Transactional marketing

Abstract

For long, transactional marketing has been the bread and butter of business. Transactional Marketing refers to the promotion and selling of the product with little or no concentration over customer value and satisfaction, and tries to make new customer every time. But, over the time around late 1970s and mid-1980s, Relationship Marketing has grown. Relationship marketing is about building and maintaining the long-term relationships with the customer, creating a sense of loyalty by providing the valued product and services for mutual benefits. Recently, new practices have been developed supporting relationship marketing. Customer Relationship Management (CRM) is a technology-based system of marketing where organizations come into contact with their long-term customers and organizations try to provide their customers with high valued products and services. Satisfied customer promotes the organizations name and could also get the referrals. Organizations having relationship marketing approach doesn't really have a threat of their customer switching to the competitors and have a competitive edge over rivals. With the implementation of Customer Relationship Management system with in the organizations, firms have to face a little bit of problems with their marketing strategies and operations but in a longer run it provides a substantial growth in the revenues and lower the expenses occurred on creating new customer each time, and organizations enjoy growth in profits each year, because its been said that 80% of the organization's business comes from 20% of the customers, those customers who are repurchasing and are fairly satisfied customers.

Introduction

Marketing is in the process of evaluation. There is no universal definition of

Marketing. The old definition of marketing was defining it as a process of buying and selling, but now the focus is being shifted from its buying and selling perspective to it being more customers focused and described as “the art of creating and maintaining customers.” (J O'shaughnessy, 1995, Pg4)

Previously marketers focused on the transactional marketing to make transactions for the company but now marketers seems more aggressive about the relationship marketing where marketers' try to bind the customers in a long-term relationship to gain long term profits and save expenses occurred on creating new customers. Relationship marketing plays a very important role in the growth of an organization. Customer relationship marketing is the vital component of the marketing strategy. These all topics will be discussed later.

Transactional marketing

Transactional Marketing is also called as Traditional marketing. Transactional marketing is a marketing approach, focusing on the single sale formula, pushing the sales through mass marketing and promotions of the product. Orientation on product and its features, rather planning for the longer run of the product or long-term view of the product in the market; it is based on the short time scale, with little or no emphasis on customer services. This employs pull technique of marketing, producing the product with quality as a primary concern, and satisfying the customers' needs and wants without building any relationship with them.

“Transactional marketing highly focuses on maximizing the profit for the company by recruiting more and more customers to purchase the firm's product and not building much of relationship with them” (M. W. Vilcox, T. O. Mohan, 2007, Pg 53)

In this ever changing and evolving world of technology and emergence of many new modes in the marketing, like, e-marketing and online marketing, Traditional marketing still holds control of many of the corporate. Transactional marketing is mostly about forwarding the message focused on advertising and promoting the product, with a view that more and more products would be sold if huge number of people knows the product.

For Example:

a day-to-day example of transactional marketing could be a phone call made to the physician to get some recommendations. It is being viewed as one event or one among the series of event taking place that day. A pharmacist, who is having a transactional viewpoint, would be mainly concerned about completing up the call and keep going on with the work. He doesn't pay any attention or importance to the outcomes of the call than the desire to conclude it quickly.

Or we can also think about a sales agent who is being given commission for sale he makes. The salesman tries to persuade the customer to buy the product by describing the

benefits of the product, and sells the product and then never gets back to the customer. Thus, no relationship is made.

Transactional marketing's Marketing Mix

The factors marketers consider before the launch of any product or service into the market. This marketing mix or 4Ps were put together by Jerome McCarthy, which consists of the four components:

  1. Product
  2. Price
  3. Promotion
  4. Placement

According to McCarthy, Product captures the first place in the mix, with its production and management. Second the Price, process of fixing the right and affordable price for the product. Then comes advertising, branding, packaging of the product, which is included in the promotion of the product. Last component of the marketing mix is Placement of the product, to make it in reach of the customers. All these four components are kept in mind before and planned really well by the marketer before launching the product.

Validity of Transactional Marketing Today

As the world changes its operations gets faster and it is better to acquire the trend.

Many analysts have said the following:

“Transactional marketing fails to work in today's world”.

New technologies such as Internet, mobile phone and other handheld devices are the greatest innovations, and have became few of the most important needs of human being and those things have helped the marketers to build a relationship with the customers which was previously not easy. Not even companies but consumers are increasingly using these communication tools to take care and control of their relationships with those companies whom they buy their products from.

Tim Kitchin says,

“The certainties of the transaction age are being replaced by the subtleties of the relationship age.”

