What is Relationship Marketing & What are its Benefits?

Relationship marketing is a type of marketing aimed at building long-term and strong relationships between a brand and customers. Its main goal is to increase customer loyalty and engagement, not to increase sales.

To the question: what is relationship marketing for? We can, therefore, answer that its main purpose is to improve communication with its target audience in order to be able to guide it along its customer journey, lead it to purchase and encourage retention, i.e. repurchase.

How does relationship marketing work?

Relationship marketing focuses on building customer loyalty. However, this requires that the company have an existing customer base. With this in place, businesses should know their customers' preferences, including which products they enjoy and how they use them.

Campaigns are then built to continually engage customers with new or different products and incentives that are of unique value to them; These ultimately encourage repeat sales .

To begin the relationship marketing process, businesses that don't have an existing customer base will need to start by building one. While those with an existing user base will need to focus on understanding their customers.

You can do this by analyzing customer profiles and behaviors, noting unique patterns and characteristics. Find out why customers buy from you, what motivates them, and what their goals are. Surveys are the best way to do this.

Once a business has a good understanding of who their customers are and what they want, they can then work to create a strategic marketing campaign around their customers' unique interests and behaviors.

This is when a business may build loyalty programs that offer discounts and incentives or send out valuable materials for free to encourage continued engagement. All relationship marketing content should ultimately lead customers closer to a sale.

Once a company launches marketing campaigns that effectively enhance customer loyalty, sales will increase. This is because relationship marketing not only leads to repeat sales, but customer loyalty generates word-of-mouth referrals, which leads to more sales.

However, it is important to note that relationship marketing should always be combined with other types of marketing aimed at acquiring new customers; This allows companies to constantly refill the sales funnel.

Why is relationship marketing so important?

By increasing customer retention, relationship marketing helps companies increase revenue and reduce costs. According to statistics , retaining a customer will cost 5-25 times less than attracting a new one. Moreover, a 5% increase in customer retention rate can increase a company's profits by 75% .

Also, relationship marketing strengthens the emotional connection between the company and customers. This increases customer loyalty, increases customer LTV , helps cultivate brand advocates and attract new users. In addition to increased sales and increased revenue, strong relationships between a company and customers have a number of other benefits.

Benefits of Relationship Marketing

We've explained why relationship marketing is important to business profitability. Now, let's see what other prospects there are for introducing it into your marketing strategy.

Reducing customer acquisition costs

The goal of relationship marketing is to develop brand advocates. When customers have a great experience with a company, they actively recommend its products and services to others. According to statistics , 84% of people around the world consider recommendations from friends and family to be the most reliable source of information.

Brand advocates expand their audience reach and based on their recommendations, from 20 to 50% of purchases occur . And the best part about this is that you get additional sales and new customers for practically nothing. Word of mouth is still the cheapest and most reliable way to attract customers.

Increasing the speed of closing deals

If a company sells a complex product or service, closing a deal takes much longer. Selling goods and services in the B2B sector takes an average of 102 days , while most of the time is spent not on the sale itself, but on nurturing the lead.

With relationship marketing, you get new potential customers through referrals who are almost ready to buy. This approach increases conversion rates and speeds up the process of closing deals, as confirmed by 67% of marketers and 69% of salespeople .

Increasing LTV

The main goal of relationship marketing is to maintain a brand's connection with customers for as long as possible. Therefore, increasing LTV may not seem particularly important. However, not only loyal customers tend to interact with a brand for a long time, their referrals do too. Roughly 60% of B2B marketers and salespeople say referrals have a higher LTV. So the LTV of referral clients is 16% higher than that of others.

Increasing brand sustainability

Relationship marketing increases customer loyalty, which is an important condition for strengthening a brand. Companies benefit from this process in different ways. Strong brands have more reliable positions in the market, it is easier for them to introduce new products, they attract the best employees, and so on.

Moreover, for a strong brand, the cost of one mistake is not so high. Customers tend to forgive companies with whom they have a strong emotional connection—only 17% of customers would abandon their favorite brand after a single mistake. However, if the first experience with a brand was negative, 39% of customers will not return in the next two years.

