This article will focus on what RM is and How it can be developed for all business especially during this time.
“I want long term partnerships. I want to identify the best suppliers in the marketplace and I want to work with them….….” Daves Lewis, CEO, Tesco “How Tesco works with suppliers.” The Grocer, 2019 www.thegrocer.co.uk
Daves Lewis, Tesco CEO made the decision to strengthen relationships with the suppliers after realising that focusing on financial challenges as a business strategy had gone too far and wasn’t bringing the results Tesco wanted. He vowed to focus on relationship marketing and partnership as Tesco’s business strategy going forward.
What is relationship marketing (RM) and why is it important?
The terms relationship marketing (RM) or customer relationship marketing are used interchangeably. Dwyer, Schurr, and Oh (1987) suggested that relationship marketing is all marketing activities directed towards establishing, developing and maintaining successful relationships. RM is a marketing strategy that cultivates deeper, more meaningful relationships with customers and other partners in the supply chain to create value for parties involved.
As a concept or technique, RM can also be understood as an activity conducted to thrill the current customers. It is centred around profitable client relationship development and customer loyalty. It depends heavily on in-depth and integrated customer knowledge, creating a great customer experience and developing close cooperative and partnerships with them.
Its development has been enhanced by the emergence of new technologies making it possible for even small businesses to benefit. RM as a concept feeds off data. Businesses can use tools like Survey Monkey to collect feedback from their customers or clients which they can use to resolve any problem and collect data for better approaches. Social media and apps in particular, have enhanced not only the reach of small businesses but also the level of engagement with the customers. Customer Relationship Management software can also be integrated at different levels and for all businesses in different sectors.
Why is Relationship Marketing important?
It is argued that customer retention is more important to any organisation (big or small)’s success than customer acquisition. Frederick Reichheld of Bain & Company found that as little as 5% increase in customer retention can result in an increase in company revenue by 25-95%. This is more or less the same as a study by Bowen & Chen, 2001 who found that when a company retains just 5 percent more of its customers, profits increase by 25% to 125 percent. This is brought about by the fact that retention effort helps to reduce market acquisition costs.
Research done by SuperOffice found that the top priority for businesses in the B2B category today is RM. The main reason being that personalised customer experience can drive revenue drastically (www.superoffice.com). SMEs too can gain a generous improvement in the bottom line. According to research 86% of buyers are willing to spend more for a great customer experience. What experience are you willing to put into your business?
Let’s explore below what needs to happen for the concept to work.
Key aspects to make Relationship Marketing (RM) work
- RM aims to benefit both business and customer. It aims for a win -win. Successful RM effort improves customer loyalty and firm performance through stronger relationship bonds that enhance opportunities for mutual value.
- RM is not for all customers and depends on customer selectivity. This is critical as not all customers are equally profitable. Using the 20/80 Parento rule, firms or entrepreneurs need to focus on the 20% of customers that bring the 80% of the profits. In depth research is required to identify the 20% customers if operating in B2C where the customer base is large.
- RM has to be implemented from the top to the bottom. It is a strategic action that has to be put in place for the organisation to achieve the desired outcome. It isn’t tactical. There are no opportunistic acts for quick gains.
- RM is a long-term strategy and less concerned with short -term transactions.
- RM can only evolve through the development of trust and commitment which all require time to develop.
How can relationship marketing be implemented to improve loyalty and the seller’s sales and profit?
RM develops from the key constructs like trust, commitment, communications, competence and conflict handling which all influence customer relationship satisfaction and enhance loyalty which leads to the increase in sales and profits.
Trust
This is the confidence in an exchange partner’s reliability and integrity. For example, many bank customers don’t leave a bank even when there is a better offer from another bank. This could be due to the bank’s service quality and reliability and employee behaviour towards clients. A study done by Coulter and Coulter (2003) found that more than a half of the customers believe that having a relationship of trust with a financial institution is more important than getting best value for money. This means that trust will lead to loyalty.
What does it mean to your organisation or service if you’re a consultant or freelancer? Do you have ways to ensure that trust is developed between you and your clients?
Commitment
This is an enduring desire to maintain a valued relationship. Consistency and ability to be flexible towards the customer needs enhances commitment. How committed are you to ensuring that your clients get the best experience? How far are you ready to go? See The Ritz Carlton Customer experience Youtube.
Communication
Communication will involve all the formal and informal exchanges that make meaningful and timely information exchanges between the buyer and seller. Starbucks’ frequent emails to their customers keeps them informed of new offers and new product launches. They also share customer content on their social media. How timely and reliable is your information to your target audience? How do you engage with them?
Understanding the customer & customer needs
This involves collecting, acknowledging and acting upon customer feedback so that the customer feels heard and valued.
What are your customer’s needs? Critical to success is meeting and exceeding customer expectation. A service provider can only win by knowing his/her customer needs and then providing exemplary customer service with efficient, friendly and knowledgeable staff. Some businesses such as Nike and Starbucks emotionally engage with customers by acknowledging special days for example birthdays and anniversaries. The organisation can then align a marketing opportunity to a great customer experience which would create a great memory.
Using tools and technologies like customer relationship management (CRM) to create a 360 view that involves tracking purchase patterns, interaction can help craft personalised messages and build loyalty. Amazon leads in this category of ensuring that all the likely products are brought to the customer’s attention to make the buying process much easier. Companies like Moonpig are good at ensuring that the customer receives the reminders of all the special days they have on their calendar in time. What can you use your customer information for? Could this be the game changer for you?
