Relationship marketing.

This checklist outlines the process for drawing up and implementing

a relationship marketing strategy.

Relationship marketing is often represented as a developmental

process, the aim of which is to increase customer loyalty and improve

the relationship customers have with an organisation. The process

evolves through a series of stages or steps which reflect the

customers’ increased importance or value to an organisation. The

six stages are: prospect (a potential customer); customer (sale is

made); client (repeat sale is made); supporter (regular customer); loyal

customer (regular customer who actively supports the organisation);

partner (customer working in partnership with the organisation). An

organisation’s ultimate aim should be to gain as many partner

customers as possible.

Definition

Relationship marketing is defined as the building of long-term,

loyal, committed and profitable relationships with potential and

existing customers through communication and the provision of quality

goods and services.

Advantages of relationship marketing

* Increased customer loyalty.

* Higher levels of customer satisfaction.

* Possible reduction in transaction costs.

* Increased long-term profits.

* Improved awareness of and interaction within the organisation.

Disadvantages of relationship marketing

* It may involve substantial capital investment with no guarantee

of return.

* It may require expenditure on new technologies, such as

electronic point of sale equipment or customer databases.

* Significant changes in the company culture may be necessary

before relationship marketing can be implemented.

Action checklist 1. Review feasibility of adoption of relationship

marketing.

Relationship marketing is not a viable option for all companies.

Consideration should be given to the company’s size and standing

within the industry sector–is relationship marketing vital to its

competitive edge? Analysis of the product and customer base is vital–a

low profit product which customers buy as a one-off transaction rather

than repeatedly cannot justify large expenditure on marketing. The

long-term commitment required to implement a relationship marketing

strategy, the cost in terms of capital investment, staff resources and

information technology should all be taken into account.

2. Determine the scope of relationship marketing efforts.

Relationship marketing can be implemented on different levels,

through a limited initiative, in a specific functional area or on an

enterprise-wide level. It may involve targeting a specific range of

customers such as those who between them generate 50% of profits; a

single customer with very specific needs; or many customers with similar

needs to each other.

3. Agree strategic objectives

Relationship marketing techniques need to be part of a larger

organisation-wide strategy emphasising quality, marketing and customer

service. It requires the commitment of senior management and affects the

whole organisation, not just the marketing department. Consider who

within the organisation will be directly involved or affected, who will

be the first point of contact, and how departments will interact with

each other in the overall strategy. The views, advice and feedback of

these departments are central to the effectiveness and success of the

initiative.

4. Identify your customer base

Recognition of customers at every level of contact is the key to

implementing a successful strategy. Customer information should be

stored on a database. The demographics of customers, their purchasing

habits, their needs, their interaction with different departments or

divisions of the company must be analysed and understood and potential

customers identified. Existing records should be updated and out-of-date

information deleted.

5. Categorise customers

It is advisable to rank customers in relation to their value to the

company, identifying the top customers who buy regularly or generate a

large proportion of the profits; isolating those that cost money or

whose custom has slackened off; investigating customers who order

occasionally and are important to competitors; and selecting possible

new customers. The main focus of relationship marketing efforts can then

be directed at the top tier of customers.

6. Interact with customers

The success of a relationship marketing strategy is dependent on

the two-way flow of information between supplier and customer. The roots

should be grounded in effective after sales service and complaints or

feedback procedures. In addition, a variety of techniques, such as

direct mail, customer magazines, discounts or loyalty schemes, call

centres, web sites, and user clubs will ensure regular customer contact

and increased customer retention.

7. Customise products/behaviour/services

The crux of successful relationship marketing lies in customising

products or behaviour to meet customers’ needs. The continuous

cycle of collecting customer information, disseminating it, tailoring

products/services, marketing to customers and receiving feedback on the

success of the product offers an opportunity to constantly update and

improve products, service and delivery. Continuous assessment of the

success of the overall relationship marketing strategy is vital and its

progress should be regularly reviewed and measured.

Dos and don’ts of relationship marketing

Do

Be clear on the overall strategic objectives.

Plan your strategy to suit the size and circumstances of your

organisation and customer base.

Consult on and communicate your objectives.

Forget that relationship marketing demands long-term

commitment–profits rarely show in the short-term.

Don’t

Neglect to use customer information once it has been collected and

analysed.

Useful reading

CRM unplugged: releasing CRM’s strategic value, Philip Bligh

and Douglas Turk Hoboken, NJ: John Wiley, 2004

Managing customer relationships: a strategic framework, Don Peppers

and Martha Rogers Hoboken, NJ: John Wiley, 2004

Exploiting CRM: connecting with customers, Patrick Molineux

Management Consultancies Association London: Hodder and Stoughton, 2002

Useful contacts

Chartered Institute of Marketing, Moor Hall, Cookham, Maidenhead,

Berks, SL6 9QH Tel: 01628 427200 www.cim.co.uk

Direct Marketing Association, DMA House, 70 Margaret Street, W1W

8SS Tel: 020 7291 3300 www.dma.org.uk

Thought starters

* Is your marketing opportunistic, haphazard or initiative-led?

* Is your marketing strategy targeting your most valuable

customers?

* Is your market stable and your market position secure?

* Do you actively encourage communication with and from your

customers?

* Are your customers advocates for your organisation?

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