Relationship vs. Transactional Marketing

During heady boom periods companies focus a lot of marketing activity on traditional transactional marketing processes to find and close individual deals or transactions. Demand is good, buyers have budgets, vendors are busy and there are lots of potential deals to pursue. Transactional marketing as the name implies is about each party maximizing the return on individual transactions. It’s about immediate value delivery and short-term revenue generation. For IT companies, transactional marketing typically focuses on acquiring new customers and gaining market share.

But as we all painfully know, economic cycles go up and down with boom periods giving way to slow periods. Transactional marketing doesn’t work well during slow periods because demand decreases significantly, spending is restrained and there are fewer new transactions to be had. Some companies continue pursuing a transactional marketing approach during slow times by using special promotions, discounting, and other tactics to keep new transactions flowing. Besides being ineffective, these short-term tactics create longer-term detrimental consequences.

Relationship marketing on the other hand focuses on long-term customer loyalty, retention and satisfaction to generate a continuing revenue stream from existing customers. The “relationship” is not about some cozy, kumbaya intimate friendship with a customer. Relationship Marketing is about a continuing mutually beneficial business relationship process that encompasses the entire customer life-cycle.

Relationship marketing continues whether or not a customer intends to buy this quarter or whenever. Although relationship marketing should be a cornerstone of B2B marketing strategy, many companies have recently found new religion in relationship marketing during the economic slowdown.

Relationship marketing is ultimately about generating additional revenue from existing customers using appropriate retention and loyalty methods. The key to successful relationship marketing is to tune your retention, loyalty and marketing activities to relevant and prevailing circumstances:

• Listening to customers or market segments of customers – they’ll communicate their circumstances, needs and buying intentions.
• Customer life cycle – what’s going on in their business, when last did they buy, what did they buy? Either individually for large customers or in groups with similar characteristics.
• Customer events – capitalize on major events such as acquisitions, management changes, new product introduction, etc.
• Customer demographics – such as larger versus smaller companies, owner operated versus corporate management, etc.
• Industry – yours and your customer’s. Each industry has its own economic cycle and specific conditions.
• Monitor customer service / support activities for trends in issues and complaints to identify threats and opportunities.
• Improve your Net Promoter Score
  
• Even though your focus is on retention and loyalty, always provide meaningful value that customers appreciate during the process.

“The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.” – Peter Drucker

I’ve seen several recent articles positing that the current slower market conditions for IT vendors may continue long after the recession is over due to a fundamental shift in the market, demand and buying motivations. Relationship marketing is the best approach to combat the vagaries of the economy and business cycles over the long term.

The basic premise of relationship marketing is to stay engaged with customers and keep them long enough to buy more stuff from you.

How does your company use relationship marketing? Your comments are always welcome.
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