Page 43 - Marketing Management

20 PART 1 UNDERSTANDING MARKETING MANAGEMENT

Relationship Marketing

Increasingly, a key goal of marketing is to develop deep, enduring relationships with people and or-
ganizations that directly or indirectly affect the success of the firm’s marketing activities.
Relationship marketing aims to build mutually satisfying long-term relationships with key con-
stituents in order to earn and retain their business. 44
Four key constituents for relationship marketing are customers, employees, marketing partners
(channels, suppliers, distributors, dealers, agencies), and members of the financial community
(shareholders, investors, analysts). Marketers must create prosperity among all these constituents
and balance the returns to all key stakeholders. To develop strong relationships with them requires
understanding their capabilities and resources, needs, goals, and desires.
The ultimate outcome of relationship marketing is a unique company asset called a marketing
network, consisting of the company and its supporting stakeholders—customers, employees, sup-
pliers, distributors, retailers, and others—with whom it has built mutually profitable business rela-
tionships. The operating principle is simple: build an effective network of relationships with key
stakeholders, and profits will follow. 45 Thus more companies are choosing to own brands rather
than physical assets and are subcontracting activities to firms that can do them better and more
cheaply, while retaining core activities at home.
Companies are also shaping separate offers, services, and messages to individual customers,
based on information about past transactions, demographics, psychographics, and media and
distribution preferences. By focusing on their most profitable customers, products, and channels,
these firms hope to achieve profitable growth, capturing a larger share of each customer’s expendi-
tures by building high customer loyalty. They estimate individual customer lifetime value and
design their market offerings and prices to make a profit over the customer’s lifetime.
These activities fall under what Columbia Business School professor Larry Selden and his wife
and business consulting partner, Yoko Sugiura Selden, call “customer centricity.” The Seldens offer
the Royal Bank of Canada as an example.

Royal Bank of Canada Royal Bank of Canada Thinking of its business in terms of customer
segments rather than product segments, Royal Bank of Canada (RBC) has put each of its
roughly 11 million clients into meaningful segments whose profitability it can measure. In the
process, it discovered a sizable subsegment of customers hidden within its broader categories
of “wealth preservers” and “wealth accumulators.” Dubbed “snowbirds,” these individuals
spent a number of months each winter in Florida, where they were experiencing difficulties establishing
credit as well as missing their Canadian communities, particularly the familiarity of the French-Canadian
accent and fluency in French. To meet their unique needs, RBC created a Canadian banking experience in
Florida. 46

Because attracting a new customer may cost five times as much as retaining an existing one,
relationship marketing also emphasizes customer retention. Companies build customer share by
offering a larger variety of goods to existing customers, training employees in cross-selling and up-
selling. Marketing must skillfully conduct not only customer relationship management (CRM), but
partner relationship management (PRM) as well. Companies are deepening their partnering
arrangements with key suppliers and distributors, seeing them as partners in delivering value to fi-
nal customers so everybody benefits.

Integrated Marketing
Integrated marketing occurs when the marketer devises marketing activities and assembles market-
ing programs to create, communicate, and deliver value for consumers such that “the whole is
greater than the sum of its parts.” Two key themes are that (1) many different marketing activities
can create, communicate, and deliver value and (2) marketers should design and implement any
one marketing activity with all other activities in mind. When a hospital buys an MRI from General
Electric’s Medical Systems division, for instance, it expects good installation, maintenance, and
training services to go with the purchase.