Relationship Marketing

Relationship marketing is a process of improving the relationships with current customers rather than focusing on acquisition of new customers. This concept has been emerged since 1980’s worldwide. The main goal of relationship marketing is to build and nurture a fixed set of customers who in turn will bring greater profits to the organization.

Research findings:

  • Repeat customers spend 33% more than new customers
  • Referrals among repeat customers are 107% greater than non-customers
  • It costs six times more to sell something to a prospect than to sell that same thing to a customer
  • Studies in several industries have shown that the cost of retaining an existing customer is only about 10% of the cost of acquiring a new customer so it can often make economic sense to pay more attention to existing customers
  • 5% improvement in customer retention will lead to a profitability increase of the firm between 25% and 85% depending on the industry

Business model – Relationship marketing

The model represents the level of customer loyalty according to the customer types. It comprises of different rungs in the relationship ladder of customer loyalty like:

  • Prospect
  • Customer
  • Client
  • Supporter
  • Advocate
  • Partner

The first rung of a ladder is a ‘prospect’ who have not made a sale but likely to make a sale in the future and being followed by the successive rungs of ‘customer’, ‘client’, ‘supporter’, ’advocate’ and ‘partner’.

    prospect Customer Client Supporter Advocate Partner

The main motto of the relationship marketing is to help the customers to move up the ladder in terms of providing them with more personalized service which exceeds the customer expectations.

Relationship marketing approach

There are two main effective approaches to relationship marketing namely

  • Customer retention
  • Referral business

Customer retention

It is the most cost effective and profitable way to retain the existing customers in today’s competitive business world because 80% of the firm’s sales will only come from 20% of its customer databases. There are customized approaches to design customer retention programs keeping in mind the needs of the customers who in turn will perceive values been associated to the campaign.

There are few customer retention techniques such as

  • Membership cards that enable the customers to avail special offers, discounts and gift vouchers
  • Customer satisfaction surveys
  • Customer grievance cell
  • Designing welcome, acknowledgement, thanks giving, birthday and anniversary letters during these special occasions
  • Event management
  • Customer delight

Referral Business

It is a term used to acquire a prospect from the current customers to make a sale or purchase a product that involves an incentive program for those who give referrals. It really increases our sales revenue.

According to world-renowned sales trainer, Tom Hopkins, in "Sales Prospecting for Dummies"; your closing ratio for non-qualified leads is 10 percent versus a 60 percent close ratio with referred leads.

Referral business building model

  • Target
  • Lead Time
  • Costomers Selection
  • Support Activity
  • Rewards Program
  • Closing

Referral Benefits:

The referral business will result in following benefits:

  • It will reduce sales cycle and sales expenses due to focusing on the current customers rather than looking for cold prospects
  • It results in building the network of satisfied and delighted customers
  • The satisfied customers will bring further more new customers to the company
  • It increases the sales revenue

Case Study - Citroen UK relationship marketing approach

Citroen is one of the world’s largest and oldest car manufacturers with strong reputation for its technical excellence capabilities and innovative design. It’s been the most successful in the United Kingdom in Fleet sales business with product ranges of car and van with effective pricing and strong after market approach.

The Situation

  • In 1990’s, in order to manage the existing business effectively in UK’s Fleet business sales wanted to move its manual method of maintaining customer records to automated method
  • Has planned to improve its effective prospect generation to build a loyal customer base

The Solution

  • Citroen has implemented Goldmine software to automate its customer sales records and also to design customer relationship programs
  • Citroen is also strongly sales –focused like other leading automotive manufacturer who has implemented Goldmine to improve the operational performance of its fleet sales business.
  • It has the ability to produce multiple sales reports, which will be helpful to prioritize its market planning activities with extensive analysis of those data.
  • It helps to focus effectively on sales campaign to drive the overall business
  • Its been highly useful to follow up with the customer appointments to support performance monitoring system
  • Overall, its highly flexible as a reporting and measurement tool to provide CRM support also
  • Its total functionality paved the way to maximize its sales and marketing efforts effectively

The Results

  • It has increased its conversion ratio of prospects into sales
  • It results in the improvement of customer retention through effective customer loyalty to its business
  • It’s latest sales revenues has increased and its market share up to 15% in the UK market
  • Its holding a top three position in the van segment in UK


  • It plays a vital role to increase the customer satisfaction and loyalty towards the specific brand
  • In order to increase the business profits, it is pivotal to build, nurture and develop the customer relationships in terms of considering the customers as the strategic business partners and providing them exemplary service with utmost care
  • The bottom line to nurture customer relationships to get more business from existing clients and customer base and in turn will increase the sales revenue to 50% without any increase in its marketing or sales budgets.
  • It's highly important to satisfy customers by providing them with the right products and services, supported by the right promotion to make it available at the right time and location.