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Friday, 26 August 2011

Relationship Marketing

Relationship Marketing Essay Example
I would like to start by saying that quite recently, the industry of banking services in the United States and abroad has suffered a deep frustration with traditional marketing. While the demand for various financial services is depressed, the competition in the field keeps increasing. Thus, to fight for their markets and enhance their competitiveness, financial service providers rushed to search for new marketing approaches, including the concept of Relationship Marketing (RM). The model was developed in 1983 by American academics with the purpose of increasing customer loyalty and overall financial performance of companies operating on the consumer markets and based the idea that customers should be approached according to their individual needs and preferences. http://free-assignment-exchange.blogspot.com/
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Relationship Marketing came to replace traditionally used techniques of 4P (Product, Price, Place, Promotion) that turned out to be ineffective in most service industries including banking. While the latter focuses primarily on the discreet activities, RM emphasizes continuous process of relationship building. Also, traditional theories of 4P proved to be insufficient to satisfy customer needs because of the process over-simplification, decreasing thus the significance of the overall organizational philosophy. It should also be mentioned that the transaction-based approach was rejected through market segmentation and market targeting to finally develop the concept of one-to-one marketing (McKenna, 90).
On the contrast to transaction-based approach, RM outlines customer attraction as being only the first step in the process of customer relationships management. Companies realizing that new customers attraction significantly influences their balance sheets strive increased customer retention. Thus, Relationship Marketing is concerned about customer attraction, customer maintenance, and customer relationships improvement.
One should not forget that essential factors for successful RM model implementation include the building of customer databases containing up-to-date, relevant, reliable, and accurate information; specifically planned communications based on the target audience characteristics mainly extracted from the database; high level of service and its consistency; customized service that incorporates the satisfaction of individual customer needs such as time and quality (Pelton, 54).
It is also important to consider the change form price to non-price competition that heavily relies on customer contact and the image of the company. Operating on the market of intangible goods, financial services providers have to recognize the value of customer relationships.
Therefore, RM model operates according to the following principles (Payne, 75):
• customers are assigned a life value,
• customer communication have to be conducted in a two-way manner,
• interaction with each customer should be highly adjusted for his or her needs and preferences accounting for the specifics of a particular situation. It follows that in order to successfully implement the RM model, a company should dispose of an adequate pool of human resources that would accept this philosophy and design he corresponding marketing strategies.
However, the recent survey conducted among marketing professionals showed that many view RM model in a different light; particularly several respondents still preferred using product-based approach, while others considered Relationship Marketing to be only an extended and well-designed traditional marketing approach with the application of information systems. Hence, the conclusion was made that a wide range of companies in the financial services industry fail to extend the horizon of their work beyond theory when ignoring cultural implications of Relationship Marketing (Peter, 191).
With the purpose of gaining a more profound understanding of RM applications, let’s analyze the activities of a regional Spirit Bank in Oklahoma. The reason why I decided to choose of the lesser banks is because typically they are less efficient than the large banks and thus present us with an opportunity to deploy our Relationship marketing skills. The institution to be discussed in this essay has relatively small operations volume and the number of employees: $430 million and 250 bankers accordingly. The company offers a wide range of services, including deposit services, SBA and Business loans, equipment leasing, and cash management. Spirit Bank has thirteen branches in twelve Oklahoma communities, and oriented on small and midsize businesses. Particularly, in the field of on-line selling services, the institution offers an Internet presence on the both local and global level. Still, I have to note that Spirit bank does not consider the idea of doing business on the global arena as the most pressing issue.
As a potential customer, I visited the Internet site of the company found at http://www.spiritbank.com/ – the first, quickest and probably the easiest way to access information about the bank. Moreover, the site of a company represents a channel of communications with its customers. Positive features include the photo a chairman, which creates the necessary atmosphere of trust. Also, the information on the site is clearly grouped and integrated. The style can be characterized as plain and welcoming. There is an emphasis on customer needs oriented approach and readiness to assist in any financial issue any time through 24 hour customer support service by phone and at any branch daily.
After analyzing the website of I would call their the bank and had a pleasant interview with Casey Tripp who is accessible at (918) 712-9292 and would ask her about the bank it is marketing strategy. The 13 minute interview was certainly instrumental in preparation of this essay.
The Spirit Bank possesses numerous subsidiaries across the USA and provides numerous broker-dealer, investment banking, financing, wealth/asset management, advisory and lending products and services. Spirit Bank strives to cater the needs of numerous clients including individual investors, businesses and corporations, financial institutions and local government agencies.
