The selling approach is more transaction based and aims at maximization in the short term. As opposed to this, the marketing approach emphasises customer management, customized approach to winning and retaining the customer and hence focuses on building profits over a long term. The selling approach generally undermines research. It is more intuitive. It works well in markets that are less complex, in the sense that competition is low and customers have very little choice. It works on the mass, marketing approach wherein customer needs are aggregate. This is opposed to the marketing approach which is linked to the basic premise that each customer is different and hence needs to be approached differently. Also, given the exorbitant cost of reaching each customer, it is possible to group them according to common measurable and definable parameters and hence create segments. Thus, the customer is the focal point of the marketing orientation.
Marketing orientation is different from selling orientation, which tends to dominate many Indian companies. The classic example is that of the Indian automobile industry. Until Maruti was launched in 1984, the two giants Hindustan Motors (manufacturers of Ambassador cars) and Premier Automobile (manufacturers of Premier Padmini brand of cars) hardly cared for the customer. They kept rolling out obsolete cars at exorbitant prices and did very little either to improve the fuel efficiency or even provide better service. Since the Indian consumer had very little choice, he had to accept whatever was given to him.
But in 1984, when Maruti was launched and the Government of India allowed foreign collaboration in this sector, both these manufacturers realized that the “golden” era was now over. Despite their new foreign collaborations their products did not sell. Each of them, were saddled with large stocks of unsold cars and thus were incurring loss. The dealers walked out of their agreements as the inventory increased in their showrooms. This made Premier Automobiles offer price discounts on the Premier car and also deliver to the customer at any place where he perceived the maximum price advantage. Yet, the condition remained far from satisfactory. The same is true of fertilizer, steel tube manufacturers and companies making power generators. As is evident the focus of all these companies, hitherto had been either on their own products or on technology. Marketing orientation as spelt out earlier is different from any or all of them. Marketing orientation (as opposed to selling orientation) focuses on customers’ needs, values and attitudes and in order to satisfy them, it uses an integrated marketing plan. The ultimate aim is to maximize profits through increased customer satisfaction.
The decade of the 90s saw the “rebirth” of relationship marketing. Once again the issue of trust between customer and marketer was emphasized. Trust, is built slowly over several transactions but disappears in a flash. As can be made out, the relationship marketing approach emphasizes on both the hard and the soft aspects of marketing processes, which help create reliability. The hard aspects relate to product reliability, use of interactive technologies both at front and back ends (i.e. integrating customers with organizational functions) retail stores and so on. The soft aspects concern human interactions and thereby work on dependability issues among salespersons, service personnel, intermediaries and so forth. The under-pining strength of relationship marketing is customer loyalty. A successful relationship marketing firm leverages its knowledge if customer needs and values which helps to determine resource allocation across different customer groups. A study showed an inverse relationship between the size of the customer groups and profits. It showed that 36 per cent of customers accounted for 80 per cent of profits in a telephone company. This is also of Mahanagar Telephone Nigam Limited (MTNL) and Bharat Sanchar Nigam Limited (BSNL) or for that matter in any product group.
Today, the need for customer centric organization is increasingly being appreciated. For that the organizational pyramid needs to be inverted and the customer placed on top of the pyramid. The logic is that, in any organization, communication flows from top to bottom and, generally the behaviour of an average employee is to look up not for guidance and help but also for recognition. The importance of recognition from the customer is far more valuable than from the CEO of the company.
The relationship marketing process emphasises on continuous interactions between the firm and the customer. These interactions lead to firms acquiring accurate, timely, and relevant information from the customer which helps in creating a differentiated or customized offer for each customer which, in turn, leads to higher customer loyalty. A relationship marketer understands a customer’s life time value (LTV) which gets enhanced over a period of time.
A LTV represents a stream of future profits from customer transactions discounted at an appropriate rate back to its current net present value. The LTV of any customer is also base on:
*reduced acquisition costs.
*sales revenue growth from each customer’s account
*cost savings resulting from efficiency in customer purchases and sales to them over a long term
*referrals leading to word of mouth publicity
* Price premium that a retained and loyal customer is willing to pay as they are less price sensitive.