Marketing Relationship

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Question:
Why is there a growing trend towards relationship marketing? What are the benefits to the company? What are the benefits to the customer? Please illustrate your response with example.

Answer:

Relationship marketing was first defined as a form of marketing developed from direct response marketing campaigns which emphasizes customer retention and satisfaction, rather than a dominant focus on sales transactions. As a practice, relationship marketing differs from other forms of marketing in that it recognizes the long term value of customer relationships and extends communication beyond intrusive advertising and sales promotional messages. First of all, the marketing mix is very important in relationship marketing. The concepts of the marketing mix and the 4Ps of marketing are product, price, place and promotion. The marketing mix is actually a list of categories of marketing variables and to begin with, this ways of defining or describing a phenomenon can never be considered a very valid one. A list never includes all relevant elements, it does not fit every situation, and it becomes obsolete. Marketing is separated from other activities of the firm and delegated to specialists who take care of the analysis, planning and implementation of various marketing tasks, such as marketing analysis, marketing planning, advertising, sales promotion, sales, pricing, distribution and product packaging.

Marketing departments are created to take responsibility for the marketing function of the firm, sometimes together with outside specialists on, for example, market analysis and advertising. The existence or introduction of such a department may be a trigger that makes everybody else lose whatever little interest in the customers they may have had. The marketing department approach to organizing the marketing function has isolated marketing from design, production, deliveries, technical service, complaints handling, invoicing and other activities of the firm. It has made it difficult, often even impossible, to turn marketing into the “integrative function” that would provide other departments with the market-related input needed in order to make the organization truly market oriented and reach a stage of “co-ordinate marketing”. In many situations long-lasting relationships between service providers and their customers may develop. During the last few years there has been a growing interest in studying the economics of long-lasting customer relationships.

Additionally, a mutually satisfactory relationship makes it possible for customers to avoid significant transaction costs involved in shifting supplier or service provider and for suppliers to avoid suffering unnecessary quality costs. However, customer retention is not enough. Some long lasting customer relationships, where the customers are obviously satisfied with what they get, are not profitable even in the long run. Therefore, segmentation based on customer relationship profitability analysis is a prerequisite for customer retention decisions. “Marketing is to establish, maintain, and enhance relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met. This is achieved by a mutual exchange and fulfilment of promises”. Establishing a relationship, for example with a customer, can be divided into two parts: to attract the customer and to build the relationship with that customer so that the economic goals of that relationship are achieved. An integral element of the relationship marketing approach is the promise concept which has been strongly emphasized by Henrik Calonius. According to him the responsibilities of marketing do not only, or predominantly, include giving promises and thus persuading customers as passive counterparts on the marketplace to act in a given way. A firm that is preoccupied with giving promises may attract new customers and initially build relationships. However, if promises are...
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