How to develop and improve a customer relationship marketing strategy
Every purchase is the result of a relationship. Companies who realize that and prioritize developing long-term business relationships with people in their target market will see increased profits. These companies accomplish that through relationship marketing.
In 3,000 BC, when people first began to exchange goods and services, buyers and sellers developed those relationships through in-person interactions. But now, people on opposite sides of the world can engage with each other.
Still, relationships are as important as they’ve ever been. That’s clear from an analysis of the last 20 years of academic research into the subject. Research shows that relationship marketing increases customer satisfaction and customer loyalty, which leads to repeat purchases.
This article will answer the following questions:
- What is relationship marketing?
- Why is relationship marketing effective?
- What are the benefits of relationship marketing?
- What obstacles face the relationship marketer?
- How can your company use relationship marketing?
What is relationship marketing?
Like relationship selling, relationship marketing focuses on developing long-term relationships with prospects and customers. It first involves a change in mindset. Your focus should be on how you can help the customer instead of how the customer will benefit you. It also requires additional technological capabilities (e.g., marketing automation and visual engagement software).
Four dimensions of relationship marketing
Relationship marketing depends on your ability to develop strong, two-way connections with your customers. But what constitutes a mutually beneficial relationship in this context?
“Managing relationship marketing,” an analysis of relationship marketing published in Marketing Intelligence & Planning, identified four dimensions of relationship marketing:
- Trust. This dimension refers to the customer’s confidence in a company’s dependability and the trust company employees place in the customer. As the relationship develops, the buyer and the seller will make commitments, and each party needs to know that they can rely on the other. Out of all the dimensions included, the dimension of trust has the most research supporting its impact on increasing customer loyalty.
- Communication. In a relationship marketing context, communication is two-way. On the seller side, it refers to the proactive delivery of information the customer needs related to your company and its offerings. On the buyer side, it’s the communication of needs and feedback.
- Empathy. Initially, empathy refers to the effort a company makes to evaluate and comprehend the needs of its customers. But, as the relationship progresses, a meaningful connection between buyer and seller should lead to mutual empathy.
- Commitment. Commitment is the desire of both parties to continue the relationship. Buyer and seller should both benefit from the relationship; otherwise, the relationship will ultimately fail.
6 characteristics of relationship marketing
To develop these relationships, relationship marketers start by putting their customers’ needs first. It’s also essential to recognize that each customer is unique. Different types of customers have varying needs. So relationship marketers don’t view their customers as a homogenous group of records in a CRM.
They take the time and collect the data to understand unique segments of their customer base to deliver personalized communications that are highly relevant and valuable to the prospects and customers who receive them.
This emphasis leads to six characteristics that companies focused on relationship marketing will have:
- Customer focus. Relationship marketers focus on the value the company provides to customers. That involves a shift in thinking from what is good for the company to what is good to the customer, but it also requires sophisticated data gathering to understand your customers (e.g., lead intelligence software) and technology so you can provide value throughout the customer journey (e.g., co-browsing software).
- Prioritize customer retention. A relationship marketing strategy concentrates on developing long-term relationships with customers since it’s more cost-efficient to retain customers than acquire new ones.
- Rewards loyal customers. Marketers and salespeople in a company that strive to create relational benefits for their prospects and customers find ways to repay their customers’ loyalty.
- Frequent (but relevant and valuable) communication with customers. Instead of email blasts, relationship marketing establishes a one-to-one communication channel through which:
- Customers can ask questions and deliver feedback
- Company representatives can request feedback and provide information to help customers understand the market
- Excellent customer service. Customer satisfaction and loyalty are the key drivers of a relationship marketing strategy, so it’s critical to offer multiple modes of contact with a quick response time. Customers should know that someone will address any problems or questions they have promptly.
- Account managers for key customers. Companies that rely on a relationship marketing approach will typically be assigned a dedicated account manager for larger customers to develop the relationship further and ensure customer satisfaction.
5 levels of relationship marketing
A robust relationship marketing strategy is challenging to implement all at once. Generally, companies who take this approach will evolve from a marketing strategy that focuses on bringing in new business to developing partnerships that solve customer problems more comprehensively.
