Why You Need to Add a Relationship Marketing Plan to Your Marketing Mix Now More Than Ever Before
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Adding Relationship Marketing to your marketing mix is critical to your business
In today’s busy world, it seems that no one has time for relationships anymore. This is especially true in business. But establishing and maintaining relationships is the key to setting yourself and your business apart from all the others. It’s called Relationship Marketing and it’s the key to keeping your existing clients, and to getting more referrals than you ever dreamed possible. It can change the way you market yourself forever. And I’m going to show you a fun and easy way to establish and maintain relationships with your clients, as well as your friends and family.
You’ve Been Googled…
Relationship Marketing vs. Traditional Marketing
When you place ads for your business, or send out offers or coupons, you’re sending out to “get”. This is the way most traditional marketing works. Of course there’s nothing wrong with that. It’s a necessity if you want to stay in business. People need to know who you are and what you do. The problem today is that there is so much competition. So many businesses are targeting the same customers. And with the popularity of the internet a consumer knows how to research products and services online making it easy to compare prices and go for the best deal. Because of this, traditional marketing and follow up tactics are becoming less and less effective. Here’s where Relationship marketing comes in.
So, What’s Relationship Marketing?
Relationship marketing is all about building relationships with clients and prospects. It’s an effective way to reduce customer turnover, and increase their loyalty to you. It focuses on building longer term relationships, as opposed to going after individual transactions. It’s about understanding the changing needs of the client as they move through the business life cycle. Many businesses concentrate far more on how to attract customers to their products and services than on how to retain them as clients.
But the cost of retaining an existing client is only about 10% of the cost of acquiring a new one. It often makes more economic sense to give more attention to existing clients. Reichheld and Sasser [1] claimed that a simple 5% improvement in customer retention can cause an increase in profitability of between 25 and 85 percent (in terms of net present value) depending on the industry. Although some dispute these numbers, in theory, it makes sense.
And according to a publication by Buchanan and Gilles [2], increased profitability associated with customer retention efforts occurs in part because;
* Cost of acquisition occurs only at the beginning of a relationship. So, the longer the relationship, the lower the amortized cost.
* Account maintenance costs decline as a percentage of total costs (or as a percentage of revenue).
* Long-term clients tend to be less price sensitive.
* Long term clients are more likely to initiate word of mouth recommendations and referrals.
* Existing clients are more likely to buy from you again.
* Long term clients tend to be satisfied with the relationship and are less likely to go to the competition.
Do You Have Customers or Clients?
According to Merriam-Webster:
Client – One that is under the protection of another.
Customer – One that purchases a commodity or service.
In order to develop a “customer” into a “client”, there are several things that you need to be doing.
* Communicate to them that they’re under your care.
* Actively look out for their best interest.
* Constantly and consistently work on establishing and maintaining relationships.
* Always provide your BEST service and value.
* Give more than is expected. (This really takes VERY little additional effort…)
References
1. Reichheld, F. and Sasser, W. (1990) “Zero Defects: Quality Comes to Services”. Harvard Business Review, Sept-Oct, 1990 pp 105-111.
2. Buchanan, R. and Gilles, C. (1990) “Value Managed Relationship: The Key to Customer Retention and Profitability”. European Management Journal, vol. 8, no. 4, 1990.