Traditional marketing is in effect focused on markets and products, giving little consideration to customers - what they want and need, how they buy and when. Adrian Payne (1991) notes that "traditional marketing concentrates on product features, has minimal interest in customer service, limited customer contact, and where quality is primarily a concern of production."
The marketing mix approach is "too limited to provide a usable framework for assessing and developing customer relationships in many industries and should be replaced by an alternative model in which the focus is on customers and relationships (Gordon, I., 1999)."
For these reasons, not a few companies soon found traditional marketing ineffective in selling consumer products. If sales were made at all, the level does not warrant the expense sunk in the traditional marketing tools such as radio, TV and outdoor ads as well as trade shows and direct mail. Gradually, it was acknowledged that traditional marketing is not suitable for selling relatively low-value products to the broad masses of customers. In this case, the sales income is often not commensurate with the advertising and promotional costs.
In the search for a marketing system that would broaden the product scope and concentrate on how to retain customers instead of simply attracting customers to products and services, marketing experts came up with the idea o...
The earliest users of the term relationship marketing included Len Berry (1983) and Jag Sheth at Emory. Theodoro Levitt (1983) of Harvard subsequently expanded the initial concept to cover activities beyond individual transactions.
Customer retention is at the heart of relationship marketing. Unlike the traditional marketing approach, which goes by one-shot individual transactions, relationship marketing seeks to build longer-term relationships with the customers. Thus, it calls for ways to understand the customer's needs as they go through their life cycle and provides a range of products or services as the customers need these at each cycle. In short, keeping the customers forever (Gordon, I., 1999). The idea of seeking to provide the customer's specific needs at each phase of his life led to the development of relationship marketing.
Increased profitability is the common objective of both the traditional and relationship marketing strategies but the most glaring difference is that one makes a sale and then moves on to another prospect, while the other stays with one customer longer to attend to all his needs. This is service marketing at work, which means servicing the customer's necessities from childhood to adolescence, from middle age to his senior years.
Less Cost, More Benefits
The advantage of relationship marketing is that despite the expanded scope and longer attention span provided by the companies to customers, the cost of retaining an existing customer is said to be about 10 per cent less than the cost required in acquiring a new customer. Moreover, the company derived other benefits such as referrals. (Wikipedia)