Management by objectives
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Today in this competitive business environment it is very important to manage existing customers than to attract new customers as the cost of managing new customers is five times more than the cost of managing their existing customers (Reichheld and Sasser 1990). Today the concept of relationship marketing has become very important in this competitive business environment as the traditional model of marketing that is of 4P’s has become inadequate model to satisfy changing needs of customers across the globe with availability of vast varieties of the product available in the various markets of the globe. The 4P’s model of marketing was suitable when there is a huge demand for the simple product across huge customer market. Gronroos, (1996) stated that as companies started to realize the importance of changing needs of customers, global market was fragmented and competition in the market become intense and globe in nature.
The theory of relationship marketing was developed from the two most important schools of thoughts. Gummesson et al, (1997) stated that the first model of relationship marketing was developed in the year 1980 and was known as Nordic approach of marketing. The importance of relationship marketing is that it helps companies to add customer value or increase their customer satisfaction which thereby helps companies to earn more and more profits. The Nordic approach of relationship marketing aimed to provide additional benefits and value for both buyer as well as seller. This approach aimed to focus more on relationship based interaction rather than only transaction based interaction between seller as well as buyers. Payne et al, (1995) stated that the Nordic approach of relationship marketing aimed to provide life time value and benefits to customers and focus on personalized services in order to satisfy differential needs and wants of customers across globe. This approach also highlighted the importance of customers in service encounter and highlighted the importance of customer service and marketing for the company.
The next model of relationship marketing is known as industrial marketing and purchasing model. This model identified that customer marketing is different than industrial marketing because both that marketing depends on each other and therefore it is important for the company to known the working of relationship marketing (Helinen, 1996). This model focuses on mutual interest of company as well as customers and differences in their marketing. Understanding differences in industrial as well as customers marketing will help company to earn profits and will thereby help company to establish better relationship among their customers as well as among their suppliers (Horne and Worthington, 1996).
Halinen, (1996) stated that the above mentioned two approach of relationship marketing based on two most importance factors. The first is that the relationships are temporary in nature, it develops over a period of time and over a period of time the importance of relationship can be changed. The other important factor is that the relationship is based on two important parties. And these two parties have different motives to enter this relationship marketing. The most important objectives of introducing relationship marketing in the company are to earn more profit with the help of customer retention. Reichheld and Sasser, (1990) stated that losing customers for service based industries is to provide defective products to the customers. Relationship marketing aimed to provide zero defective product or service and enforce its employees to recognize the importance value of customers to the company so that customer is motivated to only purchase from the company for the first time but also motivated to make their all purchases from this company.
The concept of relationship marketing is difficult to define due to different ways companies are using this concept for satisfying their customers’ needs and wants. Here we have aimed to analyze different ways in which various authors have defined the concept of relationship marketing. Doyle and Thomas, (1992) stated that relationship marketing is aimed to build long term relationship with their customers. And therefore in order to become long term supplier for the customers, companies should aimed to build trust over a period of time among their customers and also aimed to develop skills so as to grow their understanding of their customer needs and wants. McKenna, (1991) stated that relationship marketing aimed to involve customers in the company activities. Whereas Buttle, (1996) identified that continuous identification of customers needs and wants has direct influence on companies commitment and trust. Berry, (1983) stated that in order to maintain customer relationships it is important for the company to do internal marketing by motivating their employees attitudes and behaviors towards their jobs, customers and companies environment. This will help company to ensure that their customers are satisfied from the companies’ products and services.
In order to build successful relationship among their customers, companies should aimed to earn trust among their customers (Weitz and Jap, 1995), commitment (Morgan and Hunt, 1991) and aimed to highlight mutual benefits for companies as well as for their customers.