Build Relation to Beat Recession
(A Relationship Marketing Approach)


Subidita Pattanaik
College of Engineering and Technology

Tapas Ranjan Moharana
Sr. Lecturer
Nihar Mohapatra
Global Institute of Management


With the economy slowed down in a recession, many companies these days are in rein in mode. The nuisance at such times is that cutting back can become the dominant corporate focus but the strategy of building relationship with customers can raise the organization beyond the effects of recession. This paper primarily focuses on the benefits of relationship marketing during such a depression period.


Although marketing practices are centuries old, but systematic marketing concept as a distinct discipline has been evolved in the beginning of this century. Customer, the most important decider of business is given the supreme position in marketing. In the later years of 20th century, the motive of business has been profit optimization but through delighted customers. In today's competitive world, imitation of product features & offers is a very common practice, so retention of existing customers & meanwhile creation of new customers are few vital steps towards profit. The emphasis on relationships is now a key to successful business. Therefore, the traditional approach of making one-time sales is being replaced with making long term commitment to the customer. There is a shift from transactional approach to relationship. Now for this reason, marketers prefer direct marketing in both business to business & business to consumers. So marketers need to develop a strong bond with customers. In our study, we have tried to throw some light on evolution of relationship marketing along with some of its major factors for effective relationship marketing

Loyalty is a primary goal of relationship marketing and sometimes even equated with the relationship marketing concept itself. The connection between loyalty and profitability has been the focus of both theoretical and empirical studies. Customer loyalty can positively influence profitability through cost reduction effects and increased revenues per customer. With regard to cost reduction effects, it is widely reported that retaining loyal customers is less cost intensive than gaining new ones and that expenses for customer care decrease during later phases of the relationship life cycle due to the growing expertise of experienced customers. Even small improvements in customer retention can as much as double company profits. This is because: (a) it costs less to serve long-term customers. (b) Loyal customers will pay a price premium (c) Loyal customers will generate word-of-mouth referrals to other prospective customers. Customer loyalty is also reported to contribute to increased revenues along the relationship life cycle because of cross-selling activities and increased customer penetration rates. Many relationship marketing definitions are provided in services marketing, industrial marketing, bank marketing, advertising and business strategy. To best understand relationship marketing Morgan and Hunt (1994) propose that....relationship marketing refers to all marketing activities directed toward establishing, developing and maintaining successful relational exchanges.


The growth of relationship orientation of marketing in post-industrial era is the rebirth of direct marketing between producers and consumers. Several environmental and organizational development factors are responsible for this rebirth of direct relationships between producers and consumers. At least five macro-environmental forces can be identified: (a) The growing service sector (a) Competitive environment (c) Emergence of IT (d) Demanding customers (e) The adoption of total quality programs by companies

These forces are reducing the reliance of producers, as well as consumers, on middlemen for affecting the consummation and facilitation processes. We briefly discuss below how these forces are encouraging more direct interactions between producers and consumers of goods and services and is encouraging the growth of relationship marketing.

The Growing Service Sector

The developing economies now concentrate on service industries. There is a shift to service economy from industrial economy. In this labour intensive sector relationship plays an important role. The major service organizations like banking and insurance etc requires regular interaction of marketer and customers. So the bond between both should be strong. Customized offering for clients are prepared and served. Emphasis is on long lasting relationships and there comes the relationship marketing.

Competitive Environment

New free global economy has given chance to the relationship marketing get important because due to intense competition markers are more concerned about retention of existing customers. One's loss of customer is competitor's gain. There is cut throat competition prevailing in the market. There are many reasons behind that. Some argues about saturated markets, changes in the nature of competition and an increased urgency in obtaining knowledge about customers and their needs. We can give its responsibility to demanding customers and marketers at the same time want to give low cost products, increase efficiency and level of services.

