Customer Relationship Marketing - Essay Example

? RELATIONSHIP MARKETING …………………………… College/ …………………….. PART-A Introduction Relationship marketing is perhaps one of the most important and widely practiced management strategies that help management achieve basic goals of sustainable competitive advantages and better customer focus. Relationship marketing has recently gained considerable attention from businesses as it has become an increasingly important inter-disciplinary approach to marketing management. The rigorous competition, advanced technology and innovation, changing customer behaviour and attitudes and many other factors have significantly impacted the business environment and resulted to building of stronger firm-customer relationship. More and more business organizations are capitalizing and putting their major efforts on building and maintaining strong customer relationship mainly to gain highly useful and valuable information on how can they best serve their customers and keep them loyal. Relationship: A strategic Initiative ‘Strategy’ is a very common buzzword in the business filed. Large number of businesses find success with their strategy where as many turn out of the business due to in-efficient strategies. Strategies have been playing extremely significant roles in marketing in recent years. It can be argued that relationship marketing seems to be the central point of all other management strategies because no other strategies can bring success unless there is ‘better relationship’ with customers. More specifically, Total Quality Management, Supply Chain Management and Knowledge Management are some of the widely applied management strategies and these can turn to be in-effective if the firm failed to build better relation with its customers. The older profit maximization, product orientation and transaction-based marketing concepts have been questioned and thence faded away and newer concepts of Customer Relationship Marketing has gained considerable place in marketing landscape. It eventually resulted a shift from the profit orientation to the concept of consumerism. Consumer has been placed to be ‘king’ or ‘boss’ in the market and this is often termed as a change from in-out approach to the ‘out-in’ approach. Most industries, service sectors like hospitality in particular, in very recent days give extreme importance to building and maintaining ‘consumer loyalty’. Relationship marketing is basically a stronger strategy to create customer loyalty. ‘Value creation’, ‘customer loyalty’ and ‘relationship marketing’ are more inter-related terms in marketing, because relationship marketing and its tools have been found to help achieve customer loyalty by creating and adding values to the customers. Customers are better satisfied only when they find expected values from the products or services they consume and this in turn lead them become loyal customers. When it comes to the strategy perception, the marketing management focuses on retaining customers and make them their loyal customers. A vision to generate profits or increase production or compete with others through any possible measures is not exactly what a business is expected to have. Instead, production, competition and what ever a business does must be intended and able to satisfy its potential customers, give them the expected quality, values and reasonable standards, keep good relation with them in a way that they are treated as most valued ‘stakes’. Relationship marketing undertakes to know how to provide values to the customers. Empirical evidences show that 20 percent of the customers bring in 80 or more percent of the profits for a business and therefore companies find relationship marketing as a key element to attaining reasonable profits that can help them survive in the business. Finding new consumers is often more expensive than retaining the existing consumers and converting them to ‘loyal’ which in turn has been found to be more effective strategic approach of the business. Customer focus is a widespread marketing slogan which is basically inter-related to the essence of marketing concept in recognizing customer needs and wants and thus design, develop and deliver goods or services accordingly. When a business offers goods or services that can create values by delivering right goods, in right quality, to right customers on right time, the company can be said to be taking a better opportunity to generate profitability. As part of growing importance of relationship marketing, large companies like Ford, Chrysler and others have spend millions of dollars only on offering incentives to the customers to motivate them to have a buying-relationship with the company. Providing incentives, extensive discounts and market offers are mere parts of interactions and are first essential elements to build relationship. This may not yield a long-term relationship. The company thus requires to adopt various other measures to make this relations last long. In order to maintain the relationship which is built through strategies like incentives, large volume discounts etc, the company should adopt social interactions that must be able to create deep and rather less superficial links between the firm and its consumers. Social relationship with customers will an effective marketing tool. Developing the relationship in to a ‘social interaction’ level is thus the second stage that can help maintain a long term customer relationship. The Own Store Strategy that Apple Inc has implemented to reach customers more individually and deliver better services has eventually turned to be a ‘social interaction’ tool, facilitating customers to use Apple products and services including iPhone, iTunes, iMac and so on. This was an illuminating example for developing firm-customer relationship through social interaction. A retailer chatting with local customers, a hospitality firm sending holidays cards to its repeating customers, a auto-parts business man calling his customer to see whether newly fixed part works or not are some of the examples for social interaction activities. Confining on offerings of incentives or discounts can help get nothing more than a short-term sales boost-up, and therefore social interaction can be effectively used to develop this relation in to a long term and deep relationship with customers. When a firm is able to build customer relationship, the company as third step must be able to transform this relationship in to structural