2 types of loyalty and relationship marketing

2 types of loyalty and relationship marketing

Let's go over the four types of loyal customers and how to address their. be considered one of the primary focuses of your marketing strategy. 2. A Study of Relationship Marketing Types, Service Quality, and Relationship Quality on Customer Loyalty in the Life Insurance Industry! Abstract. This study. tomers, whereas relationship marketing aims at retaining .. types). These results are consistent with Hypothesis 2. As expected, loyalty ratings are significantly.

Berry argued in a conference on the field of service marketing that relationship marketing is a marketing activity for enterprises to obtain, maintain and promote effective relationships with customers. At the same time, after a long term follow-up study on the marketing process of the service industry, it is concluded that the ultimate goal of enterprise marketing should not only develop new customers, but also pay attention to the maintenance of existing customers, and improve the long term interests of both parties through good cooperative relations.

Then the content of relationship marketing is given. It also argues that the cost of maintaining an old customer is far lower than the cost of developing a new customer, and that the marketing concept of maintaining the relationship with old consumers is more economical than the marketing concept of developing new customers.

This research conclusion has been generally recognized later, but the research scope is only limited to the relationship with old customers, which is easy to ignore the dynamic development of customers, because the formation of customer loyalty customers are from the development of new customers, so we should pay attention to the development of new customers.

If the enterprise is limited to the maintenance of existing customers, then it is impossible for the enterprise to achieve any progress and cannot cope with the current market competition. From a social anthropological perspective, relationship marketing theory and practice can be interpreted as commodity exchange that instrumentalise features of gift exchange.

This perspective on marketing opens up fertile ground for future research, where marketing theory and practice can benefit from in-depth research of the principles governing gift exchange. According to Liam Alvey, [5] relationship marketing can be applied when there are competitive product alternatives for customers to choose from; and when there is an ongoing desire for the product or service. Relationship marketing revolves around the concept of gaining loyal customers. Research conducted to developing relationship marketing suggests that firms can best do this through having one of the three value strategies; best price, best product, or best service.

Firms can relay their relationship marketing message through value statements. For example, an automobile manufacturer maintaining a database of when and how repeat customers buy their products, the options they choose, the way they finance the purchase etc. In web applications, the consumer shopping profile can be built as the person shops on the website. This information is then used to compute what can be his or her likely preferences in other categories.

These predicted offerings can then be shown to the customer through cross-sell, email recommendation and other channels. Relationship marketing has also migrated back into direct mail, allowing marketers to take advantage of the technological capabilities of digital, toner-based printing presses to produce unique, personalized pieces for each recipient through a technique called " variable data printing ".

Marketers can personalize documents by any information contained in their databases, including name, address, demographics, purchase history, and dozens or even hundreds of other variables. The result is a printed piece that ideally reflects the individual needs and preferences of each recipient, increasing the relevance of the piece and increasing the response rate. Scope[ edit ] Relationship marketing has also been strongly influenced by reengineering.

2 types of loyalty and relationship marketing

According to process reengineering theory, organizations should be structured according to complete tasks and processes rather than functions. That is, cross-functional teams should be responsible for a whole process, from beginning to end, rather than having the work go from one functional department to another.

Traditional marketing is said to use the functional or 'silo' department approach. The legacy of this can still be seen in the traditional four P's of the marketing mix.

2 types of loyalty and relationship marketing

Pricingproduct managementpromotionand placement. According to Gordonthe marketing mix approach is too limited to provide a usable framework for assessing and developing customer relationships in many industries and should be replaced by the relationship marketing alternative model where the focus is on customers, relationships and interaction over time, rather than markets and products.

In contrast, relationship marketing is cross-functional marketing. It is organized around processes that involve all aspects of the organization. In fact, some commentators prefer to call relationship marketing "relationship management" in recognition of the fact that it involves much more than that which is normally included in marketing.

Because of its broad scope, relationship marketing can be effective in many contexts. As well as being relevant to 'for profit' businesses, research indicates that relationship marketing can be useful for organizations in the voluntary sector [7] and also in the public sector.

Satisfaction[ edit ] Relationship marketing relies upon the communication and acquisition of consumer requirements solely from existing customers in a mutually beneficial exchange usually involving permission for contact by the customer through an " opt-in " system.

Relationship marketing

Although groups targeted through relationship marketing may be large, accuracy of communication and overall relevancy to the customer remains higher than that of direct marketing, but has less potential for generating new leads than direct marketing and is limited to Viral marketing for the acquisition of further customers. Research by John Fleming and Jim Asplund indicates that engaged customers generate 1.

According to Buchanan and Gilles, [18] the increased profitability associated with customer retention efforts occurs because of several factors that occur once a relationship has been established with a customer. The cost of acquisition occurs only at the beginning of a relationship, so the longer the relationship, the lower the amortized cost.

Account maintenance costs decline as a percentage of total costs or as a percentage of revenue. Long-term customers tend to be less inclined to switch, and also tend to be less price sensitive.

