Difference Between 4P and Relationship Marketing

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Gwynne Young
Managing Editor, CustomerThink
Member

Posted 17-Feb-2005 02:55 PM

[Posted for Athina Tsiavou]

What is the basic difference between traditional marketing techniques (mix-4p) and relationship marketing? What exactly is relationship marketing?


Graham Hill
Guru
Member

Posted 17-Feb-2005 11:40 PM

Athina

Not an easy question to answer. Perhaps the simplest way to look at the difference is; traditional marketing is aimed anonymously at the whole market, whereas relationship marketing is aimed at specific customers in the market.

In traditional marketing, the whole addressable market is the target. This includes non-customers, potential customers and existing customers. The addressable market is typically reached through branded communications developed within the 4Ps marketing mix.

In relationship marketing, individual customers in the market are the targets. These are generally potential customers (leads) and existing customers. The target customers are reached through individual communications, typically driven using the price and promotion Ps.

These differences lie at the heart of the imagined difficulties that most marketers have reconciling their brands and CRM.

From the marketing perspective, traditional marketing builds category need, awareness of the product (through recall & recognition), a positive attitude (through developing knowledge of the product & liking it) and intention to buy (through consideration of the product and prefering it). Hopefully, a sale occurs at this point. Relationship marketing takes over after the sale for existing customers by stimulating the intention to buy and sometimes after the sale through post-purchase reinforcement. In other words, you should use traditional marketing to recruit new customers and relationship marketing to maintain the relationship with them once you brought them in.

Graham Hill
Independent CRM Consultant


apeluffo
Member

Posted 24-Feb-2005 08:00 AM

quote:
Originally posted by Gwynne Young:
[Posted for Athina Tsiavou]

What is the basic difference between traditional marketing techniques (mix-4p) and relationship marketing? What exactly is relationship marketing?

I think that the main contribution of Relationship Marketing (RM) to the previous waves (traditional, direct, etc.)is that it focuses in long term relationship not in instant success.

With traditional marketing you work around the company issues (product, price, etc.). Then, Direct Marketing focuses in the target: find the right database to reach the best prospect. As long as the direct marketers took notice that the response rate was better in cases that exists a previous relation with the client they intended to built that continuity. My feeling is that RM was born when some of those marketers started to build that relationship without trying to close a sale in each contact but achieve long term profitability in each relationship.

Just my two cents.


James Hipkin
Member

Posted 24-Feb-2005 08:27 AM

I believe the key word here is “differ”. Relationship isn’t different from traditional marketing, relationship marketing is now part of a continuum of marketing tactics that can be employed. An understanding of how relationship marketing is used in the context of what it is will help a marketer use the tactic more effectively.

This starts w/ understanding how traditional marketing, as described by the P’s, is used today. In the distant past, mass marketing was often enough; get a simple message about the product or brand to enough people and sales grew. In today’s highly fragmented market, fragmented in terms of media as well as product choices, more is required.

Sales promotion and direct marketing have taken on increased importance because of their ability to stimulate trial and retrial. But so far nothing has been done to build a brand, to build a relationship between the consumer and the band that is more than functional. This is where relationship marketing comes in.

Relationship marketing, when focused on moderate and heavy category and brand users, can be used to both grow volume by changing behavior and, over time, to build a relationship that is based on value add. This builds the business and ensures a degree of protection from the competition that doesn’t exist when there isn’t a relationship.
James Hipkin
Value-driven Relationship Marketing
415-505-0632
[email protected]


Graham Hill
Guru
Member

Posted 25-Feb-2005 02:03 AM

As James points out, marketing has started to talk about developing longer-term, more loyal relationships with customers (and sometimes does it too!).

But I think that the CRM traditions of marketing, sales and service are only a part of this longer-term picture. For example, the marketing and sales parts will not help you if the product doesn’t deliver what it says on the tin. Customer service probably won’t help you either.

We need to start to think more in terms of all the things that influence customers along their many touchpoints during the entire lifecyle; from being a prospect, through becoming a customer to being an advocate for the company. And we need to think in terms of what customers sense, feel, think and do at each touchpoint, and how this builds loyalty and value, not just about the doing part alone.

This thinking is what people are calling ‘Customer Experience Management’ (CEM). It is much more than the CRM traditions of marketing, sales and service.

Graham Hill
Independent CRM Consultant


Cathy Allington
Member

Posted 25-Feb-2005 04:09 AM

No. No and more no!! !!!!

There is such a BIG difference between the 4p’s and relationship marketing—CRM—call it what you will. CRM is all about recognising that your customers are important. The 4ps’ is all about getting the customers in the first place.

CRM is about recognising how much it cost you to get these customers in the first instance, and then recognising them. SIMPLE. SIMPLE. SIMPLE stuff.

Where CRM came about was simply as a result of a few enlightened people thinking “I collect all this data about my customers—I do nothing with it!

If you are into the 4p’s—great—if you do it well, you can launch a product and have heaps of sales. Excellent you might think. But without capitalising on these relationships—which is CRM—you are just the same as any other competitor.

