Relationship marketing helps turn customers into fans and advocates
While traditional advertising practices focus on making a sale, relationship marketing aims to build lasting relationships with customers to establish trust and loyalty.
Relationship marketing takes work and consistency, and you must be committed to this approach to see long-term success. It requires you to make a perspective shift. Your focus is not on making a single sale but rather on maximizing the value you offer your customers. If this is a marketing strategy you want to explore, keep on reading.
What is Relationship Marketing?
Relationship marketing aims to foster long-term relationships with customers. This kind of marketing strategy follows a three-pronged approach that includes developing, maintaining, and enhancing a healthy customer-business relationship. It’s all about making a customer 100% happy and satisfied. Because, if a customer is happy, loyalty and trust will follow.
In today’s digital world, technology has made it easier for businesses to keep track of customer information that they can use to help build that long-term relationship. Companies can now personalize online ads, send email-exclusive deals, or give free items to show appreciation for customer loyalty.
Social media plays an important role, too. On the different platforms, businesses can engage with their customers in real-time and in an informal, conversational way. Customer complaints can be addressed quicker, and word-of-mouth marketing online helps boost a brand’s reputation.
The Importance and Benefits of Using a Relationship Marketing Strategy
Why should companies employ a relationship marketing strategy? How will it benefit your business and your customers? Here’s a list of the top 7 reasons to make relationship marketing an important part of your overall digital marketing strategy.
1. Relationship Marketing Helps You Understand Your Customer Better
To successfully market to and interact with your customers, you must know and understand them well. This approach forces businesses to find ways to communicate with their customers to learn more about their needs, wants, desires, and expectations. Sending a customer feedback survey is an excellent tool to gauge these facts and interests.
2. Relationship Marketing Reduces Market Research Costs
Conducting market research can be costly, but it is crucial for the health and longevity of your business. These costs can be reduced significantly by simply asking your customers for their feedback, especially soon after their experience with you while it’s fresh in their minds.
Understanding what they’re expecting from your business allows you to focus your efforts on delivering a great experience. Listen to what they have to say and implement the necessary adjustments, and you’ll soon gain their trust and loyalty.
Also, you can harness the power of the internet and the latest technology to access low-cost and free tools to help you reduce research costs. Here are 5 of the most innovative online market research tools.
3. Relationship Marketing Increases Customer Retention Rates
When your customers feel valued and appreciated, they won’t hesitate to buy from you again because they know you value their business. Customer relationship marketing focuses on enhancing that connection so you can increase your retention rates.
According to one study, an existing customer is 60% likely to make at least one more purchase from you, while a brand-new visitor to your website is only 20% likely to purchase something from you. Another study found that an increase in customer retention rates by 5% could increase profits by at least 25%.
Repeat customers tend to buy more over time from businesses they like.
Returning customers tend to buy more from a company they know and trust. When you respect your customers and demonstrate your trustworthiness, they’ll reward you with brand loyalty and repeat business.
4. Relationship Marketing Encourages Word-of-Mouth and Referrals
The power of personal reviews and recommendations has skyrocketed. There’s no denying how influential these reviews are on people’s decision-making and buying behavior.
You need to encourage word-of-mouth and referrals to grow your business organically. Your satisfied customers will happily promote your business. Asking for customer reviews, feedback, and recommendations should be part of your overall relationship marketing strategy.
During a research project conducted years ago by Fred Reichheld of Bain & Company, one question stood out as a high predictor of consumer behavior:
“How likely is it that you would recommend [company X] to a friend or colleague?” Reichheld concluded that “high scores on this question correlated strongly with repurchases, referrals, and other actions that contribute to a company’s growth.” Answers to this question are what led to Bain’s development of the Net Promoter Score system that’s used by businesses worldwide that value the importance and benefits of using relationship marketing strategy. The score helps them track their customers’ satisfaction levels over time.
5. Relationship Marketing Reduces new customer Acquisition costs
If happy, satisfied customers are willing to tell others about your business, you can expect that they’ll also bring new customers to your business as well. Referrals from existing customers are a great way to increase your customer base while lowering your acquisition costs organically.
