Q

How is relationship marketing changing the way marketers look at customers?

Lior Arussy explains how the shift to relationship marketing from transactional marketing will impact organizations and customers in this expert tip.

Why have marketing managers moved dramatically from transactional marketing to relationship marketing? What are the implications of the change for organizations and customers?
The shift from transactional marketing to relationship marketing is driven by the desire to maximize revenue and profit from customers. Imagine two customers who pay $200 for a hotel stay. One stays in hotels on average three nights a year, while the other stays 50 nights a year in hotels. The financial logic is that it is worth pursing the latter customer more than the former. Additionally, some customers develop unprofitable behavior after the transaction by demanding excessive service for free. Marketers have discovered that not every transaction is profitable, and therefore they need to measure in terms of relationships.

The implications for the organization is that research of customer purchasing patterns and relationships should be carefully executed. Customers should be segmented and selected on the basis of relationships and not just by end-of-quarter transactions. Organizations should also learn to say "no" to some customers and to send unprofitable customers to the competition.

For customers, the implication is that they will have to make choices and stop spreading their business between many competitors. If they continue to do so, they will not receive an adequate customer experience and often will be treated as inferior to those customers who are committed to long-term relationships.

This was first published in April 2007
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