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Why Relationship Marketing Matters: Creating Brand Loyalty and Advocacy

Published Date: Thursday, Mar 07, 2024
Last Updated on: Friday, Mar 08, 2024
Marketers working on relationship marketing to create brand loyalty.

Acquiring a new customer is up to five times more expensive than keeping those you already have.

In today’s consumer-centric ecosystem, businesses that consistently chase net-new acquisitions as their primary sales objective will inevitably fall short at some point.

With instant gratification the new normal, it’s easy to lose sight of what customers really value: genuine and hyper-personalized interactions with your brand. They want to be more than a number in your database, and data suggests that the more companies invest in this ethos, the more likely buyers are to do business. In fact, customers that are fully engaged generate 51% higher revenue and sales than their counterparts.

So what’s the differentiator? Relationship marketing: building customer connections based on trust, keen consideration, behavioral insights and mutual understanding. Executed well, it can drive customer retention, increase lifetime value and propel businesses toward their revenue goals.

In this article, we’ll explore the value of relationship marketing and cultivating customer bonds that inspire greater brand loyalty and advocacy.

What is relationship marketing?

Relationship marketing is a strategy that focuses on cultivating stronger, more engaged relationships between buyer and brand. It looks beyond promoting singular products or services, instead concentrating on building satisfaction and loyalty through superior brand experiences. Relationship marketing efforts typically include:

  • Personalized omnichannel communications (SMS, push notifications, email marketing)
  • Targeted discounts and offers
  • Customer loyalty programs
  • Social media engagement
  • And more

Relationship marketing is far less transactional than traditional net-new tactics. The customer journey does not end with a sale or closed deal; it is more focused on the long term. The relationship marketing customer journey is the sum of all experiences each customer has with your company, with an emphasis on inspiring advocacy and driving customer lifetime value (CLV).

Relationship marketing strategy that focuses on creating a stronger connection.

The ROI of relationship marketing

While relationship marketing may not take a full transactional focus, it’s not without bottom-line influence. When executed correctly, it can steer a number of critical revenue KPIs in the right direction, including:

Customer lifetime value (CLV)

Customer churn rates

Customer retention

Renewal rates

The profitability potential from existing customers should come as no surprise to any savvy strategist. As early as 2006, Bain & Company reported that an increase in retention by as little as 5% could boost profits by up to 95%. Modern research points in the same direction:

  • Acquiring new customers is five times more expensive than retaining existing. (Harvard Business Review)
  • Repeat customers typically spend 33% more than new customers. (Flowium)
  • Customers referred by repeat customers spend 50% more than non-referred customers. (Bain & Company)

Benefits of relationship marketing

Relationship marketing is a long-term effort; it doesn’t produce quick results overnight. Businesses should not expect to build close relationships and increase repeat business in a day. It requires significant nurturing, honesty and personalization to create a substantial connection between brand and buyer.

While it may seem cumbersome, there are more immediate benefits to relationship marketing beyond long-term financial gains:

Customer loyalty: Building strong relationships with customers fosters loyalty. Satisfied customers are more likely to stick with a brand they trust, reducing the churn rate and increasing customer retention.
Advocacy and word-of-mouth marketing: Happy and engaged customers become brand advocates. They are likely to share positive experiences with their network, contributing to organic word-of-mouth marketing. This can significantly expand a brand’s reach and influence potential customers.
Increased customer lifetime value (CLV): By nurturing ongoing relationships, businesses can increase the overall value they derive from each customer over the long term. This includes both the immediate revenue from repeat purchases and the potential for upselling or cross-selling additional products or services.
Reduced marketing spend: Acquiring new customers can be expensive. Relationship marketing focuses on existing customers, often resulting in lower marketing costs. Satisfied customers are more likely to make purchases without the need for extensive advertising or promotions.
Enhanced reputation: Focusing on relationships means prioritizing customer satisfaction. Happy customers are more likely to provide positive reviews, testimonials and referrals, contributing to a positive brand reputation.
Feedback and improvement: Close relationships with customers facilitate open communication. This, in turn, allows businesses to receive valuable feedback, enabling them to understand customer needs, preferences and areas for improvement. This feedback loop is crucial for continuous refinement of products, services and experiences.
Adaptability to market dynamics: In a dynamic market, customer needs and preferences evolve. Relationship marketing establishes a direct line of communication, making it easier for businesses to adapt to changing market conditions and stay relevant.
Competitive advantage: Businesses that excel in relationship marketing gain a competitive edge. Strong connections with customers can be a unique selling proposition, differentiating a brand in a crowded market.
discussion of the immediate benefits of relationship marketing.

