Relationship Marketing is key to acquiring clients

Martin Davies, NRG Business Networks

The world of marketing has been changing dramatically over the last couple of decades. The proliferation of information channels has changed the way we research and buy products and services so, as marketers, we need to adapt.  Relationship marketing is fundamental to marketing success going forward.

Environment

Over the last twenty years we have seen an explosion in availability of information.  We see it in televison and radio channels but more dramatically in the rise of the internet.  The internet provides access to everything on demand.  We use Google as our main source of information.

We are information rich but still time poor.  The problem is that there is too much information available.  Not a problem when sourcing commodity products such as white goods but it can be a major issue when trying to buy services.  It can be very difficult to assess the quality and feel of a business service over the internet.  

So, it is interesting that in these days on information abundance we still use word of mouth as a key to decision making.  We are confronted by so many business service options that we find it too hard to make an objective decision.  We look to our trusted sources for help.  “Who would you recommend for …” is a common question.  That is what relationship marketing is all about.

What is Relationship Marketing?

Relationship marketing differs from the more traditional direct marketing approach in that is recognises the value of long term client relationships.  It comes from an understanding that short term advertising messages and focus on selling has become counter productive. It starts from a desire to understand what is important to the customer and to undertake activities which adds value to the customer and builds a long term relationship.

We have moved from a ‘Push’ marketing model (where we shout our wares at people and they don’t listen) to a ‘Pull’ marketing model (providing valuable information over a period of time, building trust so when the customer is ready to buy they turn to you).

Recent research shows:

• Business may lose up to 50% of customers over 5 years
• 6-7 times more expensive to acquire a new customer than it is to retain a current customer
• 5% increase in customer retention can increase profits by 25 to 95%.

The goal of relationship marketing is to increase customer loyalty.  You do this by developing long term client relationships.  Relationship marketing is all about customer retention and key aspects are:

• Exceed client satisfaction
• Customer value orientation
• Think long timescales
• High degree of emphasis on customer service
• High amount of customer contact
• Quality is concern of all

Ladder of loyalty

The ladder of loyalty is a simple way of displaying the different types of people with whom you might wish to buy your products or services. 

Advocates

Top of the word of mouth value chain.  Advocates are those people who know, like and trust you to the point that they go out there way to refer you on a regular basis.  These are the ‘golden geese’ of referrals and you should invest your time in building and maintaining the relationship with them.  The lifetime value of an advocate can be significant.

Clients

Clients are loyal customers who buy from you on a regular basis.  By definition you have a relationship with them and they tend to buy from you because they value the relationship with you.

Customers

These are people who have bought from you.  It may be a single purchase.•    Prospects These are people who you know have a need for your product or service.  They have demonstrated this by registering an interest in your products or services at some stage.

Suspects

These are people you suspect might have a need for your product or service.  They have not yet registered an interest in your product or service.

The Six Markets

Christopher, Payne and Ballantyne (1991) identify six markets which they claim are central to relationship marketing.   They are:

• Internal markets
  This is the focus on how the different functions within a company interact to deliver the value chain to the customer.
  

• Supplier markets
  This is the interaction with your suppliers to enhance the customer value chain.
  

• Recruitment markets
  As your staff are arguably the most valuable asset to your business it is key to involve the  providers of staff.
  

• Referral markets
  Referral marketing is the production and implement of a word of mouth marketing plan to generate referrals.  Increasingly this is probably the most effective use of resources in generating business.
  

• Influence markets
  This encompasses all the external bodies that influence your business environment and is usually to focus on your public relations.
  
  

• Customer markets
  This shifts from the traditional transactional view to a long term relationship view. 
  

Ladder of loyalty

The ladder of loyalty is a simple way of showing the different types of people who might buy your products or services.  It also shows  the relationship they have with you.

Advocates

Top of the word of mouth value chain.  Advocates are those people who know, like and trust you to the point that they go out there way to refer you on a regular basis.  These are the ‘golden geese’ of referrals and you should invest your time in building and maintaining the relationship with them.  The lifetime value of an advocate can be significant.

Clients

Clients are loyal customers who buy from you on a regular basis.  By definition you have a relationship with them and they tend to buy from you because they value the relationship with you.

Customers

These are people who have bought from you.  It may be a single purchase.

Prospects

These are people who you know have a need for your product or service.  They have demonstrated this by registering an interest in your products or services at some stage.

Suspects

These are people you suspect might have a need for your product or service.  They have not yet registered an interest in your product or service.