Relationship marketing has been successful in establishing strong ties with consumers on a large scale. The method has traditionally sought to apply its marketing communications to its customers depending on their needs. This involves customising marketing and product offerings to the various individual consumer groups to create a more personalised service, as well as to develop a relationship based on interactivity.
In Relationship Marketing a competitive strategy is needed to achieve a sustainable competitive advantage and thereby enhance a business performance. (Bharadwaj,1993).
One of the major objectives in a marketing strategy is to enhance the long-term financial performance of a company. With the growing costs of attracting customers and the declining influence of the traditional “4 P’s”, companies had to change and focusing more on the “fifth P” - People. A time where long-standing customers are less expensive to serve and customer relationships are seen as a benefit that should be evaluated and managed as carefully as any financial and physical asset.
"RM can be seen simply as a method of selling products and services by building a relationship with clients now and for the future." Morgan, 94.
Adopting techniques such as advertising, promotion and selling, reduced time, effort and risk when the customers trusts the supplier, Loyal customers will recommend the service/product, getting to know and trusting their customers, customers will be willing to pay more for the service when they can have confidence in the supplier and service.
Communication
As stated by Chaffey “One to one Marketing implies the development of long term relationships with each customer in order to better understand that customer needs and better deliver the service that meets the individuals requirements”.
Marketing communications is an important element of a relationship marketing strategy. The customer’s interactions with the product/service and the contact between the buyer and seller need to be good to create a good communication effect.
If relationship marketing is to be successful, a combination of all marketing communications messages is needed to support the establishment, maintenance and enhancement of relationships with customers. Consequently, the integrated management of marketing communications activities, regardless of the source of communication messages, is required in relationship marketing.
The major contributions of the integration approach to our present understanding of relationship marketing include:
Both buyers and sellers have similar roles in forming, developing and operating relationships.
The match between seller capability and customer need is accomplished by interaction between two parties and adaption by one or both of them.
Personal contacts are often used as a mechanism for initiating, developing and maintaining relationships. Interaction with other companies is the strength that unifies the company and gives it the capability to perform. The relationship between buyer and seller is frequently long term, close and involves complex patterns of interactions.
Value
To generate value from customers, companies need to generate customer perceived value, that is, create and deliver something that is perceived to be of value to customers.
Value creation therefore requires contributions from both buyer and seller.
Advantages of Individualisation to the Organisation
The benefits that the accuracy of this kind of relationship with customers has to an organisation are wide ranging, on strategic, business and functional levels (Muther 2002). It is argued here that companies are able to make better decisions when moving into new markets due to the knowledge accrued from existing customers.
The utilisation of CRM can be used to build up sophisticated understanding of the consumer. Dodds (2000), cited by Egan (2004), suggested that “…companies can become truly knowledge rich”. Such knowledge gives the company many strategic advantages such opportunities to better target their marketing. Stone et al. (2000) acknowledge the importance of knowledge in the modern market, where it is not only importance from a customer and market perspective, but is also a “tangible” financial asset on the balance sheet.
By developing greater ties with the consumer, retention and loyalty can be better maintained. Interactivity increases a customer’s familiarity with a particular brand, increasingly the likelihood that they will use the product again in future due to a positive experience gained from the relationship. It would be arguably valid to suggest, from a consumer behaviour perspective, that CRM compliments the kind of reinforcement and cognitive based buying processes referred to by East (1997).
Advantages of Individualisation to the Consumer
Whether in a Business2Business or Business2Customer relationship, the buyer can gain many benefits from CRM, some of which have been touched upon above. Perhaps one of the main advantages to be gained is what Muther (2004) refers to as a reduction in “blind services”. By creating a two way relationship between buyer and supplier, the buyer has the opportunity to understand more about the details of a product or service, and can even contact the supplier (often via customisation of service, of which Web based e-retailers are a good example). There can be little doubt that the combination of Internet functionality and CRM implementation has improved the quality and availability of information available in markets today.
In addition, many functional and aesthetic benefits arise through CRM techniques to improve the customer experience, such as customisation of the shop storefront (in online retailing outlets), and personalised special offers and content.
Electronic Customer Relationship Management
It could be argued that CRM and the development of relationship marketing to the fully integrated interactive consumer models of today is due in part to the parallel development of technology, and in particular the Internet.
Payne et al. (1998), perhaps writing prior to the real emergence of eCRM, detail a business model which stresses the need for marketing as a “cross functional activity” across departments (HR, Finance, Operations etc.). It is argued here that this brings better flexibility due to its integration, helping it to achieve better “quality, service levels [and] cycle times” via newly established “pools of resources”; not simply finance or marketing but a “market facing team” offering all functions of the business to the consumer.
While RM may well have achieved this level of integration, one of CRM’s main attributes remains unaddressed by Payne et al. (1998). In the former model, the authors have presented information technology as a separate function to marketing (as indeed they have with all other business departments). While their “integration” explanation hints at the potential amalgamation of the two, this potential is left unexplored.
The amalgamation of IT and other business functions is becoming gradually more central to the concept of CRM as technology improves opportunities in this area. Handen, writing in Brown (2000), suggests that technology has improved the process in three core areas: the Internet, in work flow management, and through data warehousing. The three advancements provide a company with improved cross departmental functionality in various ways; a technological solution to the Payne et al. (and RM) goal of “integration”.
Stone (2000), for example, suggests that the very technology behind CRM and in particular eCRM models have created the means for consumers to manage their suppliers as well as the intended other way around. Via the Web, customers have access to a greater number of outlets than on the high street, for instance, all of which must compete aggressively on areas such as price, service, and quality to maintain market share.
