Relationship Marketing is a customer centric strategy that selectively builds long term, mutually profitable customer relationships through interactive and individualized interactions that maximize customer lifetime value.
In the current scenario of increased competition, disintermediation, experienced and demanding customers, globalization, limited marketing resources, and fast changing technologies, market oriented management is best based on a relational approach (i.e., one that does not finish its activities after the sale is completed) rather than a transactional one. It is a common mistake for traditional marketers to be too focused on getting new customers, but neglecting to keep the existing ones, although it has been demonstrated that on the average it is about 6 8 times more expensive to gain new customers than selling to the current ones. This is a ‘revolving door effect’ while trying to pull new customers through the door, the existing customers walk away. Relationship Marketing is all about making customers happy and bringing them back.
The objective of Relationship Marketing is to selectively turn existing, new, or prospective customers into loyal ones through a good understanding of needs and individual preferences, a superior service designed accordingly and a long term, mutually beneficial relationship (Dyche, 2001). It represents a comeback to the roots of traditional hospitality: knowing every single customer intimately, providing one to one solutions to customers’ requirements, and developing a continuous relation that does not expire at the end of the customer’s stay. The result is to make customers feel part of the ‘family’ and convincing them that the hospitality company truly cares about them and their problems.
Parvatiyar and Sheth (2001) argue that there are at least three aspects that articulate the uniqueness of the concept. First, Relationship Marketing relates to a one to one relationship between the company and the customer. That implies that it cannot be pursued in the aggregate but at the individual level. Second, Relationship Marketing is an interactive process that is more than a transactional exchange, as not all the contacts with the customer have a transactional component. Third, Relationship Marketing is a value added activity through mutual interdependence and collaboration between suppliers and customers.
Another important facet of Relationship Marketing is customer selectivity. That comes from the understanding that not all customers are equally profitable for a company. The hospitality company must be selective in tailoring its marketing efforts by segmenting and selecting appropriate customers for specific marketing programs.
One of the key aspects for the success of a Relationship Marketing strategy in the hospitality industry is to understand it as a company wide business strategy. Thus,
Relationship Marketing is much more than a mere technology solution: tools such as Internet, relational databases, data mining, and data warehousing; and techniques such as collaborative filtering, expert systems, and artificial intelligence are increasingly being applied for managing information on customer interactions. But technology, despite being a core component of Relationship Marketing is not the sum total of it. Relationship Marketing is a culture, a way of thinking, a set of values, and a way of doing things. True Relationship Marketing involves the totality of how hospitality companies approach their business and interactions with customers. It is a whole attitude toward customers and employees supported by certain systems, processes, and technologies. Projects that focus on the technology tools and not over business objectives are doomed to failure.
Relationship Marketing affects the whole organization: not only marketing or IT is involved. Successful Relationship Marketing consists of a holistic business philosophy, affecting everyone in the organization, in order to align business activities and customer needs. It involves the integration of marketing, sales, customer service, frontline employees, and the back office. The frontline will be key in determining customer needs, preferences, and service expectations; and in providing personalized service as a result of that information and the support of the organizational structure. Customer contact employees need to know how to listen, probe customers for their needs, handle objections and complaints, cross sell, and make referrals. Back office departments, such as accounting are key in providing support and in organizing this information. Human Resources is responsible for providing the necessary training and support structures (performance assessment, reward and recognition, etc.).
There are four basic components of a Relationship Marketing system as follows:
1. Identification of customer needs and preferences and storage of all these data in the appropriate databases to develop a complete picture of the customer by actively gathering, organizing, and analyzing customer data.
2. Sorting of the data in order to obtain customer profiles that indicate characteristics and patterns meaningful for the organization. The analytical components of a Relationship Marketing strategy include data marts, decision support tools, customer behavior modeling, and analytical tools. The customer data that are captured within the ‘operational’ components of a Relationship Marketing system are stored, retrieved, and analyzed for performance management and results measurement.
3. Interaction with the customer: This includes face to face, telephone, mail, e mail, interactive voice response systems, and all the possibilities that the Web 2.0 brings about. The objective is to put in practice the customer contact strategies designed and to obtain even more information to feed the databases through database marketing techniques (Robledo, 2002). Direct online communications with customer anytime and anywhere, and customer service centers that help customers solve their questions are important elements but in the hospitality industry the front office customer touch points become crucial. And obviously, as the Internet is the most effective and efficient means of information exchange worldwide, there is a high potential for the cusses of the Internet in building relationships with target customers. Addressability, i.e., enabling the business firm to send tailor made message content to a smaller target audience and/or individual customer and interactivity (Liu, 2000) are the two important features of Internet for enabling Relationship Marketing to have paramount of importance, especially in the tourism industry.
4. Measurement and metrics: Periodic assessment of results is needed to evaluate if the programs are meeting expectations. Predetermined metrics for a Relationship Marketing project must include measurements of increased profit, decreased spending, and increased market share. Incorporating customer behavior analysis software can establish effective customer profitability metrics.
Relationship Marketing is closely related to Customer Relationship Management (CRM) (Parvatiyar & Sheth 2001), and other less important concepts such as one to one marketing and after marketing (Vavra, 1992). Although they can be considered almost synonyms, there are some differences that can be observed between Relationship Marketing and CRM. The main difference is that CRM is more holistic in its nature and more technology oriented.
In conclusion, Relationship Marketing is a critical strategy for achieving a competitive edge in the hotel industry since it gives hoteliers the opportunity of being closer to customers than ever and maintaining a long lasting relationship with every one of them. Furthermore, Relationship Marketing restores the personal touch that technology is often accused of destroying.
Dyche, J. (2001). The Relationship Marketing Handbook: A Business Guide to Customer Relationship Management. New York (NY): Addison Wesley.
Liu, Zhenhua (2000). Internet Tourism Marketing: Potential and Constraints. 4th International Conference ‘‘Tourism in South east Asia & Indo China: Development, Marketing and Sustainability’’, June 24 26.
Parvatiyar, A., & Sheth, J. (2001). Customer relationship management: emerging practice, process and discipline. Journal of Economic and Social Research, 3(2), 1 34.
Robledo, M. A. DBM as a source of competitive advantage for the hotel industry in: D. Buhalis and W. Schertler (eds.): Information and communication technologies in tourism, 1999, op. cit., pp. 36 45.
Vavra, T. G. (1992). After marketing: How to keep Customers for Life Through Relationship Marketing. Illinois: Irwin.
Winer, R. S. (2001). A framework for customer relationship management. California Management Review, 43(4), 89 107.