Relationship Marketing - An Overview

Smitha L.S.
Institute of Management in Kerala

Relationship Marketing-An Overview

Marketing is continually evolving in response to the changing environment. New strategies, techniques and tools for marketing managers are constantly being developed. Marketing has also moved away from the original idea of bringing about mutually satisfying benefits or exchanges. Consumers have responded to these changes and have become more sophisticated in their demand and expectations. Service marketing is a growing specialty, and concepts such as internal marketing have been developed with in the services sector, are now widely recognized to be highly relevant to all organizations.

Relationship marketing goes a step further. Organizations are urged to focus not only on their relationship with customers external and internal but with other elements within the industry and society. An emphasis to it is not on bringing about exchange processes but on building relationships. The traditional perspective of marketing fails to bring the three critical areas such as marketing orientation, customer service and quality into closer alignment. Thus the relationship-marketing concept emerged as a new paradigm integrating customer service and quality with a market orientation.

Relationship Marketing-Definition

Relationship marketing is nothing but an effort directed at creating loyal customers. Philip Kotler defined relationship marketing as." The process of creating, maintaining and enhancing value-laden relationship with valued customers, distributors, dealers and suppliers by promising and consistently delivering high quality products, good services   and fair prices". Marketing is shifting from trying to maximize the profit on individual transactions rather than to building mutually beneficial relationship with consumers and other parties.


The concept of relationship marketing was first introduced by Franklin Berry (1983) in a service context to describe a long-term approach to marketing. Since then it has attracted considerable attention from both the practitioners and researchers.

In the 1950's marketing interest was primarily focused on consumer goods. In the 1960's increased attention was placed on industrial markets, while in 1970's considerable academic effort was placed on the area of non profit or societal marketing. In the 1980's attention started to be directed at the services sector, an area of marketing that had received remarkably little attention in view of its importance in the overall economy. In the 1990's the marketing concept was shifted to relationship marketing.

Key Linkages in Relationship Marketing

Marketing orientation, quality and Customer service are the three basic elements in Relationship marketing. The linkage between these three factors will help to achieve a total customer satisfaction and long-term relationship.

As quality, customer service and market orientation are the three elements in relationship marketing, it is necessary to find the role of each factor in relationship marketing.

Role of customer service

Historically customer service has been seen from a narrow perspective where the primary role of the customer service is concerned with getting the right products at the right place at right time and the focus is much on distributors and logistics view points.

The new vision of customer service places it in a much broader context as a multi –dimensional issue with an impact on relationships with specific target groups across a broad range of company activities. It is concerned with building of financial bonds (in which marketers offer pricing as an incentive to encourage customers to do more and more business with the firm), social bonds ( which offer personalized service delivery) and structural bonds (which emphasize provision of quality services that are valuable the clients and not readily available with competitors which helps the customers to resist the temptation from the competitors) with customers and the other markets or groups to ensure long term relationships of mutual advantage.

Role of Quality

The role of quality is also undergoing review. The typical approach of the quality is changing from one of final inspection of outputs to one of assessing whether critical processes are in control and giving guidance to others in the techniques involved. Total Quality Management (TQM) programme is designed to constantly improve the quality of products, services and marketing processes. The idea of the total quality across all functions focuses the scope of quality on relationship between the firm and its customers, suppliers and other key elements on an ongoing basis.

Role of marketing orientation

Traditionally marketing has been seen as a process of perceiving, understanding, stimulating and satisfying the needs of specially selected target markets by channeling an organizations resources to meet those needs. It is concerned with the dynamic inter-relationship between a company's products and services, the customers need and want and the activities of the company. The marketing frame work mainly consists of marketing mix, market forces and the marketing process.

Relationship marketing places emphasis on building and maintaining a good workforce. Service quality depends to a very great extent on people, and developing long-term relationships with internal customers is just as important as building relationship with external ones.

