The concept of relationship marketing is gaining traction here in Quebec and the world over. More and more, we understand the importance of creating sustainable customer relationship. Of becoming more customer centric. But what exactly is relationship marketing?
This video will help to understand and clarify the concept. It will also help you answer the three fundamental questions that you must address when implementing a relationship marketing strategy.
After a recent discussion with a few colleagues, I was shocked to discover how misunderstood the concept of relationship marketing really is. I suspect that this might be the case elsewhere in the world as well. Apparently, many marketers here confuse relationship marketing with email marketing. Or more specifically with the use of newsletters to communicate with customers. In France, relationship marketing is synonymous with multi-level marketing or network marketing.
So here’s my attempt at clearing up some of the confusion (and hopefully not contributing to it). Relationship marketing is a form of marketing that focuses on creating, maintaining and growing business relationships between an organization and its customers.
Relationship marketers focus on the quality, longevity, depth and value of the relationship with customers. And it does this on an individual or personal level. This form of marketing is an offshoot of Customer Relationship Management, commonly referred to as CRM. I use the term to designate the CRM marketing vision and practices, as opposed to the management software platforms that make CRM possible.
Relationship marketing versus transactional marketing
The expression relationship marketing is used in contrast with transactional marketing. The objective is not simply to generate discrete sales of goods and services. It also includes — but is not limited to — building loyalty and optimizing customer value.
In transactional marketing, the marketing communication activities have one simple objective: to close a sale. This vision is the basis of classic direct marketing. Oddly enough, here in Quebec, Canada’s French-speaking province, the term direct marketing is generally confused with direct mail. This is quite odd since mail is but one of the many media commonly used in a direct marketing campaign. Transactional marketers strive to increase response rates, conversion rates and to minimize the cost per sale.
In relationship marketing, the goal is to create, maintain and grow a business relationship between an organization and its customers. And to extend the lifetime of those relationships as long as possible. Armed with that long-term vision, marketers think in terms of customer lifecycle rather than in terms of discrete isolated activities and campaigns. The objective is to move the customer along a journey. From prospect to customer, from occasional shopper to active patron, from customer to brand ambassador.
Targeted media that stimulate a conversation
In both transactional and relationship marketing, marketers use the same targeted media. These include email, social media, web, direct mail, telesales, text messaging and mobile applications. In both cases, marketers strive to identify each customer and create a profile.
The key difference is in how you use those media. But also what content you deploy through them. In relationship marketing, communication with the customer goes beyond the use of promotional messages designed to sell, and include informative communication. This can often take the form of newsletters, video clips, buyers guides and more. This content is designed to help build the marketers credibility. And also to provide a positive experience in order to strenghten the customer relationship.
The purpose of the content is to help customers make better, more informed choices. To help them find the right product or service based on their behavior, priorities, preferences, characteristics, etc. Marketers can also help customers learn how to use their products appropriately in order to get the most out of them. This will increase customer satisfaction and provide a positive customer experience.
Historically, one of the main characteristics of relationship marketing is some form of response. With the advent of social media, the concept of response is being transformed into that of a conversation. Today, customers can interact with marketers in real time and in a very public way. They can share their experience — positive or negative — with others. And directly influence the brand perception and appreciation of others.
Identify, know and understand your customers…
However, in relationship marketing, marketers not only want to identify their customers. They also follow and understand their behavior. That sometimes means looking at their demographic profile, but most often examining their engagement and their purchase history.
When the objective is customer acquisition there is no purchase history to analyze. Marketers will then focus on a person’s engagement behavior as well as their interest in the product or service category deduced from website visits and email clicks.
…and keep them as long as possible
Customer loyalty is the foundation of relationship marketing. However, that does not mean that a loyalty program – offering incentives in exchange for greater patronage – are absolutely necessary.
Loyalty programs are useful in the sense that they allow marketers to identify their customers and to capture transactional data. But if you can identify your customers and track their purchases, such programs are not essential. You can also build loyalty through more relevant communication, a positive customer experience and better timing.
So that is in a nutshell, my vision of relationship marketing. What is yours? What else would you have added to this one? Your comments and suggestions are more than welcome.
Here’s some additional reading to learn more: