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In a competitive market, it is important for your business to establish relationships with your customers, vendors, intermediaries, and other influencers. Relationship marketing is adopted by smart marketers who try to build a long-term strategic relationship with valued customers, distributors, dealers, suppliers, and other stakeholders.

What is Relationship Marketing?

Relationship marketing has the aim of building mutually satisfying long-term relations with key parties – customers, suppliers, distributors- in order to earn and retain business. It shifts attention from a short-term transaction and immediate profits to creating customer value by building long-term relationships.

The focus of relationship marketing is not on immediate sales, rather it is directed at building a large group of satisfied and loyal customers. Customer retention and winning back lost customers are the key strategy in relationship marketing. It uses sustained long-term efforts in delivering value to the customers and profit to the firm.

Relationship marketing has three dimensions.

1. Customer Service

The view that companies have about customers is changing. The emphasis is shifting from transaction-based marketing to relationship-based marketing.

2. Commitment

Companies, in addition to their relationship with customers, are also concerned about their enduring relationships with suppliers, middlemen, stakeholders, and other influencers. The focus is also on internal marketing where all employees are trained and motivated to work for customer satisfaction.


A strategy to bring the three key elements – quality, customer service, and marketing activities – to work together in order to produce synergistic effects for the benefit of the customers and external agencies.

Building a relationship in an organization

Businesses can form different levels of relationship with customers. The extent to which an organization practices relationship marketing depends on its investment (time and money) in building the relationship.

This process cannot be executed in a short period of time. It requires sustained enduring effort on the marketer’s side to convert customers with different levels of commitment towards the firm’s product or service. The process is explained below:

1.  Suspects

Most firms start from the pool of suspects. Suspects constitute of everyone who has the possibility of buying the firm’s product or service.

2. Prospects

From the pool of suspects, the firm identifies customer groups who are most likely to buy the product or service.

3. First time users

This group constitute of customers who have bought the firm’s product or service at least once. Depending on their level of satisfaction or dissatisfaction they can be either repeat buyers or defectors.

4. Repetitive customers

This group had a positive experience with the first trial and have purchased the firm’s product or service for the second and third time. This group has the potential to become loyal customers if the firm tries to build a relationship. In absence of the firm’s effort to build the relationship, the repeat customer may switch to competing for firm’s product or service.

5. Clients

This group consists of loyal and satisfied customers who have been buying the firm’s product or service for a long period of time. Marketers need to work closely with clients to retain this attitude.

6. Members

In relationship marketing, some firms organize business clubs amongst their loyal customers and offer the members of the club several benefits so that they remain loyal.  

7. Advocates

Amongst the members of the business club, the firm tries to convert some customers into advocates who are vocal and who openly recommend the firm’s product or service to prospects and first-time users.

8. Partners

The ultimate objective of relationship marketing is to convert some of the advocates into the firm’s partners who work together with the firm for mutual benefit.

Customers in any of the above category may experience dissatisfaction with the firm and its product or service at any point of time and move to the ex-user pool. They might cease to use the product or defect to competitors’ product when better offers are made by the competitors.

Therefore, the major focus of relationship marketing should be on delivering better value to the customer than what is offered by competitors. Firms that practice relationship marketing focus on maintaining the ‘life-time value’ of customers indicating that satisfied customers stay loyal during their entire lifetime.

A satisfied customer is a great asset to a firm in the following ways:

–          They remain loyal for longer periods

–          They buys more of the firm’s products

–          They talk favorably about the firm and its products

–          They pay less attention to competitors’ advertisements and offers

–          They provide ideas to the firm

For this, a firm needs to regularly monitor the post-purchase satisfaction level of customers and establish a system for listening to customers’ complaints and taking actions.

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