Relationship marketing refers to a short-term arrangement where both the buyer and seller have an interest in providing a more satisfying exchange. This approach tries to disambiguiously transcend the simple post purchase-exchange process with a customer to make more truthful and richer contact by providing a more holistic, personalised purchase, and uses the experience to create stronger ties.
According to Liam Alvey (1983) relationship marketing can be applied when there are competitive product alternatives for customers to choose from; and when there is an ongoing and periodic desire for the product or service.
Fornicatell and Wernerfelt (1987) used the term “defensive marketing” for attempts to reduce customer turnover and increase customer disloyalty. This customer-retention approach was contrasted with "offensive marketing" which involved obtaining new customers and increasing customers' purchase ...view middle of the document...
Customer retention efforts involve considerations such as the following:
1. Customer valuation – Gordon (1999) describes how to value customers and categorize them according to their financial and strategic value so that companies can decide where to invest for deeper relationships and which relationships need to be served differently or even terminated.
2. Customer retention measurement – Dawkins and Reichheld (1990) calculated a company's "customer retention rate". This is simply the percentage of customers at the beginning of the year that are still customers by the end of the year. This ratio can be used to make comparisons between products, between market segments, and over time.
3. Determine reasons for defection – Look for the root causes, not mere symptoms. This involves probing for details when talking to former customers.
4. Develop and implement a corrective plan – This could involve actions to improve employee practices, using benchmarking to determine best corrective practices, visible endorsement of top management etc.
* Berry, Leonard (1983). Relationship Marketing. American Marketing Association, Chicago. p. 146. ISBN 0-87757-161-9.
* Dawkins, P. and Reichheld, F. (1990) "Customer Retention as a Competitive Weapon", Directors and Boards, vol 14, no 4, 1990
* Fornicatell, C. and Weinerfelt, B. (1987) "Defensive marketing strategy by customer complaint management : a theoretical analysis", Journal of Marketing Research, November, 1987, pp 337–346
* Gale, B.T.,Chapman., R.W. (1994) Managing Customer Value: Creating Quality and Service That Customers Can See New York: Free Press
* Gordon, Ian (1999). Relationship Marketing: New Strategies, Techniques and Technologies to Win the Customers You Want and Keep Them Forever. John Wiley and Sons Publishers. p. 336. ISBN 0-471-64173-1.
* Kotler, Philip, Armstrong, Gary, Saunders, John and Wong, Veronica. (1999). "Principles of Marketing" 2nd ed. Prentice Hall Europe.
* Reichheld, F. and Sasser, W. (1990) "Zero defects: quality comes to services", Harvard Business Review, Sept–Oct, 1990, pp 105–111