The Las Vegas, Nevada based online shoe and clothing manufacturer Zappos has their customer service phone number right up there on top of their website, saying Available 24/7. While customers often have to dig deep into a website to get customer service contact details, here’s a company that says that they care about the customer.
That’s a great example of relationship marketing in action. You’ll probably find lots of others the next time you browse the web. You could also find plenty that don’t fit the bill. That brings us to the question, what is relationship marketing all about?
Relationship Marketing: Quick Overview
Every business owner recognizes and understands the value of long-term relationships with customers and clients.
The chances of selling to a new customer are between 5-20% while there is a 60-70% probability of selling to an existing one.
Existing customers are an important asset that is sometimes neglected in the rush to explore new markets. Unfortunately, more than 44% of organizations focus on new customer acquisition and only 18% value retention.
Studies show that the cost of acquiring a new customer is five times more than retaining an existing one. But only 42% of companies have been able to measure the lifetime value of customers accurately enough to leverage it.
This is where relationship marketing steps in to bridge the gap.
Relationship marketing’s origins date back to the 1980s. It is a process that enterprises undertake to gather, maintain and promote effective customer relationships and provide mutual benefits to both the seller and the buyer.
It focuses on retention and satisfaction rather than sales transactions and aims to carry the relationship beyond the mere dishing out of promotional messages and advertising campaigns.
The keywords are “relationship” and “emotion” that tend to co-exist when such connections are formed. It is a process of mapping and building the buyer journey where the experiences are shared and the relationship is explored more deeply.
It’s an effort to make the customer feel engaged, connected and invested in the brand, almost as if they share the business story with the promoters. Businesses use available data from demographics, buying patterns, etc to offer relevant, personalized and memorable customer experiences that enable customers to return, recommend and retain the relationship.
It’s important to remember that relationship marketing concepts spill over into strengthening ties with regular suppliers/vendors, shareholders and also employees within the organization to create a stronger and well knit-together corporation.
Stages In Customer Journey
Relationship marketing can be understood at different levels according to the stage of the customer journey.
1. Customization: this is done at the platform level, where information is gathered to provide marketing messages that focus on the customer’s interests, hobbies, etc.
2. Loyalty: at this stage, the customer’s loyalty is recognized and rewarded. Remarketing efforts are focused on providing benefits to loyal customers in the form of rewards, points, cashbacks, etc.
3. High-value relationships: At this stage, relationship marketing focuses on high-value customers. They are offered special status, discounts, privileges, etc, encouraged to provide suggestions, feedback, etc that may be incorporated and acknowledged, further strengthening the relationship.
Relationship Marketing Can, And Does, Boost Your Business
While the emotional and relationship aspects lie at the core of relationship marketing strategies, it’s important to evaluate them in terms of revenue, health, sustainability, and growth of your business.
1. Improved ROI: According to the Pareto Principle, 80% of sales come from 20% of customers. Relationship marketing helps you to focus on retaining high-value clients, and also on extending benefits to existing and loyal customers. You can get authentic, reliable feedback, suggestions and advice from these customers. Some companies send prototypes and samples of new products to these customers for genuine reviews.
2. Focus on Quality: Relationship marketing emphasizes the quality of the relationship rather than quantity. This means you can use your resources more effectively, and target them more efficiently. To a large extent, it prevents negative transition to competitors.
3. Lower Marketing Costs: One of the big benefits is reduced marketing costs. Studies show that every 5% rise in customer retention boosts annual profits by almost 125% while reducing marketing costs by at least 10%. Existing clients tend to spend at least 33% more than new ones and this means you don’t need to adopt hard-sell tactics for loyal customers.
4. Better Sales: Connected, loyal customers tend to bring in 51% higher revenues/sales. One study shows that 39% of new customers tend to avoid a business for at least two years, if they have a single negative experience. But engaged and connected customers who have a strong relationship with the brand are 5 times as likely to be more forgiving of negative experiences. These customers are also 7 times more likely to experiment with new products/services.
5. Win Back Lost Opportunities: If you’ve lost a few opportunities for some reason or the other, relationship marketing helps you to repair and recoup. Mending relationships is much easier than creating and nurturing new ones. Since you already have data on older customers, it’s easier to leverage this and save time and effort by rebuilding bridges and taking up the threads where they left off. It also helps you to enrich the other relationships in the organization by taking everyone on board in the process. Loyal customers can become “evangelists” for your brand.
6. Two-Way Relationship: Your website, social media and other online resources help to provide reliable customer information in real time. It’s important not to over-use social media as it can get annoying and intrusive. When you figure out where your customers are hanging out most of the time, you can create the right touch points to connect with them. This saves you a significant amount of effort, time and money. The technology is much more affordable than conventional channels, and uses highly objective, technical analysis that is both reliable and authoritative.
7. Wider Reach: Relationship marketing helps your business to reach deeper and wider into a larger pool. This would include not just customers, but also the referral, supplier, internal/employee and the influencer markets. These relationships can be monitored and nurtured, leading to better and longer-lasting relationships and resulting revenues.