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IMPORTANCE OF RELATIONSHIP MARKETING IN SERVICE SECTOR

Posted by admin | Posted in Relationship Marketing | Posted on 26-08-2011

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IMPORTANCE OF RELATIONSHIP MARKETING IN SERVICE SECTOR

The marketing practices are century’s old, but systematic marketing concept as a distinct discipline has been evolved in the beginning of 20th century. “Customer are main decider of business” – this concept is getting ultimate importance from this century. The motive of any business was profit maximization through volume of business according to Selling Concept, but in later years of 20th century, the motive of business has been shifted toward profit maximization through customer satisfaction. In today’s competitive world each and every company has to face cutthroat competition with other competitors for a foothold in ever slippery market. That is why mere customer satisfaction is not assuring loyalty towards any brand. As prospects are having many choices and they are more price sensitive now, companies need to do something additional to make its customers retail. Previously companies used to offer differentiated products and services to retain their customers. But in today’s world imitation of new features and offers are very common and that is why product and service differentiation are tough. So, not only creation of new customers but also retention of old customers is very vital step for profit maximization.

 

The emphasis on relationship is now a key to successful business and the traditional concept of making sales is being replaced by making long time win – win relationship with customers. It is emerging as the core marketing activity for business operating in fiercely competitive environments. On average, business spends six times more to acquire customers than they do to keep them (Gruen, 1997). Therefore most of the firms are now paying more attention to their relationships with existing customers to retain them and increase their share of customers’ purchases. 

Relationship marketing can be defined as “process of attracting, maintaining, and in multi service organizations, enhancing customer relationship” – Berry (1983).

The underlying concept is that to keep the loyal customer retained within the company and to honour their long term performance.

Shani and Chalsani (1992) viewed relationship marketing as ‘ an integrated effort to identify, maintain and build up a network with individual customers and to continuously strengthen the network for mutual benefits of both the sides, through interactive, individualized and value added contracts over a long period of time.

Intensifying competition and technological developments made businesses look for ways to reduce cost and improve their effectiveness. The practice of relationship marketing has the potential to improve marketing productivity through marketing efficiencies and effectiveness (Sheth and Parvaliyar, 1995).

The benefits of relationship marketing and CRM come through lower costs of retention and increased profits due to longer defection rates (Reichheld & Sasser, 1990).

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The developing economies now calculate on service industries. There is a shift to service economy from industrial economy. In this labour intensive sector relationship plays an important role. The major service organizations like banks, hospitals, hotels, IT and telecoms requires regular interaction of marketers and customers, so that the bond and understanding between both will become strong.

According to market Line Associates, the top 20% of typical bank customers produce as much as 150% of overall profit, while the bottom 20% drain about 50% from bank’s bottom line and the revenues from the rest just meeting their expenses.

Berry (1993) recommended the following five strategies for practicing relationship marketing:-

Developing a core service around which to build a customer relationship Customizing relationship to the individual customer Augmenting the core service with extra benefits Pricing service to encourage customer loyalty Marketing to employees so that they will perform well for customers

Development of relationship orientation of marketing in post industrial era is the rebirth of direct marketing between producers and consumers. Several environmental and organizational development factors are responsible for their rebirth. Development in information technology, data warehousing, data mining have made it possible for firms to maintain a one to one relationship with their customers.

Service firms are always been relationship oriented. The nature of service business is relationship based. A service is a process or performance where the customer is involved, sometimes for a long period of time, sometime only for a short time, and sometime on regular basis. There is always a direct contact between a customer and the service firms. This contact makes it possible to create a relationship between service provider and customer. In growing service businesses, the customer was turned from a relationship partner into market share statistics.

There are certain important issues for understanding customers and maintain a long term mutually trusted relationship with them. These issues are as follows –

CRM initiatives undertaken by firms Development of those programs Identifying important (key) customers Measurement of effectiveness

CRM initiatives

IT and Telecom, Banking, Hotel, Hospital sectors are adopting various CRM initiatives. In case of It and telecom the customer care centres are the initial receiver of customer complaints and processed that for the other levels of management for solution. In case of Banking, Hotels and Hospital sectors the feed back opportunity is one of the forms of getting customer satisfaction and dissatisfaction level. In customer centric marketing, marketers assess each customer individually to determine whether to serve that customer directly or indirectly. Also customer centric marketers determine whether to create an offering that customizes the product or service of the marketing mix or standardize the offering.

Process

Information from customers is collected systematically over a period of time. This can be done through regular surveys and during customer interaction noting down the important points. This information has to be combined with the organizations experiences with customers to build rich customer profiles, buying behaviours, preferences and usage patterns.

Identifying Key Customers

When it comes to combining customer information with experiences, service firms seem to be economizing. Most of them seem to be doing it for selected customers. Hotels do it for their regular guests specially those who have enrolled for their membership schemes. Financial service providers selectively do it for their high net worth individuals who typically use multiple offerings of the service provider.

Measurement of Effectiveness

Most service firms rely on periodic surveys to understand their customers’ expectations and also understand and anticipate the behaviour of customers. Many service firms have indicated that they work with their customers as a team to ensure that their expectations are to exceeded. Research has constantly indicated that one of the major reasons for poor quality service is the gap between perception of managers about the customer expectations and customers’ real or actual expectations (Parasuraman, Zeithaml & Berry, 1985). Roger and Dorf (1999) have recommended a four stage process of Identification, Differentiation, Interaction, and Customization for implementing one to one relationship with customers. After analyzing the information and findings company must go for implementing those key elements and again they need to follow up the result.

References –

Gronroos, C.(1995) ‘Relationship marketing: The Strategy Continuum’, Journal of Academy of Management Science, Vol 23, No. 4, pp 252 – 254 Parasuraman,A.,Zeithaml,V.A., & Berry, L.(1985), “A Conceptual Model of Service Quality and Its Implications for Future Research”, Journal of marketing, Fall, pp-40 – 50 Shainesh, G., Mohan, R., “Status of Customer Relationship in India” – www.decisioncraft.com Kotler,P., Keller, K.L., Koshy, A., Jha, M., ‘Marketing Management – A South Asian Perspective’ – 13th edition pp – 22 -24, Pearson Education Ltd.

 

lecturer in a reputed management institute in Kolkata.


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