Relationship Marketing and Loyalty Program Effectiveness in Global Markets

In the competitive and ever-changing environment of modern markets, customer loyalty is an expensive commodity to have. With the availability of multiple replacement products and services, customers often choose the company they know and trust. Thus, cultivating meaningful relationships with customers is paramount in order to retain market shares. The theory of relationship marketing addresses the issues of emotional attachment between customers and companies. Many businesses seek to create personalized services for their clients in order to cultivate relationships, making it a powerful marketing tool. However, any powerful and effective strategy has the potential to make things worse if mishandled. The purpose of this paper is to analyze the potential benefits as well as hazards and dangers of the relationship market in order to develop a tracking and measurement process for competitive situations.

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Literature Review

Customers tend to have a somewhat positive opinion towards relationship marketing in general. Jones et al. (2015) report that around 70% of customers tend to approve of the goals of relationship-building strategies, and roughly 60% of them would engage a company with a sound relationship marketing strategy over a customer that does not engage as much with their customers. There is some indication about what do the customers prefer in these relationships as well. According to Jones et al. (2015), clients prefer to be in control of the relationship as a viable option rather than have it enforced on them. Some of the preferred qualities in a customer relations strategy include low intrusion, high levels of honesty, and tangible results. This article provides solid evidence that high levels of intrusion, fake interest, and high demands towards customer commitment are not appreciated by the majority of the opinion-makers participating in the study (Jones et al., 2015).

Although relationship marketing is a valid strategy for many companies to use, it must be understood that not all businesses can use it effectively. All services and goods provided by the customer have different relationship coefficients, which show the prospective effectiveness of trying to build up a relationship with customers. Hill and Gandhi (2014) state that high-contact firms are more likely to engage in relationship marketing by involving their employees and customers in advertisements in order to create a facsimile of involvement or care. High-contact industries include healthcare, education, and personal services. Low-contact and goods-based businesses are less likely to attempt to develop these relationships and possess fewer effective instruments to do so (Hill & Gandhi, 2014). Thus, it can be concluded that the nature of the business and its predisposition towards contact is one of the major determinants in the success of relationship marketing strategies. The article provides useful information on the subject,

Relationships with customers do not appear overnight; they are gradually developed over the course of time. Strategies aimed at improving customer relations are reliant on the level of trust customers have with them in order to work. Zhang, Watson, Palmatier, and Dant (2016) have evaluated different strategies in relation to a concept known as relationship state. According to the article, there are five states of customer relationship:

  • Beginner relationship. At this stage, the customer does not know much about the company. The business does not have much information about its clientele as well (Zhang et al., 2016). Thus, the focus is to experiment, explore, and collect information. In this relationship, the transactional approach tends to favor both parties, such as providing consistent benefits in exchange for loyalty.
  • Advanced relationship. At this point, the trust had already been formed, and it is time to invest in developing emotional bonds with customers. Signs of affection and attention are worth more than benefits, which have already become part of the norm. Nonmaterial rewards are possible.
  • Neglected relationship. This is a negative relationship stage, during which a customer feels a disconnect between themselves and the company. This type of relationship is typically caused by neglect rather than unsuccessful interventions.
  • Betrayed relationship. This type of relationship occurs due to a deliberate error of action or judgment on the part of the company towards the beginner or advanced relationship customers. It actively damages sales and has the potential to turn customers away from the company.
  • Recovered relationship. If a company makes efforts to actively improve its status with neglected or betrayed customers, there is a chance of returning them into a neutral/transactional segment. However, unlike with the beginner stage customers, these customers would be wary and require more effort to improve their relationship to the advanced stage.

According to Zhang et al. (2016), the choice of strategy based on these relationship states have a higher chance of success when compared to doing so blindly.

One of the powerful tools currently available to the market is social media. It enables creating higher levels of customer relationships even for businesses and products not normally associated with being high-contact in nature. According to Wang and Kim (2017), social media can be used in order to improve the already existing positive HRM and CRM practices the company implements. But social media activity on its own does not have a purely positive or a purely negative effect, as it serves as a moderating factor. Facebook posts, groups, call centers, and relationship departments do not work if a company has no proper and streamlined relationship-building strategy (Wang & Kim, 2017). Without it, the positive effects of using social media to connect with customers become negligible. Lastly, the research indicates that a good portion of the positive effect of social media lies in its ability to gather customer information in order to use it to inform the existing relationship marketing strategy.

One of the greatest hazards of relationship marketing remains the perception of intrusiveness. Customers guard their personal information and prefer customers not to inquire about it without any good reasons or without a pre-existing relationship existing between them and the company. Naturally, clients also view the attempts to encroach on their privacy as a shameless attempt to expand sales and promote products without the person specifically asking for it. According to Beck, Chapman, and Palmatier (2015), privacy concerns form the backbone of trust-building, as companies who wish to get too much information out of their customers too quickly are likely to move into the negative segment of customer perception. At the same time, personalized content based on insufficient information is also a poor way to create relationships with customers. It alienates clients by showing them that the company did not do proper research or did not understand their needs as much (Beck et al., 2016).

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Proposed Measuring and Tracking Process

In order to effectively conduct a relationship marketing strategy, the company must be constantly aware of several factors affecting it and knowing where it stands in regards to CRM. The measuring process must involve collecting data from customers in order to gauge the current relationship level by analyzing their feedback and experiences. This should be done through inoffensive and non-invasive means in order to respect the customer’s privacy while receiving meaningful feedback. In order to properly track customer relationships, the company needs to develop a tracking system based on relationship stages. It would enable not only to split their customer base into different subsectors but also enable differentiating various strategies to build up relationships with them and mitigate any negative experiences they might have had in the past. Social media should be used to collect information and administer questionnaires, as well as to create a sense of community between members who are already involved in the company. Ultimately, the emphasis on customer relationships should be made in accordance with the level of contact. A high-contact company would be able to pursue the proposed strategy, whereas a low-contact business would be able to do so with less efficiency.

References

Beck, J. T., Chapman, K., & Palmatier, R. W. (2015). Understanding relationship marketing and loyalty program effectiveness in global markets. Journal of International Marketing, 23(3), 1-21.

Hill, D. J., & Gandhi, N. (2014). Relationship marketing and services advertising. Developments in Marketing Science: Proceedings of the Academy of Marketing Science, 62-67.

Jones, M. A., Reynolds, K. E., Arnold, M. J., Gabler, C. B., Gillison, S. T., & Landers, V. M. (2015). Exploring consumers’ attitude towards relationship marketing. Journal of Services Marketing, 29(3), 188-199.

Wang, Z., & Kim, H. G. (2017). Can social media marketing improve customer relationship capabilities and firm performance? Dynamic Capability Perspective. Journal of Interactive Marketing, 39, 15-26.

Zhang, J. Z., Watson, G. F., Palmatier, R. W., & Dant, R. P. (2016). Dynamic relationship marketing. Journal of Marketing, 80(5), 53-75.

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