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Strategy in service businesses has taken a new turn. The key to success now lies with concentrating on, and retaining, existing customers.
Customers have always been the prime focus for marketing activity but the way service companies view this relationship is changing. Transaction marketing of the 1980s placed the emphasis on the individual sale: relationship marketing of the 1990s places the emphasis on individual customers and seeks to establish a long-term relationship between customer and company (see Table I). (Table I omitted) In an increasingly competitive business environment, marketing should be seen as a total approach to business, placing the customer firmly at the centre; to regard it solely as an amalgam of functional activities like advertising, promotions and market research is to miss the point completely.
The basis of the relationship marketing philosophy is that the attraction of new customers is merely the first step in the marketing process. The key is retaining that customer. Marketing should not begin and end with clinching the deal -- it must also concern itself with keeping, and improving, the relationship with the customer.
The Relationship Marketing Ladder
The relationship marketing approach views customer loyalty as a ladder showing the progression of relationships customers can have with an organization (see Figure 1). (Figure I omitted) The first step on the ladder is a prospect. The first marketing task is to convert the prospect into a customer. (A customer is described in a narrow sense as someone who has done business with the organization only once.) The next marketing task is to generate repeat business with that customer. At this point, they become a client -- someone who is neutral, or possibly negative towards the organization.
The distinction between a client and a supporter -- the next step on the ladder -- can be illustrated with reference to a bank. A client may have been doing business with a bank for years, but may not be particularly happy with it or may even have a negative attitude towards it. On the other hand, if they are a supporter of the bank, they are positively disposed towards it and are quite happy with the bank's services. However, a supporter is typically passive and not outspoken about the bank's...