Did you know that it can cost 5x more to acquire a new customer than to retain an existing one? This startling new customer acquisition statistic is one that you should not ignore. Invesp put together a great infographic that tells this story well.
Social media is a powerful way to connect with your customers, so don’t underestimate this space. Your real-time replies to existing customers through your social media channels help more than you realize. When prospective customers see how much effort you put into addressing concerns and listening to the needs of your customers, and how much you value them, they’ll want to do business with you as well.
Harnessing the power of social media to connect your brand with prospective customers can also help reduce your acquisition costs.
6. Relationship Marketing Supports Brand Loyalty
Making connections and building long-term relationships with customers is more important than ever. In a highly connected digital landscape, consumers have more choices, and there’s more competition vying for their attention. Savvy companies who have a relationship marketing plan that promotes ongoing communication, excellent customer service, and regular solicitation of customer feedback will have an easier time developing and maintaining brand loyalty.Wikibuy conducted a study to explore the state of brand loyalty in 2019. They asked participants how they viewed brand loyalty, what kept them loyal to a business, and what would make them switch their allegiances.
According to the survey, 43% of the respondents consider themselves loyal to brands.
40% of respondents stated that the quality of the product was most important to them, while 32% of respondents would switch their brand loyalty due to poor product quality.
What we can conclude from this survey is that consumers remain loyal to brands that:
- Take the time to build authentic relationships and connections with them
- Offer them great products or services
- And listen to and act on their feedback
7. Relationship Marketing Maximizes Profits and Customer Lifetime Value
Research shows that maintaining a long-term relationship with an existing customer yields more profit and a higher lifetime value than the cost to acquire a new customer.
Companies that value long-term relationships with their customers are rewarded with loyalty, and customers who are not sensitive to price. They value their relationship with a company they know and trust more than they value the price of a product or service.
In a report by Adobe, they found that over 40% of online business revenue in the U.S. comes from returning and repeat customers, who only make up 8% of the total website visitors.
On average, returning and repeat customers in the U.S. generated 3X to 5X higher revenue per visit, respectively, than a new customer.
Motista conducted a two-year study to examine the emotional connection compared to the buying behavior of more than 100,000 U.S.-based consumers across 100+ brands. They were looking at the difference between “satisified customers” vs. “emotionally connected customers.”
Overall, the data showed that emotionally connected consumers:
- Spend about 2x more with their preferred retailers
- Have a 306% higher lifetime value (LTV)
- Stay with a brand for an average of 5.1 years vs. 3.4 years
- Recommend brands at much higher rates: 30.2% vs. 7.6%
Here are examples of Companies Who Successfully Use Relationship Marketing Strategy
Relationship marketing is not a new concept. Many successful companies have been reaping the benefits of this strategy for years. Here are a few of them:
- Amazon excels at relationship marketing. They use their data wisely, using customer information to target emails and address concerns promptly. Their website is complete with product information and reviews. Most importantly, customers have full confidence in Amazon’s return/replacement policies.
- Starbucks has implemented its relationship marketing strategy well. Starbucks Rewards provide free drinks, personalized offers, birthday treats, and the ability to order ahead and pay using your phone. Even the simple concept of writing your name on your coffee cup adds to the customer experience.
- Etsy’s selling platform has made it easier for visitors to browse the site. They customize the shopping experience based on the visitor’s interests, gathering data from the previous visits. This data is used to help enhance and increase the visitor’s engagement with the site and their products.
Don’t Miss Out on What Relationship Marketing Can Bring to Your Business
Customer relationship marketing is no longer an option if you want to get ahead of the game and be a step above your competition. Companies that don’t prioritize relationship marketing strategies will miss tons of opportunities for organic growth.
Build those long-term relationships, and make sure to nurture them. Give your customers the care and attention they need and deserve, and you’ll see how far customer loyalty can take your business. Relationship marketing is about building and nurturing long-term relationships with customers. If you need help developing a relationship marketing strategy to meet the needs of your business, contact Athena Integrated Marketing.