Emergence of IT

The impact of technological revolution is changing the nature and activities of the marketing institutions. The current development and introduction of sophisticated electronic and computerized communication systems into our society is making it easier for consumers to interact directly with the producers. Producers are also becoming more knowledgeable about their consumers by maintaining and accessing sophisticated databases that capture information related to each interaction with individual consumers, at a very low cost. It gives them the means by which they can practice individual marketing. This IT revolution has made customers more aware and marketers more alert. As marketers and customers are all aware of this current situation, it builds the foundation of relationship marketing.

Demanding Customers 

Credit to the information technology, it has created a good mass of aware customers who knows what they exactly want. Customer is king, so the product should be according to they preference, otherwise they have a number of alternatives available in the market. The marketing practices should be such that it explains the ways of creating and delivering the customer value profitability.

Adoption of Total Quality Programs by Companies

Due to emergence of information technology and aware customers marketers are more quality conscious along with cost. For this reason they adopt new Japanese managerial technique Total Quality Management (TQM). Most companies saw the value of offering quality products and services to customers at the lowest possible prices. When company adopt TQM technique for achieving better quality and lower cost product, it became necessary to involve suppliers and customers in implementing the program at all levels of the value chain. This needed close working relationships with customers, suppliers and other members of the marketing infrastructure. Here comes the requirement of relationship marketing. It's the requirement of implementing TQM indirectly gives path to   relationship marketing.


With the economy slowed down in a recession, many companies these days are in rein in mode. The nuisance at such times is that cutting back can become the dominant corporate focus, which may create a company climate of "planning to fail." A more positive orientation during a recession is to be focused on productivity, which can accomplish some of the same results as cost-cutting goals but with an emphasis on getting the most out of limited resources. Relationship Marketing is an ideal tool for a renewed focus on productivity.

There are many benefits which companies cannot overlook. Consumers are king and having relations with kings give an organization following benefits.

1. Relationship Marketing helps to build up customer retention for any business there by increasing customer loyalty.

2. Relationship Marketing facilitates to more customer satisfaction which results in improved customer acquisition rates.

3. Cross selling and up selling helps in generating more and more revenue generation as a result of effective Relationship marketing

4. Loyal customers will recommend your business to others, thus expanding your business for you.

5. Loyal customers are willing to try some of your new products, because they trust you.

6. Customers will be willing to pay more for your services/products if there are adjustments in pricing because they are loyal to you and trust your services/products.

7. Loyal customers will tell you about problems with your products/services enabling to improve your products/services.

8. The ultimate benefit will be an increase sales, market share and dominance.

9. Helps the enterprise to identify and target the best customers and generation of quality leads for the sales force

10. Relationship Marketing helps effective management of marketing and sales campaigns with well defined goals.

11. Facilitates the establishment of personalized relationships with the customers with a view to improve the customer satisfaction and maximizing the firm's profits.

12. Equips the employees with the information that they must know about their customers, understanding their needs and maintenance of sound relationship.


Mass production led to an oversupply of goods that marketers became transaction oriented. However, this transaction orientation in marketing is giving way to the return of relationship orientation in marketing. Beginning with interests in repeat purchase and brand loyalty, there is an increasing group of scholars who are studying ongoing marketing relationships.

The benefits of a relationship marketing approach go both ways. Your client views you as a valuable consultant, rather than a cost center. Your potential for increased revenues and a long-lasting relationship is real.

Successful organizations are opportunistic. If relationship marketing investments are recognized as a necessary cost of doing business, then over the course of a business cycle, a recession may well be the best opportunity for new relationship marketing commitments. After all, during a recession buyers have the most negotiating power, and employee time is not at as high a premium. Further, relationship marketing techniques can make sales and service efforts more effective, to squeeze the most revenues out of a soft market. The reduced upfront investment of hosted relationship marketing systems only makes these arguments even more powerful.


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Subidita Pattanaik
College of Engineering and Technology

Tapas Ranjan Moharana
Sr. Lecturer
Nihar Mohapatra
Global Institute of Management

Source: E-mail May 30, 2009


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