Traditional Marketing V Relationship Marketing

Published Date: 02 Nov 2017

Introduction

21st century's market place is characterised by technology advance, globalisation, competition and the fact of correlation between profitability and customer retention. According to Porter (1985), the key to a company's success is developing a sustainable competitive advantage and to achieve that putting customer in the centre- consistently creating value for customers and being able to build long-lasting relationship with them. Therefore in order to achieve all the above business' will need to adopt the concept of relationship marketing. According to Berry (1983) cited in (Ndubisi, 2007) relationship marketing as a strategy to attract, maintain and enhance customer relationships. In other words relationship marketing is about creating customer intimacy and developing close and customised relationship with existing customers for growth and profitability (Christopher et al. 2002).

Principles of RM and Traditional Marketing v Relationship Marketing

Principle of marketing relationship is to concentrate on building customer value in order to retain customers. In other word RM aims at increasing customer profitability while providing better services for customers (Leverin et.al, 2006). Relationship marketing according to Payne et.al (1999) emerged from early 1980's by Berry after marketing mix concept became limited and 4Ps did not take sufficient account of building a long-term relationship between an industrial buyer and seller. Relationship marketing was long-term approach for marketing. The 4Ps must work together in a single marketing plan to satisfy the customer's needs and allow the firm to make a reasonable profit. However, the principle behind RM was emphasising customer retention and continual satisfaction rather than individual transactions (Zineldin et.al, 2007). This is because companies are more competitive than even and getting new customers are proven to become more difficult and expensive. Payne (2005) and Blythe (2005) states that marketing on the basis of relationship has profound benefits that traditional marketing. RM is concerned with the lifetime value of the customer meaning that it looks at customer as individual and tries to build and keep relationship. By contrast, traditional marketing also known as transactional marketing emphasises on producing products that will satisfy customer needs, and the focus has tended to be on the single transaction and always acquiring new customers. It was stated that getting one new customer costs five times more than retaining a current one and as well as there is always danger of switching power of customer (Payne et al, 1999). For example, Tesco's is the one the companies which adopted relationship marketing. By offering Clubcard scheme. By using Clubcard they have been able to address different customer segments as well as attracting and retaining customers of all types. With its Clubcard scheme they managed to overtake any other supermarkets also has strengthened its market share. However adaptation of RM very much depends on the types of business. This means that not every business can adopt RM. For example, McDonald's declares that the establishment of relationships with customers are definitely hard to build and almost impossible to keep because of the huge amount of daily customers and lack of time as they have to serve as many customers as possible quickly (Zineldin, et.al, 2007).

Kotler argues that transaction marketing is more useful than relationship marketing when the customer has a short time horizon and can easily switch from one supplier to another without spending more and they might want to prefer short-term relationship and shop around due to cost management or quality.

Although RM was formed because of limitations marketing mix, it is argued that RM and TM work together. This means that in order for a business to build a relationship with the customer all the elements of marketing mix should be right. For example, if the price of a product is too expensive for its quality customer may not want to take the relationship any further (Zineldin et.al, 2007). Zineldind says that “companies have to use the 4Ps to create customer relationships”. In fact it was very surprising to see that some researchers argue that TM marketing was still mainstream of some business rather than relationship marketing as a basis of their business. According to a research most companies associated profit with transaction and therefore transaction is the main priority for them. It was also said that in order to create relationship with the customer a business would need to have strong transactional capabilities. The reason for some companies preferring is TM offer the advantage of a quick profit whereas loyalty as requires time and experience (Zineldin et.al, 2007). This exactly what Copalsky and Wolf (1900) cited in Zineldin (2007) said:

Relationship marketing combines elements of general advertising, sales promotions, public relations and direct marketing to create more effective and more efficient ways of reaching customers. It centers on developing a continuous relationship with customers across a family of related products

Some went on further reporting the link between marketing mix and gaing new customers and keeping those customers. (Juttner and Werli (1995) cited in Zineldin, 2007).