This can result in stable unit sales volume and increases in dollar-sales volume. Long-term customers may initiate free word of mouth promotions and referrals. Long-term customers are more likely to purchase ancillary products and high margin supplemental products.

Customers that stay with you tend to be satisfied with the relationship and are less likely to switch to competitors, making it difficult for competitors to enter the market or gain market share. Regular customers tend to be less expensive to service because they are familiar with the process, require less "education", and are consistent in their order placement.

Increased customer retention and loyalty makes the employees' jobs easier and more satisfying. In turn, happy employees feed back into better customer satisfaction in a virtuous circle. Relationship marketers speak of the "relationship ladder of customer loyalty ". It groups types of customers according to their level of loyalty. The ladder's first rung consists of "prospects", that is, people that have not purchased yet but are likely to in the future.

This is followed by the successive rungs of "customer", "client", "supporter", "advocate", and "partner". The relationship marketer's objective is to "help" customers get as high up the ladder as possible. This usually involves providing more personalized service and providing service quality that exceeds expectations at each step.

Customer retention efforts involve considerations such as the following: Customer valuation — Gordon describes how to value customers and categorize them according to their financial and strategic value so that companies can decide where to invest for deeper relationships and which relationships need to be served differently or even terminated.

Customer retention measurement — Dawkins and Reichheld calculated a company's "customer retention rate".

Relationship Marketing | What is Relationship Marketing?

This is simply the percentage of customers at the beginning of the year that are still customers by the end of the year. This ratio can be used to make comparisons between products, between market segments, and over time. Determine reasons for defection — Look for the root causes, not mere symptoms. Do not sacrifice quality for innovativeness.

Maintain a high customer satisfaction rate in all areas of the company. Make an effort to inform customers how much they are appreciated.

2 types of loyalty and relationship marketing

Relationship marketing mainly involves the improvement of internal operations. Many customers leave a company not because they didn't like the product, but because they were frustrated with the customer service.

If a business streamlines its internal operations to satisfy all service needs of their customers, customers will be happier even in the face of product problems.

Technology also plays an important role in relationship marketing. The Internet has made it easier for companies to track, store, analyze and then utilize vast amounts of information about customers. Customers are offered personalized ads, special deals, and expedited service as a token of appreciation for their loyalty.

Social media sites allow business to engage their customers in an informal and ongoing way. In the past, it would have been impossible to keep useful records about every single client, but technology makes it easy for companies to automate their marketing efforts.

See also Analytical Marketing Branding is the final component of relationship marketing. A company can form a long-term relationship with a client if that client feels like the brand they purchase reflects who they are or who they want to be. Customers are less inclined to switch to a different brand if they think that switch makes a statement about their identity. Who Employs Relationship Marketing?

Many types of companies have something to gain from developing long-term relationships with their customers. Smaller businesses often serve a steady stream of regulars, and make little effort to draw in new customers. Imagine a small restaurant that sees a steady stream of business from the morning commute. Their daily presence is a large part of the business that restaurant does every day.

Larger companies typically invest the most in carrying out sophisticated relationship marketing campaigns. In some major companies, relationship marketing is a strategy that affects every department with a client facing purpose sales, customer service, shipping etc.

Industry leaders constantly face competition from new companies who claim to provide similar goods with a higher-quality level of service. Holding onto their existing customers is the only way they can maintain their position at the top of their industry. This is true for businesses in all industries, from cell phones to baby food.

2 types of loyalty and relationship marketing

When the company changed the font in their ubiquitous catalog, Ikea lovers took to the Internet to air their complaints. Rather than alienate their customers for a trivial reason, Ikea changed the font back in the next catalog. Direct Recruitment — The direct mail marketing firm sends out handwritten birthday cards to clients and associates every year.

Customer loyalty; attitudinal loyalty, behavioural loyalty

This simple, personal touch helps clients feel like Direct Recruitment cares about them as people rather than simply consumers. American Airlines — The airline maintains a comprehensive frequent flyer program that rewards customer loyalty with the promise of free flights, upgrades, and discounts. Dell — Dell computers created a special online store for high volume corporate customers.

By tailoring the ordering process to the specific customer's needs, Dell was able to expedite many of the hassles corporate technology buyers face. Providing a higher level of service leads to increased loyalty. Vyvanse — The makers of the popular ADHD drug created an extensive online portal that included videos, forums, expert articles, and mobile apps to help those who suffer from ADHD. Rather than relying on the strength of the product alone, the drug makers created a place for users to gather and interact that was linked back to the company.

Sites like Facebook and Twitter make it fast and easy for companies to communicate information to their customers. But in order to make this a long term relationship, the company has to get their customers to become regular followers of their social media profiles.

As the chart shows, most customers do not elect to follow a company out of mere curiosity. Companies can increase their social media followers if they offer incentives like coupons or insider information.