- Customer acquisition. At this level, the focus is on customer acquisition. You might not have the data or technology needed to implement a full-scale relationship marketing effort, but you can still begin putting your customer first in all interactions.
- Feedback response. When you have customers, it’s all but guaranteed that you will receive feedback. The next step involves using that feedback to improve your product or service. Many companies put customer feedback on the backburner, instead favoring an internal roadmap. In some cases, that is necessary, but relationship marketing requires prioritizing responsiveness to customer feedback as much as possible.
- Feedback solicitation. While some level of customer feedback is almost a given, some customers will not provide input unless you ask for it. At this level, companies proactively seek feedback to improve their offering and processes. You can do that through email, website surveys, QBRs, and any other communication channel.
- Customer experience. Here, the focus shifts to improving the customer experience in all areas. In addition to improving your core offering, that includes improving support (e.g., reducing response time and resolution time), user experience, and other CX factors.
- Partnerships. Finally, in the partnership marketing stage, companies look for ways to add value for customers by partnering with other companies to meet additional customer needs. Some of your customers will need help with issues that are tangential to the problem you solve. It might not make sense for your company to address these problems, but you can work with partners to develop solutions that do.
Why is relationship marketing effective?
Relationship marketing is effective because it creates additional value for the buyer and seller. Instead of a one-time exchange of goods or services and currency, relationship marketing creates longstanding relationships between sellers and buyers.
What are the benefits of relationship marketing?
Buyers and sellers benefit from relationships, but the relational benefits are different for the buyer and the company.
Relational benefits for consumers
When entering into a relationship or making a purchase, consumers will engage in a cost-benefit analysis. They often make this analysis without conscious effort. But, subliminally or not, the consumer will evaluate the rewards of the relationship or purchase against the risks.
When a buyer has a relationship with a seller, they enjoy benefits like:
- Reduced risk. Relationships reduce the risk for the consumer. If a consumer has a good relationship with a company and its employees, they have more confidence that the product or service will meet their needs.
- Less stress. When a customer has a trusting relationship with a seller, they are confident in the quality, delivery, and support. That means they don’t have to worry about what might go wrong.
- Time savings. Having a trusted source for information on a purchase enables the customer to skip much of the research stage of the buying process.
- Improved efficiency. The benefits listed above provide buyers with better information more efficiently to make better purchasing decisions faster.
- Friendship. At its best, relationship marketing and relationship selling create meaningful social benefits. They lead to genuine friendships between buyers and salespeople that are enjoyable for both parties.
Relational benefits for consumers
The company’s goal is to make a profit, and relationship marketing increases profitability through the following benefits:
- Reduced marketing and ad spend. Retaining customers is cheaper than acquiring new ones, so customer acquisition requires less budget.
- Higher customer satisfaction. When customers feel they are receiving additional value on top of their purchase through a valuable relationship, they are more satisfied.
- Improved customer loyalty. Satisfied customers are more loyal, and loyal customers are more likely to make repeat purchases.
- Higher CLV. Since relationship marketing increases repeat purchases, customer lifetime value increases. It also provides opportunities to cross-sell new offerings.
When does relationship marketing work best?
Relationship marketing is effective in most contexts, but it has the most potential for driving profits for companies delivering highly personal services. That’s because this context leads to more communication, especially during service delivery.
4 obstacles to relationship marketing (source)
“Barriers to relationship marketing in consumer retailing,” an article published in The Journal of Services Marketing, identifies four obstacles to effective relationship marketing.
- Power imbalance. Relationship marketing depends on cooperation between equally committed parties. When there’s a power imbalance strong enough to enable one party to impose its will on the other, it’s more difficult to establish a collaborative relationship with customers.
- Lack of interactivity. When the sales and delivery process don’t require the active and psychological involvement of the buyer, it’s challenging to establish the level of communication necessary to develop mutually beneficial relationships.
- Lack of expertise. A key benefit for the buyer is that their decision-making is informed and made more efficient by the seller’s expertise. That is not the case when the seller lacks expertise. Further, the seller will have difficulty earning the buyer’s trust if the buyer doesn’t perceive that the seller is an authority in some respect (as a subject matter expert or a problem solver).
