WHAT IS RELATIONSHIP MARKETING? DEFINITION AND GUIDE
Relationship marketing has revolutionized the way businesses around the world communicate with their customers, promote their brand identity and drive an increase in their profit margins. In this article, we’ll be discussing everything you need to know about relationship marketing – what relationship marketing is, why it’s important, and a complete guide to developing your own relationship marketing strategy. We’ll even give you some real-world examples to explore how businesses have used relationship marketing to improve the customer experience and boost their sales figures.
What is Relationship Marketing?
Let’s start by explaining what relationship marketing is. In recent years, relationship marketing has emerged as the answer to a growing number of customers who prioritize a fulfilling relationship with the companies that they spend their money with. Brands that champion significant social causes or use their influence to raise awareness of important issues play a central role in the changing attitudes of customers to businesses who stay politically or socially neutral to avoid backlash. Indeed, customers are 4 times more likely to purchase from a brand with a purpose as opposed to those who sit out of difficult conversations. This means that having an unwavering and well-communicated brand identity is more important than ever for businesses trying to scale up their operations, and relationship marketing is the best way to establish this. But what is relationship marketing?
Designed to establish long-term, positive relationships between businesses and customers, relationship marketing aims to promote brand loyalty and increase customer retention rates. This is done through a range of different strategies, with some of the most commonly used being inbound marketing centered on continuously delivering value to customers new and old.
The Importance of Relationship Marketing
Now that you know what relationship marketing is, let’s go one step further. With the vast array of advertising options designed to grab a buyers attention through a range of channels, you might be wondering whether relationship marketing is even important. After all, plenty of businesses see positive trends after a paid social media campaign or radio advert that specifically addresses how a certain product can improve a customers’ life. However, these benefits can be convincingly surpassed by the right relationship marketing strategy, making this an important business function to get right – improvements into this area lead to higher value content delivery to customers, and increased profit to organizations.
Another reason why the importance of relationship marketing shouldn’t be underestimated is thanks to its place within the wider area of customer relationship management, which involves researching and collecting data on customers to implement a quality marketing strategy before putting this into action – without useful relationship marketing options, the overall management system would be unable to function effectively.
The Benefits of Relationship Marketing
If you’re considering implementing a relationship marketing strategy for your business, then there’s never been a better time to start, but you might be wondering what the benefits of relationship marketing actually are, and how this can work within your company. Some of the most commonly seen benefits include:
Building Long-Term Customer Relationships
Easily one of the biggest benefits to any relationship marketing strategy is the long-term relationship that can be fostered between a business and its customers through this method. Maintaining a positive brand image with customers that appreciate your product offering is a great way to build loyalty and drive sales.
Increased Engagement
As a consequence of a positive relationship, your business will see increased engagement with marketing material if you develop a successful relationship marketing strategy. Customers who know and love your business will be more likely to respond to your emails, take up new offers and follow your social media pages, which is in turn a fantastic opportunity to receive more traffic from new customers too.
Higher Retention Rates
Perhaps even more important than gaining new customers is retaining your existing ones. Retention defines the process of persuading a customer to return for another product, or extend a service, after their initial purchase. Because relationship marketing centers on putting the customer first, these strategies provide ample opportunities to reach out to customers to build loyalty and establish your brand, which makes retention a lot easier. What’s more, a Harvard Business School study found that boosting your customer retention by just 5% can increase profits by 25-95%, which makes relationship marketing a no-brainer if you’re trying to grow a business that is successful over the long-term.
More Testimonials
As you develop an engaged customer base, your business can benefit from a far greater number of positive reviews and testimonials, as by facilitating regular communication you can rely on your customers to support your venture. You can even benefit from repeat testimonials as you increase your customer retention rate.
Saving Time and Money
Not only does relationship marketing go a long way towards building your brand image and customer retention, it’s also an effective strategy to implement if you want to save time and money for your business. By encouraging word of mouth recommendations and more testimonials through building strong relationships with your customers, you can save money on advertising costs and make sure that the buzz around your products and services is authentic and genuine.
Examples of Relationship Marketing
Relationship marketing can take many forms, but primarily it involves personalizing your offering to customers so that they know they are valued. This can include, but is not limited to:
- Personal profile customization options on your website.
- Birthday or holiday messages and offers.
- Loyalty programs.
If you’re looking for some inspiration to help you develop an effective strategy, then there are some great examples of relationship marketing from organizations and companies around the world who have done a fantastic job of authentically building positive relationships with their customers:
- Southwest Airlines
Southwest Airlines offer their customers a Rapid Rewards loyalty program through which fliers can earn points as they spend money that can be redeemed on flights to anywhere, at any time. Offering such an incentive shows customers that they are valued for their brand loyalty and encourages them to use the service time and time again, which is a great example of relationship marketing in action.
