How to Improve Your Relationship Marketing | Social Media Today
These 4 award-winning relationship marketing examples are Human Marketing's top picks to try. Do you have insight into your marketing ROI to maximize spend ? 1. Attracting Customers. Relationship marketing begins with the first The purpose of the campaign was to engage new fans and build momentum of the. Relationship marketing is usually much easier in channels that have a one-on- one element. But what about in your broader content initiatives?. Relationship marketing can or the only one in the area that stocks the.
In some long-term customer-firm relationship a service provider may actually become part of the consumer's social support system. Hairdressers often serve as personal confidant of the customer. Less common examples include proprietors of local retail stores who become central figures in neighborhood networks. These types of personal relationships can be developed for business-to-business customers as well. Special treatment includes such things as getting the benefit of the doubt, being given a special deal or price, getting preferential treatment etc.
However, interestingly enough, special treatment benefits were less important than the other types of benefits received in service relationship. The benefits for the organisation for developing and maintaining effective relationship with the customer are numerous.
A few obvious advantages are listed below. Researchers worldwide have reported that an effective relationship with a group of profitable customers results in more number of sales. As consumers get to know a firm and are satisfied with the quality of its services relative to that of its competitors, they will tend to give more of their business to the firm.
It is a well-known fact that retaining old customers is cheaper than luring new customers. Sometimes these initial costs can outweigh the revenue expected from the new customer in the short term. Even ongoing relationship maintenance costs are likely to drop over time. For example, early in a relationship a customer is likely to have questions and to encounter problems as he or she learns to use the service.
As time goes by the customer will have fewer doubt or question and will make fewer mistakes assuming that the quality or service is maintained at a high level and the service provider will incur fewer costs in serving the customer. Services are normally complex and difficult to evaluate before actually buying it, consumers most often look to others for advice on which providers to be considered.
Satisfied, loyal customers are likely to provide a firm with strong word-of- mouth endorsements. Further, researchers report those customers show up based on a referral tend to be better quality customers in terms profitability, likelihood of being loyal than the customers who are attracted through other promotional campaigns like price promotion and advertising. Employee retention may be an indirect benefit of customer retention.
It is easier for a firm to retain employees when it has a stable base of satisfied customers.Relationship Marketing - What's this all about?
People like to work for companies whose customers are happy and loyal. Figure 3 explains this with a causal loop diagram. The positive signs within brackets show a positive change in the dependent variable with one unit change in the independent variable.
Relationship Marketing Campaign: Follow This Strategic 80/20 Example
The overall changes on all the variables will be positive as well. Having discussed the benefits of Relationship Marketing let there be a discussion on one recent development in this field, which is helping popularising the concept among practicing marketers. Lifetime Value LTV is a concept through which the marketers can find out the profitability of a customer in advance.
Lifetime value of a customer is a concept or calculation that looks at customers from the point of view of their lifetime revenue and profitability contributions to a company. The lifetime value of a customer is influenced by the length of an average "lifetime," the average revenues generated per relevant time period over the lifetime, sales of additional products and services over time, and referrals generated by the customer over time.
LTV sometimes refers to lifetime revenue stream only; other times, when costs are considered, LTV may truly mean "lifetime profitability.
Reichheld and Sasser, Jr observed -"If companies knew how much it really costs to lose a customer, they would be able to make accurate evaluations of investments designed to retain customers. Unfortunately, today's accounting systems do not capture the value of a loyal customer. During calculation, time present value of money may be considered for the future transactions those are expected from the customer, from the new customers generated through referrals of the customer under consideration.
Following important aspects might as well be considered while calculating the LTV of a customer. Importance of referrals to the new customers The frequency at which existing customers refer the product to new customers. Attrition curve indicates how many customer become inactive as a percent of total base every year.
An attrition curve is derived by analysing the activity of multiple cohorts- customer groups that started at different times- to see how many survived with each successive year.
Attrition rates are influenced by many factors, ranging from population age and mobility in product life cycle, and will differ from one business sector to another.
Average life time of a customer based on the attrition curve. Average annual spending by the customers Direct Cost: Includes merchandising, operating and fixed costs. Includes the costs of advertising and promotion, and cost of maintaining a marketing database system.
It is well appreciated that the first step in relationship marketing is the retention of the customer. Unless the company is able to retain the customer, it is meaningless to talk about relationship marketing. For this the company as well as the products under sale must meet certain criteria. These are, A consistently good quality product, so that the consumer satisfaction is assured for a long time. Proper market segmentation is done and right target is selected. If more than one segment is targeted the segments must be compatible with each other.
The product should be competitive in the target market. That means the product must be very best among the competitors. Thorough monitoring and evaluating relationship quality over time. Basic market research in the form of annual customer relationship survey may be carried out for this evaluation. Berry and Parasuraman, two early advocates of relationship marketing have developed a framework for understanding the type of relationship strategies.
The framework suggests that retention marketing can occur at different levels and that each successive level of strategy results in ties that bind the customer a little closer to the firm. At each successive level, the potential for sustained competitive advantage is also increased.
Building on the levels of the retention strategy idea, Figure 4 illustrates four types of retention strategies, which are discussed below. At level I, the customer is tied to the firm primarily through financial incentives- lower prices for greater volume purchases or lower prices for customers who have been with the firm a long time.
Examples of level 1 relationship marketing are not hard to find. Airline industry and related travel service industries like hotels and car rental companies are following this type of incentive for a long time.
