Danielle works in digital marketing and advertising. She holds a bachelor's degree in English and an MBA.
Think about branded clothes you wear. Think about brands you won't wear. Why do you make one decision versus another? Although you may not be consciously supporting a company, you show you are loyal with a brand name emblazoned across your chest.
Now think of this from the side of the business. How did it get you to wear its name? Relationship marketing is all about keeping your customers interested and buying from you. From the tone you use in your email communication to the implementation of rewards programs, relationship marketing is about building a business with and for your customers.
The definition of relationship marketing is the facet of customer relationship management that focuses on customer loyalty and long-term engagement rather than simple customer acquisition. Loyal customers come back again and again.
Relationship marketing is all about emotion. Customers should feel engaged with you, as if you are sharing your business story with them. You want to create an emotional connection with this customer. This boosts loyalty and makes it tougher for them to leave you for another brand.
Think about some of the emails you receive from your favorite companies. What do you like about them? Do their marketers seem to know you? Relationship marketing makes price changes easier to roll out. It makes hiccups in service easier to explain. Ultimately, it boosts your bottom line.
It's important to note that the opposite of relationship marketing is transactional marketing. This strategy focuses on a single transaction, or just making the sale. It's about the highest number of individuals purchasing rather than the people making those purchases.
Relationship Marketing: Benefits
Whether you are a service or product-based business, relationship marketing brings you a number of benefits. These almost always include:
- A higher return on investment with your customer base - according to the Cross-Channel Marketing Report in 2015, 70% of companies say it's cheaper to retain a customer instead of acquiring one. Customers don't want to be part of a mass marketing hub; they want to be treated as individuals. Keep your previous customers by incentivizing them to stick with you.
- Great reviews and testimonials - your customer base is a resource you can use for your business. Ask your most loyal customers for reviews and even video testimonials. If you run contests, they are likely to be the first to enter the contest anyway! Show your best people you appreciate them, or even notice them, by asking them directly for reviews or videos. Good reviews attract new customers.
- Get an honest perspective in future business decisions - another benefit of relationship marketing is being able to ask honest advice from customers. Many product-based companies send prototypes of new items to loyal customers in exchange for honest reviews. This is especially prevalent in the publishing industry where proofs of novels are sent out prior to publication in order to hype a future book release.
- Turn loyal customers into evangelism marketers - evangelism marketing is a type of word-of-mouth marketing in which a company has a specific customer who believes in a product so much he or she convinces others to buy it and use it. The reason you want relationship marketing to build evangelists for your brand is this: According to a study from Zuberance, the average brand evangelist converts about three new customers!
- Get better returns on future campaigns - in today's world, companies know information about customers because of analytics. Customer analytics is the process in which information about customer behavior gets used to make business decisions. Knowing your current customers means you have clues about your future customers. If you run a campaign for specific segments of the population based on your current customer personas, you get higher return on future campaigns.
Relationship Marketing: Challenges
Relationship marketing does have flaws, though. After all, it takes a considerable amount of effort. There are challenges to relationship marketing.
- No guaranteed quick profit - relationship marketing is more of a long game than transactional marketing. If you are running a sale, relationship marketing may not be the best way to get purchases. It takes time for relationship marketing to be effective.
- More cost per individual customer - if you choose to run a direct marketing campaign, or even communicate with individual customers, this is more expensive than a widespread campaign. The amount of time you spend on each customer is significantly higher than other marketing efforts. (This is not to say your return won't be high.) In addition, you may need to spend more money per customer if you are offering incentives or discounts to drive loyalty purchases.
- Returning customers may come to you with expectations - if you've offered a deal in the past, a returning customer may expect the same discount in the future. Customers may also be less likely to purchase at regular price as they wait for a sale to start.
All right, let's take a moment or two to review. The definition of relationship marketing is the facet of customer relationship management that focuses on customer loyalty and long-term engagement rather than simple customer acquisition. We learned that this kind of marketing is in stark contrast to transactional marketing, which is about the highest number of people purchasing rather than the people making those purchases, and therefore, only focuses on a single transaction or just making the sale.
We learned that the benefits of relationship marketing include a high return on investment; getting great reviews; getting an honest perspective on business decisions; improving returns on campaigns with the help of customer analytics, which is the process in which information about customer behavior gets used to make business decisions; and even turning the best customers into evangelists, with evangelism marketing being a type of word-of-mouth marketing in which a company has a specific customer who believes in a product so much he or she convinces others to buy it and use it. The challenges of relationship marketing are no quick profits, higher costs per individual customer, and the expectations of returning customers.
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