New business ideas

Relationship marketing involves regular interaction between a brand and customers. So, step by step, companies are increasingly understanding what users want and how to improve the product to attract more customers.

Information collected from customers helps avoid unnecessary risks when launching new products. If you know your customers' preferences, you can make effective changes to your brand and product.

Adding value to the product

Customer service plays a major role in building strong relationships. Approximately 86% of shoppers are willing to pay more for a positive shopping experience. So when other companies lower their prices to attract customers, you can sell more and get more. Of course, this option is only possible if the brand provides customers with a positive purchasing experience.

Are you already thinking about how to do this? Take your time. First, let's understand what types of relationship marketing exist.

5 Types of Relationship Marketing

1. Basic Marketing
2. Reactive Marketing
3. Responsible Marketing
4. Proactive Marketing
5. Affiliate Marketing

Types or levels of relationship marketing can be successive steps in connecting with customers. At the same time, each type can be an independent form of interaction between the brand and customers. Here are the five levels of relationship marketing:

Each company can choose the level of marketing that best suits its needs or, conversely, move from one to another to build the strongest possible relationships with customers. Whichever option you choose, carefully consider your strategy to achieve relationship marketing success.

Relationship Marketing Strategies

1. Review your communication channels
2. Attract customers with email marketing
3. Use ERP and CRM systems
4. Make customer service a priority
5. Reward loyal customers

Building relationships is a long and labor-intensive process. It can lead to increased ROI, stronger brand image and more satisfied customers, or it can be a waste of time and money. We've identified five strategies you can use to achieve your relationship marketing goals.

Review your communication channels

Most companies use only websites for online promotion, which, unfortunately, do not all work well. To attract customers using your website, make navigation as convenient as possible and provide all the information the user needs about the company and products. Add phone numbers and online chat for quick contact with support. SendPulse allows you to create and add online chat to your website for free, without any skills required.

More than 60% of the world's Internet traffic comes from mobile devices. Therefore, the company’s website must be adapted to them. Make buttons easy to click, add a vertical scroll bar, and optimize content for fast loading.

In addition to upgrading your website, consider using new communication channels. The golden rule of building a good customer-brand relationship is to be where the customers are. Conduct research, determine which social networks and instant messengers your clients use.

Give them the opportunity to interact with the company through different channels. Use multi-channel opt-in forms to let users choose where they want to receive brand communications. Register with SendPulse and create multi-channel subscription forms for email, Facebook, Telegram.

Attract customers with email marketing

To keep customers engaged over the long term, add email marketing to your strategy. Believe me, despite the rapid development of social networks and instant messengers, this marketing channel still brings excellent results.

Email campaigns allow you to regularly interact with customers and provide them with a more personalized experience, which is the key to the hearts of the most discerning customers. According to statistics , 72% of consumers only pay attention to personalized messages.

Be careful when building an email strategy to retain customers. Carefully think through each campaign and send out mailings with the required frequency, otherwise, instead of increasing loyalty, you may end up with mass unsubscribes . Remember, lasting relationships require communication, caring and sincerity, not hard selling.

Create relevant and personalized content first and then sell. This will make your email strategy more effective. When creating newsletters, focus on the needs and desires of your customers. In this article you will find some useful tips on how to do this.

Use ERP and CRM systems

Relationship marketing without accurate and specific customer information is a waste of time. To provide customers with a personalized brand experience, use modern technologies such as CRM and ERP systems.

CRM software helps you collect customer data, track the history of their interactions with a brand, identify service issues they've encountered, and much more. This information will give you more opportunities to delight your customers and keep them engaged.

ERP systems are focused on the internal processes of your company. They help automate work and run a business more efficiently.

CRM and ERP systems can reduce costs, increase sales and take relationship marketing to the next level. Therefore, check out ERP systems from companies such as Microsoft, SAP, Oracle, IBM, Peoplesoft and so on. When it comes to CRM, look beyond market leaders like Salesforce. In our blog , for example, you can see a whole list of free CRM systems.

Make customer service a priority

When it comes to building strong, long-term relationships with your audience, perfect customer service is key. Approximately 96% of consumers believe that service is critical in building their brand loyalty. Therefore, poor service is often the main reason for changing companies.

