The paper “ Relationship Marketing Helps to Understand the Customer Characteristics" is a motivating example of an essay on marketing. Relationship marketing is an old concept but the importance of relationship marketing is growing as people look towards retaining existing customers. The concept of relationship marketing is been used since the 80s (Berry, Shostack & Upah, 1983). The importance of relationship marketing has grown as intensifying competition has resulted in business making decisions to retain customers. This is highlighted by the fact that businesses have to spend six times the money they spend on acquiring new customers (Gruen, 1997).
This has resulted in more enterprises paying higher attention to relationship marketing so that customers can be retained. The importance of relationship marketing can be seen by the fact different industries are looking towards having different departments so that customers can be retained. This can be seen by the fact that banks have relationship managers for customers, airlines look towards loyalty program from travelers who use the flights frequently, bonuses for customers using credit cards and hotels and the tourism sector providing specialized services to customers.
Thus, the different industries look towards having different tools so that they are able to retain customers and ensure the growth of the business in the future. Organizations look towards relationship marketing as an important constituent of the business as slowing growth rates, intensifying competition, and technological advancements has resulted in devising a strategy so that customers can be retained. This is witnessed by a study that shows that different factors have resulted in the manufacturing cost to fall from 55% to 30%, management cost to fall from 25% to 15% and has increased the marketing cost from 20% to 55% (Sheth, 1998).
The rapid increase in cost and development of strategies to retain customers has resulted in relationship marketing gaining more importance. Relationship marketing is used by different businesses to retain customers but the importance of relationship marketing is limited in the case of mass marketing. This has resulted in business adopting the concept of relationship marketing only if the benefit exceeds the cost associated with it. This helps to benefit the business as it results in low retention costs and better profits as the defections of the product reduce (Reichheld & Sasser, 1990).
This is primarily due to the fact that customers who have entered into a relationship look towards limiting the options so the customers choose the company with which they are doing business. This will thereby ensure that the risk for the business reduces and the decisions taken by the business provides the required return the business is looking for (Sheth & Parvatiyar, 1995). Organizations look towards the concept of relationship marketing because the concept of 80-20 rules applies here and provides benefits that the business is looking for.
The importance of this multiplies in the case of the service industry like the banks where they look towards developing a relationship with the customers. This is evident from the fact that 20% of the customer helps banks to get 80% of the business while the other 80% helps banks to get 20% of the business. This has resulted in banks looking to develop relationship marketing so that they are able to multiply the business opportunity and ensure growth and business especially in case of a downturn and growing competition.