Relationship Marketing

It's true that any business, which focuses on customer satisfaction and more importantly delighting them stay in the market for long. Successful organizations never go wrong with their customers' demands and needs, and keeping the record of those needs and demands as they grow and transform. Relationship marketing was introduced by Berry in the year 1983. This concept of Relationship marketing was regarded as the biggest change in 50 years, and became the ‘Battle Cry' of the 1990s.

(Berndt, 2004, Pg 6)

In the very first days of relationship marketing it was described as an approach to attract, maintain and enhance customer relationships. But later, Gronroos (1994) proposed a comprehensive definition of relationship marketing as the following,

“The process to identify and establish, maintain and enhance, and, when necessary, terminate relationships with customers and other stakeholders, at a profit so that the objective of all parties involved are met. This is done through mutual exchange and fulfillment of promises made to the customer”.(Berndt, 2004, Pg 6)

Relationship Management uses Event driven tactics of customer retention marketing, and treats marketing as a time taking process not an unconnected single event. Relationship marketing is highly focused on creation, retention and satisfaction of the customers. Its emphasis is diverted on building and maintaining long term relationship with customer, than attracting new ones every time. Relationship marketing opposes the historical emphasis of creating customers and paying no attention on retaining them. It was claimed by Rosenberg and Czepiel that “It is ten times as expensive to win a new customer as it is to retain an existing customer”. (Buttle, 1996, Pg 5)

It is a philosophy of doing business, a strategic orientation, that focuses on keeping current customers and improving relationships with them. It does not necessarily emphasize acquiring new customers. The focus is less on attraction, and more on retention and enhancement of customer relationships

Retaining Customers

Due to the cost of creating new customers, marketers today are more focused about retaining the customers rather then making new ones. This ongoing process of building and creating new values with individual customers, and sharing lifetime benefits with them is vital and very important for the organizations because it creates the sense of loyalty in customers and long-term profit for the company.

Fig. Life-cycle of satisfied customer

In recent days of technology, relationship marketing is being used efficiently to come close to the customers and make them feel special. Technology could be used in several different ways to encourage interaction between the brand of the company and the customer.

For example:

PEPSI launched an innovative digital marketing campaign in recently, where they actually used very modern ‘quick response code' through mobile technology. The customers were brought to a website where they could download exciting free gifts for their mobile phone very easily. This campaign allowed Pepsi to communicate directly with millions of their customers easily in an innovative way. This kind of campaign actually allowed Pepsi to gather more information on who were their actual customers, what they like, how could they make long-term relations with them and much more.

Strengths of Relationship Marketing

Relationship Marketing is more focused on providing the high valued products and services to the customers. The main emphasis is on retention of the customer for the longer benefits of the company, not on making new customer everyday or on sales. It provides the customer with high valued products and striving for the customers' satisfaction and finally their delight that gives the organization a competitive advantage over its rivals/competitors. As we have discussed above, the cost incurred attracting new customer is high, so marketers today try to build long term relationships with their existing customers, which will lower the cost of attracting new ones. It is noticed that effect of word-of-mouth advertising is much stronger than any other form of advertisement or promotion, so it is possible that satisfied and loyal customers could initiate the word-of-mouth promotions for the company and could provide referrals. The biggest threat to any businesses is the fear that their customers could switch to its competitors. But if an organization follows a good relationship strategy, their customers will be less likely to switch over the competitors that will also create hindrances for the competitors to enter into the market.

Six Markets Model

Marketers say that there has been a tremendous shift from transactional marketing to on-going relationship based marketing. Adrian Payne says, “Transactional marketing of the 1980s gave emphasis on the individual sale; relationship marketing of 1990s placed the emphasis on individual customers and sought to establish a long-term relationship between the customer and the company”.

(S. Dibb, L. Simkin, 2001, Pg 10)

Cranfield's Adrian Payne, Martin Christopher and his colleagues identified six markets model, which they think are central for Relationship Marketing. Those are:

  1. Internal Markets
  2. Supplier Markets
  3. Recruitment Markets
  4. Referral Markets
  5. Influence Markets
  6. Customer Markets

Internal markets deals with the employee with in the company, and supplier issues are deal by supplier market, maintaining the relationships with supplier for the mutual benefits. Every business needs long-term and strong customer and supplier relationships for market performance viability. Referral marketing develops a strategic plan for referral stimulation. It could take long before you could view the results of referral marketing plan. Where as influence markets include sub-markets such as, government agencies, stockholders, consumer associations etc.

