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Intelligence Briefings: Building Customer Relationships

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The case for implementing relationship marketing
Find the hard benefits

Relationship marketing is not some woolly nice-to-have but non-essential activity. The core benefits from relationship marketing feed through to where it matters -- the bottom line -- although there are also soft benefits for customers and company. Hard financial benefits include:

  • Revenue protection against competitive approaches: by increasing loyalty and retention of existing customers.
  • Revenue extension: by increasing sales volumes and buying frequency of existing customers and, thereby, increasing their life-time value.
  • Revenue development: by acquiring new customers through lead generation.
  • Cost effectiveness of sales: by reducing overall cost of sales as a percentage of margin supported.

But with these benefits in sight, what do you need to consider before implementing relationship marketing? In fact, just which directions do you need to take if you want to adopt business best practice in developing customer relationships?

Before implementing fragmented marketing and sales approaches to groups of customers based on a product or business marketing plans, it is important to consider and analyse your current customer base and their needs. You must then develop management strategies for segments or customers and plan customer management policies. Finally, you must define the scope and objectives for customer management in your organisation.

Yet it is often hard to define the objectives and scope for customer management and very difficult to avoid the temptation to apply relationship marketing to your whole customer base. Setting initial management objectives and measures for all customers -- particularly if there are millions of them -- is unworkable, expensive and leads to failure. This becomes only too obvious if you consider the implications for your whole company.

So where do you start? Your overall business strategy should be the guiding factor but there are also some other areas to consider. (What follows is particularly aimed at companies that have little relationship marketing activity. But the same logic applies for a review of existing relationship marketing activities.

The first step is to define what you need. You need to identify your business's motivations and expectations using customer data where possible. This means working from your business or marketing plan and translating business objectives into relationship marketing objectives -- for example, to increase numbers of customers of a specific type or gain "share of wallet" within existing customers. With this completed, you then define the scope of the project and identify critical success factors.

The output of this activity should be a clear statement of project objectives, a work-plan and a risk list. But be aware that you may be able to quantify objectives more accurately when you better understand your own customer base. A management workshop may help you make the transition from conventional marketing planning to relationship marketing.

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