"Put people first, the money follows. "
Since relationship marketing emphasizes more on communication using the existing customers of an organization, it fosters business improvement. No people, no business. You need to give your visitors a reason to return to you. If they do not, you will forever be caught in high marketing costs to attract new clients, resulting in lower profits than you could make. Relationship marketing diverts the focus from the amount of sales transactions that take place to the number of existing customers prepared to maintain their relationship with the company in long-term.
Do you know the Benefits of Relationship Marketing?
According to latest statistics through CRM magazine, in the world of business and administration, the cost of retaining a customer is at least 8 times lesser when compared with acquiring a new one. Thus, relationship marketing capitalizes on a single fact and is beneficial to the company in a number of ways. It is a simple policy - "a bird at hand, is better than two in the bush". I have elucidated on a few of these advantages of relationship marketing below.
Understanding Customer Characteristics
Relationship marketing can help you understand your customers better. You can segregate your customers into groups depending on their characteristics like purchasing power, frequency and volume associated with sale transactions. Relationship marketing also helps receive valuable feedback out of your customers and understand their needs and expectations. This subsequently helps in value addition to services and products based on these demands and leads to happier customers because they get involved into the value creation process.
Delivery as well as Meeting Expectations
If you know what your customers require, it will help reduce wastage due to trial as well as error methods. When required product features and specifications tend to be known, it is easier to make modifications that will please your visitors and increase sales turnover. It also helps reduce costs incurred in the research and development process.
Repeat Business
Would you want to consider getting involved in any business transaction with a seller who appears rude or indifferent for your needs? No. People who buy from you wouldn't feel any special need to resist switching sellers if you don't give them an incentive to stay bound to a person. Here, relationship marketing steps in and provides a positive reinforcement to allow them to make a repeat purchase.
Prevents Negative Transition
Trust and loyalty go together and it is super beneficial for your business. It can help prevent customers from turning to your competitors. Enhancing and maintaining your relationship with existing customers will avoid the tendency of customers to switch to other products/services for any better offer. Did you know? That an average business will probably lose over 50% of its existing periods in the 5 years transitional phase. You can benefit from relationship marketing by lowering customer attrition statistics for the company.
Word-of-Mouth Marketing
A happy customer will always promote your company by telling ten other people about the amazing services or performance received out of your company. They will be excited to recommend your business to other people around them to allow them to try it too. Also, research suggests that people are more motivated to get one of these product/service based on reviews from an existing customer they know than they'll be from persuasion by advertisements. Hence, relationship marketing is a highly effective strategy beyond expensive advertising campaigns that create product/service awareness but don't promise a remarkable rise in sales.
Increasing Customer Bottom
It is no secret that a happy customer brings you new ones with him/her. In fact, a satisfied existing customer is 107% prone to recommend a product/service to a prospective customer. Apart through customer referrals, there are several other ways to increase customer satisfaction by employing methods of utilizing websites, blogs, informal surveys, benefits on loyalty cards, timely reaction to complaints and requests as a constant reminder of your own presence around customers through consistent communication. Your company's value equity and retention equity is improved by enhancing client satisfaction. Relationship marketing benefits, especially, in the creation of new clients apart from maintaining existing ones.
Reduced Marketing Costs
Advantages of relationship marketing include lesser marketing costs and more worth creation. This can be explained by stating the subsequent statistics:
- Every 5% increase in customer retention can improve a company's annual profits from at least 25% up to 125%, while simultaneously leading to a reduction of 10% within marketing costs.
- An existing customer will spend 33% greater than a new customer to buy your product/service.
- Most businesses spend around 80% of their budget for marketing expenditure to make new clients.
A happy customer will be willing to pay more for your product when there is a guaranteed satisfaction of products and after sales services mounted on the price. Hence, you will gain repeat business from your existing customers in the long run even if there is a rise in prices at which you sell your services and products. However, quotation for a premium price must come with advantages of value addition. Customer loyalty and satisfaction are proven main contributors to profit maximization.
Identification With the Company
The advantages of relationship marketing are reaped both by the company and also the customers. It helps your customers identify more with your organization. Staying in touch with your customers makes them seem like they are important to the company. Now, who does not enjoy that? It will keep your customers coming in and build brand equity for your company over time. Also, familiarity with your company and the fact that you understand your customer's need better because of the time period of your association as compared to that having a new company, play as de-motivators for your customers to create a switch.
Product Market Expansion
This one is tricky and many companies fail to recognize this benefit of relationship advertising. Are your employees ready to deliver beyond the corporation's boundaries on customer demand? As pointed out earlier, customers play an essential role in value generation process. They are the ultimate consumers of your services and products, thus, they can help you identify potential profitable areas for expansion and diversification. A company that is prepared to venture outside its set boundaries, can constantly grow using the support of its customers through relationship marketing.
Relationship Advertising: Today
The benefits of relationship marketing are most probably be observed in companies engaged in providing services, manufacturing industrial goods or high-end products like credit card issuers, retail banking providers, automobile manufacturing companies, airlines, insurance, healthcare and pharmaceutical companies. These companies require higher employee involvement with customers and much more customer participation in production. Companies like Delta Airlines, Ls Airlines, Barclaycard (UK), Cisco Systems, IKEA, Toyota and Starbucks have reaped these advantages of relationship marketing. Does your company have a relationship online marketing strategy too?
Through relationship marketing, customers will have greater assurance of the organization's fulfillment of its commitments by delivering promised service or product performance. The concept of relationship marketing was introduced in order to service marketing as recently as 1983 by Leonard M. Berry. Companies have now come to realize that their survival and success aren't dependent on just one element of the business procedure cycle, but entails bi-lateral involvement of customers. A one-time buy order can assure increase in current profits. However, with regard to long-term growth, companies must adhere to customers needs as well as expectations. The benefits of relationship marketing help ensure accomplishment of those long term goals. Your business is run by the cash your customers spend on your products. If you out-do their own expectations, you will surely make an impression on their minds and they'll be encouraged to suggest your business to others around them to allow them to reap the benefits of your services too. This builds a person referral network and increases your sales turnover.
Taking a step beyond business and showing your visitors that you care will create feelings of happiness and satisfaction each time they make a purchase. You instantly build a reference to them. At times of unsatisfactory performance of your products and services, relationship marketing will help in damage control and your customers could be more than willing to forgive such mistakes from your finish. You wouldn't have to lose repeat business from them and they'll be happy with the compensation provided. This is among the best benefits of relationship marketing.
Customer interaction and communication on most companies is restricted to marketing campaigns and promotional methods. But, will your customers remember you after the campaign has ended? Have you left your mark? Every visionary businessman and entrepreneur knows that customer relationship building is definitely an ongoing process. Simply put, relationship marketing is an assurance and insurance of future business out of your customers.