Relationship Marketing by Dwyers Bathrooms Company - Term Paper Example

A report on the application of relationship marketing and retention planning theories and principles by Dwyers Bathrooms Company Relationship marketing is a marketing model that developed from direct response marketing campaigns that were conducted in the 1960s and 1980s. The distinctive elements about the campaigns were their emphasis on customer retention and perpetual satisfaction placed above individual transactions and per-case customer resolution. The salient aspect of relationship marketing that distinguishes it from other forms of marketing is based on that relationship marketing focuses on a market's more specifically suited information on products and services which suit retained customers' interests in a way contrary to direct or intrusion marketing which focuses on obtaining new clients by targeting bigger market communities basing on potential client listings. In the light of the preceding nuances this report presents an explanation and exploration of the principles and application of relationship marketing and retention planning in relation to the case scenario presented on the Dwyers Bathrooms Company. Principles and Applications of Relationship Marketing In the Case Scenario The relationship marketing model holds that service providers can capitalise on offering a broad ranging list of services and products. The model can be well applied when there are alternatives for clients to choose from. Dwyers Bathrooms have created a feasible range of services and products that provide a working foundation for the more intensive implementation and enhancements of the relationship marketing stratagem. Upon providing the core services comprising the supplying and installing of mid-range bathroom suites, Dwyers have also developed a new make-over service which focuses on repairs on bathroom fixtures, tiles, seals and grouting. Dwyers can cash in on this development by enlightening their clients on the new services and products that they are now offering. The application of relationship marketing in various services and product provision domains has been characterised by the development and use of various customer relationship management schemes that allow the observation and assessment of each customer's preferences and dislikes. Dwyers still has a long way to go in tapping the merits of this relationship marketing dynamics. The only element of this kind that Dwyers have implemented has been the customer satisfaction surveys carried out after an installation. The company has to develop and broaden the satisfaction assessment scope of the satisfaction assessment instrument. Also the company has to find means of soliciting information from clients their specific needs that Dwyers can supply upon the range of the products and services they are already offering. The company may consider applying a company tracking service schedules and contacting customers directly on product or service recalls. Dwyers has also not tapped the merits of the other effective element of relationship marketing, personalized marketing. In personalized marketing the main preference is given to the customer. This dimension entails building customer shopping or service purchasing profiles. Information obtained and compiled on customer shopping trends preferences and dislikes, etc, is used to compute and deduce the likelihood of the customer interest and/or preferences in other product/service categories. The likely preferences are conveyed to the clients through various communication channels that a company has in lace for contacting its clients. Although this is typically an internet tailored relationship marketing model, Dwyers is well suited to customize this model and cash in on the huge customer listings they already have. Dwyers must adopt means of conveying computed likely customer references through a way of making recommendations to the clients in via customers email listings, mail postages and any feasible communicative avenues that the company may devise. "Personalized marketing has also migrated into direct mail, allowing marketers to take advantage of the technological capabilities of digital, toner-based printing presses to produce unique, personalized pieces for each recipient. Marketers can personalize documents by any information contained in their databases, including name, address, demographics, purchase history, and dozens (or even hundreds) of other variables. The result is a printed piece that (ideally) reflects the individual needs and preferences of each recipient, increasing the relevance of the piece and increasing the response rate." (Wikipedia: Relationship marketing) The above extract provides various dimensions and dynamics within the personalised marketing front of relationship marketing which can be fitly adopted and adapted by companies and marketing professionals to capitalise on the contacts they already have as a way of boosting sales whilst also catering significantly to important aspect of customer satisfaction. Contemporary relationship marketing forms have been largely shaped by the reengineering dispensation. The reengineering theory holds that organizations should be structured in way of completing tasks holistically and processes rather than operating as autonomous entities and functions. "That is, cross-functional teams should be responsible for a whole process, from beginning to end, rather than having the work go from one functional department to another. Traditional marketing is said to use the functional department approach. This can be seen in the traditional four P's of the marketing mix. Pricing, product management, promotion, and placement are claimed to be functional silos that must be accessed by the marketer if she is going to perform her task. The marketing mix approach is too limited to provide a usable framework for assessing and developing customer relationships in many industries and should be replaced by an alternative model where the focus is on customers and relationships rather than markets and products. (Gordon 1999). Dwyers has to adopt the tenets of the reengineering theory that stress on the organisation function as a whole to achieve synergy. In this marketing philosophy every individual and department in an organisation is by essence a marketer. Principles and Applications of Retention Planning In the Case Scenario One salient aspect of relationship marketing is the retention of customers through varying means and practices meant to ensure a perpetual trade relationship with existing customers by satisfying customers' needs competently through a mutually beneficial company-clients relationship. According to