A Match Made In Heaven? Customer Loyalty And Relationship Marketing
Customer acquisitions can cost up to 25 times more than customer retention, therefore the ability to build relationships is key. This blog will define what relationship marketing is and how vital it is in helping to keep customers loyal. It will analyse whether Customer Loyalty and Relationship Marketing is indeed a match made in heaven?
What is Relationship Marketing?
Relationship marketing is a process that combines the ability of winning over a target audience in combination with keeping them as long term loyal customers. Relationship marketing is defined by leading marketing scholar Evert Gummesson as a ‘strategy in which the management of interactions, relationships and networks is a fundamental issue’. Gronroos reflects it is used to ‘establish, maintain lasting relationships between firms and its customers for both sides’. The main purpose of relationship marketing is maximising profitability and customer loyalty with the ambition of providing the best possible service.
In order to provide the best possible customer service, four key virtues of relationship marketing are necessary. These are as follows: Trust, Commitment, ‘Communication’ and ‘Conflict Handling’. We will now go over each in detail and suggest why each is so important in their own way. Then we will analyse how they can work to combine customer loyalty and relationship marketing.
Trust in relationship marketing can be defined as the willingness to rely on a partner who you have confidence in. The key to trust in relationship marketing is the ability to keep promises. In addition, the need to be able to rely on the quality of a promise provided by the other party. An Edelman study states that 81 percent of consumers said that they need to be able to trust the brand in order to buy from them. Trust for a customer base is key to success with existing customers. Most customers are only willing to stay if provided with a real reason to do so.
Relationship marketing allows you to build and maintain commitment to a brand. Customers can become attached to certain salespeople and it is crucial. One way that salespeople can build these relationships is with follow-up calls with customers checking in with them without selling anything . A similar approach is email marketing and personalised messaging with both creating a bond between the company and the customer. This is due to the customer feeling seen and valued.
Break of trust
Crucially, a break of trust between the customer and the company can lead to a defection which could create a poorer reputation. 1 in 3 customers will leave a brand they love after just one bad experience, while 92% would completely abandon a company after two or three negative interactions. A key contemporary example where a loss of trust has been detrimental to a company can be reflected in the United Airlines passenger incident in 2017. Here, David Dao was dragged from an overbooked flight by staff after refusing to leave voluntarily. This incident caused a worldwide backlash and a significant drop in stock.
In order to keep a customer loyal, trust is vital. As you have seen making sure that a break of trust does not occur is just as important.
Commitment in relationship marketing reflects a higher obligation to make a relationship succeed in a mutually beneficial way. There are two different types of commitment when looking at relationship marketing. These are calculative and affective commitment. Calculative commitment is focused on the economic/fact-based reasoning with companies relying on the quality of the product or service. In contrast, affective commitment is more about the personal development of a relationship between a customer and a firm. These two types of commitment can be crucial in building customer loyalty through relationship marketing. However, affective commitment with the focus on the emotional connection may be the easiest to be achieved of the two.
A key objective of relationship marketing is to ‘foster customer loyalty and deeply held commitment to re-buy a preferred product or service’ and this is why commitment is so important. One way in which you can enable relationship marketing commitment is to mold your social media approach so that it fits your audience. The ability of creating a relationship with a customer that makes them want to to visit your social media whilst making them wanting to stay there.
Building commitment through social media
Social media provides a direct communication channel which used to be more difficult to achieve with traditional methods of advertising. Crucially, social media uses a two-way channel that gives the power to the customer to have a conversation with the brand. This is instead of speaking at the customer. This communication channel leads to a creation of stronger bonds, commitment and if handled right: trust. However, there is a balance needs to be struck. Any problems should handled with the utmost amount of care, social media disasters have tarnished many a brand’s reputation.
Relationship marketing communication means keeping in touch with valued customers in a timely trustworthy manner. However, what’s crucial is the ability to communicate proactively if a problem occurs. There needs to be clear transparency between the customer and the company. This is crucial in building the trust and commitment and creating a strong bond between both parties.
Improving communication through loyalty programs
This is where loyalty programs come into play and offer a great platform for communication. One key way to implement the communication aspect of relationship marketing is to create your very own loyalty program. Loyalty platforms can leverage relationship marketing in numerous ways. These include: keeping in touch at all times through apps, push notifications and more. Tiered loyalty programs can also help to segment a customer audience because this leads to collective commitment and trust.
In addition, another important aspect of creating your own loyalty program is to ensure that your program is genuinely attractive to customers and provides true value to the customer. The possibilities provided by marketing modules within loyalty programs include push notifications, active campaigns and targeted messaging. All this helps to keep the customer engaged which is crucial to the success of a loyalty program. Have a look at the marketing module that White Label offers here.
Conflict handling is a crucial component of relationship marketing. The ability to perceive what conflicts can arise with customers and being able to deal with them is crucial. Therefore this can be a make or break event for a customer. There's a chance they'll leave the company if they're not satisfied with how an issue has been dealt with.
Conflict handling in practice
One recent way that a brand managed to deal with a major incident in a pragmatic manner was KFC’s management of the chicken shortage that led to 700 stores closing. Their jovial tone whilst offering transparency on their social media in response to this crisis reflected a tactic of handling conflict successfully. So much so that it didn’t lead to the possible irreparable damage that could have been garnered from such a mistake. This reflects another way in which social media can build a relationship with a customer.
Customer loyalty means keeping customers around and the principle way to do this is to build a relationship with them. Moreover, they need to be seen as a company that treats customers as individual people and VIPs. This is to ensure that customers don't feel ignored and that the company and customer relationship is intact.
What do customer loyalty and relationship marketing have in common?
Relationship marketing and customer loyalty are interlinked. There is a need for both schools of thought to harmonise in order to create the perfect customer experience. In order to have customer loyalty, the principles of relationship marketing need to be put into place.
As you have seen, trust, commitment, communication and conflict-handling are all key components of relationship marketing and each offer their own merits. However, a combination of all four is crucial to ensure a balanced relationship and to ensure customer loyalty.
Are you seeking a trusted partner for your loyalty journey who can allow you to build a lasting relationship with customers?
Look no further. You’re in the right place. White Label Loyalty is here for you.
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Jack was our Marketing Assistant. He helped with content creation including writing the blog posts you love to read!