KIRAN  KUMAR  VATHADA  ::  M  00540726   1    

THE RELATIONSHIP MARKETING IN LUXURY BRANDS.

Literature Review: KIRAN KUMAR VATHADA

INTRODUCTION Today Building & managing brand equity in the global economy with changing technology, customer needs, buying power, competition has became key priority for small scale to large scale industries & in different sectors. After all brand equity is all about customer loyalty, customer retention and engaging the customer with right product & right communication. This diverse and uncertain environment has forced organizations to restructure themselves in order to enhance their chances of survival, growth and existences. The paradigm shift has taken place in the marketing sector and relationship marketing became now competition weapon for organization to gain heart share or mind share of the today’s customers and becoming battle between the brands. “The new competition is not between what companies produce in their factory in the form of packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing and other things that people value.” (Marketing Guru – Theodore Levitt) Luxury brands have been looking at the rise of new marketing concepts with influence of information technology, such as social media and digital innovation. Customer Relationship marketing is fact a unique opportunity for luxury brands with new era digital tools have a chance to reconnect to their core values, employing marketing tactics that were at the grass of history: building relationships towards the success.

Definition & Goal of Relationship Marketing: Relationship marketing is concerned with the long-term and not merely to sell a product or services to a customer one time and that is it. The goal is to have a satisfied customer and establish an ongoing, personal and long-term relationship with him or her. This means that the organization will have to understand the needs of the customer as they change over time. A firm that believes in relationship marketing wants to establish a connection with the customer. It is important to communicate with the customer and develop the relationship. Without two-way communication, it is difficult to develop a relationship. What matters is the lifetime value of the customer, not how much money a brand makes with one transaction. Goal of relationship marketing is customer retention, i.e., to keep an organization’s existing customers. The Cost of keeping an existing customer is a fraction of the cost of finding a new customer. It is therefore foolish for a firm to ignore existing customers and focus solely on

finding new ones. Of course, if a organization only expects to sell a product to a customer once, than relationship marketing may not be an issue. If a luxury brand expects to do business with a individual for long term, there is question that is should be concerned about having long-term relationship with customers. More over Relationship marketing is the ongoing process of identifying and creating new values with individual customers and then sharing the benefits from this over a lifetime of association. To conceptualize the traditional transactions approach versus the relationship marketing approach is two way direction, which are, connects each other strategies, that are incorporate elements from both approaches could be implemented. Transaction Marketing Relationship Marketing

One-off Exchanges, Brand Management

FOCUS Ongoing Exchanges, Customer Management

Short-term Focus TIME PERSPECTIVE Long-term Focus Mass Communication PRIMARY

COMMUNICATION Personal Communication

Isolated Market Research CUSTOMER FEEDBACK MECHANISM

Ongoing Dialogue

Mass Markets or Marketing Segments

MARKET SIZE Market – of One

Market Share CRITERION FOR SUCCESS

Mind share (i.e. share of Customer)

Modified from Gronroos, C.(1991). The Marketing Strategy continuum, Management Decision (January), 7-13

Relationship Marketing Process: Relationship marketing strategies are not new: several factors – including increased fragmentation of markets, intense competition, high level of product quality, more customer demands and changing buying patterns, having long term enduring relationships with customers. With Internet & Information technologies have provided additional incentives for organizations to adopt such strategies. One of the defining characteristic of the social media is the simple fact that it is a network, each connection in the network, creating the possibilities of relationships, whether it be between organizations and customers, organizations to organizations, customer to other customer or customer to machines. With this it is recognizes the importance’s of relationships even organizations employees, distributors, retailers, channel partners which will deliver the best value to the customers. “Marketing is everything and everything is marketing” (McKenna, 1991). He continues to argue that marketing in modern times is not simply a function; but it is a way of doing business. Marketing has to be all-pervasive, a part of everyone’s job description in order to

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integrate the customer into design of the product and a process for interaction. Payne, 2009 identifies the key principles of CRM as: emphasizing on retaining profitable customers, emphasizing on a cross functional approach to marketing and emphasizing on multiple stakeholders. CRM seeks to focus marketing action on multiple stakeholder markets. A market consists of a number of forces or elements like the government, suppliers, media agencies, unions, customers etc. CRM recognizes that multiple market domains can directly or indirectly affect a business’s ability to win and keep profitable customers (Payne, 2009) With shift towards the relationship Marketing does not mean that companies abandon transaction marketing, Organizations need to operate with a mixture of transactional and the relational marketing approaches. Relationship marketing calls for new practices with traditional 4P’s of marketing – product, promotion, placement/distribution & price,

PRODUCT - More Products are customized to the customer's preferences. - New Products are developed and designed cooperatively with suppliers and distributors.

PRICE

- The company will set a price based on the relationship with the customer. - In business-to – business marketing,

there is more negotiation because products are often designed for each customer.

