Although it is nothing new for companies to build relationships with customers, it has generally been done on a one-to-one basis. In recent years, however, technological developments have made it possible to build up individual relationships with clients on a much larger scale, and this more sophisticated kind of operation is known as relationship marketing. Relationship marketing aims to increase sales through deliberate efforts to retain customers and promote two-way communication with them – and new technology has make communication possible with a for larger customer base than before. The information gathered forms the basis of highly technical analyses of customer purchasing and profitability, which can be used to increase sales.
The building of good personal relationships with customers is usually integral to the management of small businesses, and owners of small corner shops clearly illustrate the essence of relationship marketing, although the technology available to them is far less advanced than that available to, say, a supermarket chain. Small shopkeepers have direct knowledge of regular customers and become familiar with their needs, likes and dislikes. The shopkeepers can then provide services tailored to individual needs. Over time, a bond of loyalty is likely to develop between shopkeepers and regular customers.
The benefits of relationship marketing enjoyed by small businesses are now available to big businesses, thanks to a number of developments. First and foremost is the increasing recognition of the importance of profitability of retaining existing customers. Secondly, technologies have been developed which enable the collection, manipulation and analysis of huge banks of customer information. Large retailers can use store cards to obtain detailed background information about customer’s ages, salaries and lifestyles, and point-of-sale technology can be sued to track purchases made by every customer. Electronic storage enables all of this information to be retained, manipulated and integrated, while detailed analyses can be carried out on ever more powerful computers. Companies are thus able to target individuals amongst their thousands of customers with unique promotions or information matched to their back grounds and to their purchasing tendencies. Thirdly, companies feel a need to use relationship marketing because of increased competition: amassing knowledge about customers and building up customer relationships through interactive contact can enable organizations to differentiate their products or services more easily form those of competitors.
However, relationship marketing is not always the right route for organizations to take, and is not appropriate for all customers. Some bank customers, for example, cost more to serve than the bank actually makes form their custom, while a supermarket customer who spends very little and does not shop regularly does not justify the expenditure of several pounds per annum on relationship marketing. In addition, customers may not always be interested in a relationship, even where there are demonstrable benefits to be had.
Overall, successful relationship marketing depends upon selecting and targeting the customers you wish to retain, and identifying sales areas where the investment and effort will be worthwhile. Many organizations have found the approach to be very rewarding in terms of customer retention and related profitability, but relationship marketing is still a developing field and is neither cheap nor easy to operate. It involves an integrative approach which draws marketing, quality and customer service together; it also depends upon developing the capacity of every employee – particularly front-line staff – to market the goods or services of the organization in a customer-focused way; and finally, it can require heavy investment in appropriate information technology.
15. In the first paragraph, the writer describes relationship marketing as
a. an idea that has passed in and out of fashion over the last few years.
b. a term used for an activity that used to exist in a more basic form.
c. a way for a company to advertise to its customers.
d. a way for a company to analyze its profitability.
16. Why are small shopkeepers used to illustrate relationship marketing?
a. Their success depends on their relationships with their customers.
b. They keep information about their customers on computer.
c. They were the first to use the term relationship marketing.
c. Their relationship with customers has started to change recently.
17. One reason why large companies didn’t use relationship marketing in the past is that
a. they underestimated the true value of customer loyalty.
b. heir customers didn’t want them to collect information.
c. they didn’t need to find out about individual customers.
d. they didn’t think they could justify the expenses.