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There are all kinds of marketing strategies businesses employ to entice new customers and keep existing customers coming back. One such tactic, relationship marketing, focuses on building a solid relationship between an existing customer and a brand. The idea is that if customers feel an attachment to a certain product, they will continue to purchase that product time and time again.
Many businesses use relationship marketing for customer retention, but what are the benefits and challenges of employing such a marketing strategy? Here are several pros and cons of relationship marketing:
1. Pro: Customer Loyalty
Successful relationship marketing creates loyal customers who often become ambassadors for the company. Because these customers are happy with the products and/or services they receive, they will let others know, resulting in free word-of-mouth advertising. Giving away free corporate promotional products is a great way to begin building relationships with your customers.
2. Con: New Customers Aren’t as Important as Existing Customers
Since the goal of relationship marketing is customer retention, new customers often get overlooked. While you want to do whatever is necessary to keep your loyal customers happy, you still need new customers to meet financial goals and grow your business. Relationship marketing leaves little room for catering to the new customer base, which can limit business potential.
3. Pro: Returning Customers Often Buy and Spend More
Because you have a returning customer base, you create an atmosphere where per-purchase averages are often much higher. This enables a business to experience more revenue from its existing customer base. In fact, many businesses that implement relationship marketing get as much as 40 percent of their total revenue from returning customers.
4. Con: Negative Information can Derail a Relationship Marketing Campaign
Because everyone is online and sharing these days, it doesn’t take long for negative information to make its rounds. All it takes is for one dissatisfied customer to share their experience with your brand, and your relationship marketing campaign is dead.
Customers today are concerned with immediate gratification and short-term values. If you can’t provide them with what they want, they often won’t even consider the long-term benefits. Instead, they will look to your competitors for immediate satisfaction.
5. Pro: Relationship Marketing Builds Personal Connection
When a loyal customer comes into a brick-and-mortar business and interacts with the staff, those team members become a physical representation of the brand. Whether they’re a car salesperson or a tax agent, the customer will look to them for advice and recommendations, trusting their expertise and building a personal connection with the staff and the brand they love.
6. Con: Building Relationships with Customers Takes Time
Many customers feel that any business that wants to build a relationship with them should be able to spend as much time with them as necessary to keep them happy. As such, when a customer walks through the doors of your business, they expect to have an employee’s complete attention for however long it takes to meet their needs and answer their questions. To build a strong relationship with your customers, expect to increase your one-on-one time with them.
Relationship marketing focuses on building meaningful relationships with your existing customers to keep them coming back. There are many advantages and disadvantages to this type of marketing. While it can increase revenue and improve reputation, it’s not without risks. You’ll need to study the pros and cons carefully to decide if this type of marketing will benefit your business or not.