Relationship Marketing

Saturn prides itself on the notion that it manufactures a superior automotive product and provides superior service. Part of this superior service involves better listening to its customers and responding to their suggestions. During early summer, for example, thousands of Saturn owners typically respond to the company's invitation to attend a 3-day picnic at company headquarters in Spring Hill, Tennessee. Not only is it a way to thank owners for their business, but it also is a proven means of building customer loyalty. Mail-order merchants Cabela's, L.L. Bean, and Lands' End, among others, deploy impressive computer capabilities to better track and anticipate customer needs. At Cabela's, for example, customers that order camping equipment and hiking boots are good candidates for the company's camping and outdoor gear catalog. Lands' End customers who order chinos and other casual attire also receive specialized catalogs. At L.L. Bean, the company's unconditional 100 percent satisfaction guarantee keeps valued customers coming back. At FedEx, highly profitable customers get special attention.

Car companies, mail-order merchants, airlines (with frequent flyer programs), and hotels with repeat business customers are obvious candidates for effective relationship marketing. The untapped potential for relationship marketing lies in new and innovative applications. For example, if a company wants to sell detergent, it might obtain a database of large families and offer them a bargain price. While a typical product promotion effort would stop there, relationship marketing goes further. Relationship marketing would suggest that the firm offer such families a free washer or dryer if they remained a loyal customer for, say, 5 years. Because the markup on detergent is substantial, such a long-term promotion could be highly beneficial for both the customer and the company.

The logic behind relationship marketing is simple. It costs much more to get a new customer than it does to keep a current one, so the retention of valued customers is key to long-term success.

See: Dow Jones Newswires, "Expedia, Delta Set Marketing Deal," The Wall Street Journal Online, March 2O, 2OO2 (http://online.wsj.com).

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