CRM is simple to explain. It is about recognising the time and effort that you have put into winning a customer—if you do the right thing by them, you will win ten fold. But to do this, we need to first have a recognition that the customer is important. Fine OK—”we recognise this—we just dont know how to do this”—how to contact our existing customers.

This is where CRM and technology have evolved into bedfellows—you need a database, and you need to be able to communicate with that database. But how do you judge what system you need?

Most CRM needs are pretty simple—the technology to do that should be simple too!

So 4p’s is about getting your product “out there”. CRM is about how you collect those results and use it to your best advantage!

www.gyob.net.au


Graham Hill
Guru
Member

Posted 27-Feb-2005 11:57 PM

Yes, Yes and more YES!

Cathy

I am not so sure that the real differences you propose between traditional (4Ps) marketing and CRM are as great as you suggest. Traditional marketing is used to create leads and first-time customers, typically through branded communications and sales promotions. Once you have made contact with the lead or customer, you can use what you know about them to build future sales through CRM. The customer and the customer’s developing experience with the ‘brand’ are the common threads, but just focussing on the customer is not enough to guarantee business sucess.

The tools and techniques used in traditional marketing and CRM are very similar in today’s data-rich environment. Prof Heinrich Holland’s research into critical success factors for marketing communications identified four key factors: targetting (including addresability) at 50%, the offer at 20%, timing at 20% and creative at 10%. Of these four factors, only addressing target groups is significantly different (and weaker) in traditional marketing. And traditional marketing now widely uses segmentation techniques (using internal customer and external market data) in media planning to offset this natural weakness.

Where CRM has to be very careful is in your suggestion that… “CRM is about recognising how much it cost you to get these customers in the first instance, and then recognising them”. In most traditional marketing, the money you spend attracting customers has already been spent and is not recoverable afterwards. In other words, it is a sunk cost. If that is the case, the job of CRM is not so much to recognise how much you have spent on acquiring particular customers, but to identify how you can get the best return from spending more money in the future. That may mean spending more developing a relationship with the most loyal customers or most valuable customers, as for example, Lufthansa does with its ‘Senator’ Miles & More frequent flyer programme members. But it may also mean spending more on getting customers in the middle to buy again or to buy more through targetted promotions, as for example, Tesco does to its Clubcard loyalty programme members. Paradoxically, it may also mean spending more on acquiring customers through traditional marketing, rather than developing them through CRM, as for example, most mobile telcos do in developing markets. In most companies I have worked with, it generally means a balance of all three. And the balance will change as market conditions change.

At the end of the day, it all depends upon the economics of customer value in the market you are in. A Marketing or CRM Manager who doesn’t drive their business by these numbers can expect to be asked some pretty tough questions by the CFO.

I still believe that traditional marketing and CRM are best seen in the light of the ongoing development of customer insight enabling more opportunities to engage in a sales-supporting dialogue, not as two different things entirely. The customer and the customer’s experience may be the common threads, but it is the economics of customer value that increasingly drives traditional marketing and CRM alike.

Graham Hill
Independent CRM Consultant


Cathy Allington
Member

Posted 09-Mar-2005 01:36 AM

OK—let me put it more succinctly.

I have been doing a lot of work with wineries in South Australia ie the Barossa Valley, Penfolds (Grange). South Australia produces just under 50% of the wine in Australia. It has done a tremendouse job of the “4p’s”. But what they are recognising now is that they have to go further. To really do well—and they have buyers internationially , nationally, and intrastate—they know that they need to do something about their customers. They know they need a central database—accessible to everyone who works with their cusomters—they know they need an easy way of acknowledging and recognising customers—what they have bought—where they are from—how much they have spent … etc.

Their investment in this is so very much different from the 4P’s—the 4P’s attracted people to the region, and to their Cellar Door, but they keep them as customers by communicating with them.

CRM is TOTALLY different from the 4 P’s we are taught in marketing.

www.gyob.net.au


Jeremy Cox
Member

Posted 17-Mar-2005 08:42 AM

Cathy the 4Ps are four levers for creating customer value. To these can be added:
Process
People
Physical Evidence and 7 Cs enabled by the right kind of IT:
Customer Experience
Convenience & Self Service
Collaboration
Cusotmer Insight & Innovation
Proactive Customer Service
Real time Customer Feedback

Many firms will treat each component of value as discrete elements. This leads to piecemeal or ad hoc approaches which deliver little value.

As for Strategic Market Management and CRM, these are to my mind joined at the hip. The former perhaps focuses more on longer term changes and developing appropriate strategies to adapt the business, and CRM done effectively provides more immediate impact and customer feedback. Both are necessary to create a good Darwinian or’adaptive’ capability—sensing change and responding accordingly.

You might like to tell your client that the Brits are getting fed up with sweet Aussie red wine, as our taste buds are at last maturing.

Jeremy Cox MA DipM
Managing Director
The Wisdom Network Ltd,
www.thewisdomnetwork.com

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