Part Ten: Sustaining Value
Today, it’s not enough to simply promote and market to a target audience; consumers are starting to demand relationships in different forms prior to, during and after their purchases. The relationships offered by an organisation are another channel of communication to consumers and therefore must also be managed just like all other elements of the marketing plan are.
Relationship Marketing (RM)
RM, also referred to as Customer Relationship Marketing (CRM) is the branch of marketing that caters to the sustaining value of relationship building with customers. The characteristics of RM are:
- Long term plan orientated aimed to preserve customer base
- Commitment and fulfilment of product and organisational promises
- Customer share based, not market share based
- Leveraging customer life-time value
- Two-way dialogue
- Customisation and tailoring the offering to suit each customer
These relationships must exist beyond one staff member, so that, should that staff member leave, the relationship is not destroyed.
Additionally, RM should be managed so that it isn’t the only strategy employed as investing all efforts into keeping current customers and not into securing new ones can be risky. However, a good relationship marketing plan will keep customers happy and encourage repeat purchasing.
The Benefits and Disadvantages of RM
RM strategies can be both positive and negative depending on the type or method used, as well as the industry and product category.
- It provides benefits for customers and suppliers
- Enhances brand loyalty and creates brand advocates
- Allows direct contact with customers
- Allows for interaction and measureable feedback
- Resource demanding
- Unexpected demands
- Opportunity costs
If the target market, currently brand advocates via a RM program change overtime and the organisation wishes to target a new segment, an RM can be quite restrictive as the newer segments may not wish to be associated with the previous segment. This is the case with some clothing brands- the brand develops a solid relationship with a young crowd, however as they get older and the brand wants to refocus on the new youth, they may see the other segment wearing that brand and not wish to be associated with it.
Of course, it can also be the other way around. Banks can secure the next generation if they have a good, long term relationship with the parents and previous generations.
Flank brands are a strategy sometimes employed when an RM program has found extreme loyalty with one segment, and therefore to target a new segment, a separate brand is created.
Targeting a RM Program
An organisation has six main markets that they can build a relationship with. These are:
- The customer target market themselves (ie: purchasers)
- Potential employees
Customer modes are the types of behaviours customers exhibit with their purchase, and determine the level of a relationship they want or expect. Naturally, different customers have a different view on different purchases, however it is important for an organisation to correctly access the mode their target market is in, so as to best cater for their needs.
(1) Transactional Mode: All they want is a quick exchange and no more than a simple brand awareness so they know what their preference is. This tends to be with simple purchases such as a chocolate bar.
(2) Active Relational Mode: The customer expects a relationship otherwise it will negatively impact their value and experience. For example, airlines, real estate, doctors, hotels, and so on.
(3) Passive Relational Mode: Customers want a detached transactional mode until they deem it necessary to fall back onto a relationship. For example, when a car is purchased, most customers don’t want a relationship until it needs a service or they need help.
Depending on these modes, the potential for a good recovery strategy is high here. If a customer is unhappy, they can use the relationship to provide feedback, and if an organisation implements a good response, studies show brand loyalty is increased drastically.
The Scope of Relationships
There is a continuum scale of how best to match a relationship marketing program. If customers exhibit certain behaviours, then an appropriate RM program can be catered to their demands.
Transactional Mode End
- Customers have low anxiety over purchases
- Contact seen as unnecessary
- Standard, low investment products
- Customers purchase easily without a need for follow up
Relationship Marketing (Active and Passive relational modes) End
- High customer anxiety over purchase
- High degree of contact expected
- Confidence, social and special benefits highly valued
- Customers wish to know that the organisation is there when they need them
Besides Relationship marketing, there are two other methods to retain customers. The first is to create exit barriers making it difficult to leave, such as long-term contracts. Whilst this is effective to an extent, it can create a resentment toward the brand.
The second is loyalty schemes. These are gentler and more customer friendly than solid exit barriers, rewarding customers for repeat purchases and getting them comfortable with the product offering.
Whilst these are effective in keeping customers with an organisation’s brand, competitors can come up with clever schemes to undermine these barriers, such as honouring the current loyalty scheme for a competing brand themselves.
An organisation needs to find the best combination to ensure they’re fostering a good relationship with their customers. It takes customer satisfaction, trust and commitment to create customer loyalty (known as the loyalty formula) and if an organisation can’t successfully hit those three factors, their retention strategy is weak.
Customer Trust and Commitment
Customer satisfaction (as a part of the loyalty formula) can be achieved with the marketing mix strategy. The other two elements, trust and commitment derive from:
- Delivering on promises
- Customer care
- Recovery strategies
- Valued relationship
- Shared power (two-way communication channels)
- Avoidance of unethical or untasteful behaviour
- The open sharing of information
- Healthy and positive image/reputation
- Focusing on customer orientation
There is a growing trend that customers are demanding more environmental awareness and practices. Green marketing is promoting environmentally friendly products to create a positive image with the brand and organisation. It is just one way that assists with consumer relationship marketing.