LECTURER: NGUYEN TRAN PHUOC

Main Contents

1. The roots of relationship marketing (RM)

2. RM and its domain: why RM works
3. RM as a paradigm shift
4. When RM is most applicable
5. RM and the characteristics of a relationship
6. RM and CRM
7. The impact of RM and CRM
 1. The Roots of Relationship Marketing

v Marketers have started shifting their focus from

acquisition of new customers to maintenance,
enhancement, and retention of customers through
numerous strategies called CRM.
v What are the forces driving marketers to focus so
intently on customer and partner relationships?
 The Roots of Relationship Marketing
o IT enables companies to develop and analyze customer
transaction histories.
o The dramatic growth in direct marketing has led to more
and more companies entering one-to-one relationship
with their customers.
o Marketers believed they could increase profits by serving
existing customers, increasing their retention, and
managing downward migration.
Procter & Gamble, a standard
for marketing practitioners,
renamed its marketing
department Customer
Business Development; it
focuses on large retail and
supermarket customers. It is
predicted that companies will
soon have vice presidents of
data—a position charged
with analyzing customer data
contained in company
databases in order to better
understand consumer
behavior.
 2. Relationship Marketing & Its Domain

There are numerous definitions of Relationship

Marketing (RM).
There are three key aspects of RM:
Ø An individualized, one-to-one relationship with a
customer.
Ø An interactive process, rather than a transaction
exchange.
Ø A value-added activity between suppliers and
customers.
The expansion of relationship marketing’s domain.
Relationship marketing was first defined in terms of
lasting bonds between a company and its customers.
Next, it was defined in terms of lasting bonds
between an entire marketing channel (a company
and its distributors and dealers) and its customers.
IBM is believed to have more
than 500 strategic alliances
with other companies.
P&G has employees who
have been permanently
assigned to work at
Walmart’s headquarters
3. RM as a Paradigm Shift

Why consumers may want to engage in

relationship marketing?
“Relationship marketing is much like a marriage—a
connection between equal partners, characterized by
trust, commitment, communication, and sharing,
which results in the mutual achievement of goals.”
—L. O’Malley and C. Tynan, “Reframing Relationship Marketing for Consumer Markets,”
Interactive Marketing, 2, 3 (2001): 240–246
 3. RM as a Paradigm Shift

v RM reduces risk in the minds of consumers and the

number of choices, it simplifies decision-making.
v RM brings consumers the additional benefits – the
recognition and rewards they accrue from loyalty
programs.
v Customers also satisfy social needs through RM . By
having one-to-one relationships with service
providers, they receive more personalized and
customized attention, which leads to greater
satisfaction and loyalty to the supplier.
3. RM as a Paradigm Shift

What is the payback to companies for their

relationship marketing efforts?
 3. RM as a Paradigm Shift

v By making marketing more effective and efficient,

relationship marketing will lead to greater marketing
productivity for companies.
RM will make marketing more effective by:
1. enabling marketers to learn more and more about individual
customers and, through this organizational memory, develop
customized products and services;
2. allowing customers to help design and develop the product;
3. minimizing opportunities for negative images of marketing.
RM will make marketing more efficient by:
1. enabling companies to retain customers (retention being the
major driver of company profits);
2. reducing mass-marketing wastes;
3. having consumers do much of the marketer’s work, such as
order processing and product design.
4. When RM is Most Applicable

Will relationship marketing benefit every

company in dealings with every customer?
Exchange Continuum
 Exchange Continuum

v For the left of the continuum, it is unlikely that either party

to the exchange is interested in establishing and
maintaining a relationship.
v For the right of the continuum, both parties are
emotionally involved. RM has a critical place in relationship
maintenance and development.
v The closer your product or service is to the right of the
continuum, the greater benefits you will glean from
relationship marketing.
Extended Product Model
 Extended Product Model

v There are many ways products can be arrayed on a

continuum. One way is to position “commodities” at one
end and “customized/individualized” products at the other.
v The Extended Product Model states that a product is much
more than simply its physical characteristics. It consists of
maintenance, service, installation, training, warranties,
delivery, and image, all of which offer companies the
opportunities for creating value for the customer over
time.
Choosing a Loyalty Strategy
 Choosing a Loyalty Strategy

v For Butterflies, firms need to maximize transactional profit

through short-term promotional blitzes and not to attempt
a long-term relationship.
v For True Friends, companies must foster this relationship
more than the others but not overwhelm these customers
with constant communications.
v For Strangers, no investment should be made, and
companies should seek profit on every transaction.
v For Barnacles, firms should try to increase profits from this
group by cross-selling and trading up.
 Continuum Based on Relationship Strength

v Intimate Relationships: such as patient and doctor

v Face-to-Face Customer Relationship: such as customers
and retail stores
v Distant Relationships: interactions over phone or online,
such as Fedex, or American Express
v No Relationships: manufacturers with final customers who
buy through the distributor-dealer channel (such as
Huggies), or service providers who only have contact with
customers through their sales force (such as Marry Kay)
 5. RM & Characteristic of a Relationship

To describe strength and depth of a relationship,

numerous variables must be examined:
Ø Customer satisfaction
Ø Trust
Ø Commitment
Ø Empathy
 “Dove is devoted to
healthy beauty”.
Unilever builds trust
among all partners,
employees and
stakeholders. Customers
trust a company that has
a core belief that is
original, authentic and
transparent. Trust takes
time to build, after all it
is based on satisfying
interactions over time.
Empathy is the
identification with and
understanding of another’s
situation, feelings and
motives.
Harley-Davidson
executives spend at least a
week each year with H-D
riders on the Harley-
Davidson Possee Ride.
During the trip the
evenings are spent with
riders telling stories about
their H-D experiences
 6. Relationship Marketing and CRM

v There are more similarities than differences between

RM and CRM
v RM focuses on the establishment and maintenance of
close relationships with customers, whereas CRM is
concerned with developing a portfolio of profit-
maximizing customer relationships (that excluded low
or no-profit customers).
v CRM focuses more than RM on the operational
components of relationships (includes integration of
front and back office products and activities).
 7. The Impact of RM and CRM

v If the purpose of marketing is to establish, maintain,

and enhance relationships, then RM creates many
issues for traditional marketing.
v Marketing thought underlies the concept of RM, and
CRM is an integral part of RM.
v Reorganizing marketing to maximize benefits of CRM
o The marketing functions in today’s companies are no longer
centralized within marketing departments. Some traditional
marketing functions, such as advertising, sales promotion,
and marketing research, may continue to be centralized
within a “marketing” department, but the customer-centric
focus has diffused throughout departments.
o Some suggest that the mix of 4 Ps will be replaced with the
4 Cs (customer value, lower costs, better convenience, and
better communications) .
o Others feel that mass-media advertising will not disappear,
since it is necessary to “feed the funnel” and get prospects
into the pipeline. CRM is that another level of marketing
and communications planning has been opened.
o Current organizational structures will undergo significant
modification (setting up the roles of “segment managers”,
or the separate CRM department).
o C. Moorman and R. T. Rust state that the marketing
function should play a role in connecting the customer with
the product, service delivery, and financial accountability
systems. The traditional role of marketing has been to link
the customer with the product, while CRM has facilitated
other two connections, between customers & service
delivery, and customers & financial accountability.
Thank you