mainstream scholars and observations this technique is now used as a means of counterbalancing new customers and opportunities with current and existing customers as a means of maximizing profit and counteracting the "leaky bucket theory of business" in which new customers gained in older direct marketing oriented businesses were at the expense of or coincided with the loss of older customers. This process of "churning" is less economically viable than retaining all or the majority of customers using both direct and relationship management as lead generation via new customers requires more investment. (Opcit) Dwyers have taped into the merits of retention planning. This is evident through their customers' feedback endeavor demonstrated by the conducting of a customer relationship activity in form of customer satisfaction survey following installations. The notable evidence to the merits of the retention stratagem which Dwyers have benefited from is the fact that the company has installed 2000 bathrooms in the past decade and has the names and addresses of all the past customers. Most notably, the company's contracts value has risen by 20% per year to average 3500 in 2008. The trend is shows that in many scenarios, companies direct resources into retaining existent companies instead of breaking new ground in new market demographics. Assessments of the merits of retention marketing show that it may cost five times more to attract new customers and needless to say the retention model brings remarkable merits of effectiveness as well as cost cutting measures. This is so as direct or "offensive" marketing demands much more intensive and extensive resources to cause defection from competitors. There are nonetheless indications that because of the extensive classic marketing theories centering on means of attracting customers and creating transactions rather than maintaining them, the mainstream usage of direct marketing used in the past is now steadily being used more in conjunction with relationship marketing as its importance becomes more recognisable. Reichheld et al (1990) claim that a 5% improvement in customer retention can cause an increase in profitability of between 25 and 85 percent (in terms of net present value) depending on the industry. The 20 % contract value of the Dwyers is not a far cry from these claims as they reflect o the gains that the company are making through the retention policy. Recommendations In Buchanan and Gilles, (1990) terms, the increased profitability related to customer preservation efforts occurs because of several factors that occur once a relationship has been established with a customer. The scholars state the following; The cost of acquisition occurs only at the beginning of a relationship, so the longer the relationship, the lower the amortized cost. Account maintenance costs decline as a percentage of total costs (or as a percentage of revenue). Long-term customers tend to be less inclined to switch, and also tend to be less price sensitive. This can result in stable unit sales volume and increases in dollar-sales volume. Long-term customers may initiate free word of mouth promotions and referrals. Long-term customers are more likely to purchase ancillary products and high margin supplemental products. Customers that stay with you tend to be satisfied with the relationship and are less likely to switch to competitors, making it difficult for competitors to enter the market or gain market share. Regular customers tend to be less expensive to service because they are familiar with the process, require less "education", and are consistent in their order placement. Increased customer retention and loyalty makes the employees' jobs easier and more satisfying. In turn, happy employees feed back into better customer satisfaction in a virtuous circle. In relationship marketing customer loyalty is categorised into what has been called the relationship ladder of customer loyalty. In this criteria customers are grouped according to the levels of loyalty with the ladders first rung comprising 'prospects', potential customers with currently no purchase history but highly likely to purchase in the immediate or distant futures. The first rung is followed by the successive rungs of "customer", "client", "supporter", "advocate", and "partner". Relationship marketers through this model strive to apply feasible means of elevating customers up the relationship ladder. The provision of more personalised service and delivering beyond expectations are mainly used in this strategy. Dwyers must employ these among other methods to enhance customer satisfaction by obtaining and meeting specific customer needs. The company can employ of various media forms and channels to lure customers upon making remarkable impact through the impact repetitive marketing strategies. The company must utilise the marketing platforms provided by the internet. Web related marketing utilities will help Dwyers enhance the personalised relationship marketing subterfuge. Dwyers customer database must be constantly updated with new customer details including appropriate customer contacts information but more importantly, the database must include specific details about each customer preferences and dislikes. The company has to make use of the customer contacts to solicit meaningful customers' feedback and custom needs as well as convey information about new products and services that the company has added to its products and services repertoire. Conclusion The relationship marketing model provides the balance achieved by the integrated marketing approach focusing on service and quality. As such the strategy provides an ideal basis for the achievement of competitive advantage. Relationship marketing costs a fraction of what would be incurred in soliciting new customers and long term customers get to contribute to the company's marketing endeavors by way of word of mouth referrals. Dwyers has to tap in the merits of relationship marketing as the company has laid an ideal foundation provided by the current contracts value and the value growth. References Gordon, Ian (1999). Relationship Marketing: New Strategies, Techniques and Technologies to Win the Customers You Want and Keep Them Forever, John Wiley and Sons Publishers, 336. ISBN 0471641731 Buchanan, R. and Gilles, C. (1990) "Value managed relationship: The key to customer retention and profitability", European Management Journal, vol 8, no 4, 1990 Wikipedia: Relationship marketing http://en.wikipedia.org/wiki/Relationship_marketing Accessed 11 August 2008 Reichheld, F. and Sasser, W. (1990) "Zero defects: quality comes to services", Harvard Business Review, Sept-Oct, 1990, pp 105-111 Read More