Benefits of relationship marketing

Relationship marketing is aimed at increasing customer loyalty or retention within a current customer base which is highly desirable for the following reasons:

• Effectively no acquisition costs (which are usually far higher than 'maintenance' costs);

• Less need to offer incentives such as discounts, or to give vouchers to maintain custom (although these may be desirable);

• Less price-sensitive (loyal customers are happy with the value they are getting);

• Loyal customers will recommend the company to others ('referrals');

• Individual revenue growth occurs as trust increases.

Rigby et al. (2000) have summarised a study by Mainspring and Bain & Company which evaluated the spending patterns and loyalty of consumers in online retail categories of clothing, groceries and consumer electronics. Their work shows that e-tailers could not

Table 6.1 A summary of different concepts for the transactional and relationship paradigms
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