Relationship Marketing

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Today, most marketers are seeking more than just a one-time exchange or transaction with customers. The focus of market-driven companies is on developing and sustaining relationships with their customers. This has led to a new emphasis on relationship marketing, which involves creating, maintaining, and enhancing long-term relationships with individual customers as well as other stakeholders for mutual benefit.5

The movement toward relationship marketing is due to several factors. First, companies recognize that customers have become much more demanding. Consumers desire superior customer value, which includes quality products and services that are competitively priced, convenient to purchase, delivered on time, and supported by excellent customer service. They also want personalized products and services that are tailored to their specific needs and wants. Advances in information technology, along with flexible manufacturing systems and new marketing processes, have led to mass customization, whereby a company can make a product or deliver a service in response to a particular customer's needs in a cost-effective

Exhibit 1-2 Nonprofit organizations use advertising to solicit contributions and support

Exhibit 1-2 Nonprofit organizations use advertising to solicit contributions and support

way.6 New technology is making it possible to configure and personalize a wide array of products and services including computers, automobiles, clothing, golf clubs, cosmetics, mortgages, and vitamins. Consumers can log on to websites such as Mattel Inc.'s barbie.com and design their own Barbie pal doll or Fingerhut's myjewelry.com to design their own rings. Technological developments are also likely to make the mass customization of advertising more practical as well.7

Another major reason why marketers are emphasizing relationships is that it is often more cost-effective to retain customers than to acquire new ones. Marketers are giving more attention to the lifetime value of a customer because studies have shown that reducing customer defections by just 5 percent can increase future profit by as much as 30 to 90 percent.8 Exhibit 1-3 shows an ad for Dell Computer, a company that recognizes the importance of developing long-term relationships with its customers.

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