Transactional Vs Relationship marketing

There is no issue among different scholars and the practitioners about the differences and the inter-relation between the two main marketing perspectives i.e. (Transactional and Relationship). Coviello, Brodie and Munro (1997) after working on various ideas by different schools of marketing of Europe and US, defined these two marketing perspectives.

As discussed above, transactional marketing attracts the customers to buy the product without establishing any

relationship with them. On the other hand, relationship marketing takes first step to customer relation building. A very good example of these two different approaches is Tesco and WalMart. As Tesco seems to be striving to engage in relationship with its customers by introducing various loyalty programs and offering various promotions to them, whereas WalMart is focused on providing its customer with low priced products, not considering any previous interactions. WalMart has a motto and very famous saying, which was set by Sam Walton, “If you want loyalty, get a dog.”

Transactional Marketing Relationship Marketing

  1. Focuses on one-time sale recruitment. 1. Focuses on retention of the customer and building relationship
  2. Emphasizes on product and its features 2. Emphasizes on product benefits and systematic solutions
  3. It's for short-term 3. It is a long-term relationship between the company and customer
  4. Little or no importance given to 4. Customer service taken as the most customer services important element
  5. Limited commitment toward the 5. Higher commitment towards customersCustomers
  6. Focused on product quality 6. Quality in all aspects
  7. Communicate to persuade 7. Communicate to make sense and meaning and building relation
  8. Functional, mechanistic, 8. More humanistic and relationship basedproduction-oriented based business business modelmodel
  9. Goal is sales and customer satisfaction 9. Goal is to delight the customer

Customer Relationship Management

As said by Peter Drucker “The purpose of business is to create customers.” K. Anderson, C. Kerr, 2001, Pg1)

But in today's business, it's more important to keep those customers, and growing in-depth relationship with them. It is a globally accepted fact that most of the customers are profitable for the business in the second year of their business with you. (K. Anderson, C. Kerr, 2001, Pg1)

So it is very important for any business to retain their customers to gain a long-term profit because new customers, in the beginning, will cost you the money, in terms of advertising, marketing, researching about their wants and finally educating them how beneficial are you to do business with. Retaining customers is very important for any company to seek long-term profits.

CRM is the most effective technique one uses to make sure that customers become and stay loyal. Customer Relationship Management (CRM) in any business holds the primary position, even before your people (Employee). CRM is not just about the selling and marketing, but it touches various areas of the business, it could be, from customer services group to information and technology team. As defined by

Anderson and Kerr:

“CRM is a comprehensive approach for creating, maintaining and expanding the customer relationships.” (2001, Pg 2) Judith W. Kincaid gave a very broad definition of CRM, saying:

“Customer Relationship Management is the strategic use of information, processes, technology and the people to manage the customer relationship with your company (Marketing, sales, services and support) across the complete customer life cycle.” (2003, Pg 41)

Customer Relationship Management came into existence in 1990s. The term CRM is being used in different ways. According to the views of some IT related companies, the term CRM is used to give details about software applications that mechanize the selling, marketing and service functions and other various functions of the business. CRM could be thought at three different levels:

  1. Strategic CRM
  2. Operational CRM
  3. Analytical CRM
  4. Strategic CRM:

Strategic CRM is more inclined towards the development of customer-focused kind of business culture. This novel culture is striving to create and retain the customers by providing them better value than competitors do. Resources are used to enhance customer value; specific reward systems and other ways of promotions are introduced to improve employee behaviors to increase customer satisfaction. Here, the best among employees is the one who would provide an outstanding value or services to all the customers. It could be outlines as:

“A top-down perspective on Customer Relationship Management which views it as a core customer-centric business strategy, that aims at winning and keeping the profitable customers”(Buttle, 2004, Pg 3)

Operational CRM:

Operational level of the customer relationship management deals with the frontline interaction with the customers. It could connect through call centres, worldwide webs, direct emails or call, or direct sales. It is highly focused on the front office business processes like sales, marketing and customer care. The customer database is settled usually, where each interaction with customer is added up, so that the customers could easily interact with different people in the organization, without mentioning their personal information again.

Customer satisfaction is usually assessed and addressed through two techniques or models i.e. Customer satisfaction model and the SERVQUAL for services companies.