British Airways Interactive Channel Management Team, an internal technical and business-oriented consulting group, began focusing on interactive technologies, such as e-mail and the World Wide Web.
The Interactive Channel Management Team at British Airways soon realized they needed a new tool that could improve interactions with customers and business partners worldwide. They considered electronic newsletters and online discussion groups as an effective answer to their problem.
“LISTSERV is most appropriate for our needs in terms of managing large-volume distribution lists with minimum administrative overhead, being a cost-effective, reliable and supported solution," said Eilish Gorse, E-Mail Operations Lead at British Airways. "We now have mass-distribution lists that we use to facilitate customer relationship marketing. We inform customers of current, relevant promotions. This gives them the opportunity to take advantage of our special offers.
Developments in Information Technology (IT) and Manufacturing Technology have had an enormous impact on the theory and practice of marketing in general and Relationship Marketing in particular. (Egan, 2008:27)
It is generally acknowledged that IT has potential for relationship building, if used effectively. Developments in IT allow a relationship-orientated management to store and manipulate information about their customers and, ultimately, to provide those customers with a better service.
RM is a valuable tool for equally the company and customers, as it creates many benefits for each party concerned. It not only consists of relationships with buyers, it also concentrates on internal, lateral and supplier relationships
In order for RM to be a successful approach, it must create a supportive culture within a business, market internally, understand customer expectations, create sophisticated databases and create new organisational structures and reward schemes.
Promotional Objectives
The objectives of the campaign, including sales and communication effectiveness, can be analysed according to what behaviour might be expected of existing consumers. Using CRM, it may be possible to recognize a consumers behavioural attributes (e.g. susceptibility to certain types of advertising). Such information can be used to develop realistic promotion objectives.
An example of effective marketing strategy which helped Singapore Airlines (SIA) reduce cost pressures in the airline industry through value adding targeted market segmentation. The use of a Singapore Girl as a icon for SIA has enhanced its competitive position in the industry, (Chan, 2000).
Communication Strategy and Promotion Methods to be used
As the idea of CRM is to place the importance on the consumer, the technique can be used to develop a successful strategy based on consumer preferences. Specifically, a detailed analysis of the types of media customers use can be found, together with their previous reactions to that media. New media advertising such as email marketing can be expected to be appropriate for customers who booked flights online rather than over the phone, for instance.
With a database of customers, a company has the ability to target its marketing based on one-on-one level. Using technology, companies are able to develop increasingly sophisticated approaches to its marketing. New media applications such as mobile phones allow companies to send out extremely targeted messages. A mobile phone operator such as T-Mobile, for instance, is able to send out special offer text messages to customers aimed at increasing their spend on top up credit by offering incentives to spend more.
Evaluation
Feedback from the campaign using CRM techniques has the potential to provide organisations with detailed breakdowns in campaign effectiveness. Using technology to gather feedback data is far more possible now due to the advent of new media. In all aspects of a marketing plan, then, it is possible to see the potential benefit and influence CRM can have. Critically, it is perhaps best used to discover customer preferences, and to help make decisions accordingly.
Conclusion
There can be little doubt that as technology has improved so too has the ability to interact with customers on increasingly personal levels. Concurrently, Egan (2004) is perhaps correct in his observation that, despite the differences and advancements observed in this essay, there is little differentiation in the objectives of both ideas. If this is the case, it can be asserted that CRM is merely the latest development on an original concept which remains to grow ever more sophisticated in its approaches.
In order for RM to be a successful approach, it must create a supportive culture within a business, market internally, understand customer expectations, create sophisticated databases and create new organisational structures and reward schemes.
We have established that without the successful use of technology, Relationship Marketing is not an effective strategy. Although the concept has been criticised, on the whole with application to examples throughout this presentation it shows that RM is an effective marketing tool.
It not only includes relationships with customers, it also concentrates on internal, lateral and supplier relationships RM is a valuable tool for both businesses and customers, as it creates many benefits for each party concerned. Relationship Marketing has shifted from a transactional approach to building, maintaining and developing ongoing relationships with customers
Bibliography
Berry, L.L., “Relationship Marketing”, in Berry, L.L.,Shostack, G.L. and Upah, G.D. (Eds), Emerging
Perspectives of Services Marketing, American Marketing Association, Chicago, IL.
Brown, SA. (2000), “Customer Relationship Management - A Strategic Imperative in the World of e Business”, John Wiley & Sons Canada, Ltd
Chaffey, D, Mayor R, et al, (2000), Internet Marketing, Pearson Education, Harlow.
East, R. (1997), “Consumer Behaviour: Advances and Applications in Marketing” FT Prentice Hall, UK
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Fill, C. (2002), “Marketing Communications: Contexts, Strategies and Applications (3rd Ed.)”, FT Prentice Hall, UK
Greenberg, P. (2002), “Customer Relationship Management at the Speed of Light (2nd Ed.)” McGraw-Hill, Berkeley, USA
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Muther, A. (2002), Customer Relationship Management Electronic Customer Care in the New Economy”, Springer-Verlag, Berlin
Payne, A., Christopher, M., Clark, M., Peck, H. (1998), “Relationship Marketing for Competitive Advantage Winning and Keeping Customers”, Butterworth Heinemann, Oxford
Stone, M., Woodcock, N., Machtynger, L. (2000), “Customer Relationship Marketing get to know your Customers and Win their Loyalty”, Kogan Page Ltd, London
Websites
http://www.lsoft.com/customers/britishairways.asp accessed 13thOctober2009
http://www.expedia.com accessed 12thNovember2009
http://www.emeraldinsight.com accessed 28 October 2009
Journals
Chan, D. (2000) The story of Singapore Airlines and the Singapore Girl, Journal of Management Development, Vol. 19.