changes that can enhance true partnership between buyer and seller, which in turn creating dependence on one another and yet to grow over times. Firms that value maintaining customer relationship give greater emphasis on obtaining customer feedback and various information on goods and services being offered to them. These feedback and information can be of greater help to the business, including measuring of customers’ satisfaction and evaluating their responses to features of products and services. Customer relationship marketing thus has become an increasingly important marketing strategy that helps a firm gain various advantages like long term profitability, sustainable competitive advantages etc. PART- B Introduction This part of the paper presents a piece of research on customer relationship marketing and its relevance in modern business contexts. By reviewing various literatures, this research paper attempts to address meanings, underpinning theories and marketing concepts of customer relationship marketing and examines how this can help a firm achieve its basic goals of long term profitability as well as gaining sustainable competitive advantages. Relationship Marketing Relationship, in relation to the marketing, is an antecedent to the value-creating and sharing buyer-seller interaction (Varey, 2002, p. 1). As discussed in part-A, customers who become satisfied of certain goods or services get relevant values and promises from their sellers. The relationship marketing, which was emerged as an inter-disciplinary of service marketing (Ndubisi, 2006, p. 99) has been viewed as a marketing and managerial strategy, to attract and foster relationship with various stakeholders, mainly with customers. The relationship marketing aims at creating and maintaining long-term relation between firm and its customers, rewarding for both the parties and is achieved through promise-fulfillment. Most marketers have recently understood the importance of customer loyalty, which is basically customer’s commitment to repeated purchases and re-patronization for a preferred goods or service. Marketers often look at grabbing the slice of the pie from the opportunities of customer’s switching behavior and therefore it is highly important that creating a marketing relation is a more significant strategy for sustainable competitive advantage. Christopher, Payne and Ballantyne (2002) emphasized that one of the very significant elements of relationship marketing is value-creation which consists of three-basic elements, that are a) the value customer receives, b) the value the firm receives and c) maximizing the life-time value of desirable customer segments through the value exchange (p. 38). The relationship marketing is thus a process as well as a marketing strategy in which value-creation for both the sides is extremely important. By identifying, recognizing and evaluating the exact customer needs and requirements, a firm will be able to consider the economic value of the customer segments. Harwood and Garry (2007) emphasized that value can be created and added in relationships through a number of ways. Some of the strategies to create and add values include intangible components and more rational aspects of the delivery process(p. 109). Commitment, trust, customer orientation and empathy, experience and satisfaction, flexibility and responsiveness of the parties to one another are some of the intangible components that create and add values. communication frequency and physical proximity are more measurable aspects of such intangible components (Harwood and Garry, 2007, p. 109) Relationship marketing, being different from the traditional marketing, has given greater emphasis on the creation of customer value, which is the summation of all the positive effects that the suppliers have upon their customers’ business or the satisfaction of final consumers. In order to create customer value, the marketer is basically required to understand the customer value chain and mainly the whereabouts of the chain (Payne, Christopher, Peck and Clark, 1998, p. 7). Lagrosen (2005) pointed that relationship marketing helps a company develop new product design and bring further success keys to product differentiation through innovation (p. 426). Customers are information-providers as their feedback, responses, repeated purchases, word of mouth are some of the very useful sources of information that a company can depend and use for product development and various other purposes. The main elements of relationship marketing, detailed by Christopher, Payne and Ballantyne (2002) are: It emphasizes on relationship, rather than a transactional approach to marketing, It focuses on customer retention to ensure that right amounts of money and other resources are appropriately allocated. It considers internal marketing as valuable and key element to achieve external marketing success. It extends its concepts to a range of diverse market domains. Integrates customer relation, quality of goods and services and marketing needs and objectives. It ensures that marketing is to be considered in a cross-functional context (p. 4). Relationship Ladder Payne (1994) has addressed relationship ladder as an important principle to the relationship marketing approach. It views customer loyalty as a ladder that shows progress of relationship that customers can have in an organization. As shown in figure- 1, the first step in the ladder is a prospect. It is thus to be converted in to a customer. A customer, who had business deal once with the organization can be thus prompted to come for repeated purchases, it thus shows progress in relationship. The relationship ladder thus develops and makes progress in relationship. The final step is creating partnership in which a strong as well as long-term relationship can be developed between a supplier and his customer, based on satisfaction they receive. Six-Markets framework Though relationship marketing gives greater emphasis on maintaining firm-customer relationship, it considers that a long term mutual and committed relationship with other stakeholders like employees, suppliers etc is imperative in helping a business achieve its goals. The six-markets model suggested by Christopher (1991, p. 21-31, Peck, 1991, p. 1) has gained significant and rather wide acceptance by most companies worldwide. This model basically comprises of six markets, they are, a) Internal Markets, b) referral markets, c) potential employees market, d) supplier