Customer Satisfaction Model: This model was given by Prof N. Kano, which is used as a quality management and marketing technique to measure the customer's satisfaction. This model distinguishes 6 categories of quality attribute, of which, first three focuses on customer satisfaction (Basic factors, Excitement factors and Performance factors), while other three factors mentioned by Kano are, Indifferent attributes, Questionable attributes and finally, Reverse attributes. Analytical CRM:

Analytical CRM is highly focused on using the customer data to enhance the customer and organizational value. It is highly based on the customer information. This data could be found from the history of purchases made, credit scores or payments made, marketing data taken through the surveys or loyalty schemes etc. This information helps the organization to identify its loyal customers, and help the company to get answers of the most important questions like customers who are most likely to switch over to the competitors, which customer would respond to certain offer, which customer should be targeted, which part/area needs more sales efforts etc.

Analytical CRM, in customer's point of view, delivers timely, more personalized solutions to the problems of customers, getting high customer satisfaction in return.

In organization's point of view, Analytical CRM provides highly powerful up selling and

cross selling chances, with effective customer acquisition and retention techniques.

Impact of CRM on Marketing and Operations of an Organization

As discussed above, Customer Relationship Management is all about managing customer relationships. It has been said rightly by Don Peppers, “… Managing customer relationships. If I'm managing customers' relationships, it means I'm treating different customers differently, across every enterprise…. the relationship develops a context over time, it drives a change in behavior… this means that I have to change my behavior as an enterprise based on the customer.” (Solomon, 2003, Pg 92)

This novel view of CRM completely changed the operations of the organizations. Companies became more concerned about keeping the customer than striving completely making new ones. This new dimension of marketing changed the complete approach, companies changed their marketing strategies, and every customer is different than other so each one is being treated differently. Different CRM strategies/plans are used by the companies, which allow them to identify their best customers, try to satisfy their needs and eventually increase their level of satisfaction and take them up to the loyalty level.

In early 1990s, Philip Kotler proposed a novel dimension of organizational performance and success based on the relationships rather than the transactional marketing approach, which is based on the marketing mix. This marketing mix approach wasn't actually replaced but it was repositioned as the toolbox to understand and respond to all the main players in organizational environment i.e. Customers, distributors, suppliers, unions, retailers, employees etc. Kotler outlined the importance of this approach to the stakeholders.(Payne, 2006, Pg 7)

CRM has a huge impact on marketing of an organization. It has almost shifted the focus from mass marketing to the individual customer. Managing each customer relationship is the heart of CRM, while traditional market metrics hardly allowed the companies to make operational decisions that affect the individual customers. CRM helped the organizations to improve its mass marketing and the campaign measures. These retention campaigns cost a lot but it is very effective in longer run.

Traditional marketing approach was highly focused on the sales while CRM has a view of long-term relationship with the customers. This idea of retaining the customers has made huge changes within the organizations and changed its marketing and operations drastically. Organizations have started building and maintaining databases of the customers' information. CRM made businesses more conscious about customer services, acquiring and serving the customers, increasing their value towards the company, retaining the good customers and determining which customer should be retained or given higher level of services.

Businesses today put a lot of efforts on analyzing the purchasing behavior of the customer, they manage many databases where they keep records of each customer i.e. what does he/she purchase? How frequently he/she purchases? What amount he/she spends? etc

According to the information each customer is targeted individually. Various schemes and campaigns are being organized by the business to retain the customers.

For example:

Businesses, today, provide different kind of promotion and loyalty schemes to retain and delight their customer. These schemes include different promotions to create a sense of loyalty among the customers. Like different newspapers give a free copy to its regular customers sometimes, one stamp on the loyalty card on purchase of one book from Eason, and the time one gets 10 stamps on the card h/she gets 10% off on the next purchase.

CRM has affected the marketing of the organizations in a sense that it has made organizations to change all its marketing strategies and operations. CRM based organizations are concerned more about the customers. Organizations are now attempting to define the characteristics of the best customers, and estimate their lifetime value such customers, and are changing their marketing strategies accordingly. CRM system is technology-based, and it affects the customers' behavior a lot, if it is not implemented properly.

For example:

if a customer orders anything online from any supplier, and he suddenly gets 200 mails from firms which sale related products, in this situation a customer would think twice before placing an order online with the organization again. A CRM-based organization is highly focusing on up selling and cross selling than just following the single sale strategy. This concept also had a deep impact on the marketing management of the organization.

With the implementation of CRM system in the organizations, their marketing strategies seemed to be highly customer-centric (striving to create the customer loyalty rather than making new customer every time) and focus is mainly being given to 1:1 marketing, rather than mass marketing.

