Relationship Marketing

The term relationship marketing implicitly recognizes the importance of both the buyer (the customer) and the seller in the marketing process. Beginning in the 1960s, marketing practitioners and scholars (like Theodore Levitt and Philip Kotier) began to emphasize that marketing truly was an “exchange” in which both parties shaped the direction and outcome of the ultimate product offering. Marketing, according to this perspective, was not equivalent to merely selling a finished product to a passive audience who lacked input; rather, marketing, to be most effective, needed to encompass a much broader range of activities that extended far beyond the traditional marketing department and it needed to involve more players, including customers. As a new breed of marketers stressed, it was essential that customer feedback be more fully incorporated into the planning and execution of marketing initiatives.

This emphasis on the critical roles played by customers (not just sellers) in the marketing process led to the rise in the 1980s of the term relationship marketing. According to this dogma, organizations, if they expected to be successful, needed to build long-term relationships with their customers. The tasks of listening to customers and keeping them engaged and satisfied were heralded as not only good for corporate profits but also socially responsible business practices and hence also good for consumers and society writ large.

Concurrent with organizations' growing awareness of the necessity of building deep relationships [Page 1357]with buyers was a rising focus on “customer lifetime value,” which recognized the many benefits that a firm accrued from keeping customers fully satisfied and coming back for additional purchases for the remainder of their lives. The term relationship marketing, like customer lifetime value, conveys the importance of customer retention. Marketing is not solely about making a one-time sale to a customer. It is, as Fevitt once said, “after the sale is over” that the challenge of long-term customer relationship-building begins in earnest.

The rising importance of relationship marketing is well exemplified by the trajectory of the automobile industry's approach to customers. In the 1920s, Henry Ford famously said that a customer could have a car in any color he wanted, as long as it was black. While this simplified approach was conducive to achieving economies of scale and hence temporarily quite effective, Ford ultimately fumbled by ignoring customers' wishes. Competitors like General Motors rushed to fill the void in model designs. Automobile manufacturers (as well as other organizations) learned the importance of listening to customers' wishes and incorporating their feedback into the products and services being offered.

The buyer-seller relationship, however, does not end at the point of purchase. Extended warranties, customer service telephone lines, satisfaction surveys, and installment plans are just several of the ways the relationship evolves and builds after the sale is consummated. A customer satisfied with the post-purchase experience presumably is much more likely to buy from the same manufacturer again when down the road, he finds himself in the market for a new product to replace the old one.

The term relationship management remains popular today, although the concept is broadening to include more parties than strictly the buyer and seller. Organizations are engaged in many relationships, such as with vendors, suppliers, and other stakeholders. Today, a growing number of organizations are beginning to appreciate more fully the importance of nurturing these relationships, too, and moving them from a short-term, often adversarial orientation to a long-term, mutually beneficial relationship basis.

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