Why do customers care about relationship marketing?

Customers equate brands with experiences. “From customer service to the digital journey to retail ambience, our association with a brand is based on how it makes us feel,” argues Daniel Newman, Contributor at Forbes.

When brands are proactive in delivering exceptional experiences, they channelize their resources to engage consumers throughout the lifecycle – and that benefits the customer as much as it does the business.

So, what’s really in it for the customer?

Customer differentiation: Customers are increasingly expecting one-to-one interactions from brands, tailored to their individual pains, packages and behaviors. For 84% of customers, marketing that treats people as unique individuals is a linchpin to winning their continued business.
Shared values: Modern consumers actively invest in brands that openly share their values and beliefs. 71% of customers aged 16 to 24 say they feel strongly about corporate social responsibility. 89% of shoppers would switch to a brand that is associated with a good cause. McDonald’s recently admitted experiencing a “meaningful” hit to business due to its perceived support of Israel in the Israel-Hamas war.
Authenticity: It is no longer enough to simply “champion” humanitarian efforts. Customers don’t want to be patronized, which has led to criticisms of brands in the past over virtue-signalling and pandering allegations. When brands actively promote specific causes – and show sincere involvement – it creates stickiness and authenticity among consumers.
discussion of the four essential steps to building relationship marketing strategy.

Building a relationship marketing strategy

Despite the known benefits of building strong customer bonds and loyalty, research suggests that only a small proportion of businesses actively engage in relationship marketing. According to a 2023 study, only 19% of businesses intend use relationship marketing as part of their marketing strategy.

So, why aren’t companies investing in relationship marketing when its benefits are so apparent? The answer is usually mentality. Many businesses are still rigid in their understanding of customers – focusing on single transactions rather than the entire customer lifecycle. 

Similarly, relationship marketing requires its own set of tactics and tools for effective rollout. This does not come without additional budgeting, resources, headcount and leadership, much of which is deemed “better placed” on chasing net-new targets.

For those looking to turn the tides, here are four essential steps to building a relationship marketing strategy that genuinely drives business outcomes.

Data hygiene and enriched customer insights

Data collection and retention go hand in hand with successful relationship marketing. By implementing rigorous, high-quality customer data into your strategy, marketing execution can be hyper-targeted to their needs, based on behaviors, preferences and known intent – not just simple demographic data. CRM data hygiene is foundational. To effectively target and segment customers, businesses need to validate and deduplicate their databases, creating a clean, reliable bedrock for customer targeting and personalization.

More advanced marketing teams can look to implement artificial intelligence (AI) and machine learning (ML) to sharpen customer analytics. Many businesses have introduced sentiment analysis by parsing through customer interactions and generating insights on potential upsell opportunities and attrition signals. AI can also be used to predict new behaviors and preferences based on customer intent and consumption patterns, enabling businesses to deliver more proactive content and messaging on a 1:1 or 1:few basis.

Dynamic segmentation and customization

Customers navigate unique journeys and relationships with your company. They aren’t mutually exclusive – but one size certainly doesn’t fit all. By categorizing leads based on their behavior, interests and position in the lifecycle, you can deliver offers that align with the unique needs and acknowledged interests of each customer in your database – making it easier to build authentic relationships and scale one-to-one communications. 

