L11: Relational marketing Flashcards
The key to success of relationship marketing
Loyal repeat purchase behaviour - keep old customers for an efficient allocation of resources (5x times)
Relationship marketing (Gronroos, 1997)
To establish, maintain and enhance exchange relationships with customers and other partners at a profit, so the objectives of parties involved are met.
It is achieved by mutual exchange and promise fulfilment.
Benefits of customer loyalty
- Customers: better customer insights, positive WOM, reduce churn rate.
- Profit: Save cost from recruiting new customers, Prompt customers to spend more => Boost profits by ~100% by retaining just 5% more of their customers.
The difference between Relational marketing and transaction marketing
- Quality: Functional, so it is the concern of all
- Orientation: Customer retention (L-T), customer values
- Unlimited emphasis on customer service, customer commitment, and high customer contact.
- Method: Real-time customer feedback system and Directly by managing customer database
- MKT: Interactive marketing-led; Interface and Internal marketing great strategic importance.
=> Less price-sensitive customers
The difference between relational marketing and Transaction marketing
- Quality: Technical, so it is the concern of production
- Orientation: Single sale (S-T), product features
- Limited emphasis on customer service, customer commitment, and low customer contact.
- Method: Ad hoc customer satisfaction surveys and Indirectly by monitoring market share.
- MKT: Marketing-led; Interface and Internal marketing no strategic importance.
=> More price-sensitive customers.
Different types of strategic collaborative partnership
- Lateral partnership
- Internal partnership
- Supplier partnership
Lateral partnership
Horizontal partnership with not-for-profit organizations to enhance the brand or increase sales.
Ex: Volvic and UNICEF provide safe water.
Internal partnership
Integrate different functions and BUs to maximize customer value, to implement effective marketing strategies and to build the right corporate culture.
Supplier partnership
Producing a quality product, being at the forefront of innovation.
Ex: Apple uses Intel processor for its products.
Partnership benefits
Partners get to know each other and each other’s way’s of working better, and one or both makes adaptations in their production, delivery or buying processes.
Good selection for partnerships require an understanding of
- Its own core competencies
- Strategic priorities
Criteria to evaluate whether to enter into a collaborative relationship
- Good relationship management/facilitation
- Assess network effectiveness
- Good communication to maintain customer focus
Model of relationship development
As long-term in orientation and interaction is intended to enhance stability, it suggests that relationships become closer and deeper over time.
Inter-organizational commitment and closeness (Hooley et al., 2012)
Outsourcing > Partnership > Strategic alliance > Joint venture > Vertical integration
Outsourcing in model of relationship development
Purchase of goods or services.
Partnership in model of relationship development
Co-ordinated activities and planning between partner companies.
Strategic alliance in model of relationship development
Formal agreement between companies to collaborate and act jointly.
Joint venture in model of relationship development
Shared ownership in an operation with a collaborator company.
Vertical integration in model of relationship development
Full ownership of the activity or operation.
Customer Relationship Management
A process of gathering information about its customers’ wants and needs to adjust its offerings to be better fit those wants and needs. It’s because increasing customers satisfaction is less expensive than investment on high switching barriers.
Failure of CRM and Relational marketing
- Implement CRM: before developing customer strategy. (clear defined customers based on personality) or before the organization becomes a customer-focused entity with suitable processes.
- Technological-intensive CRM.
- Potentially stalk customers or building relationships with people who do not want.
Customer loyalty ladder
- Suspects, Prospects, Customers: emphasize on new customers.
- Clients.
- Supporters, Advocates, Partners: emphasize on developing and enhancing relationships.
The objectives of loyalty scheme
- Convert a supporter to an outright advocate.
- Reward loyal customer.
- Manipulate customer behaviour by making use of information about each customer that is complete, specific and pertinent.
- Defensive tool to combat a competing scheme.
Benefits of loyalty scheme
- Profit: a greater share in the wallet, prompt customers to purchase more, and generate more revenue.
- Customers: Provide insight in behaviour and preferences; Positive WOM and reduce churn rate.