Sharp edges in customer service can have negative consequences for a brand. However, the responsiveness of support service representatives alone is not enough. It is necessary to take the initiative to provide assistance. To be proactive, identify common problems that customers face and create a plan to solve them. This approach will help company representatives to immediately respond to emerging difficulties.

In terms of speed of interaction, customers expect to receive an answer to their question within an hour. Therefore, consider using a chatbot to serve your users. This will speed up the process of communication with customers and reduce your support costs by 30%.

To create your own chatbot, register with SendPulse. In our service you can design a bot for Facebook , Telegram , Instagram , WhatsApp for free . Send up to 10,000 messages per month for free, set up auto-reply chains, get detailed statistics on interactions with the chatbot, and much more.

Reward loyal customers

Humans have a neural structure called the reward system. It reinforces certain behavior patterns. As a result, we tend to recreate actions that lead to some valuable reward. Use this psychological factor in your relationship marketing to encourage customer loyalty.

Even though the market seems oversaturated with loyalty programs, they really work. They motivate 79% of consumers to continue interacting with a brand. However, people are only active in half of the programs they participate in. To create an effective loyalty program, follow a few rules:

Now you know about relationship marketing strategies you can put into practice. Let's look at exactly how brands use some of them to improve communication and customer retention.

Here are some additional relationship marketing pros and cons to consider before incorporating its principles into a future campaign.

What are the benefits of relationship marketing?

1. Regular customers tend to buy more than new ones.

   Because you can retain customers, you can create an environment where higher average per purchase can occur. This will help the brand and business generate more revenue from their current customer base.

   According to CMS Wire reports based on data collected by SumAll, 25-40% of stable companies' total revenue comes from repeat customers. Companies with 40% repeat customer revenue were able to generate 47% more revenue than companies with only 1 in 10 repeat customers purchasing products or services.

2. Sales can be increased with minimal investment.

   Many customers who are associated with a brand will purchase subsequent products because of the past values they had in previous purchases. This means that the only marketing effort required is to inform the current customer base about the new product or service being offered.

3. Positive experiences help create positive personalized viral marketing.

   People leave reviews of brands and companies when the experience exceeds their expectations. This is why there are so many negative reviews - the buyer expects a positive experience.

   When your marketing is focused on the value proposition you can provide, then it is possible to exceed expectations in a positive way to generate positive reviews, word of mouth marketing and social media sharing.

4. Create personal connections.

   While marketing efforts can connect a customer to a brand, ultimately customers also form personal connections with employees. For local construction companies, managers or owners also become ambassadors for the brand in the community. If a customer interacts with that person, they also interact with that brand, increasing the chances of a future purchase.

5. Brands and companies receive honest information from interested people.

   Often it is not one big problem, but a series of small problems that ultimately lead to the downfall of a brand and business. The proverbial “last straw” can be found and eliminated through relationship marketing. This is because customers are personally involved in the business. They want you to succeed because it becomes personal success for them.

6. Create opportunities to solve problems immediately.

   There is no brand or business on our planet that is 100% perfect. Products sometimes fail. Services are not always provided as expected. When relationship marketing efforts are made, it gives the organization an opportunity to retain that customer. This is because customer contact is at the forefront of these marketing efforts.

   From customer service lines to Twitter accounts to in-person visits, the ability to effectively address a problem and then resolve it positively contributes to marketing efforts.

7. Nowadays, there are many opportunities for building relationships.

   Today's brands and companies have advantages that have never been seen before in our world. Through social media, a brand can create an immediate, personalized impact on customers. They can use their social media accounts and pages to further reinforce their value proposition. Even a short email that takes a few seconds to write can have a lasting impact on a customer.

   This is combined with personal contacts, direct mail and other forms of communication that are offered to everyone today. There are even underutilized communication methods that can be used to promote such a marketing campaign. Skype, FaceTime and SnapChat are just three examples where a company can communicate with a representative to strengthen its brand.

What are the disadvantages of relationship marketing?

1. New customers are treated as a secondary product.

   You want to retain your best clients, but sometimes you also need new clients to meet your budget goals. In relationship marketing, the focus of the brand and business is on retaining and supporting the existing customer base. This results in new customers being overlooked and possibly ignored.