- Lack of personal contact. When conditions of the sale do not compel a high level of personal contact, establishing a two-way line of communication between the buyer and seller is harder.
How to develop an effective relationship marketing strategy
To summarize the information we’ve covered so far, a successful relationship marketing strategy depends on your ability to establish:
- Two-way communication
- Company expertise
The primary tactics for meeting these requirements are:
- Customer service. Providing excellent service is critical. That means having enough well-trained employees to support your customers. In addition to training, providing your team with tools like video chat and co-browsing software fosters a more conducive environment for relationship building.
- Employee training. Your team should understand that your customers are your priority. Each department should receive training on how to serve your customers as individuals.
- Content marketing. Creating valuable content is a proven way to develop trusted relationships and drive engagement. The content should not focus on your brand; it should focus on providing value to your customers. Non-promotional content that educates customers on topics relevant to your business shows that your company is an expert in the field and that you want to use your expertise to their benefit.
- Show gratitude. Whether through a loyalty program, special events, random rewards, or just remembering to say thanks, your customer-facing employees should look for opportunities to let customers know they are appreciated.
- Solicit feedback. Encourage your customers to provide feedback. That could be through surveys, email, or verbal requests by support or sales team members.
- Brand advocacy programs. Develop a program your customers can participate in to promote your company. As your employees develop strong relationships with your customers, they’ll be committed to your success. A brand advocacy program helps them understand how they can help, and it rewards them for their efforts.
Examples of relationship marketing
Any method you can use to build trust, establish two-way communication, gain commitment, or provide value to your customers can play a role in your relationship marketing efforts. Here are a few specific examples of relationship marketing in action.
AXA, an insurance company in Singapore, added a digital interaction layer to its existing technology to recreate an in-person meeting over the internet. That enabled their agents to communicate with customers face-to-face while choosing specific policy options, editing and signing documents online, and making payments.
The result was increased close rates, and customers who reported that they were as satisfied by this enhanced online interaction as they were by in-person meetings.
Employee Family Protection, a leading health insurance solutions provider, took a similar approach to educate their customers. The team implemented visual engagement software that enabled their counselors to walk their clients’ employees through policies online in a shared browser window.
“Educating somebody on benefits can be very complicated,” Benefit Service Center Supervisor Catherine Demers said. “An employee who’s never really experienced it really needs that extra education.”
By using visual engagement software, Employee Family Protection’s counselors can develop more meaningful connections with employees. Customers feel in control, counselors answer their questions faster, and browsing online material together in real-time builds trust.
“Having employees be able to see, touch, draw, and point arrows ensures that the relationship that gets built between a counselor and the employee is stronger,” Demers said.
Menswear company Suitsupply used co-browsing technology to create a personalized, in-store experience through their website. Online shoppers were able to browse through Suitsupply’s with a member of the Suitsupply team.
At the height of the pandemic, this technology allowed the company to continue having the personal interactions that lead to long-term relationships. When the company reopened its stores, shoppers wanted the service to continue because they liked shopping online with assistance from a Suitsupply team member before going to the store.
“Co-browsing creates a more efficient shopping experience,” Suitsupply CEO Fokke de Jong told The Washington Post. “[It] helps regulate occupancy and means people end up buying more because they’ve already pre-screened everything in their fitting room.”
By providing customers with a new way of shopping options, Suitsupply saw higher customer satisfaction and brand loyalty.
Relationship marketing is a win-win strategy. Customers win because companies taking this approach put their customers first. Your company wins because your customers will be loyal and make more purchases. Implementing the strategy, processes, and tools we’ve covered in this article (and our article on relationship selling) will help you begin to develop lasting relationships that drive efficient business growth.
Companies today are using more and more visual channels to build collaborative relationships with their customers. To learn more about visual engagement tools and to understand which tool your business should invest in 2022, you can access the full Frost and Sullivan report for free.
Frost & Sullivan’s latest report breaks down 4 most popular visual engagement tools — co-browsing, video, screen sharing, and annotations.