Business

Is your CEO ready for relationship marketing?

Sales Pitch

Herman Alvaranga

Wednesday, December 27, 2017

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THE ORIGINAL MARKETING MIX

In the 1950s when the science of marketing as we now know it was still at an early stage of development, frameworks were formulated to manipulate and exploit market demand.

The most enduring of these was the idea of the 'marketing mix', particularly as enshrined in the shorthand of the '4Ps' of product, price, promotion and place. These were the levers that, if pulled appropriately, would lead to increased demand for the company's offer. Marketing management aimed to devise strategies that would optimise expenditure on the marketing mix to maximise sales.

4PS MODEL GOOD ONLY FOR AMERICA?

The fundamental concept of the marketing mix still applies today, in the sense that organisations need to understand and manage the influences on demand. Yet we need to remember that these original frameworks for marketing action were devised in a unique environment. They emerged from the United States during a period of unprecedented growth and prosperity, and focused on fast-moving consumer goods.

But though the tools and techniques developed in a particular era and for particular products might not necessarily be successfully applied more universally, the basic ideas of '4Ps marketing' were rapidly extended into industrial markets, then service markets and even not-for-profit markets.

QUESTIONING THE MODEL

That mix served well for decades, but during the closing years of the twentieth century some of these basic tenets of marketing were increasingly being questioned. The marketplace was vastly different from that of the 1950s.

Consumers and customers were more sophisticated and less responsive to the traditional marketing pressures – particularly advertising. There was greater choice, partly as a result of the globalisation of markets and new sources of competition. And many markets had matured, in the sense that growth was low or non-existent.

As a result of these and many other pressures, brand loyalty is weaker than it used to be, and simplistic 4Ps marketing is unlikely to win or retain customers either in consumer or industrial markets. This gave rise to an extended marketing with the addition of 4Ps -- people, processes and physical evidence, and more recently, partnerships.

But people are still asking, 'Is marketing dead?' It is against this background that a wave of marketing thinking known as 'relationship marketing' emerged.

RELATIONSHIP MARKETING IS NOT BEFRIENDING PEOPLE!

There are many books on sales which claim that people only buy from friends. Indeed, well do I recall an HR Manager in the insurance sector who wanted someone to teach her staff how to befriend people in order to get more business! Needless to say, that didn't work because that is not how consumers behave.

At the heart of relationship marketing is maximising the lifetime value of a customer.

PRINCIPLES OF RELTATIONSHIP MARKETING

A number of characteristics distinguish relationship marketing from earlier frameworks such as the 4Ps or the extended marketing mix.

• The first is an emphasis on extending the 'lifetime value' of customers through strategies that focus on retaining targeted customers. Adopting the principle of maximising customer lifetime value forces the organisation to recognise that not all customers are equally profitable, and that it must devise strategies to enhance the profitability of those customers it seeks to target.

• The second differentiating feature of relationship marketing is the concept of focusing marketing action on multiple markets. These other markets include suppliers, employees, influencers, distributors and alliance partners.

• The third key element of relationship marketing is that it must be cross-functional. This requires bringing marketing out of its functional silo and inculcating the concept and the philosophy of marketing across the business. In practice this needs to be accompanied by an organisational change that fosters cross-functional working, and develops the mindset that everyone within the business serves a customer, be they internal or external customers.

THE LAST WORD

Relationship marketing is what causes people like me to become a MacAddict who wouldn't even look at a Samsung phone or tablet, or an HP or Dell computer. Here the relationship is with the total product and whatever that encompasses. Achieving this requires an organisational change that must be led by the CEO.

And so we ask, is your CEO up to the challenge of making relationship marketing a part of your company's DNA?

Herman Alvaranga FCIM, MBA, is president of the Caribbean School of Sales & Marketing (CSSM), the region's only CIM Accredited Study Centre. For more insights on sales and marketing please go to his blog at www.cssm.edu.jm

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