Relationship Marketing Vs Transactional Marketing
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Relationship Marketing Vs Transactional Marketing

Relationship Marketing is a relatively new concept in marketing. The concept is catching more attractions by organizations day by day because of the longevity of relationship with customers and low cost of retaining customers.

Marketing has moved from customer acquisition to customer retention to customer selection. The importance of relationship marketing in retention of few profitable customers has become even more important than ever. Smith and Taylor in their book “Marketing Communication: an integrated approach” are of the view that organizations today do not look at customers as buying one can of beans, one car or photocopying machine but they think of them as buying thousands of cans of beans, dozens of cars and photocopiers during their life time. Today selling has moved away from short term, quick scale scenario and selling today is more about “partnering” and relationship building, you don’t sell to people you partner with them.

Relationship Marketing vs Transactional Marketing

Transactional marketing is a business strategy that focuses on “single point of sale” transactions. The emphasis is on maximizing the efficiency and volume of individual sales rather than developing a relationship with buyer. On the other hand relationship marketing is a business strategy that seeks to establish long term relationship with its customers rather than focusing on single transaction, not only does it focus on individual customers but on all the stakeholders in order to manage a relationship that adds value to each person.

Varey and Lewis in their book “Internal Marketing Directions for Management” describe in detail how transactional marketing differs from relationship marketing.

- Focus: The transactional marketing focus on recruitment of customers for single sale; Relationship marketing focus on customer retention

- Orientation: Transactional marketing is oriented on product features; Relationship Marketing orientation is on product benefits and system solutions

- Time Horizon: Transactional marketing has short time horizon: Relationship marketing has long term horizon

- Customer Focus: Transactional Marketing has little customer focus: Relationship Marketing has high customer focus

- Information: Transactional Marketing information is content of communication; Relationship Marketing information is product of communication.

- Contact: In Transactional Marketing there is low contact with customers; In Relationship marketing there is high contact with customers

Egan in his book “Relationship Marketing 3rd Edition” says that relationship marketing has a dual focus both on customer retention and acquisition strategies. It has become underpinning conviction of relationship marketing that it encourages retention marketing first and acquisition marketing later on. The academics are of the view that customer retention offers significant advantage than customer acquisition, particularly in saturated markets.

Benefits of Relationship marketing over transactional marketing

Relationship Marketing is rooted in the idea that it is cheaper to retain an existing customer than to recruit a new one. There are many benefits of relationship marketing. The first and foremost is that it focuses on providing value to its customers and places a great emphasis on customer retention. Secondly relationship marketing approach is an integrated approach to marketing, service and quality and therefore it helps in gaining competitive advantage. The long term customer may do the word of mouth promotions and referrals and many studies have revealed that cost to retain existing customer is just fraction of the cost to acquire new customers. Mudie and Perrie in their third edition of their book “Services Marketing Management” assert that relational customer also tend to increase their purchases overtime either because they are consolidating their purchasing onto preferred supplier due to grown business/ family and it has also been found that there is less need to offer price promotions to this group as these customers are likely to be less price sensitive than others.

Trend towards Relationship Marketing

Nowadays more and more organizations are adapting relationship marketing approach. The big examples in this case are Club Card by Tesco and Nectar Card by Sainsbury and other partner organisation. The points scored are not only tempting to customers for repeat buying but the data collected also gives the organizations an insight into the buying habits of their customers. It helps in making a more customised marketing strategy directed at individual customers and time to time customers are sent information on promotions and new products. Some organizations go even further and send gifts and cards on birthdays or other such special occasion of customers.

With time organizations have realized that the cost of attracting new customers is very high and retaining customer results not only in increased profits but word of mouth marketing and positive referrals also help in generating more business leads. Relationship marketing has become the approach for 21st century and soon enough longevity of relationship with customers will be key in determining success of businesses in today’s highly competitive environment.

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Comments (4)

Very interesting.Voted up

Zulqarnain Arabian

Thanks Lucia, appreciate that ...

Satyam

Well, I made a small graph here to comprehend what is relationship marketing. It is when we involve customers in the process or creation of products/services.

http://marketinomics.com/digital-marketing-2/ever-evolving-marketing/

Hope this will make it easier!

Hi Zulqarnain, very well written. Speacilly using examples like Tesco and etc, it helps to make it more easy to undrestand. I would also recommend you to read ‘Transactional Marketing over Information Economies’. It is more focused on internet marketing. Thanks.

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