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Relationship Marketing

Posted by admin | Posted in Relationship Marketing | Posted on 27-08-2011

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Relationship Marketing

In the early 1990s the concept of relationship marketing was formally introduced into the field of service marketing. And further the concept was also found applicable in the case of industrial as well as consumer products. As the concept of relationship marketing has emerged the focus has been shifted from transaction marketing to relationship marketing as under:

Transaction marketing – Relationship Marketing

* Focus on single sale – * Focus on customer retention

* Orientation on product features – * Orientation on product benefits

* Little emphasis on customer – * High customer service emphasis

Service

* Limited customer commitment – * High customer commitment

* Moderate customer contact – * High customer contact

* Quality is primarily a concern – * Quality is concern for all.

Of production – (TQM ).

NEED FOR RELATIONSHIP MARKETING

The aim of relationship marketing is to create strong, lasting relationship with core group of customers. It is to a firm’s advantage to develop long term relationship with existing customers because it is easier and less expensive to make an additional sale to an exiting customer than to make a new sale to a new customer.

BENEFITS OF RELATIONSHIP MARKETING

The relationship marketing helps the customer on one hand and the service provider on the other hand.

The benefits which are associated with the customers are:

o Customers remain loyal and receive more value compared to the competitors.

o Customers have the sense of well being and quality of life as they have long term relationship with the service provider.

o Customer think that the service provider knows their preferences and have tailored services to suit their needs over a period of time and they do not want to change this arrangement they have remain loyal.

The benefits for the service producers are:

o Due to good relationship management the service provider gets committed and loyal customers, thus increasing the purchases, which in turn increase the profits of the company.

o Lower cost retaining the current customers cost much lower than making new customers as new customers attract advertising cost and other promotional costs, operating costs of setting up accounts and systems and cost of getting to know the customers.

o Free advertising through word of mouth.

o It is easier for the firm to retain the employees when the company has stable base of satisfied customers.
CONSTRAINTS OF CRM

CRM is not panacea for all marketing maladies. It has its own constraints.

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o CRM is not for everyone. When the market consists of a myriad of customers and the unit profit margins are not much, for instance selling washing powders, basic marketing is enough. CRM is an apt strategy when customers are of long-time horizons and profit margins are much.

o CRM assumes that customers play a passive role in relationships. But in the networked world, they have the ability to play an active role in managing relationships. Now a-days the marketing is towards collaborative marketing, in which the company collaborates with customers and makes them an integral part of the company’s marketing activities.

o CRM is mainly based on customer databases. The collection of data and storage of data for CRM comes in handy only. When the data collected is accurate and appropriate, is collected at a reasonable cost, analysed diligently, reported promptly in a lucid manner and kept secret from competitors. Simon London opines, “Data have little value on their own: They are useful only when they have context and relevance.”

(2) RELEATIONSHIP MARKETING IN BANKING SECTOR

Introduction

In the past, customers were simple persons and were happy at whatever banks dished out to them. Over a period of time with the competition and technological improvements customers have become fully aware of their rights. They now demand nothing short of excellent and prompt services. And further expect improvements there on. In fact over a period of time customer service has become customer satisfaction and customer delight and it can be said what they look forward to now is customer ecstasy. Umpteen alternatives are available to enlightened customers and they choose only those banks that they consider best suites them.

Why customer Service?

A customer is the most important person who visits the premises of a bank. He is not dependent on the bank – rather the bank is dependent on him. He should not be considered as a rude interruption in work. Rather he is the purpose of the work. Further it must be realised that:

(a) It takes months to find and get a good customer but only seconds to loose one.

(b) It is easier to rectify a mistake than to go on arguing on a mistake with a customer.

(c) A satisfied customer brings in more customers and he is the best advertisement for the back.

Initiatives by Banks

Of late, banks have been taking a plethora of initiatives to reorient their basic customer service ethos. These include

o Emphasis on process reengineering for improving customers’ terms of transaction.

o Shift from ‘cost plus’ pricing to competitive pricing of services.

o Progressive IT application for swift delivery channels

o Universal service obligation by creating ‘bank within a branch’ concept.

o Improving value chain for customers.

o Pursuit of TQM at operational and administrative units.

o Three pronged strategy of product innovation, product delivery and product servicing

o Focus on product augmentation as well as hybridization.

o Shift from a “selling” to “marketing” mode.

o Multiple platforms for swift redressal of grievances.

o Periodical rating of service quality in house as well as by external agencies.
o Enrichment of training calendar, with sharp focus on behavioral aspects of customer service.

Effective CRM: The Task Ahead

Any bank aspiring to grow in size, diversity, profitability and clientele base must adopt a four fold strategy. These relate to

1. Acquiring new customers more cost effectively.

2. Increasing revenues from existing clientèle.

3. Increasing retention rates, especially among high value clients.

4. Reducing the cost of sales and servicing.

Suggestions

For a better customer service, banks should emphasis on :

o Increasing the volume of business by extending working hours with the use of technology

o Widening the clientèle base by providing anywhere, anytime and any channel banking service to the customers.

o Increasing the number of delivery channels like ATM banking, phone banking etc.

o Improving service quality and operational efficiency.

o Improving management information system to use data as a business intelligence fool.

o Enhancing cross selling of products to existing customer.

o Service culture is to be developed among the staff. Human Resource Development standards should be maintained in the recruitments at all levels.

Conclusion

Banks, in the days to come, have to provide their broad based service package in the midst of stiff competition. To ensure their competitive edge in future they have to fight with rivals in terms of quality of their service. The challenges that lie before the bankers are four fold. First, they need to satisfy customer needs that are complex and difficult to manage. Second, they need to face up to increased competition from within the sector and from new entrants coming in to the financial sector market. Third, they need to address the demands based in supply chain. Finally they must continually invent new products and services to attract and retain the customer.

Dr.Gomathi Viswanathan


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