Relationship Marketing

Relationship marketing is a form of marketing that evolved from direct response marketing in the 1960s and emerged in the 1980s, in which emphasis is placed on building longer term relationships with customers rather than on individual transactions. It involves understanding the customer's needs as they go through their life cycles. It emphasizes providing a range of products or services to existing customers as they need them.

The discussion of the evolution of customer relationship demonstrates how a firm's relationship with its customers might be enhanced as customers move further along this relationship continuum. As the relationship value of customer increases, the provider is more likely to pursue a closer relationship. The primary goal of relationship marketing is to build and maintain a base of committed customers who are profitable for the organization.

The origins of relationship marketing observes: "What is surprising is that researchers and businessmen have concentrated far more on how to attract customers to products and services than on how to retain customers". The initial research was done by Leonard Berry at Texas A&M (Berry, L. 1982) and Jag Sheth at Emory, both of whom were early users of the term "Relationship Marketing", and by marketing theorist Theodore Levitt at Harvard (Levitt, T. 1983) who broadened the scope of marketing beyond individual transactions.

In practice, relationship marketing originated in industrial and B2B markets where long-term contracts have been quite common for many years. Academics like Barbara Bund Jackson at Harvard re-examined these industrial marketing practices and applied them to marketing proper.

According to Leonard Berry, relationship marketing can be applied: when there are alternatives to choose from; when the customer makes the selection decision; and when there is an ongoing and periodic desire for the product or service.

The practice of relationship marketing has been greatly facilitated by several generations of customer relationship management software that allow tracking and analyzing of each customer's preferences, activities, tastes, likes, dislikes, and complaints. This is a powerful tool in any company's marketing strategy. For example, an automobile manufacturer maintaining a database of when and how repeat customers buy their products, the options they choose, the way they finance the purchase etc., is in a powerful position to custom target sales material. In return, the customer benefits from the company tracking service schedules and communicating directly on issues like product recalls.

The latest trends in relationship marketing is personalized marketing. In personalized marketing, the main preference is given to consumer. The consumer shopping profile is built as the person shops on the website. This information is then used to compute what can be his likely preferences in other categories. This items are than shown to the customer through web cross-sell, email recommendation and other channels.

Relationship marketing has been strongly influenced by reengineering. According to reengineering theory, organizations should be structured according to complete tasks and processes rather than functions. That is, cross-functional teams should be responsible for a whole process, from beginning to end, rather than having the work go from one functional department to another. Traditional marketing is said to use the functional department approach.

In contrast, relationship marketing is cross-functional marketing. It is organized around processes that involve all aspects of the organization. In fact, some commentators prefer to call relationship marketing "relationship management" in recognition of the fact that it involves much more than that which is normally included in marketing.

In spite of this broad scope, relationship marketing has not lost its core marketing orientation though. It involves the application of the marketing philosophy to all parts of the organization. Every employee is said to be a "part-time marketer". The way Regis McKenna (1991) puts it:

"Marketing is not a function, it is a way of doing business . . . marketing has to be all pervasive, part of everyone's job description, from the receptionist to the board of directors."
Because of this, it is claimed that relationship marketing is a more pure form of marketing than traditional marketing.