Kotler said that: ‘there are a number of cost advantages in a customer retention strategy'. Many argues consider relational marketing beneficial and important to any organization and believe that for success of business developing long-term customer relations is the only essential key. The advantages of RM include higher levels of satisfaction for the company's customers and satisfaction often means good reputation and satisfaction is said to correlated with loyalty, increase in long-term profits and improvement of awareness increase in customer loyalty. It is stated in Leverin (2006) article that many studies shown associated with customer loyalty and profitability. It was stated that: ‘customer relationship profitability arises through the acquisition and retention of “high quality” customers with low maintenance costs and high revenue'. (Leverin,et.al., 2006, p.235). This means that the cost of acquisition occurs only at the beginning of a relationship, so the longer the relationships are the costs will be lower. This can result in stable and increase sales. Long-term customers will provide referrals and this may introduce new customers and every customer would mean increase of sales and profit. Customers that repurchase are satisfied with the relationship and so they are less likely to consider switching to competitors. Regular customers tend to be less expensive because often cost less to service as they are familiar with the process, company or the product and therefore require less information. For instance, if customers of HSBC satisfied this would mean that they are aware of the services available to them so there may not be need for employee training as often and so it would save them money as well as time. Satisfied long-term are usually price sensitive so they will shop around for cost management and may be prepared to pay premium prices (Payne, 1994).

Elements and the dimensions for customer loyalty are trust, commitment, empathy, bonding, good experience, promise fulfilment, customer satisfaction and good communication. Relationship Marketing concept is based on the understanding of customer needs and wants. If a company that satisfies needs and creates value for the customer, customer satisfaction and the right customer perceived quality, the company stands the best chance of success.

However RM does have disadvantages. They are: it may involve in considerable capital investment with no guarantee of return. This could mean that as the new products and services become available and demand changes so often, customers becomes more and more demanding. So if a business cannot meet those demands customers may consider switching. Second, it may necessitate expenditure on up-to-date technologies and equipment. And finally, it can be time consuming as relational marketing is slow process. Therefore some belief that creating loyalty requires time, effort and specialist knowledge.

Whichever concept adopted business' have to build some kind of relationship. For a business to be able to build that relationship they need to realize the importance of the customers and their needs. Customers need to be made to feel that they are wanted and appreciated. If they don't feel valued, they will take their business elsewhere. Customers are very important for most business' as they are the one who will spend and generate profit. So for that reason it is very important to build relationships with them. Relationships are very important on the basis that long-term relationship means customer satisfaction and loyalty and satisfaction influences repurchase intentions. A satisfied customer creates a strong relationship with the provider and this leads to longer relationship. Customer loyalty is strength and measure of the relationship between an individual's attitude and repeat purchase with a supplier. Building customer relationship is the key to building sustainable competitive advantage. In other knowing your customers means that knowing what they want and expect and bringing those expectations real could give a company competitive edge.

Ndubisi said that more firms are capitalising on strong relationships between firms and customers to in order to gain valuable information what is the best for the customer, how best to serve them and keep them from switching to other competing brands and customer relationship building have mutual rewards which the firm and the customer can both benefit. By building relationships with customers, an organisation can also gain quality sources of marketing intelligence for better planning of marketing plan and marketing strategy and help to make better decision on those plans.

Conclusion

Marketing is so complex that it will not survive on only RM or on only one marketing strategy. The concept of relationship marketing is very essential in general marketing processes, as long as along it is accompanied by other marketing strategies. In other words there must be involvement of other marketing strategies such as 4P's in order to be successful and achieve the goals and RM requires strong interaction and social exchange in order to succeed.

To conclude relationship marketing is must be present at all the times at different level because the characteristics of relationships marketing, customizing market communications and products, listening to customers, caring and retaining customers from going to the competitors. Relationship Marketing emphasizes understanding and satisfying the needs, wants, and resources of individual customers rather than those of mass markets or segments. If companies put customers in the centre of the business they will be able to achieve effective efficiency in their marketing processes, as well as encompass an intimate understanding of their customers.Overall adaptation of relationship marketing is beneficial and should be implemented as it will guarantee nothing but good reputation.