markets, e) supplier markets and f) influence markets. This has been depicted in the figure- 2. As Gummesson (2002) argued, relationship marketing is a marketing based on interaction with networks of relationships (p. 3) and this can be understood from the figure above. The internal marketing relation deals with treating of individuals and departments within the organization as customers and suppliers because they too are true customers of the firm. employees within an organization are customers as well and they should be treated well in better relationship, which is referred as employee market. Referral markets are sources of new businesses as they come from sources of professional advice like lawyers, banks, accountants etc and also from satisfied outside customers. Word-of-mouth publicity is of greater significance in relation to the referral markets. Influence markets are organizations and individuals having positive ability to influence the marketing environment that the company competes in (Payne, Christopher, Peck and Clark, 1998, p. 9). Supplier markets comprise of suppliers. Maintaining good relationship with them is an important key too success because it helps maintain competitiveness through the creation and delivery of a better value proposition for the end customers (Peck, 1999, p. 10). Customer Relationship Marketing The very basic concept of customer relationship marketing is that customers do not buy goods or services, but rather, they buy benefits that goods and services provide them. They buy offerings consisting of goods, services, personal attention, information etc (Gronroos, 2007, p. 4). This is the reason why customer retention or repeated customer purchases have been widely agreed up as part of maintaining goods relationship with customers. Newell (2003) argued that CRM is at standstill and companies that practice it often fail to see expected returns mainly because of its celebrity and the name CRM has been loosely applied to anything that relates to customer-centricity (p. 4). As Sheth (2006) noted, customer relationship management is built on the old school thinking, that is the customer is king and the customer is sovereign. CRM thus typically ignores the people aspect of the customer (p. 308). Ryals (2005) argued that CRM is failing and therefore it is imperative to adopt some practical ways to address this issue. He suggested that maximizing the value of the customers is truly an effective approach to find success of the CRM (p. 252). Customer relationship management is a marketing approach to understand and influence customer behaviour by adopting effective communication in order to manage relationship and to improve customer turnover. It is concerned with creating improved values through developing of appropriate relationship with customers and customer segments (Anvari and Amin, 2010, p.19). Customer relationship marketing has gained popularity because it was perceived that CRM can be useful to reduce costs and gain profitability. An increase in the customer retention can eventually result to decrease cost of sales and increase sales as well. Facilitating e-business has recently been viewed to be an efficient way of maintaining CRM because it enables a firm to communicate with its customers more accurately and directly and to maintain long-term personal contacts (Foss and Stone, 2002, p. 303). More over, it increases potential revenues for the firm. Relationship Marketing to achieve competitive advantage Out of various strategies in practice to achieve competitive advantage, relationship marketing remains to be a stronger and powerful tool. Payne, Christopher, Peck and Clark (1998) argued that relationship marketing, based on their Marketing ladder perspective, is an important key to success in achieving competitive advantage. Hougaard and Bjerre (2003) pointed that developing a relationship economic competence being superior to that of competitors is a way of reaching the position of competitive advantage (p. 105). As Sheth and Shainesh (2001) pointed, relationship marketing has been considered to be a necessary and effective way of achieving competitive advantage, mainly through the creation of relationship, networks and long term interactions (p. 162). Conclusion This part of the research work has reviewed relevant literatures on relationship marketing and has highlighted importance of relationship marketing in modern business contexts. This paper presents CRM as an important marketing strategy, that creates and adds values to the customers, this can be improved or progressed by converting them to a long-term relationship of partnership between firm and customers. References Anvari, Rand Amin, S.M (2010), The Customer Relationship Management Strategies: Personal Needs Assessment of Training and Customer Turnover, European Journal of Social Sciences – Volume 14, Number 1, EBSCO data base Christopher, M, Payne, A and Ballantyne, D (2002). Relationship Marketing: Creating Stakeholder Value. Oxford: Butterworth – Heinemann Foss, B and Stone, M (2002), CRM in financial services: a practical guide to making customer relationship management work, Illustrated edition, Kogan Page Publishers Gummesson, E (2002). Total Relationship Marketing. Total relationship marketing: marketing strategy moving from the 4Ps--product, price, promotion, place--of traditional marketing management to the 30Rs--the thirty relationships--of a new marketing paradigm 2nd. Oxford: Butterworth-Heinemann Gronroos, C (2007), Service Management And Marketing: Customer Management In Service Competition, 3Rd Ed, John Wile and Sons, Harwood, T. G and Garry, T (2007), Relationship Marketing, Why Bother?, Handbook of Business Strategy, Emerald Group Publishing Limited Hougaard, S and Bjerre, M (2003) Strategic relationship marketing, Springer Lagrosen, S (2005), Customer involvement in new product development A relationship marketing perspective, European Journal of Innovation Management, Vol. 8 No. 4, Emerald Group Publishing Limited Little E and Marandi E (2003), Relationship marketing management, Cengage Learning EMEA Ndubisi, N. O (2006), Relationship marketing and Customer Loyalty, Marketing Intelligence & Planning, Vol. 25 No. 1, Emerald Group Publishing Limited Newell, F (2003). Why CRM Doesn't Work. London: Kogan Page Payne, A, Martin, C, Peck, H and Clark, M (1998). Relationship marketing for competitive advantage: winning and keeping customers, 2nd Ed. 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