Mumbai University > Information Technology > Sem 7 > E–Commerce & E-Business

Marks: 10 M

Year: May 2013

1. 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.
2. 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.
3. With the growth of the internet and mobile platforms, relationship marketing has continued to evolve and move forward as technology opens more collaborative and social communication channels.
4. This includes tools for managing relationships with customers that go beyond simple demographic and customer service data. Relationship marketing extends to include inbound marketing efforts, (a combination of search optimization and strategic content), PR, social media and application development.

5. Benefits:

   a. Understanding Customer Characteristics:- Relationship marketing helps you understand your customers better. You can segregate your customers into groups based on their characteristics like purchasing power, frequency and volume of sale transactions. It also helps you get valuable feedback from your customers and understand their needs and expectations. This subsequently helps in value addition to products and services based on these demands and leads to happier customers as they get involved into the value creation process.

   b. Delivery and Meeting Expectations:- If you know what your customers need, it will help reduce wastage due to trial and error methods. When required product features and specifications are known, it is easier to make modifications that will please your customers and increase sales turnover. It also helps reduce costs incurred from the research and development process.

   c. Repeat Business:- Would you be interested in getting involved in any business transaction with a seller who appears rude or indifferent to your needs? No. People who buy from you wouldn't feel any special need to resist switching sellers if you do not give them an incentive to stay bound to you. Here, relationship marketing steps in and provides a positive reinforcement for them to make a repeat purchase.

   d. Prevents Negative Transition:- Trust and loyalty go hand in hand and it is super beneficial for your business. It will help prevent customers from turning to your competitors. Enhancing and maintaining your relationship with existing customers will prevent the tendency of customers to switch to other products/services for a better offer.

   e. Increasing Customer Base:- It is no secret that a happy customer will bring you new ones. In fact, a satisfied existing customer is 107% more likely to recommend a product/service to a prospective customer. Apart from customer referrals, there are several other ways to increase customer satisfaction by employing methods of utilizing social networking websites, blogs, informal surveys, benefits on loyalty cards, timely response to complaints and requests as a constant reminder of your presence around customers through consistent communication.

   f. Reduced Marketing Costs:- Benefits also include lesser marketing costs and more value creation. This can be explained by stating the following statistics: Every 5% increase in customer retention can increase a company's annual profits from at least 25% to as much as 125%, while simultaneously leading to a reduction of 10% in marketing costs. An existing customer will spend 33% more than a new customer to buy your product/service. Most businesses spend as much as 80% of their budget for marketing expenditure to make new customers.