2. Wrong information can ruin a relationship marketing campaign.

   With so much sharing going on today, all it takes is a negative experience being shared with others for this type of marketing to fail. Many consumers focus on immediate short-term values.

   If you don't provide them, these customers won't see long-term benefits. They will look to see who can deliver them immediate rewards from competitors.

3. Relationship marketing takes time to become effective.

   Many customers feel like a brand, and a company that wants to build a relationship with them must be able to devote time to this. This means that there will be customers who want direct answers from employees or representatives rather than searching for information themselves. Not only does it take time for relationships to develop, but many workers will also be asked to increase their individual time commitments to continue the process.

4. Sometimes relationships can become closed.

   Good relationship with the client. However, relationships that become intimate can be bad. When managers pay too much attention to the needs of their customers, they do not pay enough attention to their subordinates or the tasks that need to be completed.

   This can cause the brand and business to fail at the end of a successful marketing campaign.

5. Value propositions change over time, so marketing efforts must change too.

   Some products always have a certain perceived value. Let's take coffee for example. Millions enjoy a cup (or three) every morning. It always has a core value. What if one brand offered vanilla-flavored coffee that cost $2 less than another successful brand's regular coffee?

   Now the value relations have changed. The consumer can not only get aromatic coffee, but also cheaper. Without changing their marketing approach, a brand selling regular coffee will eventually find itself without customers.

6. Culture change may be required.

   A brand or business cannot implement a relationship marketing strategy without an organizational culture behind it. If a customer comes to a brand expecting support but receives something else, the likely result will be a shift in business towards competition.

   The worst negative reviews happen when customers vote with their money and your brand and business are not included on the ballot.

7. Some regular customers can count on a discount.

   There will always be customers who expect the brand and business to treat them better because they will come back for another purchase. They want discounts that go beyond normal sales and offers that can be part of marketing efforts. Without this “extra” benefit, they may say they will go to the competition, sometimes even under the threat of leaving a negative review.

   These are not the customers your marketing efforts should be targeting. Brands need to recognize the lack of value in this offering. If an "extra" discount is given, that customer will want to get even more benefits on their next visit.

   The pros and cons of relationship marketing show that brand and business efforts to connect with existing customers can increase revenue. It can also improve a brand's reputation. However, a campaign like this comes with risks, so flexibility must also be built into every marketing effort so that the brand and business can adapt to the changing needs of its core demographic.

   Have you had the privilege of running a relationship marketing campaign? What is the most important lesson you learned from your experience that you would share with others who may be starting their first campaign right now?

How to develop a relationship marketing strategy

Maybe you think you're already doing some form of relationship marketing in your business - offering discounts, loyalty programs , personalized services, and upselling.

But these are tactics – and there are many of them.

Let's take a step back.

To develop a good relationship, you need to retain customers, create friendships, and inspire feelings that price changes, marketing campaigns, or discounts cannot compete with.

Relationship marketing offers three ways to capture the mind and heart of the customer: an emotional connection, a purposeful connection, and involvement in a brand community .

Let's take a closer look at each area.

1. Build an emotional relationship with your customers

   When you think of customer loyalty and brand ambassadors, you might think of Apple, Tesla and Nike – they are all about the customer .

   Their customer loyalty is so strong that their customers immediately defend them against negative comments and criticism.

   Now you might be thinking: “There are no such relationships in B2B!”

   Incorrect. Of course they exist!

   Although “B2B” stands for business-to-business, it is always a person (not a company) who visits your website, downloads a white paper and requests a demo.

   This person also has feelings. And you have to use these feelings to create an emotional connection. Why?

   The more emotionally connected a customer is to your brand , the more money they will spend on your products or services .

   So how do you create an emotional connection in your marketing campaigns?

   You need to build trust, show personality, demonstrate reliability and provide a great customer experience .

   Build trust . Trust is an important part of every relationship. Many users, especially when buying an expensive product (or service), are tormented by doubts about the correctness of the choice and guarantees after the transaction. Reassure the client and show him that you are ready to be responsible for your products even after payment. It is very important! As an example, say that within a certain time the buyer will be able to get their money back if the purchase does not meet certain requirements or promises. Has your product been awarded? Do your customers rate your product with 5 stars? If so, show this on your website. Don’t just tell your customers you’re trustworthy – show them!

