Traditional sales and marketing methods are based on increasing market share. The focus is on increasing revenues by expanding the sales and marketing functions. The aim is to find and sell to new customers in new markets. Attention is not directed towards existing customers. The concept of relationship marketing is slightly different. In the online environment the objective of relationshipmarket is to target both existing as well as potential customers. However the idea is that existing customers must first be kept satisfied before new customers are aproached. For new potential) customers, relationship marketing seeks to first establish contact, create a dialogue, understand requirements and then create a bond. In case of existing customers, however, relationship marketing seeks to improve contact, get to understand requirements better and then sustain the bond.
In order to achieve the above, relationship marketing uses specific tools and techniques that attract and then build interest of existing and new customers. these shall be examined shortly. the successful use of these tools and techniques allows the organisation to also target new customers. Relationship marketing thus implies taking care of existing customers as well as using tools and techniques to capturing new ones. The overall objective is to build customer satisfaction and customer loyalty as well as enhance the brand.
Successful relationship marketing, however, requires paradigm change. It requires to become customer focussed. It means that not onlyvalues profits but also place value on each of its customers. It recognises that customers are the source of continued revenue, profitability and growth. It does not think of the customer as just a one-time transaction but as a long-term asset to be prized and developed.
Relationship marketing also require to identify customers who represent high lifetime value. It calls for the use of techniques that can be effectively utilised for high-value customers. In this regardd relationship marketing places lesser emphasis on customers that represent low lifetime value. The objective is to build an alliance and partnership with those customers who represent high potential to meen the future revenue needs.
The concept of relationship marketing is build on the premise that high-worth customers should buy the organisation’s products, buy more of the sam products and should also not buy from competitors. In essence it implies that the organisation gains total ownership and control of the customer. It gets inside the mind of the customer, understands his/her accross all product lines and services and makes sure that he/she remains loyal.
Take the case of amazon.com. The organisation was unprofitable for years. It is only now beginning to show a turnaround and has become marginally profitable. It however still does not provide a healthy return on investment. Its owner Jeff Bezos does not seem too concerned though. He knows that despite making substantial losses, Amazon’s strength lies it its growing customer base.
Today Amazon has a base of million customers. these customers are spread worldwide and have purchased books from it over the past six-seven years. These customers also represent an asset called customer relationship. Amazon has since used this asset to diversify into other areas such as the selling of electronic gadgets, garden equipment as well as toys. The company knows that the strength of its customer relationships allows it to sell items apart from books.