Tag: transactional marketing

The Changing Scope of Brand Management

In recent years, with the rise of social media and the recognition that many western markets are mature, we have seen a shift from traditional transactional marketing to relationship marketing.

The focus has shifted from continually increasing sales to new customers to customer retention strategies. This is recognised by the maxim;  The longer you keep a customer, the more you earn from them.

This shift has required marketers to develop new working methods, new marketing tools and to think differently.

The transactional focus required marketers to develop knowledge of why consumers purchase and the choice criteria behind it.  This leads to marketing plans developing mixes wholly reliant on the sacred four ‘P’s of Kotler’s original marketing mix.

However, today most products require a service element and a marketing mix based on the seven ‘P’s (Product, Price, Place, Promotion, People, Process, Physical Evidence).

The shift to relationship marketing has also meant the marketing profession developing new buzzwords:

  • Instead of financial capital marketers speak of Customer Capital.
  • They no longer speak of conquering consumers but in retaining them
  •  They no longer talk of predicting consumer choice and instead focus on classifying the relationships consumers have with a brand and the relationships between individual consumers.
  •  They look to a relationship between consumer and brand beyond achieving a sale. they talk of long-term customer engagement.

As discussed in last week’s blog entry, the best form of loyalty is not based on transactional criteria such as loyalty cards.  It is the creation of internalised loyalty and thus brand commitment.

Brand managers and marketers look to deepen the relationship between the customer and the brand through the creation of emotional connections.

The aim is to move from the emotional high of a purchase to the satisfaction of ownership to the experiential delight of product use and ownership. So products need to deliver the pre-purchase expectations of consumers and deliver an experience which is rewarding.

Many retailers now look to developing more that an opportunity to purchase when a consumer walks through the doors of a store, they should expect a rewarding experience.  Philip Kotler talks of the creation of ‘atmospherics’ which provide consumers with fantasies, feelings and fun.

Bonds need to be created through aspirational values with which the consumer identifies. this means that all brands have to be, in some way, aspirational.  Aspiration goes beyond materialism or hedonism. Aspiration should not simply be short-term highs but long-term satisfaction.  This aspiration should be represented by your businesses vision and mission. Long-term aspiration should be central to your organisational values.

Marketing tactics can be categorized as follows:

  1. Short-term transactional relationship and functional satisfaction:  Product quality, product advantage, trial promotions.
  2. Short-term transactional relationship and experiential enchantment: Advertising, in-store animations, built-in experience products, storetainment, street marketing.
  3. Short-term transactional relationship and aspirational fulfilment:  Image advertising, co-branding, sponsorship.
  4. Re-purchase and functional satisfaction:  Post-purchase promises
  5. Re-purchase and experiential enchantment:  Collectables and systematic additions tied to events
  6. Re-purchase and aspirational fulfilment:  Fanzines, websites, virtual commuities, ehtical growth.
  7. Long-term commitment and functional satisfaction:  Loyalty cards and programmes
  8. Long-term commitment and experiential enchantment:  One to one recognition and service, product co-creation.
  9. Long-term commitment and aspirational fulfilment:  Inter-community groups, disruptive innovations.

So if you are running a business and looking to survive over the longer term it is no longer enough to focus on the acquisition of new customers or sales growth.  You should aim not just to acquire new customers, you should look to continually improve the experiences of existing customers.

The latest advertising from the insurance firm Aviva is a good example. Rather than offering price discounts to new customers whilst existing customers pay more, the price for all customers is the same. And the insurer’s focus has shifted to providing a high level of customer service to both groups.

The Importance of Relationship Marketing

The traditional view of marketing is activities designed to promote transactional activity: the physical act of selling goods and services.  Little thought was applied other than to creating transactions.

In recent years however, the focus of marketing has shifted from transaction marketing to building relationships.  Increasingly marketing is about developing customer loyalty and creating the most effective long-term relationships with customers.

This makes sense in mature economies where the number of new customers is limited and additional market share is obtained by taking it from competitors.

Transactional marketing:

  • Has a focus on single sales
  • Has a short timeframe
  • Makes little effort to retain customers
  • Has limited customer commitment
  • Has moderate customer contact
  • Quality is the concern of production managers and no-one else.

Relationship marketing:

  • Has a focus on customer retention and building customer loyalty.
  • Has an emphasis on product benefits meaningful to target customer groups.
  • Focuses on the long-term: You accept high costs in the short-term because they lead to larger long-term profits.
  • The emphasis is on high service standards; often tailored to individual customers
  • Has high customer commitment
  • Has high customer contact (to gain information not just building relationships).
  • Product quality is a concern for all stakeholders in an organisation.  The attitude is that minor mistakes can lead to major problems.

In mature markets the costs of obtaining new customers can be far greater than the costs of servicing existing customers.  Relationship marketing and long-term relationships offers greater opportunities for cross-selling, up-selling, strategic partnerships and other alliances.  The focus is on creating significant customer lifetime value.  Relationship marketing can allow the ability to charge price premiums.  Relationship marketing is also a way to develop word of mouth and create customer referrals.  There can be lower marketing costs over the longer term with relationship marketing tactics and greater value can be created from higher order volumes.

To develop a relationship marketing strategy you need to focus on four steps:

  1.  Focus on the between target and existing behaviour
  2. Identify steps to close any gaps between these behaviours
  3. Formulate a programme of benefits that satisfy the core needs of target customers
  4. Formulate a communications plan which aims to modify the behaviour of target customer groups.

Before taking these four steps you need to:

  • Identify key customers where the most profitable long-term relationships can be developed.
  • determine what customers want from a relationship.  Some customers will only want a transaction.
  • categorise customers in terms of current and future potential
  • Tailor goods and services offered to those potentials
  • Examine the expectations of each market segment from both sides, customer and seller.
  • Identify how these two sides can work together in a cost-effective and profitable way.
  • Appoint relationship managers whilst changing operational processes on both sides of the relationship so cooperation is easier.  For example, a logistics firm may offer bespoke computer software which ties customers to their systems.
  • Develop small wins in the first instance and gradually strengthen the relationship.
  • recognise from the outset that different customers will have different expectations that will need to be satisfied if a relationship is to develop.