Competence
Customer relationships are maintained more easily by hiring, training and motivating the front facing employees or key account managers. Corporations or businesses should align a competent employee with each key customer to create great impact in the relationship. Understanding that loyalty is generated by the customer facing person is important. But, also not forgetting that the employees can walk away to a different firm with the customer. This is a situation that is seen in service-based firms like law firms. Having in place retention incentives for such employees is critical. See The Ritz Carlton Youtube
Conflict handling
This is the ability to minimise negative results from an undesirable interaction or occurrence especially for the selected 20% customers.
Unresolved conflict between seller and the customer affects trust, commitment and the relationship. For example, if you are a seller, you have to ensure that your business approach is aligned to the relationship marketing strategy. This involves having a clear approach on how to resolve conflict. What process do you have in place to resolve conflict?
Relationship satisfaction
This is a customer’s affective or emotional state toward a relationship, typically evaluated cumulatively over the history of the exchange. This explains why Relationship Marketing is long term. You have to ensure that the customer or client is satisfied along all the touch points of the customer journey. Satisfied customers are less likely to switch to a competitor. When satisfaction is high, the potential for loyalty is high as well. Customer surveys can help businesses to determine how happy their customers are and how to improve their experiences.
It is also noted that happy customers are likely to tell others about their experience. Consider approaches taken by Ritz Carlton Hotel , where the trained employees at the Ritz Carlton are empowered to spend up to $2000 to make customers happy. How far are you willing to go? How much are you willing to spend?
Relationship quality
The quality of the experience you give your clients or customers will determine whether they come back or not. This will involve taking care of all the touch points of the customer journey and ensuring that you follow up on the customer experience. Many consultants after providing the service, they forget to follow up or offering any after sales service, this affects the quality of the total experience. In my own experience this is a key problem for many small business owners. They don’t invest in follow ups. This means that the client or customer can easily move to the competitor even if they would have come back to you. Do you have a follow up plan? Do you ensure that your customers are happy?
Customer loyalty
Customer loyalty on the other hand is a composite of groups of intentions, attitudes and seller performance indicators.
Loyal customers are less sensitive to competitor advertising and price reductions. Loyal customers have a high expectation for continuity, provide a favourable word of mouth which means they refer and recommend others which all result into more sales and profits.
The impact of COVID -19 on the development relationship marketing and what you can do about it?
All businesses big or small have been hit by the impact of COVID -19 pandemic. According to the Harvard Business Review many businesses have been forced to focus on building and maintaining customer relationships. Some businesses have found it difficult to grow during this period as customers have had to change their priorities and preferences. This has hit hard new and small businesses. Just looking at stores like Debenhams UK that had to close all its stores by 15th May 2021 after more than 200 years of trade on the UK high street. Imagine the effect of the same on small businesses? According to Simply Business UK CEO, the scale of the impact on the small business is high. It is believed that COVID -19 will cost SMEs an estimated £126.6 million which is double what was previously predicted.
What can be done? Can relationship marketing be one of the solutions? How can it be implemented?
According to Harvard Business review (HBR), relationship marketing seems to be the main solution for businesses. Here are some of the strategies that can be implemented by big, small and medium and sole entrepreneurs and by both product-based organisations and service-based organisations. These have been developed using HBR HEART framework that ensures sustainable crisis communications.
Humanizing your company – Empathise with the clients, employees and other stakeholders affected with COVID -19. You can make a decision to use your front-line employees to deliver personalised deliveries instead of outsourcing deliveries and laying employees off.
Educate about change – Spend time educating your clients and customers about the changes and how they would be operating with your company, customer service availability and any options available like returns. Some shops have had to increase the number of days for a return during this time as they had reduced opening hours. Dance studio joined force with another dance studio to offer sessions online with varied times.
Assure stability
Ensure that you continue to offer what the clients or customers buy from you and what they value from your service. If your customers value full guidance and after sales service, make sure that these are maintained. Universities had to make sure during the pandemic that in addition to teaching students online, all the lecture sessions were recorded and that students still had their feedback hours. Many dentists tried to still offer their clients the same preferred sessions even with reduced staff members.
Revolutionize offerings
According to Harvard Business Review apart from providing the value proposition, firms need to tell their clients and customers what innovations have arisen from dealing with the pandemic. Tell them how you are able to satisfy them using new ways. Necessity is the mother of invention. Are you going to reach them using Zoom or stream to reach them on all the different platforms? Tony Robbin’s UPW ‘s 2020 first event had to be hosted on Zoom with over 30,000 people online, a number zoom had never accommodated before. Our Inspiring Women for Aspiring Women’s networking club used to have sessions as face to face and these all moved to online and more mindfulness sessions were introduced throughout the period.
Tackle the future. Inform the customers on when you will be making changes and demonstrate how you will be able to go over and beyond what is needed for their benefit. A CRM system will make it easier to adopt a relationship marketing program that will give greater results. Today many firms including small businesses have made the decision to maintain the online offering. Some dentists, and opticians have been able to create a system that allows them to trigger reminders and also allow clients to fill in the required forms that help them spend less time during their appointments and to help update the service provider on anything that may be required during the session.
Ensure That Your Customer Relationships Outlast Coronavirus (hbr.org)
Dwyer, F.R., Schurr, P.H. and Oh, S. (1987) Developing Buyer-Seller Relationships. Journal of Marketing, 51, 11-27.