- American Express
From their quick and easy customer onboarding process to loyalty programs that foster long-term relationships, American Express have nailed their relationship marketing strategy. By prioritizing initiatives that reward customers who stay with the company for a long time, such as travel perks and a lucrative referral scheme, their business model supports high levels of customer retention. Not only does this lead to an increase in sales figures, but it also gives Amex a glowing reputation.
- Amazon
One of the biggest drivers of Amazon’s success is their relationship marketing strategy, and they do this so well through a critical analysis of their data. By focusing their data analysis on customer retention, and learning what works to keep customers coming back time and time again, they are highlighting the value that they place on their customers, and encouraging them to return to the store. On top of this, Amazon have developed processes and products that support long-term relationships between customers and the company – their Prime subscription encourages customers to make the most out of the benefit based on personalized product suggestions.
By following in the footsteps of these effective examples of relationship marketing, you can ensure that you give your business the best chance of success when it comes to acquiring and retaining customers.
How to Track the Success of Relationship Marketing
Many companies use relationship marketing to drive their business to the next level, but there are a variety of strategies that can be implemented to track the actual success of these strategies, to find out what works well and what could use some improvement. Tracking the success of any marketing strategy is vital to communicate its effectiveness to stakeholders and increase growth, but with relationship marketing it can sometimes be difficult to tell if a strategy has truly paid off. Here are some of the most popular techniques employed by marketing teams to track their performance.
Customer Lifetime Value
Customer Lifetime Value, or CLV, works to define a customer’s total worth to a business, which is calculated across the entirety of their relationship with the company. You can use this metric to decide how much you need to invest in your customers to keep retention rates high – after all, it’s far cheaper to keep existing customers happy than it is to persuade new ones to come on board. CLV is therefore a key component to understanding which areas to work on.
For businesses, this means that they can tailor their products and service to individual consumers in a way that works to keep existing customers and also attract new ones. To work out a CLV, it’s easier to use customers who have spent a long time shopping with the company, or paying for a subscription, as this will give you a greater understanding of what they value, but keep in mind that you’ll also need to factor in the cost of acquiring that customer in the first place, known as your Customer Acquisition Cost (CAC).
Conversion Rates
Another useful metric that can be implemented into data tracking to analyse your success levels is your conversion rate. Essentially, your conversion rate simply defines the number of people who became a customer after interacting with your content. Whether this is through your website, social media pages or in-person advertising doesn’t matter – all you need to do is have an awareness of exactly how many people find enough value in your content to buy from you. There are number of different ways through which you can track your customer conversion rates; some businesses prefer to hire trained data analysts as part of the team, while others use dedicated data analytics software that can give them a clear understanding of their conversion rates and recent performance.
Customer Surveys
While data tracking is important, sometimes it doesn’t quite give the full picture. While conversion rates might be high, there could be a reason why customers are looking to leave the business shortly after subscribing to a service or buying a product, which isn’t easy to ascertain from data alone. Because of this, customer surveys are an important way to track the success of your relationship marketing strategy, as they can provide an insight into whether your brand image is being seen and appreciated, as well as if there is anything missing as you advertise to customers.
The best way to encourage people to complete surveys for relationship marketing analysis is to create a simple, short survey that is easy to access, and send the link to your customers by email. This way, you’ll know that the customers who complete it are genuine, and form part of your longer-term strategy thanks to their subscription to receive your company emails. By thanking them for their time, and taking their feedback on board, you can elevate your customer service and drive successful, long-term client relationships.
Guide to Develop a Relationship Marketing Strategy
So you know what relationship marketing is and that you need to develop a good relationship marketing strategy, but how do you actually go about doing this? There are plenty of tactics that you can take in your approach, so we’ve pulled together our top tips to help you get started. By following the steps in this guide, you can optimize your relationship marketing strategy and see higher quality long-term relationships develop between your customers and your business.
Use Content Marketing
One of the most effective ways to build and maintain an effective relationship marketing strategy is to use content marketing to promote messages to your customers. Creating unique, original content allows you to bring value to customers who are directly searching for it, and gives your business the opportunity to answer their questions. Businesses have taken a hugely varied approach to content creation, especially as the digital age affords so many avenues to explore when it comes to marketing to your customers. Some of the most popular options include:
- Blog posts
Blog posts are a great way to engage with customers, and you can make them as formal or informal as you like. For a lot of companies, blogs allow an insight into the workings of the business and the people involved in the design and marketing processes. Through posts like these, you can promote your products with relatable, useful content.
