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RELATIONSHIP MARKETING: A CONTEMPORARY EVALUATION Abstract of the Paper to be presented at the Conference Global Competition and Competitiveness of Indian Corporates at the Indian Institute of Management, Kohzikode, May 18-19, 2007. Miss Caren Laveena Crasta (Author for Correspondence) Lecturer, MBA Aloysius Institute of Business Administration St. Aloysius College Mangalore – 575001 Mangalore, DK, Karnataka, India Phone: (0824) 2214569(R) E-mail ID: [email protected] AND Mr. Sunil D’souza Lecturer, MBA Aloysius Institute of Business Administration St. Aloysius College Mangalore – 575001 Mangalore, DK, Karnataka, India Phone: 9986 965275 E-mail ID: [email protected] RELATIONSHIP MARKETING: A CONTEMPORARY EVALUATION Caren Laveena Crasta, Aloysius Institute of Business Administration, Mangalore [email protected] Sunil D’souza, Aloysius Institute of Business Administration, Mangalore [email protected] Abstract: Trade is not a recent phenomenon though it has brought about a radical change in every country. In the early times, trade has been taking place to gratify the requirements of the individuals. The increasing demand for the goods and services brought about the industrial revolution. Later to reach the target customers and bring awareness about the products the companies had to enforce some strategies so that the customers would be aware of the company’s products and could reach them. Thus, marketing concept came into existence. In the past few years the marketing concept has seen a drastic change. A change in the marketing structure has thus strengthened the relationship between the buyer and the seller. Globalization has also contributed to embrace various relationship marketing strategies. This paper tries to highlight the contemporary evaluation to provide a platform for the customer centre philosophy and the application of relationship marketing at present and in future. The paper also stresses upon bridging the gap between pre- industrialization and post-industrialization marketing practices. Pre- Industrialization marketing practices were highly individualized, relationship – oriented and customized since the customer needs were considered while producing the goods and services. Hence, it did not require push of marketing activities. At the beginning of industrialization, the companies in order to enjoy the benefits of economies of large scale produced goods and services on a larger scale. As a result inventories were pilled up and this led to the concept of aggressive selling. Selling, as it matured, distanced the manufactures from their customers. With passage of time this situation polarized customers and manufactures. Customers and manufactures in industrialization era were acting in isolation, as there was no match between customer demand and manufacture’s in those days were producing what best they could and customers were left with no option but to buy those offerings. In the later part of the industrialization era, certain important developments occurred, one being the marketer’s realization that repeat purchase by customers was critical, making it necessary to build brand loyalty. The other significant change was development of administered vertical marketing systems, whereby marketers not only gained control over channels of distribution but developed effective barriers for their competitors. This reduced the gap between the producers and customers. However, the emphasis remained on discrete transaction. Some firms not content with discrete transaction began developing long term contracts through suppliers and services, creating on going interactive relationships among themselves. The relationship marketing observers, researchers and businessmen, have concentrated far more on how to attract customers to products and services than on how to retain customer. In practice, relationship marketing originated in industrial and B 2 B markets where long-term contracts have been quite common for many years. Relationship marketing applied when there are alternatives choose from ;when customer selection decision and when there is an ongoing and periodic desire for the product or service. The term “defensive marketing” is an attempt to reduce customer turnover and increase customer loyalty. This customer –retention approach was contrasted with offensive marketing which involved obtaining new customer and increasing customer’s purchase frequency. Further, defensive marketing focused on reducing or managing the dissatisfaction of customers, while offensive marketing focused liberating dissatisfied customer from completion and generating new customers. Traditional marketing originated in 1960s and 1970 as companies fond it difficult to sell consumer products. Its consumer market origins molded traditional marketing into system suitable for selling relatively low –value products to masses customers. Over the decades, attempts have been made to broaden the scope of marketing into relationship marketing, Customer relationship management etc. The CRM, software that allows tracking and analysis of each customer preferences, activities, tastes likes ,dislikes ,and complaints .Today this has become powerful marketing strategy for companies. Relationship marketing environment and business organization changed radically toward the end twentieth Century. Markets became more global and technologically sophisticated; and with intense competition and demanding consumers .companies placed greater emphasis on service (Boride 1999).Relationship marketing was now advocated as the appropriate paradigm for all business for all business (Christopher 1991).It was argued that traditional marketing with its 4 P s frame work is simple for today’s competitive environment ,but that relationship marketing ,in contrast seeks to improve business performance by manse of relationships ,networks and interaction. It is clear that relationship marketing moved from transaction to integrate marketing by providing more value to customer. Recent studies claim that, it has potential to forge new synthesis between quality management, customer service management. It involves the application of the marketing philosophy to all parts of the organization .It is true that, relationship marketing is a more pure form of marketing than traditional marketing. However, transactional marketing is most appropriate when marketing relatively low value consumer products, when the product is a commodity, when switching costs are low, when consumers prefer single transaction to relationships, and customer involvement in production low. This table highlights the Pre and Post Industrialization Era Production Era Prior to 1920s Production orientation Business success often defined solely in terms of production victories Sales Era Prior to 1950s Customers resist nonessential goods and services Personal selling and advertising’s task is to convince them to buy Marketing Era Since 1950s Marketing Concept Emerges Satisfying customer needs Relationship Era Began in 1990s Carried customer orientation even further Focuses on establishing and maintaining relationships with both customers and suppliers Involves long–term, value–added relationships Customer relationship management The combination of strategies and tools that drive relationship programs, re-orientating the entire organization to a concentrated focus on satisfying customers Keywords: Industrialization, Customer Relationship Management (CRM), Customer Retention, Integration.