Relationship Marketing

         Relationship marketing, as the name suggests, focuses on building strong customer relationships. It does not focus only on increasing the number of individual sales but is more concerned about customer retention and satisfaction.  Relationship marketing puts in a lot of effort in understanding the ‘Life Cycle’ of the potential customer and creates his marketing campaigns and strategies accordingly. It believes this is the best way to satisfy a consumer and build strong ties with him.

         Life Cycle of a Customer

         With the advent of internet marketing and other forms of direct marketing the marketers can interact with his customers directly. They now have an easy access to huge databases of customer information. New concepts of marketing like Customer Relationship Marketing (CRM), Customer Life Cycle Management (LCM) and Customer Relationship Planning were thus born. All these concepts try to put these databases of customer information to use for maximum customer retention and marketing profits.

         Generally marketers have been using customer data for targeted mailing alone. They have not been able to extract anything more substantial from these databases. Experienced marketers rely more on studying the behavioural pattern of a customer when they go through these databases and ignore the demographic details of it. Behavioural data is much more potent and influential than demographic data. Marketers are commonly plagued by questions like “will the customer stay with us or move on?” Such queries cannot be resolved by going through demographic details. Understanding the customer life cycle helps in maximising the return of investments made by the marketer.

         Life cycle of a customer can be summarized in five steps.

• The first step is to attract the attention of the potential customer.
• Educating the customer about the product or service offered.
• Making the customer buy the product or service.
• Turning a first time customer into a loyal customer.
• The customer satisfaction reaches a point where he suggests others to buy the same product or service.

         Basic CRM Model

         The three important phases of the CRM model are

• Customer Acquisition

         The marketer tries to attract the customer. In this stage the marketer for the first time acquires a customer.

• Customer Retention

         Customer retention is when the customer returns to the marketer to buy the same product or service or an upgraded version.

• Customer Extension

         By the time the customer reaches this phase he is returning regularly to the marketer. New products or services which may have little similarity to the one he purchased in the past are introduced to him. Once he buys the new product the marketer tries to retain the customer for as long as possible.

         Relationship marketing or CRM is successful when the customer travels through this life cycle again and again.

         Before a marketer begins a CRM program he must understand the behavior pattern of his customers. This will help him save both money and time in future. A good customer life cycle means the customer has a good relationship with the company. Once a customer enters this cycle he may continue and complete the cycle or leave mid way. The mindset of the customer or his behavioral pattern at each stage of the cycle can be understood through constant interactions with him. These interactions provide us with behavioral data which help us to understand which stage of the life cycle the customer has reached. When the marketer learns how to predict the position of his customer in the life cycle he can recognize which customers are likely to buy more products or services and targets them. He can try to save customers who are showing a lack of interest and stop wasting his time, money and efforts on customers who have no interest in continuing business with him.

         For example a marketer can send welcome kits to his new customers. The customer will definitely appreciate this gesture and may buy the product or service for the second time. Now the marketer will have to wait and observe the customer’s behavior in the next two months. If the customer does not return, the marketer can mail him a discount coupon which might have a ‘call to action’ effect and the customer is drawn back for another purchase. So the marketer tries to study the behavior cycle of the customer and plan his marketing strategy accordingly.

         In another case a regular customer may stop visiting the store for no known reason. This is a ‘trigger’ which must be picked up by the marketer. It is a change in the behavioral pattern of the customer and the marketer should be ready with a different marketing strategy to bring back the customer to him. The marketer should immediately communicate with the buyer and ask for a feedback. Once the marketer has worked on the feedback he must send a correspondence informing the customer about it. If the customer returns then the marketer must communicate and thank the customer for his faith in him.

         If the customer makes a return and also purchases a product or service then it is a major change in his behavioral pattern. This is the beginning of a new relationship with renewed trust. The marketer should instantly communicate and appreciate the customer for showing trust in him. He may give a discount coupon to the customer as well. If the customer again stops visiting the site or store the marketer has to again communicate and repeat the procedure.

         In each stage the marketer is studying the customer behavior and planning his business strategy accordingly. The behavior pattern of the customer is understood through his activity or inactivity. This activity charted over a period of time is the life cycle of the customer. The marketing efforts made by the customer are the most important trigger points in the life cycle of the customer. Interactions with the customer help the marketer to create simple rules to follow in future. These rules help marketers in targeting the right customer at the right time and maximize their profit.

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