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Transactional paradigm concept

Relationship paradigm concept

Comments and examples

Market segment

Individual customer

Raphel (1997) describes the success story of AMC Kabuki 8 movie theatres in San Francisco. Despite the competition from the giant multiplexes, AMC is flourishing because of its understanding of the cinematic preferences of its customers so they can be informed in advance of ticket sales.

'The most failure-prone fault-line in transactional marketing is the statistical customer - the hypothetical human who is composed of statistically averaged attributes drawn form research'. (Wolfe, 1998)

Duration of transaction

Lifetime relationship

The pursuit of customer loyalty 'is a perpetual one - more of a journey than a destination'. (Duffy, 1998)

Margin

Lifetime value

To support the Huggies product in the 1970s, Kimberley-Clark spent over $10m to construct a database that could identify 75 per cent of the four million expectant mothers every year in the USA, using information obtained from doctors, hospitals and childbirth trainers. During the pregnancy, mothers received a magazine and letters with advice on baby care. When the baby arrived a coded coupon was sent, which was tracked to learn which mothers had tried the product. The justification was the lifetime value of these prospective customers, not the unit sale. (Shaw, 1996)

Market share

Most valued customers and customer share

Rather than waging expensive 'trench warfare' where profit objectives are linked automatically to overall market share, companies have now realised that, as 80 per cent of their business often comes from 20 per cent of their customers (the famous Pareto law), then retaining and delighting that 20 per cent will be much more cost-effective than trying to retain the loyalty of the 80 per cent. Reichheld (1996) conducted research indicating that an increase in customer retention of 5 per cent could improve profitability by as much as 125 per cent.

Mass market monologue

Direct marketing dialogue

'The new marketing requires a feedback loop'. (McKenna, 1993)

Passive consumers

Empowered clients

'Transactional marketing is all about seduction and propaganda and it depends on a passive, narcotized receptor, the legendary "couch potato".' (Rosenfield, 1998)

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