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Improving Growth and Profits Through Relationship Marketing

  • ID: 42713
  • Report
  • March 2002
  • 146 Pages
  • American Productivity & Quality Center, APQC
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What is Relationship Marketing?

Relationship marketing (RM) is often used interchangeably with terms such as customer relationship management (CRM), loyalty marketing, “below-the-line” adve rtising, database marketing, data warehousing, one-to-one marketing, relationship selling, customer retention, customer intimacy, and customer bonding.

Although relationship marketing involves these practices, it encompasses many more elements.

This benchmarking study uses Carlson Marketing Group’s definition for relationship marketing as astarting point: Relationship marketing is “a business strategy that proactively builds a preference for an organization with its individual customers, channel partners, and employees, driving increased performance andsustainable business results.”

This definition has been cited in Frederick Newell’s book Loyalty.com: Customer Relationship Management in the New Era of Internet Marketing and appraised by the faculty at Harvard Business Schools.

A number of points emanate from this definition.

- Relationship marketing is a business strategy because it is paradigmatic, includes relationships as assets, and can become a competitive differentiation. Also, with direction set by the CEOs, relationship marketing is the base from which one develops all tactical programs.

- Relationship marketing seeks to build preference for the goods, services, or capabilities of one company over its competitors. Relationship marketing has a competitive context because customers choose where to allocate their limited resources.

- Relationship marketing affects the entire enterprise and all its stakeholders. Relationship marketing is not just another layer on the marketing onion; it is the onion. The organization that fully adopts relationship marketing will find itself transformed after it develops new structures and processes to align internally and externally with individual customers, employees, channel partners, and all other stakeholders.

- Relationship marketing is geared to improve business performance. Almost all companies already practice some form of relationship marketing, although perhaps limited. Those that embrace it and focus on improving will gain the most strategic benefit.

Changing Nature of Marketing

The nature of marketing has changed dramatically over the last decade as marketers have begun to use new technologies and processes to create additional value for customers and their companies. Traditional underpinnings of marketing involved concepts such as market segmentation, target market selection, and strategy development for the 4Ps of marketing (product, price, promotion, and placement).

Using these concepts, marketers identified groups of customers with similar needs—market segments—for whom their companies could be especially relevant. Marketers then attempted to pro fitably meet each group’s needs. Many marketers continue to use this approach. With the emergence of new technologies and processes, marketers are able to doin consumer markets what business-to-business marketers have done for a long time: treat customers individually by interacting with each uniquely and by providing the value each customer wants. And business-to-business marketers are also making use of new technologies to change how and when they interact with their customers.

In all marketplaces, marketers are now beginning to understand each customer better than ever and are choosing with whom to do business and how to manage customers’ behaviors and attitudes. Often the new techniques and tools can enable this at lower costs than mass marketing; and because better information is made available to management, companies improve effectiveness and efficiency in their interaction with customers.

Some of the main challenges for today’s marketers are:- increasing rate of change for business in general and for marketers in particular,
- changes in approaches to market segmentation,
- designing individual preferences into products and services,
- compressing time frames to research markets and customers,
- individualized communication,
- gathering information about individual customers,
- servicing customers as they wish to be served over their lifetimes, and
- involving customers in pricing decisions.

KEY FINDINGS

The findings of this study are reported in terms of the three categories of the study scope. Within these three categories, 10 key findings have emerged.

1. Strategy- Best-practice organizations develop a clear, holistic vision of all stakeholder relationships.- Best-practice organizations understand the relative importance of theircustomers and allocate resources accordingly.- Best-practice organizations centrally coordinate the relationship marketingstrategy and customize the strategy locally.- Best-practice organizations deploy relationship marketing in stages, yetpossess and are guided by a comprehensive vision.

2. Aligning- A successful relationship marketing strategy is tightly integrated with numerous functional areas.- Best-practice organizations rely on effective change management processes toinvolve all employees in an internal partnership for relationship marketing.- Successful relationship marketing organizations provide a consistent customerexperience through multiple contact points.- Best-practice organizations align the relationship marketing strategy withthe brand.

3. Measuring- Best-practice organizations build better relationships through data-basedinsights.- Best-practice organizations achieve relationship marketing accountability.
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- Sponsor and Partner Organizations

A listing of the sponsor organizations in this study, as well as the best-practice (“partner”) organizations that were benchmarked for their innovation and advancements using relationship marketing.

- Executive Summary

A bird’s-eye view of the study, presenting the key findings discovered and the methodology used throughout the course of the study. The findings are explored in detail in the following sections.

- Findings

An in-depth look at the key findings of this study. The findings are supported by quantitative data and qualitative examples of practices employed by thepartner organizations.

- Predictions

The subject matter expert’s analysis of trends in respect to relationship marketing strategy, alignment, and measurement.

- Partner Case Studies

Background information on the partner organizations and their relationship marketing practices.
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