Frequent flier programs provide financial incentives and rewards for travelers who choose their airline for long time. Hotels and car rental companies do the same. Long-distance telephone companies in the United States have engaged in a similar battle, trying to provide volume discounts and other price incentives to retain market share and build a loyal customer base. Unfortunately, financial incentives do not generally provide long-term advantages to a firm since, unless combined with another relationship strategy, they don't serve to differentiate the firm for a long period.
Many travelers belong to several frequent flyer programs and don't hesitate to trade off among them. While price and other financial incentives are important to customers, they are generally not difficult for competitors to imitate, since the primary customized element of the marketing mix is price.
Other types of retention strategy are cross selling of services, like the tie up of airlines industry with hotel chains and credit card companies. Level 2- Social Bonds: This strategy bonds the customers to the firm through more than financial incentives. While price is still assumed to be important, level 2 retention marketers build long term relationship through social and interpersonal as well as financial bonds.
Customers are viewed as clients rather than mere customers. The clients are the individuals whose wants and needs the firm tries to understand and design the product accordingly. Services are customised to fit individual needs, and the marketers find ways of sticking to the customers, thereby developing social bonds with them.
Social, interpersonal bonds are common among professional service providers e. A dentist who takes a few minutes to review his patient's file before coming in to the exam room is able to jog his memory on personal facts about the patient occupation, family details, interests, dental health history. By bringing these personal details into the conversation, the dentist reveals his genuine interest in the patient as an individual and builds social bonds.
Sometimes relationships are formed with the organization due to the social bonds that develop among customers rather than between customers and the provider of the service. Over time the social relationships they have with other customers are important factors that keep them from switching to another organization.
While social bonds alone may not tie the customer permanently to the firm, they are much more difficult for competitors to imitate than are price incentives. In the absence of strong reasons to shift to another provider, interpersonal bonds can encourage customers to stay in a relationship. In combination with financial incentives, social-bonding strategies may be very effective.
Level 3 strategies involve more than social ties and financial incentives, although there are common elements of level 1 and 2 strategies encompassed within a customisation strategy and vice-versa. Two commonly used terms fit within the customization bonds approach: Mass customization and customer intimacy.
Both of these strategies suggest that customer loyalty can be encouraged through intimate knowledge of individual customers, and through the development of one-to-one solution that fits the individual customers needs.
Mass customisation has been defined as the use of flexible processes and organisational structures to produce varied and often individually customized products and services at the price of standardised mass-produced alternatives. Mass customisation, however, does not mean providing customers with endless solutions or choices that only make them work harder for what they want; rather, it means providing them through little effort on their part with tailored services to fit their individual needs.
Even after a resolution is made, be sure to ask right then and there if there's anything else you can do. Or, if permitting, respond a few days after the fact, as a follow-up. So, when training your team, use a storytelling strategy. This will enable them to see a scenario play out. You may not realize the power of storytelling and mindset, but the truth is, you can change a mindset through storytelling.
Stories can help influence and change the way your team thinks and acts.
To make your story a true educational tool, you should try to weave in a few elements. A simple framework Be able to thread common daily elements Ensure the story is relevant to your company Involve employees when applicable Example: The manage of Beans Coffee Shop is telling a story to a new employee. She then explains the story of a customer named Katy who came in to grab a cup of coffee.
The manager then explains that the best and easiest solution to this is to give Katy an apology and a new coffee, at the least.
To go above and beyond, he gave Katy a free treat to go with her coffee and even offered a refund. And to top that off, Robert also gave Katy a coupon for a free coffee during her next visit.
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The manager says, as you can see, a mistake was made, but because Robert apologized and went above and beyond, Katy is still a regular customer. Robert seeded a relationship with Katy, and because of that Katy has since brought in new customers for us because she has a funny anecdote to remember.
- How to Improve Your Relationship Marketing
Imagine you only have one channel An easy way to get into the mindset of relationship marketing is to imagine that you can no longer talk to new customers at all. All you have to grow and maintain your business is by working with existing customers. No other channels are allowed - ZERO. How do you make customers love you so they bring their friends?
Make your customers love you. Practical strategies and ideas you can use Providing good customer service is important for every business. The first step in fixing this situation is to apologize. Secondly, make a new coffee. That's basic customer service; seeing the problem, apologizing and fixing. Robert, however, took things above and beyond what Katy expected. Remember relationship marketing is really just about helping the customer.
So listen to their concerns, what they like, and what they want to be changed. Be Generous and Opportunistic Be opportunistic about when to give away things - discounts, freebies, etc. Ideally, avoiding bad interactions is the goal, but human and machine error can happen. That can mean a sign of new updates by the cash register, or a monthly email sent out. If you do want customers to know about every single update, it would make more sense to send those as an email.
And again use signage around the store to spark interest.
Think of where can you go above and beyond. A good rule of thumb is, the easier it is for the customer to complete, the better. This is why eCommerce stores typically work well - many eCommerce stores keep customers credit cards and addresses on file, making it a fast process to make purchases.
On top of that, customers are often allowed to log in via social media, making it very easy for customers to complete transactions. Beans Coffee Shop has an app that enables customers to pay with their phone just like Starbucks. So while being convenient for customers, it also creates a reason for repeat purchases.
Another way to make it easy Provide content and training — So you sell a product or service that customers actually use - think SaaS or a tool. Providing additional help to customers who buy these products is key to good relationship marketing, especially when it comes to software people often need a little hand-holding. Help Resources like a knowledge base, in-app chat, and videos make it easy for a customer to learn the product and ask questions. One increases loyalty, while the other uses loyal customers to spread the word.
Both of them, however, rely on good relationships. Loyalty marketing goes hand-in-hand with relationship marketing.