This essay aims to critically analyze the marketing theory of relationship marketing and its sub-concept of customer loyalty. The context for the analysis is the increase in Apple’s profits, as references by a 2021 New York Times article (Nicas, 2021). Last quarter’s revenue was unprecedently high and reached $ 81.434 billion, 36% more than in the third quarter of the fiscal year 2020. Also, product sales brought the company $ 63.948 billion, and services – $ 17.486 billion. Operating income for the quarter was $ 24.126 billion, up from $ 13.091 billion a year ago. Net profit for the year increased from $ 11.253 to $ 21.744 billion. This essay will define the theory of relationship marketing and its related fundamental concept of customer loyalty and outline its application and impact on business performance for Apple.
Concept Exploration
Currently, broader interpretations of relationship marketing are widely used. Thus, Gummesson (2008) defines relationship marketing as an integrated effort to build, maintain, and develop a network of relationships with individual consumers for mutual benefit through interaction and individualization of relationships over a long time. Already here, the scope of relationship marketing is significantly expanded and extends to interaction with individual consumers. Developing this direction, Lian and Yoong (2017) offer a strategic view on relationship marketing, emphasizing the need to increase the role of the consumer and the transition from consumer manipulation to the formation of genuine consumer interest (communication and knowledge exchange), the search for forms of direct involvement of the buyer in interaction with the firm.
Therefore, the central concept of this theory is customer loyalty – the commitment of consumers to one brand and the willingness to buy only its products, regardless of comfort and price (Pekovic & Rolland, 2020). To grow loyal customers, companies use a variety of marketing strategies, including loyalty programs, bonuses, and gifts. Here, the coordinating component of marketing is clearly highlighted, focusing on creating mutual value in the interaction process of various parties. Despite the fact that the new relationship marketing recognizes the diversity of market interactions, relationships with customers stand out in a separate priority group.
Application and Reasoning
Since 2007, Apple has been one of the first companies to implement the NPS system. Since then, all employees have supported this system, and the corporation has taken actions on a daily basis to increase customer loyalty to the brand. Loyalty index NPS (Net Promoter Score) – an index for determining the commitment of consumers to a product or company (index of readiness to recommend), is used to assess readiness to repeat purchases (Baehre et al., 2021).
Apple uses NPS to get reliable customer feedback on a brand. Immediately after the customer makes a purchase, the company sends them a survey asking them to rate their level of satisfaction and the chance that they recommend products to friends. Apple’s NPS team uses these responses to clarify the reasons that lead customers to recommend a brand. Each employee can view the responses of customers and make changes in their work based on this information.
Following an NPS survey, Apple Store representatives identify “brand critics” within 24 hours. Research has shown that companies that quickly close cycles and resolve conflicts with unhappy customers obtain a 10% increase in sales (Customer Guru, 2021). More importantly, after satisfying dissatisfied customers within one day, Apple achieved a better return on investment. Subsequently, due the work with NPS, already loyal “brand critics,” purchased more Apple products and services compared to other customers (Gocheva, 2021). Additional sales exceeded $ 25 million in the first year of experience with NPS (Gocheva, 2021). Thus, relationship marketing and customer loyalty stay at the core of Apple’s business strategy and profits.
Theory and Argument
As noted, an essential difference between relationship marketing and traditional marketing is that relationship marketing shifts the emphasis and sphere of influence of marketing from individual dual buyer-seller relationships to the entire complex of company relationships. At the same time, the relationship “consumer – supplier” remains the critical area of ​​interest of relationship marketing, as well as marketing in general (Peng & Li, 2018). Many researchers, recognizing the benefits of expanding the central area of marketing, note that the focus of marketing will always be on consumers and relationships with them (Steinhoff et al., 2019).
The formation and maintenance of consumer loyalty to the brand are realized through the creation of additional products. That is, Apple uses the iPhone as a platform for developing related products and their connection with each other. Consequently, Apple’s marketing strategy is aimed at maintaining the image of the company and its products as unique, innovative products made with consumer care, operating on a single technology platform.
Business Implications
The key business implication of relationship marketing is brand image. When choosing a product, a modern consumer is guided not only by price, quality, variety of assortment, reliability, and brand awareness but also by the quality of service. The Covid-19 pandemic is forcing companies to maintain and build relationships with consumers at a time when their world is upside down.
Today, businesses must drive sales in times of extreme economic hardship, which is at odds with new priorities and consumer preferences posed by the threat to life and income that looms over everyone (Sheth, 2020). Sustainable crisis communication defines what should and should not be said to consumers during protracted crises. It emphasizes the need to notify existing and potential customers of the company’s plans for customer support and new value creation that can be useful to the consumer (Sharma et al., 2020).
For example, Apple knew about the upcoming store closings and anticipated this even before the corresponding government orders. They reached out to their customers to shop online, recalling their convenient return policy and helpful call center staff who provide customer support. In Apple’s advertising, people who have bought their devices look happy and satisfied, and this, undoubtedly, is transferred into people’s minds, affecting the emotional component. In their advertising, they focus on ease of presentation, speak the same language with consumers and rely on the reliability of their gadgets, which inspires trust among potential customers. Also, this company pays great attention to visual merchandising.
Today, Apple continues to improve NPS to measure customer satisfaction continuously, and, as a result, the company is one of the top leaders in the market. Apple achieved the world-class Net Promoter Score due to four key tactics — starting with the experience of the customer, not the product; listening carefully to customer reviews; quickly closing loops and getting all Apple employees involved in NPS. As a result of its success, Apple has generated good ROI and increased sales.
References
Baehre, S., O’Dwyer, M., O’Malley, L., & Lee, N. (2021). The use of Net Promoter Score (NPS) to predict sales growth: insights from an empirical investigation. Journal of the Academy of Marketing Science, 1-18.
Customer Guru (2021). Apple Net Promoter Score 2021 Benchmarks. Web.
Gocheva, C. (2021). Four Key Ingredients Fuelling Apple’s High Net Promoter Score. Customer Gauge. Web.
Gummesson, E. (2008). Total relationship marketing, 3rd ed. Butterworth-Heinemann.
Lian, S. B., & Yoong, L. C. (2017). The effectiveness of strategic relationship marketing: exploring relationship quality towards customer loyalty. International Business Research, 10(12), 159-166.
Nicas, J. (2021). Apple’s profits nearly doubled in the latest quarter. The New York Times. Web.
Pekovic, S., & Rolland, S. (2020). Recipes for achieving customer loyalty: A qualitative comparative analysis of the dimensions of customer experience. Journal of Retailing and Consumer Services, 56, 102171.
Peng, M. Y. P., & Li, Y. (2019). The impact of expressive brand relationship on brand loyalty: Drawing on relationship marketing theory. In 2019 16th International Conference on Service Systems and Service Management (ICSSSM) (pp. 1-5). IEEE.
Sharma, P., Leung, T. Y., Kingshott, R. P., Davcik, N. S., & Cardinali, S. (2020). Managing uncertainty during a global pandemic: An international business perspective. Journal of business research, 116, 188-192.
Sheth, J. (2020). Business of business is more than business: Managing during the Covid crisis. Industrial Marketing Management, 88, 261-264.
Steinhoff, L., Arli, D., Weaven, S., & Kozlenkova, I. V. (2019). Online relationship marketing. Journal of the Academy of marketing science, 47(3), 369-393.