Relationship Marketing Essay

Frameworks and Models

Understanding consumer behaviour allows companies to engage in relationship marketing techniques. Relationship marketing is a key element in E-CRM strategy. There are many tangible benefits to a company; reduces price sensitivity, there is a lower need for price discounting and it creates market referrals.

Lifetime Value

Lifetimevalue Segmentation refers to the net present value of the potential revenue stream for any particular customer over a number of years. It starts with current purchase activity then extrapolates to include potential additions from cross-selling, upgrades, total ownership, etc.

Most-valuable customers (MVCs) are customers who contribute most profit to the organisation. MVCs are a small proportion of the total customer base and they tend to purchase more or higher-value products. The strategy for an organisation is to focus on the retention of these customers rather than the extension. Banks use direct personal contact as a main channel to conect with MVCs. Online marketing is

MGCs are profitable when assessed in terms of lifetime value. The number of product holdings or lifetimevalue is relatively low compared with the MVCs. Companies focus their strategies for these customers on customer extension by recommending new products based on previous purchases and encouraging similar repurchases. Online marketing offers great opportunities to make personalised recommendations with the website and email.

Below zero customers (BZCs) are unprofitable customers for an organisation. The strategy to deal with these customers can vary. Companies can encourage BZCs to develop towards MGCs. A company’s expenditure can be minimised if it is felt that it is too difficult to change BZCs loyalty behaviour. Digital media can be used as a lower-cost form to encourage these customers to make repeat purchases or to allow them to self-serve