Relationship Marketing

relationship marketing

Relationships are the currency of business. The visionary company focus on customer relationship rather than just selling goods and services. Selling ensures the short-term stability of the company whereas the relationship ensures the long-lasting stability of the company.

Relationship marketing is defined as ‘the identification, specification, initiation, maintenance and if necessary, dissolution of long-term relationships with key customers and other parties, through mutual exchange, fulfillment of promises and adherence to relationship norms, in order to satisfy the objectives and enhance the experience of the parties concerned.

As traditional marketing becomes more outdated, the concept of relationship marketing emphasizes the importance of communication – not as a method of educating, but as a way of coordinating exchanges. Maintaining relationships needs communication, and communication occurs when the concerned parties have a good relationship.

Traditional marketing treats everyone the same – there is little or no differentiation between first-time and repeat/long-standing consumers – in traditional marketing, everyone is considered as a potential for recruitment, even if they have already traded and built a connection. Interactive marketing, on the other hand, occurs when consumers and suppliers collaborate to co-produce the value they require and desire.

The cost of acquiring a new client may be several times that of keeping an existing one. Maintaining trade ties with consumers may be considerably more cost-effective, lucrative, and rewarding in other ways than allowing them to go and then having to make effort to draw them back or recruit new clients.

Trust and dedication are important criteria for long-term commercial partnerships and are the result of communication. Communication management is critical for managing connections with consumers and other stakeholders.

Trust is the foundation of strong connections, whereas knowledge is the foundation of lucrative partnerships. Trading partners must be aware of each other’s preferred modes of treatment as well as what is available for exchange.

There are three forms of marketing, and each demands complete focus to guarantee that clients obtain an acceptable offering from a satisfactory exchange connection.

External marketing is the traditional focus of activity. It refers to the direct connection that exists between a supply organization and its clients. External marketing includes typical marketing tactics such as product, pricing, distribution methods, and communication. Within this connection, branding can also be seen growing, although this is dependent on both supplier and consumer interaction.

Interactive marketing focuses on the particular connections between people within a supply organization as well as the procedures utilized, both of which can have a good or bad impact on relationships. During these engaging meetings, the perceived level of customer service is generally determined. These interactions are essential for the establishment of strong connections between consumers and providers.

Internal marketing: The third form of marketing examines the relationship between a provider and its own personnel. The way an organization treats and informs its own employees reflects on how those employees deal with external consumers. While there are numerous areas of general management and particular concerns from human resource management involved, marketing may make a contribution. Internal marketing refers to the use of marketing skills and strategies directed particularly at internal employees.

Because a company’s marketing operations will be assessed by the outcomes obtained with consumers, it is critical that all three forms of marketing be deemed significant, and that efforts be made to guarantee consistency in all elements of customer interaction.

The Evolution of Customer

Company relationships with customers change as other social relationships change over the period of time. According to academics, marketing relationships between a firm and customers frequently go through various forms such as strangers to acquaintances to friends to partners.


Strangers are consumers who have not yet transacted with a company and may not even be aware of the company. Strangers can be defined as customers who have not yet joined the market at the industry level, or as consumers of rivals at the firm level.

At this moment, it is clear that the company has no relationship with the client. As a result, the firm’s principal aim with these potential clients (“strangers”) is to be in contact with them in order to attract and gain their business.


After achieving consumer awareness and trial, familiarity is developed, and the customer and the company become acquaintances, laying the groundwork for an exchange relationship. At this point in the relationship, the firm’s primary aim is to please the client. Firms at the acquaintance stage are typically focused on offering a value proposition to consumers that are comparable to that of competitors.

An acquaintanceship is effective for a consumer as long as the client is generally pleased and what is obtained in the trade is seen as fair value. A familiarity connection enables transactions largely by lowering the customer’s perceived risk and the provider’s expenses.


As a customer continues to buy from a company and get value in the exchange relationship, the company gains particular knowledge of the client’s wants, allowing it to build a product that specifically solves the customer’s circumstance.

Providing a unique product to customers, and therefore distinctive value elevates the connection from acquaintance to friendship. Customers who become friends not only become acquainted with the firm but also grow to believe that it delivers greater value.

Customer retention is a major aim for businesses during the friendship stage of their relationship.

Because the product is more distinctive, and the consumer grows to trust that uniqueness, a firm’s capacity to create lasting competitive advantage through friends should be greater than through acquaintances.


As a customer interacts with a company, their degree of trust grows, and they may obtain more personalized product offerings and interactions. Trust built during the friendship stage is a necessary but not sufficient prerequisite for the development of a customer–firm alliance.

A company must leverage consumer knowledge and information systems to create highly personalized and tailored products in order to transition the relationship into a partner relationship.

The firm’s priority during the partnership stage is to strengthen the connection. Customers are more inclined to stick with a firm if they believe it understands its changing requirements and is ready to invest in the relationship by continually upgrading and evolving its product and service mix.

By strengthening these ties, the company anticipates that such consumers will be less likely to be enticed away by rivals and will be more inclined to purchase additional products and services from the company over time.