   Show personality . It's time to close the distance between you and your customers. Show who the people behind your company are. For example, post photos of your employees on social media or share how you support local communities in your email marketing campaigns. Engage your audience and encourage them to share their stories or photos. Engaging with your audience is a great way to build a deeper connection.

   Show reliability . If two people sign up for your free trial offer, will they receive the same brand experience? They should. What about the communication strategy – does it differ depending on the customer’s location? She shouldn't. Whether advertising campaigns, sales presentations or websites – a consistent brand presence throughout the company creates trust among customers.

   Deliver a great customer experience . A positive customer experience is no longer enough these days. You need to delight your customers with an unforgettable and emotional experience. But what can the marketing team do to make the customer experience unique?

   Here are a few simple marketing ideas:

   • Send only relevant content to your target audience – use a CRM to avoid impersonal “one size fits all” marketing campaigns.
   • Create personalized videos for customers when they celebrate an important event, such as a product launch, 1-year anniversary, etc.
   • Talk to customers . Ask customers for feedback and suggestions. Let them know if you use their suggestions in your marketing materials. Let them collaborate on your message.
2. Give a compelling reason for the business relationship

   Added value, be it in the form of content, software features or customer service , always helps strengthen the relationship with your customers.

   But there's a new way to win your customers' hearts: a mission. A mission beyond sales, profits and dividends.

   Simon Sinek summed it up in one of his famous Ted Talks: “ Profit is not a mission. Profit is a result. A mission means that our actions have real value to others .”

   A study by Clutch found that customers rank purpose-driven attributes more important than price or value when selecting their business partners.

   Today's consumers want to buy from companies that stand for something - whether it's volunteering, promoting equality, fighting injustice or protecting the environment.

   Studies also prove this.

   Customers are more likely to be generous with their budgets when companies have a mission, such as: E.g.:

   • 47% of customers buy from brands that support a good cause every month.
   • 53% of customers would NOT invest in a company that does not actively support a good cause.
   • 91% of customers would switch brands if another brand with similar price and quality supported a good cause.

   In other words: Social commitment is a growth driver for your company .

   What is your mission?

   You'll have to determine your mission, but we hope we can give you some valuable ideas. Think about these three questions:

   • Are you ready to invest? Social commitment requires financial resources. You need to set a budget. The bigger the mission, the bigger the budget.
   • How can you get the whole company on board? Purposeful action is not the sole responsibility of the CEO or management. It is a company-wide initiative.
   • Does the mission fit your brand? How are you perceived by your customers today? How do you want your brand to be appear in the future? The mission has a big impact on brand perception.
3. Leverage your community

   When you have a close relationship with your customers and your brand stands for a specific mission, communities form naturally. A brand community is a group of customers who support and advocate your brand at every opportunity.

   But these relationships also need to be maintained.

   How to proceed:

   • Bring your community together . Your community is active on multiple platforms - whether on your website, in forums or on social media. Think about how you can bring them together – either in person at an event or online to network and share new marketing ideas.
   • Listen to your community . Your existing customers read your content, use your product and interact with your social accounts more often than new prospects. When they provide feedback on campaigns and marketing materials, respond and thank your customers.
   • Get the support of your community . Your community loves your brand. She wants to spread the word and shares her experience with friends, family and colleagues. Help them spread the word and develop marketing campaigns and stories that speak not only to the mind but also to the heart.
   • Put the community at the center . It doesn't always have to be about you. Put your customers' contributions in the spotlight and promote your most loyal followers in the community. You can invite them to an event, feature them on your blog, or create a video series about their work and achievements.

Conclusion

Successful companies have realized that the key to growth lies in long-term customers.

Technology has changed the way we do business . It is our responsibility to build, maintain and develop customer relationships over a longer period of time.

We need to think more about how we make our customers feel. Because a strong bond is created through feelings. Using the relationship marketing strategies described above, you'll ignite emotions, promote a good cause (not just profitability), and leverage community influence to gain loyal followers in droves.

Now more than ever, you should remember what the “R” in CRM stands for: “Relationship”.

Because relationships are important .