Customer Centric

This term is being used for the organizations/companies that are operated from customers' point of view. In other words, organization makes sure that its customers could easily contact it and have greater ease in communicating.

For example:

A very good example of customer centric organization could be Amazon.com. It has personalized web pages with wide rang of products to select, the low price lead towards the customer loyalty and a long-term relationship of Amazon.com. More than 20 million people have purchased from Amazon.com and 15 to 20% of them are returning customers, comparing to other e-business retailers, who have a returning customer percentage of 3 to 5%.

One-to-One Marketing

It is also expressed as 1:1 Marketing. It is a CRM strategy which emphasizes on personalized interaction with the customers. It is thought that this personalized interaction will increase customer loyalty and will give a better return on the marketing investments.

This 1:1 marketing term could be new but the approach is quite old. And it is been taking place since the commerce came into being.

For example:

the owner of a grocery store would take this one-to-one approach while dealing with the customers, i.e. remembering the customer details about their preferences and their characteristics and ultimately providing the services based on that data and knowledge.

“One-to-one (1:1) marketing seeks to reinvent marketing with the personal touch absent from various modern business interactions.”(D. Peppers, M. Rogers, 1994)

Customer Relationship Management has also affected the operations of the organization in terms of putting more pressure on them. A CRM system could run better if the organization have the right employees, who have knowledge of the CRM system, so the organizations now have to spend more on training the employees and make them aware of the system. CRM system is more or less technology based so certain tools should be upgraded continuously like the WebPages. Organizations now tend to make and work on the databases of the customers, which have increased the burden because this approach of 1:1 marketing and customer loyalty expects a lot.

In a nutshell we can say that the CRM has given organization great benefits in terms of improved marketing methods, customer retention, a growth in the market share and an analysis of the customer profitability. CRM provides the organization with a sustainable competitive advantage over its competitors.

Questionnaire

A questionnaire was made to identify consumer preferences towards common relationship marketing and communication tactics of businesses. The questions were asked to a group of people aged between 20-40.The bank sector (service sector) was taken as a base of questionnaire for convenience.

1. If I don't get a live person when I phone a customer service line, I am disappointed.

2. I like it when the bank I patronize offers a number of diverse services.

3. I like the way my bank follows -up with a phone call after a service is performed.

4. I get catalogs in the mail or from executives from the bank that I show interest in.

5. I don't want special treatment from a bank I patronize; rather, I just want good service.

6. I like getting mail about new products or services being introduced from the bank I do business with.

7. I prefer getting e-mail messages rather than the frequent disturbing phone calls.

8. I like being notified every time any transaction is being done from my account on time by e-mail or phone.

9. I like it when tele-marketers call me to offer additional services of the bank like loansetc.

10. I like it when telemarketers address me by name, even if I have never done businesswith them before.

Analysis of Questionnaire:

It is seen from the graphs that call should be attended immediately without waiting the customers for a long time. A number of services but quality services are preferred by the customers with instant follow-up. Informing of new services and products through mail is moderately liked by the customers. E-Mail messages are preferred than phone calls. Instant notifications of transactions through e-mail or phone are liked by the customers. Customers do not like telemarketers calling them and informing about additional services. Customers like to be called by their name only when they know whom are they talking to. Thus, we see that whatever we discussed throughout the paper is in accordance with the results from questionnaire made.

In all, building strong relationships with customer is very important for any business to grow.

Conclusion

It can be concluded that relationships with customers help a lot growing the revenues/profits for the organization. Relationship marketing is all about creating, building and maintaining the relationships with the existing as well as new customers for the long-term profits. Transactional marketing is the one time sale strategy which doesn't mainly focuses on building the relations, but this approach of marketing is still applicable and many organizations still use this approach of marketing more or less. CRM is a comprehensive and strategic approach of creating and maintaining long-term relationships. One-to-one (1:1) marketing approach has impacted on various aspects of the organization; this is more technology-based approach to stay in touch with the customers, striving to make them loyal with the company. Due to this relation maintaining approach, marketing strategies and

operations of the companies have changed. Companies should change all of their previous strategies and start working on this new approach. Questionnaire made was successful as it conformed to the whole paper.

Relationship-focused marketing is not something that will happen overnight. It requires a change in thinking and some discipline along the way. Top level management support is highly needed for introducing such change.

In recent days it's quite obvious that CRM approach is really successful, because 80% of an organization's revenues are generated by 20% of the customers. Thus, it is concluded that building strong relationships with customer is very important for any business to grow and Relationship Marketing is a mantra to long-term success by retaining and delighting the customers.