Developing Customer Relationship Strategies

Because of the potential benefits of building long-term connections with consumers, companies should consider implementing client retention strategies. This includes customer retention, bonding, internal marketing, promise fulfillment, trust-building, and service recovery.

Targeting Customers for Retention

Not all consumers benefit from relationship development; for example, regular brand switchers who react to the lowest cost deal available regardless of brand, and low spenders who may not produce enough income to warrant the effort of developing and sustaining the relationship.

Disruptive clients whose attitudes and behavior create so much disturbance to the service provider that the costs of providing them outweigh the benefits.

The marketer must analyze their consumers to determine which customers they want to engage in a long­term relationship with, which customers a transactional marketing approach is better suited for, and which customers they would prefer not to do business with.

Targeting consumers for retention entails identifying those who are likely to defect and those who are likely to remain loyal. Service providers must understand why consumers remain or depart, what adds value to their lives, and their customer profile.


Firms might participate in activities that encourage consumers to stay in the relationship because they “want to,” resulting in the formation of relationship connections.

Level 1: Financial Bonds

At level 1, the consumer is largely attached to the firm by financial incentives, such as reduced prices for larger volume purchases or lower prices for customers who have been with the firm for a long time.

Unfortunately, financial incentives do not typically offer a business with long-term benefits since, unless paired with another relationship approach, they do not differentiate the firm in the long run because they are not difficult for rivals to replicate.

Degree 2: Social Bonds

Level 2 methods aim to foster long-term connections through fostering social and interpersonal links.

Customers are regarded as “clients,” rather than as nameless faces, and become persons whose needs and desires the business strives to comprehend.

Professional service providers (lawyers, accountants, instructors) and their clients form social, interpersonal ties, as do personal care providers (hairdressers, counselors, health care providers) and their clients.

Over time, the social ties they have with other customers become key considerations in keeping them from transferring to another company. Although social connections may not permanently bind a consumer to a company, they are considerably more difficult for competitors to mimic than economic incentives. In the absence of compelling reasons to switch providers, interpersonal ties might promote customers to remain in relationships with providers.

Level 3—Customization Bonds

According to a customized approach, the company should have a deep understanding of individual customers’ needs and wants and the development of one-to-one solutions that match the particular customer’s demands.

Level 4—Structural Bonds

Structural bonds are formed by providing clients with services that are built into the service delivery system. Providing tailored services to the client that are technology-based and make the customer more productive is a common way for structural ties to be formed.

Internal marketing

Internal marketing is concerned with educating, interacting with, and inspiring employees. Staff must be taught to be technically skilled in their professions as well as to handle customer service interactions. They must be motivated and understand what is expected of them in order to perform successfully.

Employee selection and retention should be the primary emphasis of any internal marketing effort. Care firms with significant employee turnover are constantly hiring new, inexperienced employees to manage customer service interactions. Employees who have been with the firm for a long time are more knowledgeable about the business and have had the chance to establish relationships with customers.

Higher levels of customer retention may be accomplished by hiring the appropriate people and managing them in such a manner that they remain loyal to the service organization via the development of trust and personal knowledge obtained through long­term engagement with consumers.

Promise Fulfilment

Promise fulfillment is essential for preserving service connections. This entails three essential activities: establishing reasonable promises at the outset, upholding those promises during service delivery, and allowing employees and service systems to deliver on those promises.

It is critical not to overpromise in marketing communications since this will lead to disappointment and, as a result, consumer discontent and desertion. The promise must be both credible and reasonable.

Building Trust

Companies that want to increase their trustworthiness should maintain regular two ­way communication with their customers to foster feelings of closeness and openness, provide guarantees to symbolize the confidence they have in their service delivery while also lowering their customers’ perceived risk of the purchase, and maintain a policy of fairness and high standards of conduct with their customers.

Service Recovery

Service recovery plans should attempt to fix difficulties and restore customers’ faith in the firm while also improving the service system so that the problem does not occur again. Recovery is critical because, if done correctly, it may inspire consumers to become brand loyal and reduce the probability of unsatisfied customers informing others about their unpleasant experiences.

Benefits for the Organization

Relationship marketing provides various benefits to both customers and organizations. Below are a few advantages of relationship marketing to the firm:

Increased Purchase

This contributes to the development of trust between the firm and the consumer as they grow relationships. Customers are happy with the firm’s product and rely on it for the fulfillment of their needs.

Human Resource Management Benefits

Loyal consumers may also help a company with human resource management. First, committed consumers may be able to contribute to service coproduction by aiding in service delivery due to their expertise with and understanding of the provider; frequently, more experienced customers may make the job of service professionals easier.

Economic Benefit

The expenses of acquiring new consumers are likely to be considerably more than the costs of keeping existing customers. The time spent making repeated calls to persuade a prospect to open an account, the advertising and promotional costs involved in making prospects aware of the company and its service offering, the operating costs of setting up accounts and systems, and the time spent building bonds between the client and vendor in the early stages of the relationship are all examples of start­up costs.