PLACEMENT/ DISTRIBUTION - RM favors more direct marketing to the customer, thus reducing the role of middlemen. - RM favors offering alternatives to customers to choose the way they want to order, pay for, receive, install and even repair the productions

PROMOTION / COMMUNICATION

- RM Favors more individual communication and dialogue with customers. - RM favors more integrated marketing

communications to deliver the same promise and image to the customer. - RM sets up extranets with large

customers to facilitate information exchange, joint planning, ordering and payments

Copyright © 2003 by Philip Kotler. All rights reserved. Published by John Wiley& Sons., Hoboken, New Jersey Due to lack of clarity over Relationship marketing definition and description, they vary greatly among great authors and authorities. Customer Relationship Marketing has often misinterpreted simply as an e-commerce application (Khanna, 2001) or Data Driven Marketing (Kutner & Cripps, 1997). Payne, 2009 defines “ the business approach that seeks to create, develop and enhance customer relationships with carefully targeted customers in order to improve customer value and corporated profitability.”

Information technology in Relationship Marketing: With technological changes and advancement of marketing environment is affects relationship marketing success. It is obvious that now a days organizations and consumers will find it difficult to separate a relationship from information technology and other technological advances. “Marketing evolves as technology evolves” (McKenna, 1991), Customers has advantage or rethink and change their mind very fast at one click of a button, if they see a better or new product or offering from competitior. The markets have never been static and the needs to anticipate and respond to change has been a basic prerequisite for survival , since business start. Today, Marketing management is faces a greater challenges of complex nature and from wider number of resources. Technological changes are one of the most serious challenges in the relationship marketing. Yet information technology (IT) and information systems (IS) are most essential to provide the information needed for successful relationships or partnering (Cashet al 1992; Achrol, 1991; Konsynski and Mc Farlan, 1990; Pawar and Sharda, 1997)

Luxury Market & Customer Relationship Marketing: Luxury brands have often been associated with the core competences of creativity, exclusivity, great craftsmenship, high quality, precision, innovation and premium value. These product attributes gives the consumers, satisfaction, pleasure of desire, esteem, prestige and sense of high status that associates to different group. According the wealthy consumers, luxury is defined by three elements - 73% believe superior quality is the most important attribute - 54% consider a brand’s design that most important quality - 47% say its customer service.

Luxury brands such a s Louis Vuitton or Chanel have built their initial success within a close community with the Paris fashion community. Most creators still today have built their initial success by building strong relationships with a small community of clients in show biz or fashion industry. In a word, relationship has always been vital to success of luxury brands. Successful Luxury brands largely focusing on the new marketing paradigm shifts and to stand in an environment with increasing competition and the stagnation of purchase power, growing penetration on existing customers has become key business objective, customer engagement. With New Media & E-commerce, luxury retailers has the opportunity to develop & to establish new business models to maintain, preserve their brand image & identity, market product/services globally and create, maintain & enhance unique relationships with the customers. Electronic marketing (e-marketing) through the use of electronic communications technology such as internet, email, databases and mobile devices improves customer loyalty (smith & Chaffey, 2001)

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With information technology & digital tools, we could identify more about the customer through database analysis and organizations can know more about their customers individually by tracking their purchases, likes, dislikes, reactions, behaviors during promotions, communication, styles and purchases cycle. With this Organizations can improve, make new product/services, more attractive, more unique, more desirable. Relationship Marketing Challenges in Luxury Retail: Chu & Pike, 2002 came out with experience that the key factor of satisfaction in retail sector, especially the experience of feeling of belongingness in society. Chu & Pike, 2002, argues that best experience can be delivered by perfect implementation of Customer Relationship marketing. Perfect implementation of CRM and experience will result to higher customer loyalty and customer satisfaction(Chu & Pike, 2002). The ultimate goal of CRM is to provide an one-to-one personalized service to each other customer. CRM initiative should be to enhance the customer experience. CRM Value cycle CRM value cycle provides an over all framework and approach for understanding how a company needs to transform the luxury retail experience from customers point of view. This framework was proposed for retailers, regardless of their level of CRM Sophistication. Primary goal of the value cycle is to create strong, unique and continuously improved customer experience.

CRM Frameworks for the Luxury Retail Several Authors, researcher argues that marketing is altimate customer satisfaction. In current markets, customer satisfaction is key factor in business strategy . Authors study the satisfaction of customer, such as Wikie (1991), Bolton (1995), Perkins (1991) and many others.

Samanta(2010) and Ghavami & Olyaei(2006) see the impact of CRM activity towards customer retention, customer loyalty and customer satisfaction. Chu & Pike, 2002 developed a pyramid framework of customer centric strategy

“ the key to customer retention is customer satisfaction” Kotler (1994), some more authors shared similar views and arguments (Rust & Zahorik, 1993; Fornell, 1992, Fornell et.al., 1994) CRM strategy gives impact of customer satisfaction, and to implement perfect CRM strategy it is necessary to collect information about the customer and analyze it (Fornell, 1994) Marketing and Communication help company connect with customer and to implement perfect CRM(Rust & Zahorik, 1993).

Further Research The functional model of relationship marketing in luxury retail sector is associated with importance and impact of CRM to influence buying behavior of customer. Luxury retailer should align their CRM strategies to focus on nurturing the value that customers continued satisfaction creates, not simply on creating attractive promotions. A great deal more research is necessary and full usage of relationship marketing will emerge only when theories help us understand luxury marketing, luxury customers in their full complexity. Conclusion Relationships are among the most important and powerful aspects of luxury marketing. In this article, synthesize the observations and analyses into a framework & value cycle for using and managing CRM tools as the most important factors to effectively and efficiently create, develop and sustain mutual profitable business-business and business to consumer long-term relationships associated in luxury retail.

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