Successful segmentation has to be dynamic to drive results. With the wealth of options a customer can have (both internally and externally) – and the constant expansion of channels – preferences can change overnight. Consumers may migrate throughout a period, and if your segmentation is static, this will undoubtedly influence relationships and business opportunities. Dynamic segmentation adapts in real time to the consumer, enabling messages to be customized with exactness and confidence for each and every buyer.

Invest in CX

As the name implies, relationship marketing relies on the experience, reputation and connection that customers associate with your brand. That means robust support and CX operations are essential. A personal approach to customer service goes a long way toward the type of relationship buyers are willing to have with your business. In fact, 96% say great service is crucial to their loyalty with a brand, and almost half of Americans cite poor service as their main reason for switching companies. 

Integrating relationship marketing with customer care can be labor intensive, but cutting corners is likely to cause painful results – or at least underwhelming marketing returns. Many businesses have found success by introducing predictive AI and automation into their CX and marketing functions, configured to make real-time decisions based on a customer’s current emotional state and session information. For example, AI can let customers know that it’s time to renew their subscription, or that they’ve left something in their shopping cart. It can even be agent-facing, prompting team members with the next best actions to take with customers once an engagement has ended for the purpose of relationship building. Using generative AI, conversations can also be proactively summarized and flagged as an identified knowledge gap, providing CX and marketing teams with real-time customer insights that indicate new pains and potential content shortcomings, helping businesses to standardize messaging across their operations.

Genuinely reward customer loyalty and advocacy

Reward programs can and do build customer loyalty – and most businesses now appreciate how valuable that loyalty can be. It’s no secret that a company’s most loyal customers are also its most profitable. In fact, customers who are members of loyalty programs generate between 12-18% more revenue than non-members. Equally, customers who endure longer relationships are less costly to serve, and even become business endorsers – paying premium prices and referring new customers to your business.

A reward program can accelerate customer loyalty, encouraging new customers to behave like a company’s most profitable patrons. In order to maximize loyalty and profitability, a company must find ways to share value with its customers in proportion to the value the customer’s loyalty creates for the company. This is usually built on a points, spend, referral or value-based model – incentivizing purchasing or advocacy behaviors from consumers. Such promotions are rife in product marketing, meaning customers are so accustomed to perks-based programs that they either ignore the value or become experts at getting “freebies.” Loyalty programs today must be built on three key tenets:

Link programs to behaviors: Customer inertia is not the same as customer loyalty. In order for a rewards program to generate tangible bottom-line value, the payout must be inextricably linked to desired behaviors and actions, not just consistency.
Continually educate and reward: Loyalty rewards should not be a moving target; there should be no grand prize. Businesses should focus on developing a strategic, sustainable system through which customers are continually rewarded for their loyalty in a way that they value, keeping them motivated to engage.
Offer your best value to your best customers: Unlocking the potential of loyalty programs requires an admission that not all customers are created equal. Companies must offer their best value to their best customers – those who generate superior profits should enjoy the benefits of their investment into your business.
thinking of ways to reward customer advocacy.

Final thoughts

In a world where customers crave unique, one-to-one interactions and associate brands with experiences, relationship marketing emerges as not just a strategy but a commitment to building lasting connections. In this era of heightened customer expectations, businesses that embrace relationship marketing stand poised to not only meet but exceed those expectations, securing a competitive edge in a crowded marketplace.

In essence, relationship marketing is not just a strategy; it’s a philosophy that recognizes the profound impact of meaningful connections on both the customer and the business. As we navigate the evolving landscape of consumer expectations, businesses that prioritize these connections will find themselves not only meeting the demands of today but also building a foundation for sustained success in the future.

Looking to get started? Harte Hanks is a specialist in relationship marketing strategy, helping businesses nurture, convert and retain customers across the globe. We help stimulate stronger relationships between world-leading brands and their buyers through data activation and campaign acceleration, orchestrating B2B and B2C programs that drive customer engagement and lifetime value.

Contact us today.

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