of the product or the solution of specific problems. Creating a product that meets the customer's specific needs is a good way to build a long-term relationship with them. Companies often believe that customers are able to "assemble" the right product themselves. This is a mistake. In fact, it's the other way round. If you take a step toward the customer, it will stimulate them to show more interest in the product and subsequently "assemble" their own perfect product.
- Customer Relationship Management (CRM) strategy. According to this strategy, a business is built around customer interactions: their shopping habits, etc.
The need to develop customer relationships is obvious to many manufacturers, but not all manufacturers have yet implemented the strategies above. Examples of relationship marketing often include working with technical innovations. These are the relationship marketing tools needed to implement all relationship marketing strategies.
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Relationship marketing tools
Relationship marketing tools are similar to those used to solve other marketing tasks. In fact, only the specifics of the application differ: marketing tools are used to build long-term relationships with customers. The most popular of these tools are:
- CRM-system. This is the software for the strategy mentioned in the previous section. This software allows you to collect and process customer data.
- Email marketing. Newsletter is a flexible tool used to make customer relationships more personalized.
- Chatbots. They are used to quickly respond to any customer's questions and successfully build relationships with customers.
The concept of relationship marketing itself is what extremely relevant today because the modern person is less and less paying attention to advertising and trusting it. This is why marketers are increasingly looking for new ways to capture consumer attention. Relationship marketing does not help to attract the customer's attention, but it helps to solve an equally important task. It turns a customer who purchased from a company once into a regular buyer.