Relationship Marketing by Moses Isaac

Many firms have established relationship marketing programs (sometimes called loyalty programs) to fostet usage loyalty and a commitment to their company'sproducts and services. Relationship marketing is exceedingly logical when we realize credit card research has shown that "75 Percent of college students keep their first card for 15 years, and 60 percent keep that card for life. This kind of loyaly is enhanced by relationship marketing, which at its heart is all about building trust (between the firm and its customers) and keeping promises," ("making promises," "enabling promises," and "keeping promises" on the part of the firm and, possibly , on the part of the customer)

Indeed it is the aim of relationship marketing to create strong, lasting relationships with a core group of customers. The emphasis is on developing long-term bonds with customers by making them feel good about how the company interacts (or does business) with them, and giving them some kind of personal connection to the business. A real relationship marketing program is more than use of database marketing tactics to better target customers - the consumer must feel that he or she has received something for being a participant in the relationship. In a positive vein, businesses have been finding that the Internet is an inexpensive,efficient and more productive way to extend customer services. This has resulted in "permission marketing." It is the "art of asking consumers if they would like to receive a targeted e-mail ad, promotion, or ,essage before it appears in their in-box. "The opposite tact, sending a consumerspam and offering the option to "click here to opt out." annoys consumers and is not permisstion marketing.

Although direct marketing, sales promotion, and general advertising may be used as part of a relationship marketing strategy, relationship marketing stresses long-term commitment to the individual customer. Advances in technology (such as UPC scanning equipment, and relational databases) have provided techniques that make tracking customers simpler, thus influencing the trend toward relationship marketing. Indeed Wal-Mart's database is second in size only to the database of the U.S. government. Still further, a recent study suggests that relationship markeiting program are more likely to succeed if the product or service is one that buyers consider to be high involvement due to its association with financial, social, or physical risk.

Relationship marketing program have been used in a wide variety of product and service categories. Many companies call their relationship program a club, and some even charge a fee to join. Membership in a club may serve as a m eans to convey to customers the notions of permanence and exclusivity inherent in a committer relationship. Additionally those firms that charge a fee (such as the American Express Platinum card) increase customers investment in the relationship that may, in turn, lead to greater commitment to the relationship and increased usage loyalty.

Airlines and major hotel chains, in particular, use relationship marketing techniques by awarding points to frequent customers that can be used to obtain additional goods or services fromn the company. This kind of point system may act as an exit barrier because starting a new relationship would mean giving up the potential future value of the points and starting from ground zero with a new service provider. That is why, for example, Hilton consider the 6.5 million member of the Hilton HHonors loyalty program the most important customers the company has.

Moreover, companies have recently been broadening the scope of such relationship programs. For example many products and services offered to participants in the American Airlines AAdvantage Mileage. Program. Still further, research has found that airline frequent flyer programs contribute in a positive way to the frequent business traveller's lifestyle and to his/her quality of life, perhaps by compensating for some of the negative aspects of frequent business travel. In addition, happy frequent business travelers perceived themselves to be more loyal to a particular airline that their less happy counterparts.

Ultimately, it is to a firm's advantage to develop long-term relationships with existing customers because it is easier and less expensive to make an additional sale to an existing customer that to make a new sale to a new consumer.


Moses Isaac
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