Effect of Relationship Marketing on Customer Retention

There is a relationship between two or more parties who are in contact with each other, comprise supplier (seller) and customer. Relationship marketing begins to provide framework for such marketing situations as describe by the two experiences. But its applicability has also invaded consumer goods and services. Relationship marketing became a common approach of marketing.

Nowadays, there are the four waves of marketing comprise Mass marketing, Targeted marketing, Global marketing and finally Relationship marketing. Those waves play an important role by itself. Three of four waves share one thing in common. Its goal is maximizing sale in Mass marketing, Global marketing or Target marketing. After all they try to increase sale and endure profitable growth simultaneously and marketers are beginning to appreciate that they need more creation and reinforcement of building customer relationships.

The relationship marketing is influenced by some areas of marketing comprises traditional marketing, sale management and marketing mix(the 4Ps of product, price, place, promotion), service marketing, and the network approach to industrial or business marketing. The relationship marketing itself not only provides a road to improve the customer retention but also long term relationships with vendors, government, media, competitors and so on.

The customer retention is one of the approaches based on consumer behavior. It helps company to retain the customers, not even current customer but also attracts new customers and potential customers in domestic market and around the world. This approach helps customers from action to reaction in order to keep contact with them. Those marketers who recognize the important of customer retention will push as much emphasis to create or strengthen brand loyalty. The improvement of customer satisfaction and customer retention come from variety of activities available to the company. The gain in customer retention comes from improvements of service quality, customer complaint handling and service feature.

Caring for existing customers used to be second to attracting new customers. Within a company, there is always a need of the salesperson who acquires the new customer as well as a salesperson that take care old customers. Nowadays, most of companies prioritize keeping, caring for and developing existing relationships. Their strategy is treating the old customers well before start courting new customer from the competitor.

Importance of Customer Enhancement

In the era of mature and intense, most of companies in the same sector are offering the same service to the customer, and they tend to be different from the others. Therefore is a pressure upon the company to retain the customer. Past and current customer behavior will help us to predict the future or potential customer behavior. Past behavior of our customer can help us to segment the company’s customer, what they want about our products or services and how to satisfy them. It is often true in activities like making purchases or visiting websites. Those customers who were satisfied will tend to stay longer in relationship with the company. Marketers should take advantage to offer promotions of various kinds like discounts or coupons and sweepstakes. Promotion keeps the interaction of customers with company. Competition is happening day by day, the cost of courting one customer could be lesser than losing one customer. Hence, it is very important to appreciate the customer’s overtime. In addition, many companies tend to develop stronger bonds and loyalty with their customer. In the past, many companies took their customers for granted. Their customers may not have had many alternative sources of supply, or all suppliers provide same services or product with the same quality or switching cost to other supplier was high or even the market was growing so fast that the company did not worry about satisfy its customers.

Attitude and Expectations of Customer

Customer’s needs and wants become more various. Understanding customer’s expectation is more and more important to service-oriented company, there are numerous companies offer same product or services, therefore customer has many choices and they tend to switch if they are not satisfied. Today’s customers are harder to please. They are smarter, more price conscious, more demanding, less forgiving and approached by more competitors with equal or even better offers. The challenge is not producing satisfied customers, because other company even does it better. The challenge is to produce loyal customers. Marketers emphasize focus on customer retention by creating the right physical environment, employ right people, expose the right culture and deliver to customer focused products. Customer should know what they are given when using company’s products or services. Determine the right expectation is important in order to avoid customer dissatisfaction or expectations that cannot be fulfilled. Often, wrong information or unjustified expectation is reason leads to dissatisfaction. The issues can lead to brand switching, complaining or bad word of mouth. Creating the attitude, get to know customer expectation and providing more information towards the company to customer is a good strategy for marketers to retain customer.

Customer Satisfaction

Whether the buyer is satisfied after purchase is up to performance of the company in relation to the customer’s expectation. Customer satisfaction is the feeling or attitude towards products or services of customer after purchased or used and it is generally described as the full meeting of customer’s expectations.

