Relationship Marketing is described as "the process of creating, maintaining and enhancing strong, value-laden relationships with customers and other stakeholders" (Kotler, et al, 1998, "marketing",Prentice Hall). The application of this marketing concept differs greatly for various products and services, but in general it involves building mutually valuable and on-going relationships, resulting in increased consumer loyalty and customer satisfaction over the long term. In an increasingly competitive business environment, many companies are realising the importance of maintaining their customer base and maximising the lifetime value of their consumers. This requires an entire business approach towards building and maintaining profitable relationships on many levels and within all marketing communication channels.
The internet and its many applications can provide marketers with unique opportunities to reach potential and existing customers and build strong associations with them. The benefits of these activities can be measured in the long term.
Ever since the commercial use of the internet began in the 1990's, marketers have utilized the unique qualities of the internet and the world wide web to extend their marketing communications and activities. The technology associated with the internet has developed significantly since it's beginning and is now considered a powerful and vital way for companies to connect with their customers and partners, be it consumers or other businesses.
Marketers have found numerous ways to benefit from information technology and the specific attributes of the internet. The world wide web particularly has expanded the opportunities for branding, advertising, selling and diversification of products and services. The very nature of "the web" has increased a marketing messages reach, content and the ability to target specific market segments and even individuals. There is now a truely global medium through which various promotional tools can be implemented.
Before referring specifically to relationship marketing and its major attractions, it is neccessary to first explain the core benefits and disadvantages of this technology.
There are numerous internet-based incentives for businesses and consumers alike. These general benefits are listed below:
Some considerations about the internet and its business applications involve:
The internet has made it even more necessary for firms to practice relationship marketing in order to increase customer satisfaction and loyalty. In a highly transparent world such as the internet where consumers can easily compare products, prices and competitors, customer retention efforts are paramount. The days of merely making sales are over. Many markets are maturing, and competition and traditional marketing costs are increasing. In addition to this, companies need to make a more concerted effort to improve relations with other supply chain members to gain a competitive advantage. This is particularly relevant to those using internet based business strategies which rely heavily on timely and cost effective delivery systems, which are often outsourced.
There are very high costs involved with losing customers, because the cost of obtaining new ones is very high and competition is fierce in many industries. Another major cost is forgoing a "customer's lifetime value" to the company, which can be worth a huge amount of money. Profitable customers create revenue for a company over their lifetime that will exceed the cost of attracting and servicing that customer (Kotler, et al, 1998, "marketing",Prentice Hall).
As outlined before, the internet provides users with the unique ability to search many sources and conduct comparissons with ease. "Shopping around" has never been so easy and consumers are no longer limited to shopping from businesses in their regional area. While this has been extremely beneficial to consumers, in that they experience greater price competition amoungst producers and suppliers, businesses have had to respond to decreased profit margins and more demanding customers. These factors have made it difficult for companies to avoid price competition on the internet, but they must be wary of the implications of price competitiveness. One way to prevent severe price cuts to keep ahead of competitors is to increase a product or service's value to customers.
Successful businesses on the internet are moving away from competing on price to creating value-laden products and services targeted at specialised market segments. Knowing one's consumer base; their expectations and their needs is the key to this approach.
It isn't possible to satisfy everybody, all of the time, but identifying profitable customers and maximising their loyalty will be rewarded. There are many ways to deliver high customer value, depending on the products or services being sold. Product development, inventory management and customer service are all important factors in providing quality and cost effective goods, but it is often the extra's that can set you apart from the rest and help to build meaningful relationships over time:
In traditional marketing examples the emphasis of relationship marketing has been on the sales people and the marketing material conveyed to the target audience. On-line marketing however, does not rely on personal selling whatsoever. Direct marketing techniques are the key relationship building tools used by a variety of businesses on "the web". Direct marketing involves the communication of marketing materials to a select, targeted group of customers, rather than random techniques. It is one of the fastest growing promotional fields, especially on "the net". In the faceless world of computers and the www, direct marketing provides a way for businesses to stay in touch with their customer base and promote highly focused offers towards specific consumers. This can be achieved via email letters, product information, digital catalogues and order forms. Another example is sending samples over the internet, for instance attaching an audio file containing music that you can actually play or download to an email. This would be a great way for music retailers based on the internet to keep their regular customers informed of what is new and available to buy. Below are some more detailed examples of direct marketing on the internet:
Email is the most popular use of the world wide web and it has hence become a very common way for people to communicate. Many businesses rely less on phone and fax today thanks to the internet and the ability to easily communicate and exchange documents and information over "the net", within the company, to other companies and to end customers. It is very fast, inexpensive, and high in quality and there for can be a very effective direct marketing tool where marketers are trying to initiate a direct and timely response from the recipient. Email lists can be purchased from various e-commerce sites or generated from voluntary consumer memberships containing customer profiles based on demographic, lifestyle and past purchases data and information. This enables marketers to target certain customers with well suited products and services related to their profiles and it helps to ascertain the likelihood of them purchasing. It is said that this kind of campaign is more effective than other promotional tools used on the internet such as banner advertising (Laudon, et al, 2001 "E-commerce, Business, Technology, Society", Addison Wesley). In addition to this, many company's encourage consumers to contact the company via email regarding any questions or feedback on their actual web site to maximise communication to and from consumers.
