How Relationship Marketing Transforms Business: What It Is and Why It’s Essential 

Discover the essentials of relationship marketing: building customer loyalty, maximizing CLV, and transforming buyers into lifelong brand advocates.
Morgan Hugoboom
15 February 2024
Blog
4
How Relationship Marketing Transforms Business: What It Is and Why It's Essential

Building stronger relationships with customers and making them loyal to your brand is becoming a key part of a successful business plan. More than 90% of business leaders now think it’s more important to keep existing customers than to find new ones. Repeat customers spend more than new ones – and bring added value beyond their own purchase power. 

Investing in relationship marketing helps a business build long-term relationships and a long-term connection with its customers, which will eventually maximize the customer lifetime’s value (CLV). Relationship marketing helps a brand meet a customer’s needs across various platforms and channels. When a business becomes part of a customer’s life and keeps offering value, it can change a one-time buyer into a loyal customer. 

What is the relationship marketing definition? 

Relationship marketing definition:  

A marketing strategy that establishes deeper, more connected relationships with customers to promote long-term benefits like brand loyalty, customer engagement, and satisfaction.  

Whereas other strategies focus on short-term goals like customer acquisition and individual sales, relationship marketing is a long-term strategy focused on maximizing the customer lifetime’s value (CLV).  

Relationship marketing strategy usually begins after a customer’s initial purchase. Then, the focus shifts from making a sale to keeping the customer for a long time, fostering long-term customer relationships. Businesses can build a relationship with their customers that’s more than just selling things by using loyalty programs, rewards, and asking for customer feedback. 

When a brand becomes a natural and genuine part of a customer’s life, the customer is more likely to keep coming back to that business. Customer satisfaction also remains high, ensuring increased rates of word-of-mouth and referral marketing.  

Why is relationship marketing important? 

Relationship marketing is important because it capitalizes on a marketing truth: established customers are more profitable than new ones. An existing customer contributes more – from repeat sales to referral marketing opportunities – than a new customer.  

Relationship marketing offers a higher ROI than simply using traditional methods like transactional marketing alone. With transactional marketing, businesses prioritize short-term goals such as customer acquisition and individual sales. If the customer only engages in a single purchase, the ROI compared to acquiring the customer diminishes. In some cases, the cost to acquire the customer is greater than the profit from the single sale. 

Just a 5% increase in customer retention can mean more than a 25% increase in profit. Relationship marketing drives a higher return on customer acquisition by maintaining a relationship with the customer. It provides more opportunities for referral marketing, repeat sales, and continued growth – increasing the overall customer lifetime value. 

10 benefits of relationship marketing: 

Some of the biggest benefits to relationship marketing include: 

1. Higher customer satisfaction 

Customers who enjoy a deeper connection to a brand are more likely to feel positively toward that business. 

2. Increased customer lifetime value (CLV) 

Referrals, word-of-mouth promotion, positive feedback, and other aspects of a successful relationship with a brand all contribute to a higher CLV. 

3. Higher ROI than acquisition alone 

The cost of acquiring a customer is high and can oftentimes overshadow the actual profit from an individual sale. By making it more likely for customers to buy again, relationship marketing gets more value from the initial cost of getting that customer. 

4. Lower marketing and advertising costs 

It costs less to keep a customer than it does to attract them in the first place. Relationship marketing also leads to free or cheap advertising through customer recommendations, good reviews, and people who promote the brand. 

5. Brand loyalty and customer retention 

Customers who like a brand and develop long-term relationships are more likely to become long-term customers, keeping them buying from that business and resulting in fewer customers leaving. 

6. Referral marketing (word of mouth, referrals) 

In a recent survey, 52% of customers reported showing their loyalty by recommending the brand to their family or friends. 

7. Brand awareness 

Increased word-of-mouth referrals, brand ambassador programs, and other relationship marketing strategies spread positive awareness of a brand. 

8. Repeat purchases, cross-selling, upselling 

A loyal customer is a repeat customer. They will return to a brand (and generate more sales) when they already have positive experiences, feel bonded to the brand, and know they can continue to trust that business. 

9. Increased positive feedback and customer reviews 

A satisfied customer is also more likely to leave positive feedback about a brand or product. This low-cost (or free) social proof and referral marketing pays big dividends toward future sales and brand awareness. 

10. Stronger understanding of customer 

By investing in relationships with their customers, businesses will gain a deeper understanding of their behaviors, needs, and more. This comprehensive customer knowledge helps brands create more targeted products, marketing, experiences, and campaigns. 

Examples of relationship marketing 

Relationship marketing examples include: 

  1. Personalizing the customer experience 
  2. Collecting customer feedback (polls, surveys) 
  3. Instituting customer loyalty programs 
  4. Offering incentives, discounts, and rewards 
  5. Creating a brand philosophy, ethos, or cause
  6. Thanking customers for their continued business  
  7. Using brand ambassadors, advocacy programs, user-generated content marketing 
  8. Developing content that offers customers value 
  9. Incorporating technology to better serve customer needs 

No two relationship marketing strategies are alike – each business will customize its own to best serve its unique customer base. The best relationship marketing strategies maximize customer satisfaction by personalizing the experience at an individual level. This kind of personal touch meets customers’ needs and blends a brand smoothly into their lives, making them loyal to the brand. 

Harnessing technology for relationship marketing 

Technology like customer relationship management (CRM) and customer data platform (CDP) tools can accelerate relationship marketing strategies. Most businesses already use CRM software to store customer contact information, coordinate marketing campaigns, and manage customer interactions.  

Using a CDP takes it a step further by collecting up-to-date customer data from all channels and offering a database of customer behaviors, needs, and other details. A CDP generates unique customer profiles that map every interaction and need in a customer’s journey. Businesses can share the database with teams throughout the organization, allowing each team to run its own customer segmentation and analytics. Segmentation allows for targeted customer experiences at an individual level while the shared data coordinates cohesive strategies on all platforms. 

The result?  

Customers enjoy a branded, customized experience that integrates into their lives. Businesses make targeted, data-backed decisions that maximize the ROI of their relationship marketing strategies. 

The relationship marketing definition of success 

The most profitable customer is the one who values a brand. That is the customer who will recommend a brand to their family and friends. 

They will return for future purchases. They will provide positive feedback and reviews. They are even more likely to stand by a company after a business snafu because of their brand loyalty. 

This loyalty does not happen by accident – it comes from relationship marketing. 

Businesses that want to maximize their customer lifetime value need to invest in a relationship marketing strategy. With relationship marketing, businesses can create stronger bonds with their customers, keep offering them value, and make their brand a normal part of the customer’s life. This integration means continued sales, increased referral marketing, and more long-term profits that go beyond a single sale. 

Prioritizing individual sales or customer acquisitions is an incomplete strategy on its own. Relationship marketing is the key to sustainable, long-term success

Find out how your business can benefit from Dialog Insight.

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