Marketing scholars agree that exchange is a basic framework for understanding the market. Bagozzi (1975) stated that marketing is the process of creating and resolving exchange relationship. Organizations or individuals need social and economic exchange to satisfy their needs. It means marketing could take place either in social or economic relationships, such as between retailers or between ultimate consumers, or within a family structure relationship. Relationship has become an inevitable feature in today’s business environment. Businesses are increasingly emphasizing relationships they have with their suppliers and customers and are demanding that they adhere to high standards. The pressure to compete also makes it necessary for the development and maintenance of relationships between buyers and suppliers.
Due to rapid changes in market place and marketing environment, firms have to change their marketing strategies and tactics from a simple market-based transaction to a long-lasting relationship, which provides better competitive advantages. The main advantages in relational based exchange are reduction of uncertainty of transactions, reduction of transactional costs and the synergy of combining complementary operations. Furthermore, relationship-based transactions lead to lower customer turnover and higher customer satisfaction, leading to lower service costs, and higher effectiveness of selling expenditure.
The importance of relational exchange has emerged as a major focal point for business strategy over the past decades, and this can be attributed to factors such as the blurring boundaries between markets or industries. Berry (1983) was among the first to introduce the term ‘relationship marketing’ as a modern concept in relational exchange-based marketing. He suggested that relationship marketing should be defined as “attracting, maintaining and…enhancing customer relationship”.
The concept was further redefined by Gronroos (1994) as “to identify and establish, maintain and enhance and when necessary, terminate relationships with customers and other stakeholders, at a profit so that the objectives of all parties involved are met; and this is done by mutual exchange and fulfillment of promises”. Meanwhile, Berry and Parasuraman (1991) defined relationship marketing in service area as “relationship marketing concerns attracting, developing, and retaining customer relationships”. They identified three different levels of relationship marketing. The first is to encourage customers to repurchase the product through price allowances, which is relatively easy. The second level is social bonding. In this level a more permanent way to retain a customer to the business through social setting is used, such as greeting cards, special gifts and holiday trips. A structural relationship is the third level of relationship marketing. It ties both buyers and sellers together in mutually beneficial relationship.
Dwyer et al. (1987) provided an early and widely cited conceptualization of relationship marketing. Pulling from the social psychology literature and marriage and family, they suggested that the relationship development process evolved through five stages: awareness, exploration, expansion, commitment and dissolution. The appropriateness of relationship development is further supported by Morgan and Hunt (1994) who categorized relationship with reference to focal firm and its relational exchanges in four categories:
(1) Supplier partnership such as partnerships between focal firm and goods or services supplier.
(2) Lateral relationship that is partnership between focal firm and institution with the same level such as alliances with competitors, with non-profit organizations and joint research and development with government.
(3) Buyer partnerships such as long-term exchanges between focal firm and its ultimate customer, relational exchange of working partnership like channel members or intermediary customers.
(4) Internal partnerships with focal firm such as with functional departments, employees, and business units.
In other words, they defined relationship marketing as “all marketing activities directed towards establishing, developing, and maintaining successful relationship exchange”. From the discussion above, it appears that strengthening relationship involves interactions among several functional areas and the emergence of strong personal relationship between individuals, mutual problems solving and informal adaptations, which occur between the two companies.
Before we start with the importance of Relationship Marketing in retailing, let’s discuss on the key in building loyalty in a brand. Now-a-days during this 21st century era, more and more retailers are realizing that the key to building a brand loyalty will be to:
- Develop interdependent and mutually satisfying relationships with their customers: The relationship between the retailers and their customers needs to lead to a “Win-Win” situation for both parties. If the products and services offered by the retailers do not deliver satisfaction to the customers then the customers will not return back to the retailer’s outlets. In addition to that, both parties need to take part in the exchange process voluntarily, as mutual enthusiasm and participation will strengthen their relationship with each other.
- Make sure that their walk-in customers return: The ultimate goal of relationship marketing is to gain loyalty from the customers. So, retailers need to make sure that their marketing efforts will result in repeat purchases by their walk-in customers.
- Shift away from simple transactional marketing to relationship marketing: In a retail set up it is very difficult to ensure customer’s dedication towards the retail brand, as the competition is intense and there are fewer barriers for entrance by the new comers in the industry. Therefore, the retailers evolve their traditional marketing practices from transactional centered towards relationship centered. By this approach, they will have mechanisms and processes to build and enhance their relationships with their walk-in customers.
According to the Pareto Principle, 80% of our sales come from 20% of our customers. This means to keep customers returning, we need to help them remain loyal to our stores.
Satisfy the customer
The easiest, and possibly the most affordable, way to build customer loyalty is to satisfy the customer. Sometimes this is easier in theory than in practice. Customers come in all personalities and with different objectives. Some people are even impossible to please.
So how does a retailer appease a large segment of the population? Begin by implementing the most basic customer service rule: treat the customer the way you want to be treated when shopping.
In order to satisfy most customers and keep them happy, retailers can institute the following customer service practices in their store policy manual. Just be sure all employees are working towards satisfying the customer.
- Greet every person as they enter the store
- Let shoppers know you’re available for help, if needed
- Offer your expert advice
- Provide services beyond the customer’s expectations
- Thank every shopper as they exit the store
Acknowledge the customer
Do you remember the television show Cheers? Each time George Wendt’s character entered the bar, everyone would shout “Norm!” The truth is customers love to be acknowledged. Not only do they want retailers to greet them when they enter the store, but they feel special if that retailer knows them by name. We can’t expect the retailer to remember each and every shopper’s name but there are several instances where we have the opportunity to put a name with a face.
- Introduce yourself to the customer. He/she may offer their name as a reply.
- Customers provide their name when writing a check, paying by credit or filling out forms.
Once you know the customer’s name, use it every chance you get. Creating a dialog, and ultimately a relationship, with the customer can reinforce loyalty.
Reward the customer
From store cards that discount certain items, to free gifts with purchase, there are numerous ways to incorporate a customer reward program. Before you spend a lot of money in marketing, consider what type of reward you value most as a shopper.
To some customers, a real reward may be a simple gesture of appreciation. Something small and inexpensive can read like a true “thank you for your business.” When you choose the reward, you’ll probably agree spending a few dollars on a loyal customer will get you hundreds of more in revenue. It may even bring you referrals.
Follow Up with the customer
Like a good friend, loyal customers want to know that you care about their needs and interests. Here are a few ways to keep in touch:
- Send personalized mailings
- Invite them to special in-store events as a VIP shopper
- Ask about their family or events in their life
In the end, we can conclude by saying that consumers appreciate knowing that someone is thinking about them. In return, a loyal customer will keep those cash registers working. Providing excellent customer service is a means to an end, but the intention should always come from the heart of the retailers, themselves.