Relationship Marketing
(Levitt)

Build continuing relationships between the organization and its customers. Explanation of Relationship Marketing of Theodore Levitt. ('83)

What is Relationship Marketing? Description

Relationship Marketing is an approach which emphasizes the continuing relationships that should exist between the organization and its customers. It emphasizes the importance of customer service and quality and of developing a series of transactions with consumers. The terminology was first described by Theodore Levitt in 1983.

Origin of the Relationship Marketing Approach. History

Already in 1980, B. Schneider wrote: What is surprising is that researchers and businessmen have concentrated far more on how to attract customers to products and services than on retaining customers. In 1983 Levitt wrote: In a great and increasing proportion of transactions, the relationship actually intensifies subsequent to the sale. This becomes a central factor in the buyer's choice of the seller the next time.

Relationship Marketing is strongly linked to Business Process Reengineering. According to this reengineering theory, organizations should be structured according to complete tasks and processes. Rather than functions.

Usage of Relationship Marketing. Applications

Relationship marketing and traditional transactional marketing are not mutually exclusive and they are not necessarily in conflict with each other. Relationship Marketing may be more suitable in the following circumstances or situations:

• High value products or services.
• Industrial products.
• Products are not generic commodities.
• Switching costs are high.
• Customers prefer a continuous relation.
• There is customer involvement in the production phase. See: Co-Creation.

Steps in the Relationship Marketing Process

1. Chart the service delivery system. Set standards for each part of the system, especially the 'encounter points'.
2. Identify critical service issues.
3. Set service standards for all aspects of service delivery.
4. Develop customer communication systems.
5. Train employees on building and maintaining a good relationship with clients.
6. Monitor service standards, reward staff for exceeding service levels, correct sub-standard service levels.
7. Ensure that each employee fully understands the importance of quality and relationships in the marketing philosophy.

Strengths of Relationship Marketing. Benefits

• Focus on providing value to customers.
• Emphasis on customer retention.
• The method is an integrated approach to marketing, service and quality. Therefore it provides a better basis for achieving Competitive Advantage.
• Studies in several industries show that the costs to keep an existing customer are just a fraction of the costs to acquire a new customer. So often it makes economic sense to pay more attention to existing customers.
• Long-term customers may initiate free word of mouth promotions and referrals.
• Long-term customers are less likely to switch to competitors. This makes it more difficult for competitors to enter the market.
• Happier customers may lead to happier employees.

Limitations of the Relationship Marketing model. Disadvantages

Relationship Marketing is less appropriate in the following circumstances:

• Relatively low value products or services.
• Consumer products.
• Generic commodities.
• Switching costs are low.
• Clients prefer a single transaction to relationships.
• No / low customer involvement in production.

Book: Theodore Levitt - The Marketing Imagination -

Relationship Marketing Forum

Rajmonda - Kosova

RM and customer

"A very important element on building relations is perception. Besides needs are wants that are based on perception and I strongly believe that these are individual chioces. So, every customer is unique and should be treated as so in order to build a strong relation and retain customer. "

-4

Qamar Abbas - Pakistan

Relationship Marketing

"Relationship marketing is a form of marketing that evolved from direct response marketing in the 1960s and emerged in the 1980s, in which emphasis is placed on building longer term relationships with customers rather than on individual transactions. It involves understanding the customer's needs as they go through their life cycles. It emphasizes providing a range of products or services to existing customers as they need them. "

10

Piyush - UK / India

Relationship Marketing focus

"One of the major points Relationship Marketing must focus on is after sales services. A lot depends on it maintain the relationship between the company and its consumers."

3

Laura - USA

Contracts, penalties and fees

"Gail McGovern and Youngme Moon explain in an article "Companies and the customers who hate them" (HBR June 2007) how many industries (cell phones, credit cards, banking, insurance, leasing) are using negative forms of relationship marketing by profiting from customers' confusion, ignorance or poor decision-making to establish various kinds of contracts, penalties and bleeding fees. Unfortunately these strategies are often very profitable, until eventually a customer-friendly competitor arrives on the scene, with an offering that puts customer satisfaction and transparency first."

14

Eddie - UK

Relationship Marketing

"Relationship marketing is a more wholistic approach than marketing mix - 4Ps. As part of marketing strategy, they both seek to recruit and retain customers. However, relationship marketing has communication at its center."

-8

Melvin Ram - US

Relationship Building Secrets

"There is a webinar on building deep relationships with people important to your current and future sucess available at volcanicmarketing.com. It's 20 mins of jam-packed info."

18

lugordon - China

Guanxi in Chinese Culture

"The Chinese are acclaimed to be the masters of building Guanxi (relationship in Chinese), sometimes by ourselves, unfortunately there is an obvious misunderstanding of the concept in Chinese culture and society. As its Pinyin is becoming more popular in English language instead of any other translations such as "relationships" or "connections", we can see how widely and fiercely Guanxi is expanding its cultural, social and (mostly) commercial implications and influences beyond its Chinese cultural territory. The core concept of Guanxi in Chinese is "a personal connection between two people or a group of people (a network) in which one is able to prevail upon another to perform a favor or service, or be prevailed upon." As an art of social relationship, Guanxi has generally formed the basis of Chinese social value structure. When it goes to the business reign, unfortunately, it often violates bureaucratic norms and leads to corruption. Such negative aspects will no doubt impair its great charm as a social art. Thankfully, while the research of relationship in the western is learning from the oriental wisdom, the science of relationship will definitely have a positive influence on this Chinese social art. "

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