Relationship Marketing
(Levitt)

Knowledge Center

What is Relationship Marketing?

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

Forum Start a new topic about Relationship Marketing Write here. Ask a question or explain something. Current forum discussions about Relationship Marketing: What is Relationship Marketing? Definition 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 ... 21   2 comments Relationship Management in Chinese Culture: Guanxi (关系) The Chinese are acclaimed to be the masters of building Guanxi (关系) (it means "connections" or "relationships" in Chinese), sometimes by ourselves, unfortunately there is an obvious mis... 20   3 comments What are 'Business Relationships'? What differences do customers perceive between personal relationships and business relationships? Do they even think of their interactions with businesses as 'relationships'?... 17   2 comments Is Relationship Marketing a New Paradigm Is relationship marketing an addendum to the traditional marketing mix elements, or is it a new paradigm altogether?... 17   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 ... 16

Courses about Relationship Marketing. Beginners Course Advanced Course Course for Experts

Expert Tips Advanced insights about Relationship Marketing. Here you will find professional advices by experts. Consultancy Tips Teaching Tips Practical Implementation Tips Pitfalls of Traditional Relationship Marketing Relationship Marketing Implementation / Improvement About 50 percent of leading brands' buyers change preferences regarding their favorite brand every year. This reveals hu... The Old versus the New View on Relationship Marketing Relationship Marketing Implementation Here is a point by point comparison: Goal Old View on Relationship Marketing: Having relationships with customer... Six Causes of Relationship Marketing problems Relationship Marketing Implementation Researchers Deb Rapacz and Martin Reilly identified the following six paradigms as the Root Cause limiting effectiveness... Factors for Corporate Credibility Establishing Trust Strong bonds and relationships between organizations and customers depend on their perceived credibility. Corporate Cred...

Information Sources Various sources of information regarding Relationship Marketing. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops. Factors Influencing the Effectiveness of Relationship Marketing Effective Relationship Marketing Relationship marketing (RM) has emerged as one of the dominant mantras in business strategy circles, though RM investiga... A Service-Oriented View on Marketing Service-Dominant Logic, Perspectives on Marketing Presentation about a service-dominant logic mindset in marketing, including the following sections: 1. Getting the logi... The Effect of Relatinal Constructs on Relationship Performance Relationship Marketing Peter C. Verhoef, Philip Hans Franses and Janny C. Hoekstra examine the effect of relational constructs, such as satisfa...

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