Direct marketers have traditionaly sent product catalogues or order forms to targeted consumer segments via direct mail to the home or office. With the use of the internet, this can now be achieved electronically by email attachment. This is a relatively new field, but could alter the way direct marketing is carried out dramatically in the future.
Directly linked to the increase in direct marketing efforts is the rise in database generation, management and marketing. What better way to know your customers than to store and analyse data related to their purchasing behaviour. The major attraction of database marketing is tapping in to the "lifetime value" of customers.
A database is a valuable asset which contains a huge amount of data on consumers, but accessing this wealth of information can be difficult. The main idea is to collect details of a person's past purchases, demographics, attitudes, lifestyle and particular wants and needs. From this, customer profiles can be developed and used to identify, target and provide for profitable customers. Marketers have the tools to better cater for cutomers individual needs, thus increasing their satisfaction and loyalty.
A vast array of information can be collected ranging from various transaction data to all communications between the company and the customer. Transaction data involves shopping cart contents (regularly purchased products and services), payment methods used, frequency of purchases, value of purchases, and overall customer profitability. Internet users who purchase on the web relay a large amount of information about themselves to businesses, because they often have to register as members to purchase. Order forms, membership forms and mailing instructions contain details such as names, mailing addresses, phone numbers, email, and much more are provided by customers and can become an excellent source for marketers either for internet or other forms of marketing communication. It is a unique opportunity to collect consumer data to focus on individuals; improving personalisation and meeting their personal requirements.
The key matter regarding database marketing, is management of information. Data must be kept up to date and sorted correctly for analysis and interpretation by marketers. Luckily, there is a vast selection of software and other technologies available to help maintain and build on data warehouses. Examples of this are "Cookies" and "Web Bugs", which are programs designed to aid marketers in customer profile generation. "Cookies", unlike "web bugs" are web site specific. They can track and record information about a customer's behaviour and purchasing behaviour on a particular web site. This can be of great value to a company wishing to design a focused marketing message related to a person's likes/dislikes, interests, purchasing history, etc. By analysing customers, the likelihood of successful customer responses to marketing material is increased. Without these technologies, managing the information would be impossible.
Applications of customer information other than personal communication include product alteraions or development, up-selling, and customised product development.
There are many topics for debate regarding relationship marketing on the internet and the major tools employed; direct and database marketing:
With the enormous growth of the internet and the world wide web, many businesses have developed websites and on-line ways of conducting business. Some businesses have been born out of this technology alone. These are known as "clicks" and carry out all of their business on the internet. The majority of businesses involved with the internet adopt a mixture of "clicks" and "bricks", meaning a mixture of electronic commerce and physical store(s). The later has proven to be more successful business strategy so far and this trend is predicted to continue (Laudon, et al, 2001 "E-commerce, Business, Technology, Society", Addison Wesley). This inturn requires greater integration of marketing efforts to coordinate all aspects of a company's communication to its target market.
Although the internet has progressed rapidly since it's beginning, it is still in its early stages. It is expected that as our knowledge and development of the technology grows, so will our application of its many uses. As consumers become more and more info-tech savvy, so will businesses to keep up with the demand for a more diverse range of products and services available on "the net". There is already a lot of pressure for businesses of all kinds to provide a web site and online shopping for customers. Those who do not join in and fail to establish a prescence on the internet now, may be left behind. Consumers have come to value the world wide web as a major reference point for information about businesses and the products and services that they offer.
Relationship marketing techniques such as direct email will certaintly be attracting increased regulation in the near future. Following examples of blatant breech of guidelines involving SPAM and other mass marketing techniques, increased legislation is expected to curtail inappropriate use of email lists. Apart from the legal rammifications of these changes, marketers must be careful not to annoy their customers by directing excessive marketing material to them.
The competitive nature of the internet has always established grounds for price competition, but many firms are realising this is an unsustainable long term strategy. Differentiation and customisation will allow businesses to avoid price competition. In addition to this, marketers have realised the importance of developing long term, profitable relationships with customers to increase consumer loyalty and to obtain a competitive advantage. Further developments in this field and better utilisation of database information will be necessary if relationship marketing is to reach its full potential on "the net".
The internet has affected the way in which products and services are marketed to their target audiences in many industries dramatically. It has created a need for increased relationship marketing efforts to create competitive advantages at many levels of the supply chain. A long term approach towards creating profitable relations with end customers as well as business partners will allow many businesses operating on the internet to maximise the lifetime value and profitability of consumers. The key elements needed to achieve this objective are differentiation of products and services and personalisation and customisation of all marketing activities to recognise consumers' individual needs. These efforts will be rewarded by improved customer loyalty and satisfaction.
Please feel free to contact me with any questions or feedback regarding this document @ anniethring @hotmail.com
