In the early days of marketing size, the focus of businesses was very much on successful transactions. The aim of marketing departments was to grow sales.
Today, that focus has changed. The market is mature. New customers can be hard to come by and expensive to obtain. So the focus of marketers has shifted to creating and maintaining relationships between a business and its customer base. This is obviously based on the tenet: The longer you keep a customer, the more you earn from them.
This relationship focus has seen the rise of social media as a marketing tool. Social media in marketing is an unproven and likely poor sales channel. Businesses should not see it as an aid to successful transactions. Social media is about developing relationships, creating brand communities and moving target consumers from prospects to close business partners. Social media is also about weaponizing your current customer based as part of your marketing team; through the development of E-WOM (electronic word of mouth).
So much of marketing today is about relationship building.
Piercy (1999) warned that businesses need to avoid relationship marketing myopia; the naïve belief that every consumer wants a deep relationship with their suppliers. This is why I often laugh when necessary but embarrassing products have social media accounts. For example, who wants to become part of the John Smith haemorrhoid cream community?
Piercy goes further and states that different consumers want different forms of relationship with their suppliers. Piercy states that to ignore this as a reality is an “expensive indulgence”.
In Piercy’s model, there are four types of relationship that consumers have with a business:
- Relationship seekers: These consumers want long and close relationships with a supplier. So a local authority will likely want a close relationship with an ICT supplier.
- Relationship Exploiters: These consumers will grab at all free services and offers provided. They are also fickle and will move their custom when they feel like it. They may well be ‘zombie customers’; customers who will cost more to service than you will earn from them.
- Loyal Buyers: These consumers are happy with a long-term relationship but they do not want a close relationship with their suppliers.
- Arms-length Transactional Buyers: These consumers actively avoid long-term relationships with suppliers. This may well be transactions based on price, technical specification or innovation.
What these four categories highlight is that relationship strategies for marketing MUST be based on market segmentation.
Investing in relationships with profitable relationship seekers is a good thing. Relationship development with exploiters and transactional customers is a waste. You need to develop different marketing strategies to suit different relationship needs.
Some argue that there is a link between customer loyalty and customer satisfaction. surprisingly there is little evidence to support this. As I have often written customers are fickle and so is their loyalty. What is much more likely is that there is a link between customer dissatisfaction and customer disloyalty.
In many markets, such as utility provision and retail banking, there is significant customer inertia. Who reading this article has been a customer of their bank since childhood?
Today businesses spend billions on customer relationship management. But is a radical rethink needed? Should we be looking at managing customer relationships with our business or should we be giving customers options as to the type of relationship on offer? Is it time for the customer management of relationships?
Customer management of relationships represents a new power balance where customers choose the relationship they want based on:
- What they are interested in,
- what information they want,
- what levels of service they want,
- what way they want to communicate.
In this process you need to recognise the real value of relationship development tactics and target consumers who are interested in those relationships. For example, what is the point of a loyalty card scheme if everybody can have one regardless of their level of loyalty?