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Relationship Marketing: Benefits & Challenges

Instructor: Danielle Reed

Danielle works in digital marketing and advertising. She holds a bachelor's degree in English and an MBA.

Learn more about relationship marketing in this lesson. We also will cover the benefits and challenges of this type of marketing strategy for product and service-based businesses.

Relationship Marketing

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

Why Relationship Marketing?

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 prices changes easier to roll out. It makes hiccups in service easier to explain. Ultimately, it boosts your bottom line.

It is 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 is about the highest number of individuals purchasing rather than the individuals making those purchases.

Benefits of Relationship Marketing

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 is 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.

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