Customer satisfaction can be viewed as an attitude of customer which helps to retain customers. Many companies are aiming for high satisfaction because customers who are just satisfied still find it easy to switch when a better offer comes along. Those who are highly satisfied are much less ready to switch. High satisfaction or delight can helps to create a strong relationship with the brand and then leads to high customer loyalty.

Customer Loyalty

Customer loyalty comes from a number of methods which builds closer links with customers and hence moving them higher up the relationship marketing ladder. A basic approach to building relationships is through the development of enhanced benefits of loyalty for customer. There are financial benefits or social benefits. Financial benefits offer to customer a reason to build a long term relationship and remain loyal with company. Social benefits might be the establishment of regular social groupings or even includes corporate hospitality or social events sponsored by a company where its clients can meet other clients with a view to developing their mutual business interest.

To improve the probability of customer retention it is now necessary to go beyond what is expected and deliver even greater value to customers. Among very satisfied or delighted customers retention rates are significantly higher, and they are more likely to become advocates, telling stories of their goods experiences towards company. Creating loyal customer demands a high priority be given to customer service, both in the strategies and the actions it takes in the marketplace.

Example 1: Vodafone Group  

Vodafone UK is one of the biggest giants in mobile community all over the world. It has over 18.4 million customers until now. The company offers a wide range on voice and data communications; it also provides mobile solutions to customer and business customers. Doing business within a high competitive market, Vodafone came out with a strategy and required a competitor intelligence tool that could help the sale advisers in order to reduce the customer attrition, attract new sales and customer retention.

Vodafone required a service which could deliver timely and accurate information about tariff, deals from customers and also offers from competitors. A system was established, provided by CInergy’s Accelerated Intelligence. It delivers same-day market tracking and analyzes the key competitor information. The company recognized this challenge and requires a competitor intelligence tool in order to help it to retain existing customer, contract renewal and attract potential customers. Another problem is that the company lacks of comprehensive, on time and accurate information about competitors for adviser to rely on during customer negotiation.

After a short time, Vodafone form an alliance with CInergy’s Accelerated Intelligence in order to provide up to date and accurate information to advisers of Vodafone. The intelligence tool comes out with many key features comprise: overview of tariff and promotion managing; provides up to date pricing of all major competitors; comparisons of different deals from customers and suppliers; analyzes data accurately and reliable information.

The alliance was delivering a wide range of benefits to Vodafone comprising: increasing in rate of customer retention, enterprise customer bases and also attracting new customers; reducing expenses of calling cost; improve the ability to advisers when dealing with customers; improvement in operational efficiency and finally, improving the great understanding of competitors, negotiation with dealer and channel marketing.

Example 2: Apple Computer

Apple is one of the biggest companies in technology gadgets, computers and accessories. Its customers range from mid-sized business, individual customer, education, government and so on. On 25TH September 2010, Apple has over 317 retail stores, comprising 233 stores in USA and 84 official stores internationally and a number of official retailers around the world. Apple has its own distribution through the internet called Apple Store. With over millions of user around the world, Apple has established an effective strategy to retain customer therefore it becomes a market leader and enjoys fanatical brand loyalty. This strategy is a part of a well thought out plan to deliver products and create the “Apple Culture”.

Apple employs fantastic strategies in order to achieve its tremendous customer loyalty. They introduce a store just for Apple products. This is an advance of Apple; they try to become different with other competitors. Apple stores are a friendly place where Mac user can find any kind of gadgets or accessories for their Mac and also a chance to explore the latest technology offers by Apple. By this way, Apple has encouraged its existing customers and new customers to experience about what it has to offers. Apple gives their customer a completely solution. Apple’s products have high interaction with each other. For example, customer buys an iPod and then he/she can download music directly via iTunes. By this sort of control, they can monitor over the entire user process, software and hardware, strengthen customer loyalty. Apple also sales product to universities and schools, they turn classroom into a small showroom with comfortable interface, gorgeous design and highly performance. By this way, Apple acquires customers before they even know that they ‘are’ customers.

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