Word of mouth

Because services are intangible and difficult to evaluate before purchasing, word of mouth is extremely essential. In these cases, potential buyers frequently seek personal recommendations from people who have used the service (e.g., a hotel or financial service).

Benefits for the Customer

When businesses continuously offer value from the customer’s perspective, the customer obviously benefits and has a motivation to continue in the relationship.

Higher ­quality service

Having a long­term connection with a service provider might also result in better service.

This is because the service provider learns about the needs of the consumer. Beauticians and hairstylists, for example, learn about their clients’ tastes. Knowledge of the client gained via a series of service interactions allows tailoring or modifying the service to each customer’s unique demands.

Confidence Benefits

Confidence advantages were the most significant to customers across all services evaluated in the relational benefits research. The benefits of confidence include emotions of trust or confidence in the provider, as well as a sense of lessened worry and comfort in knowing what to expect.

Social Benefits

A continued connection with a provider can also provide customers with social and prestigious benefits. Because many service interactions are also social interactions, recurrent contact can take on personal as well as professional aspects. In such cases, service consumers may form connections that resemble personal friendships. The danger to the company of losing clients when a valued employee quits and takes customers with him or her is the other side of this consumer advantage.

Unique Treatment Benefits

Being offered a special deal or pricing, receiving preferred treatment, or maybe obtaining the “benefit of the doubt” from the service provider are all examples of special treatment.

Relationship Marketing Challenges

Given the numerous advantages of long-term client relationships, it would appear that a firm would not want to refuse to serve or end a connection with any customer. However, situations happen in which either the company, the client or both choose to terminate their relationship.

The Customer is Not Necessarily Right

The consumer is not always correct, and in some instances, it may be desirable for the company to end its relationship with a client.

A firm cannot cater to all consumer groups; some are more suited than others. It would be unwise to establish ties with conflicting market sectors at the same time. Customers in many service firms experience the service together and might affect each other’s opinions of the value obtained. As a result, in order to optimize service to core segments, an organization may choose to reject marginally profitable sectors that are incompatible.

Organizations will avoid long-term ties with unprofitable clients. Even if the services provided meet their demands, some client groups will not be lucrative for the firm.

Some instances of this circumstance include when there aren’t enough consumers in the segment to make it viable to serve, when the segment can’t afford to pay the cost of the service, and when the segment’s expected revenue flows don’t cover the expenditures needed to start and run their firm.

In many cases, companies’ service interactions fail due to dysfunctional consumers. Dysfunctional customer behavior refers to the activities of consumers who, whether purposefully or inadvertently, engage in a way that disturbs otherwise functioning service encounters. Employees, other customers, and the company might all suffer as a result of dysfunctional consumer behavior.

Ending Business Relationships

Firms may identify certain consumers that are not in their target group, are not lucrative in the long term, are difficult to deal with, or are dysfunctional. A business may not wish to maintain relationships with every consumer. Managers must be able to not only develop but also terminate marketing relationships in order to effectively manage them.

Firms should try to get rid of consumers who aren’t a good fit for them. Many businesses make these judgments because they believe that difficult clients are generally less profitable and less loyal and that keeping their business may be counterproductive.

Frequently Asked Questions (FAQs)

What is the ultimate objective of relationship marketing?

The ultimate goal of customer relationship management, or CRM, is to improve and develop business processes by improving customer and seller relationships.

Why is relationship marketing important?

Relationship marketing is crucial since it allows you to not only attract new consumers but also keep them. It is possible to retain customers because you’re giving them a better experience as they interact with your company.

How to improve relationship marketing?

The company is always exploring new strategies to strengthen its consumer relationships. Things that are effective today may not be effective tomorrow. As a result, the company should be willing to try new ideas. A few things, however, such as loyalty programs, customer education, enhanced customer service, and focusing on customer feedback, can help to improve customer relationships.

What are the levels of relationship marketing?

Relationship marketing has five levels and each level represents a distinct stage of it. These levels are basic marketing, reactive marketing, accountable marketing, proactive marketing, and partnership marketing.

What is a relationship marketing strategy?

A relationship marketing strategy is a collection of approaches used by businesses to develop strong customer relationships, including ways to improve customer experiences. A relationship marketing strategy aims to keep clients and create brand loyalty over time.


Both brands and relationships emerge over time as a result of customers’ growing trust and in response to providers’ continuous marketing efforts. Both exist only if the consumer accepts the scenario – if a client feels exploited, or just indifferent or uninvolved in the sequence of transactions, the emotional linkages do not form.

It makes no difference how many communications a provider sends out or how many other activities they engage in; if a consumer does not engage emotionally, no brand identity and no interaction relationship will emerge.

If a connection develops, whether with the marketing offering – a brand – or with the supply organization, the growing mutual reliance might benefit both parties. The brand will develop a personality that adds value to the client and may be further exploited by the brand owner.

Furthermore, the dynamic interaction between firm and consumer should result in a more efficient marketing transaction.

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