Origin of Relationship Marketing

The year 2050 – intelligent cameras on the facade of retail outlet read the eye-prints of passersby identify them and greet them by name, giving individualized offerings and inviting them to the mall. The sales representative at the door of outlet, taking advantage of the database shared by various merchandisers offers him shoes matching the trousers he bought last month from other shopping mall. Such is the extent to which marketing capabilities might evolve by the mid-twenty-first century but in reality, it is not feasible till date. The idea behind this hypothetical development however is old – to optimize customer profitability by delivering the right messages, to the right individual customers and develop a cordial relationship. Till the hypothetical situation comes out to be true we have to focus on the basics of relationship marketing.

It was always there

Pre-industrialization marketing practices were highly individualized, relationship oriented and customized. The design of clothes, jewelries, watches, home furnishings and other consumer products were customized. Since production, those days was primarily based on customer request and demand, it did not require push form of marketing activities. The beginning of industrialization could be seen as the end of personal relationship between producers and customers. Those were the days when producers were confronted with inventories piling up that forced companies to focus on aggressive selling.

Selling, as it matured distanced the manufacturers from their customers. This situation with passage of time polarized customers and manufacturers. Customers and manufacturers in industrialization era were acting in isolation, as there was no match in customers’ demand and manufacturers’ offerings.

Manufacturers, those days, were producing what best they could and customers were left with no other option but to buy those offerings. Industrialization resulted in mass production that increased the gap between the customers and the manufacturer. The advent of mass production and mass consumption during those times led the marketers to adopt a transactional approach of marketing.

In the later part of the industrialization era, certain important developments occurred, one being the marketer’s realization that repeat-purchase by customers was critical, making it necessary to build brand loyalty. The other significant change was the development of administered vertical marketing systems whereby marketers not only gained control over channels of distribution but developed effective barriers for their competitors. This reduced the gap between the producers from the customers. However, the emphasis remained on discrete transactions. Some firms, not content with such discrete transactions, began developing long-term contracts through suppliers and service, creating ongoing interactive relationships among themselves.

The change is also observed in various other industries viz. hospitality, automobile, aviation, education. It is obvious from the changes in these mammoth industries that the phenomenon of relationship marketing has not only helped small grocery stores but also organizations with huge marketing setup.

Relationship marketing is more of use to the organizations, which have grown in operation, and whose decision makers have moved farther from the front line. Developing and sustaining long lasting one-to-one cordial relationship for the decision makers, in such organizations becomes a distant concept. Hence the onus of sustaining relationships goes down to the front line managers. Moreover environmental and organizational development factors, rebirth of direct relationships between producers and consumers are few of the factors responsible for the shift in market structure. These factors are not only instrumental in the shift in the form of marketing but also in strengthening relationship marketing.

The other factors are:
Rapid technological advancements, especially in information technology
Increased role of information technology-based interactivity
Transformation of organizations and adoption of total quality programs
Empowerment of employees
Increase in competitive intensity that shifts the focus towards customer retention
Increasing emphasis on services and service aspects of products
Focus on financial accountability and ROI on marketing initiatives
Increased emphasis on loyalty and value management
Shifts in power and control within marketing systems
Decline of traditional mass marketing techniques
Increasing focus on price, as differentiation decreases
Development of fragmented, regional, and/or global markets

Benefits Relationship Marketing
The benefit relationship marketing offers has helped it gain popularity in the recent past as an approach to develop bonding with individual constituents of the value chain of a firm operating in an industry. Players, to gain a competitive edge in an increasingly cutthroat market condition are using it as a competitive marketing weapon. Marketers are increasingly using relationship as a tool of value creation and in the process they are involving customers for their real time views on product development, designing, pricing distribution etc. It is observed that in this era of Relationship Marketing, consumers are increasingly becoming co-designers and in few cases co-producers. Let us take the instance of Texas Instruments, which established dialogue with more than 30,000 high school teachers in developing its new TI-92 calculators. In one another classic case the FMCG giant Procter & Gamble deputed 20 of its employees to live and work at Wal-Mart’s headquarters to improve the speed of delivery and reduce the cost of supplying its goods to Wal-Mart’s stores. Although some experts refer to Relationship Marketing as ‘relational relationship marketing exchange’, the actions undertaken are not always for the purpose of exchange. The parties involved cooperate to share resources for joint value creation. In certain instances, the conversations taking place may not ultimately result in a monetary exchange but may bring greater benefits to the people involved in the process. More of such instances may be found in cases like Zeppelin, the German distributor of Caterpillar that caters to the individual needs of its customers and recommends preventive maintenance, Amazon.com that maintains databases on customer preference and pro-actively advises them on purchasing books and hotels like Holiday Inn that offers customized services to customers. Relationship marketing in a few other instances brings monitory benefit to the customer without diluting the manufacturer’s profitability.