- Articles
Although articles are often similar to blog post in their length and purpose, they will typically be more heavily focused on answering specific questions for customers and providing information.
- Social media ads
In recent years, advertising on social media has proven to be a highly effective relationship marketing strategy, as an increasing number of customers are using social sites as their primary news source, which gives added weight to content that communicates with them through these channels.
- Website content
An often neglected area of content creation is website material, but this is actually one of the most convincing ways to build a relationship with customers. Having a compelling ‘About’ section that tells your brand story can make or break a customer acquisition, as it’s been proven that customers want to buy from companies that they understand and can relate to.
To center your content around a relationship marketing campaign, make sure that the content you produce effectively conveys your brand message, as well as any causes that are close to the hearts of your company and your customers. This will reinforce not only the value your business can provide, but also the relationship that can be established based on positive interactions.
When creating content, you can use an SEO optimization strategy to propel your content to the top page of the most popular search engines, which means customers who are searching for specific terms or keywords will reach your business first. For this reason, it’s important that the content you provide is relevant and informative, to prevent them clicking away and looking elsewhere for the solution to their problem.
Consider The Entire Customer Journey
When developing your business’ relationship marketing strategy, it’s important to consider the entire customer journey when making plans. How will you grab the attention of someone who has never heard of your business? And how will you nurture their interest as they purchase products and continue to interact with you until they return? Keeping the entire journey in mind when strategizing is a good way to go the extra mile, and this will in turn improve retention rates.
Offer Personalized Services
No matter how large your company is, offering some form of personalized service is a great way to foster long-term relationships with your clients. Reaching out to them and understanding the type of content that they respond well to, as well as the products or services that they’re searching for is the best way to do this, as you can then tailor your services to their needs and expectations.
Address Problems Quickly
Any good relationship marketing strategy is underpinned by a range of factors that promote positive long-term relationships with customers. One of these is the ability of your company to address any problems that arise quickly and efficiently, while putting the customer first in any of your interactions. Ideally, you should be reaching out as soon as an issue occurs, even if a customer hasn’t noticed it, to explain what has happened and how you’re going to fix it. This approach goes a long way towards building brand loyalty and trust, and reassures customers that you are a company who does the right thing.
Taking a compassionate approach to problem solving is also important to building an effective relationship marketing strategy. If an issue has arisen that negatively impacts your brand image, or is at odds with your stated values, this can be damaging to your reputation, and customers who have an emotional connection to your brand have the right to be disappointed. Responding to this compassionately and with integrity shows your customers that you care to right the wrong.
When responding to problems, it’s useful to follow a codified process so that all team members can treat customers in an equal and fair way. This also conveys professionalism to your customers and reinforces your brand image as one that they can relate to and trust.
Track your Success with the Right Metrics
Finally, once you’ve implemented a relationship marketing strategy, it’s vital that you take steps to track its success using the right metrics, to understand how you can improve and keep developing your customer relationships. Using a range of metrics like CLV, conversion rates and customer surveys is an effective way to do this that offers you the clearest picture of how to get better. You can also use wider Customer Relationship Management success metrics to understand what you need to bring to your relationship strategy, such as:
- Customer Effort Score (CES)
This score underlines how easy or difficult it is for customers to have a positive relationship with your business. If they are constantly having to put in a lot of effort to chase up missing orders or find the answer to a question, the CES score will fall, and to rebuild it you’ll need to focus on offering reliable products and customer service that makes life easy for your buyers.
- Renewal Rate (CRM)
The Customer Renewal Metric is a reliable way to track a relationship marketing strategy’s effectiveness, as you can see exactly how many customers are renewing their subscriptions, which is a good indicator for the strength of a customer and business relationship.
- Retention Costs
Despite not being a direct indicator of how positively your customers see your business, understanding how much it costs to retain an existing customer is a helpful indicator of your relationship marketing strategy’s success – by doing this you can identify whether the investment you’ve made into your existing customers is paying off.
Closing Words
Ultimately, relationship marketing underscores the ability and willingness of businesses to invest just as much in existing customers as they do in new ones. Using the guide to understand what relationship marketing is and how to develop a strong strategy is a great start, but you’ll still need to be authentic and enthusiastic in your approach if you want these top tips to work for your business. Take the time to understand your customers wants and needs, build positive relationships with them, and you’ll see this marketing strategy paying off dividends in the long run!
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