Mnm3712 summary -
notes on chapters.100% CORRECT questions, answers, workings and explanations.TOPIC1: The Nature of Relationship Marketing
In this module you will be introduced to one of the key assets of any organisation, namely
customer relationships. You will discover how marketers can creat...
TOPIC1: The Nature of Relationship Marketing
In this module you will be introduced to one of the key assets of any organisation, namely
customer relationships. You will discover how marketers can create new value for their
customers, suppliers, employees and other stakeholders by managing these relationships.
If these relationships are the key assets of the organisation, then all the organisation's
efforts should be geared towards building them.
Relationship marketing is about establishing and maintaining long-term customer
relationships with all stakeholders (eg end-customers, employees and suppliers). Thus
there is a new focus on customer retention, high commitment to customers and a long-
term perspective.
We will look at the changes in marketing practices and the solutions offered by relationship
marketing. Throughout this module we stress the profound impact of technology on
virtually every aspect of marketing and the organisation, and the way in which technology
enables the business to focus on individual customers.
It is important to understand the terms ``relationship marketing'' and ``customer
relationship management'' (CRM), and how these terms may be used interchangeably. The
relationship marketing concept draws on traditional marketing principles and, in effect,
takes marketing back to its roots. Relationship marketing is the new philosophy, while the
implementation of this new philosophy is known as customer relationship management
(CRM).
THE TRADITIONAL MARKETING APPROACH
1. Criticism Levelled Against Traditional Marketing
Traditional marketing is seen as a functional approach, no innovation and make use
of defensive strategies.
Practise marketing management instead of marketing-orientated management.
2. The Marketing Concept
Focus on customer needs and wants
Only practiced in theory, ignored in practice
Management does not portray a client focus
3. The Traditional Marketing Approach
Serve all customers as if they want the same thing
Needs, wants and expectations of customers not really seen as important
Marketing mix too restrictive to apply to B-2-B (business to business) and service
marketing
Intangible service characteristics and customer service considerations are
becoming the prime differentiating factor between products
Must see 4 P’s (Product/Place/Price/Promotion) from customer-orientated
perspective
4. Transactional Marketing
Objective is to sell
Marketing process ends when sale has occurred
Retaining consumers is not regarded as important
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MNM3014 Study Notes
Focus on new customers
Perceive that customers do not want to buy, but rather has to be persuaded
5. Market Segmentation
Difficult to group customers into categories
Focus on individual customers has become necessary
Get competitive edge rather through delivery of superior customer value
Nb!! Bases Of Segmentation-Tb5
Geographically, mostly used, dividing market into different geographical areas
Demographic(using variables such as, income, education, and living standards)
Psychographic – by use of categories such as social class, lifestyle and personality
Behavioural –basis of buying behaviour such as benefits sought,loyalty status ,
attitude toward the product.
Assessment Question:
Explain the shift in business thinking from traditional marketing to relationship marketing?
MNM3014 study notes Study Unit 2
2.1 The relationship marketing concept (p6 t/b)
Customers remain very important, successful companies never lose sight of their
customers’ demands and carefully keep track of these needs as they evolve and change
Definition Relationship Marketing: the objectives of relationship marketing are to identify and
establish, maintain and enhance and, when necessary, terminate relationships with
customers and other stakeholders at a profit so that the objectives of all parties involved are
met. This is done by mutual exchange and fulfilment of promises.
Dimensions of the definition:
Relationship marketing (RM) seeks to create new value for customers and then share it with
these customers, because customers estimate which offer will deliver the most value. Adam
Toil- ‘ the real price of anything is the toil and trouble of acquiring it; the total cost includes
the buyers time and energy’
RM recognises the key role that individual customers have, both as purchasers and in
defining the value they wish to achieve
RM businesses are seen to design and align processes, communication, technology
and people in support of customer value
RM represents continuous co-operative effort between buyers and sellers
RM recognises the value of customers purchasing lifetimes (ie their lifetime value).
Lifetime value is the present value of the future profits expected over the customer’s
lifetime purchases.
To create the value the customers want, RM seeks to build a chain of relationships within
the organisation and between the organisation and its main stakeholders including suppliers,
distribution channels, intermediaries and shareholders One of the main principles of RM is to
identify the most profitable customers so that the business can focus on customers
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MNM3014 Study Notes
appropriate to its strategy
Figure 1.1 depicts traditional and relationship marketing. Relationship marketing is a new
philosophy of marketing – implementation of which is known as customer relationship
marketing (CRM). CRM is important and most companies use a mixture of transactional and
relationship marketing practices. figure 1.1 illustrates: the development of relationship
marketing points to a significant paradigm shift: from independence and choice to mutual
independence. Transactional marketing was rapidly becoming outdated- unsuited to the
complex modern marketing reality, with no consideration of future contact with customers
An organisation thus needs to orient itself towards total customer relationships as opposed
to focusing on a single transaction with a customer. This implies the linking of separate
transactions – because only this approach enables the utilisation of things such as cost
saving potential of customer retention.
Relationship marketing is an ongoing process of identifying and creating new value with
individual customers and they share the benefits from this over a lifetime association.
Involves collaboration amongst supplier and selected customers for mutual creation.
Figure 1.1 transactional and relationship marketing
Mutual independence
Relationship marketing
Completion and mutual co-operation
Conflict
Transactional marketing
Independence and choice
2.2 Focus areas of relationship marketing
2.2.1 Individual Customer Approach
Key aspect of RM is to focus on individual customers, in terms of the definition of RM- CRM
recognises the key role individual customers have and the most profitable customers have
to be indentified so that the business can focus on customers appropriate to its strategy
21st century companies are different. In the old economy – companies focus was to
standardise production, products and business processes, invested in large buildings and
was run like machines. In the new economy- the business is supported by information, which
has the ability to differentiate, customise and personalise, and which enables it to gather
information about individual customers and business partners such as suppliers. They are
more flexible and have the ability to individualise the market offering, messages and media.
Different customers should be treated differently, its key to know who the best customers
are and to treat them as such. For larger companies with many customers one-to-one
marketing is an impossible task, customers should rather be segmented based on what is
known about them. Segments can be described as value and potential value to an
organisation, and appropriate communication strategies can de designed for each segment.
Effective segmentation E.g. allows for a bank manger to know that customers from one
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