Relationship marketing - A Broader view

Traditionally marketing has been from the perspective of managing relationship with customer groups. However, a much broader viewpoint is appropriate in relationship marketing. Generally this can be done through two ways, viz,

1. By considering a wider range of markets; and
2. By expanding the marketing mix

Widening the markets

In traditional form of marketing, managing relationships with customer groups and new customers was given more importance than the existing ones. Later on companies realized the long-term advantage they would get by maintaining and enhancing the relationship with their existing customers. For providing quality products and best services, it is necessary to consider a wider range of markets. So in addition to formulating marketing activity directed at existing and potential customers companies are now considering other markets which includes:

a) Supplier market

The relationship between an organization and its suppliers is undergoing some fundamental changes mainly under the influence of Japanese. The old adversarial relationship where a company tried to squeeze its suppliers to its own advantage, is giving away to a relationship based much more on partnership and collaboration.

b) Recruitment market

The key resource for business (and other) organizations is no longer capital or raw materials but skilled people, a vital, perhaps the most vital element in customer service delivery. Companies maintain a good relationship with these markets, which assures a regular supply of skilled labour.

c) Referral markets

The best marketing is that which is carried out by your customer, that is why the customer loyalty ladder and the creation of advocates is important. But existing customers are not the only sources of referral. Referral markets go under many names intermediaries, connectors, multipliers, agencies and so on.

d) Influence markets

Influence markets tend to vary according to the type of industry or industry sector that an organization belongs to. Companies involved in selling infrastructure we items will place Government departments and regulatory bodies high on the list of markets they may address. Most companies also place the financial community, in its various forms- brokers, analysts, and financial journalists and so on in influence category.

e) Internal markets

Internal marketing involves two main concepts; the first is that every employee and every department in an organization is both an internal customer and an internal supplier. Specially formulated internal marketing programmes to communicate, train and motivate internal market members are very important if the relationship is to be a positive one. Service quality depends to a great extent on people, and developing long-term relationships with the internal customers is just as important as building relationships with external ones.

The optimal operation of the organization is ensured when every individual and department provide and receive excellent service.

Expanded Marketing Mix

While considering relationship marketing across different sectors, we need to identify more marketing mix elements, which are generic and have applicability to all areas of marketing. The elements, which offer the customers same form of value satisfaction can be included in the marketing mix. So three more elements have been included in marketing mix, i.e.

-People-The employee of the organization whom they consider as their greatest assets and can be categorized into contractors, modifiers, influences and isolated.

-Processes-Which involves the procedures, task schedules, mechanisms, activities and routines by which a product or service is delivered ton the customer.

-Provision of customer services-Which is considered as a crucial element in the marketing mix and seen in the content of the supply marketing channel, i.e., service is providing not only to its immediate customers and suppliers but also to its ultimate consumers and even the supplier's suppliers.

Integrating Relationship Marketing in a Firm

Relationship marketing implies a consideration of not just better relationships with customer markets, but also the development and enhancement of the relationship with other markets. There is no need for a separate marketing plan for each market. But the companies must develop some strategies to address each of these markets. The strategies must be deeply ingrained and understood by all staff within the organization. The following are the steps required for establishing relationship marketing in a company.

1. Identify key customers for the relationship marketing. The company can choose five to ten large customers and designate them for relationship marketing. Additional customers can be added who show exceptional growth.
2. Assign a skilled relationship manager to each key customer. The sales person servicing the customer should receive training in relationship marketing.
3. Develop a clear job description to relationship managers.
4. Appoint an overall manager.

Advantages of Relationship Marketing

Compared with other marketing concepts Relationship Marketing has got a lot of advantages. This marketing strategy ensures a better relationship with customers and other stakeholders of the organization. If relationship marketing is adopted in an organization, it will ensure a lower amortized cost for acquiring new customers. Moreover, the customers will become less price sensitive. Later on they will become the word of mouth advertisers and referrals for the company. Relationship marketing ensures improved employee as well as customer satisfaction and thus retained them for a long–term. There will be a healthy relationship with suppliers if relationship marketing is practiced. A good relation with government and other regulatory bodies is also visualized under relationship marketing.

Smitha L.S.
Institute of Management in Kerala

Source : E-mail March 28, 2005



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