Relationship Marketing 101

What is relationship marketing?

Relationship marketing is a widely used term. Often, though, it is used interchangeably with terms such as customer loyalty, database marketing, predictive modeling, data warehousing, one-to-one marketing, relationship selling, retention, mass customization, customer intimacy or customer bonding. While relationship marketing includes these practices, it is more. Much more. A company using database marketing, for example, as its relationship marketing approach may find itself no more able to forge deeper bonding with customers than previously, with mass marketing or market segmentation techniques.

Let's start with a definition of relationship marketing:

Relationship marketing is the on-going process of identifying and creating new value with individual customers and then sharing the benefits of this over a lifetime of association. It involves the understanding, focusing and management of on-going collaboration between suppliers and selected customers for mutual value creation and sharing through interdependence and organizational alignment.

Key principles

A number of points flow from this:

Relationships are the main asset of the enterprise - not the machines that make the products, the products themselves, or even the intellectual capital inherent in people, patents or know-how, important though all these might be.
Relationship marketing affects the entire enterprise. This is not just another layer on the marketing onion. This is the onion. The organization fully adopting relationship marketing will find itself quite different after the adoption than it is today.
Relationship marketing is a process, not a program. As such, its work is never done as long as the customer has money to spend, a willingness to spend it, and a supplier that can profit from the expenditure.
Customers want value from their suppliers as a pre-condition for a relationship. If a company talks of relationships as a way to avoid price competition, they may have missed the point.
Relationships derive from working with customers to create new value. Relationships in business, like those more personally, are weakened unless they are continuously refreshed.
Relationships depend on mutuality. Value must be shared for both supplier and customer to benefit - no one-sided attempts to profit at the customer's expense here.
Mass production, distribution and marketing of goods and services will give way to mass customization of product-service, communication and everything else that touches the customer, particularly for intangibles.
There must be enough new value to be created for both supplier and customer to warrant interest by both parties.
Triage customers into best, average and worst, and have different plans for each category.
The profitability of a relationship needs to be understood, as does the relationship quality. Set objectives to advance both. That is, do not expect customers to become your sincerest advocates shortly after doing business with you. Tight bonding requires progressively deeper trust and confidence.
Some companies need new approaches for their strategies, processes, people, technology and knowledge / insight / foresight systems to remake themselves profitably according to relationship marketing principles.
Knowledge / insight / foresight is a particularly important opportunity for management. Databases should capture the entire customer experience and behavior, capturing data from disparate databases such as the enterprise system, call centers, the Internet, sales automation and contact management, marketing research and so on.
Individual sales performance needs to give way to account teamwork, with multidisciplinary teams from your company, the customer and partners working together.

Before most companies can adopt Relationship Marketing, a number of internal barriers will need to be overcome. Foremost among them, is the absence of a CRM plan.