Nevertheless, the major disadvantage of the company’s website is that for a financial institution it looks too simple with inappropriate graphics. What is more, the information volume offered is not enough to satisfy a potential customer, given the fact that small and middle-sized businesses need extensive data and procedure description to make the right decision. Instead of welcoming customers to walk in the nearest branch, it would be more wisely to place full information packet for each service offered. In addition, one can observe a product-oriented approach (Gordon, 133).
The Spirit Bank certainly has to do a lot to improve its services and the use of relationship marketing is likely to benefit the firm and improve the traditional 4P approach. Currently at the Spirit Bank the relationship marketing is considered to be a very new tool that might not work with small banks who just like Spirit Bank are obsessed with cost-reduction aspects. As far as I understood, Spirit Bank is too conservative in its practices and does not invest in something new unless it sees other banks doing it for several years and benefiting from it. Although, this approach might indeed seem rather irrational for a small bank that definitely needs to take more risks than the large banks to catch up with the volume and services provided by large banks, Spirit Bank is reluctant to take the first step.
Nevertheless, Spirit Bank is a bank that strives to promote innovation at a corporate level and is likely to need a more sophisticated Database Marketing and Interaction Marketing approaches thus acknowledging that information is of the greatest importance.
Banks like Spirit Bank usually over rely on the IT and thus are too rigid to work well in the financial market which together with the risk-aversion and resistance to change prevents the Spirit Bank of Oklahoma from getting the ultimate leadership position.
As for the Integrated marketing communication (IMC), it is of importance to note that it is a comprehensive, coordinated, organization-wide effort used by organizations worldwide to communicate mission-critical values and messages in the very ways that target audiences notice, accept, understand and respond to. Unlike RM, integrated marketing communication strives to stress data-driven corporate segmentation, message integration, coordination and evaluation. Integrated marketing communication just like relations marketing is a relatively new business concept that strives to make all aspects of marketing communication, namely advertising, PR, sales, direct marketing, promotion and publicity work in an aggregate rather than independently.
The Spirit bank should understand that IMC recognizes the need for the added value created by the IMC plan that assesses the cohesiveness of work of different marketing communication disciplines like public relations, advertising, promotion, direct response etc.). Then IMC would provide the management with the needed and clear communication brief.
Integrated marketing communication with respect to the Spirit Bank of Oklahoma comprises four distinct stages that the bank needs to develop in order to make use of the integrated marketing communication that would be reflected in increased market share, productivity, and improved financial ratios:
1. Tactical coordination of communication.
2. Redefining the scope of communication.
3. Application of information technology.
4. Financial and strategic integration.
The four stages shown above would allow the spirit bank of Oklahoma to plan, develop, execute and evaluate various coordinated bank SMART programs with the bank’s consumers, as well as internal and external audiences. One should still remember that the internet is an indispensable part of the IMC because it helps the bank to measure the effectiveness of its programs in behavioral and not only in attitudinal terms. Thus IMC allows the bank to focus on strategic marketing communication (two-way) rather than on promotion.
Speaking about recommendations, it is vital to remember that first of all Spirit Bank needs to understand well the application of Relationship marketing prior to making use of it. Spirit Bank should strive to achieve the following two things in order to improve its products and services. Spirit Bank needs to understand the concept of value that RM creates and that is very much appreciated by the customers. Furthermore, Spirit Bank needs to make some progress with its information systems in order to build and maintain close understanding of the customer’s current needs and behaviors. Spirit Bank should not forget that RM cannot exist without challenges which need to be overcome. In order for the bank to properly implement the RM principles, it has to certainly change the organizational view of individual customers and their needs and wishes.
Thus Spirit Bank should understand that investing in a new database will do little good, while the success is likely to depend on the following:
• Senior management commitment.
• Increased investment in employee/personnel training.
• Increased investment in the corporate IT and Information systems.
While Spirit Bank notes certain improvements and progress in the database development, customer segmentation and cross-selling, it still has to overcome several problems. Spirit Bank has not yet understood the measurement of customer profitability and still considers most of its relationships with the customer as one-way (from Spirit Bank to the customer) which do not allow Spirit Bank to provide personalized services.
The current situation at the Sprit Bank certainly shows that the bank possesses the following weak areas that do not allow the proper implementation of the RM:
1. Lack of information regarding the customer needs.
2. Lack of information regarding the customer lifetime value.
The last but not least is the concept of the RM philosophy that Spirit Bank needs to adopt in order to properly assess the situation and benefit from it.
Spirit Bank should set the following areas of the greatest priority:
1. Understand the vitality and superiority of information. Spirit Bank needs to determine what is needed by the customers and how to meet these needs.
2. Develop up-to-date state-of-art information system that would provide the two way communication process for the bank and its clients and thus increase interaction.
3. Consider customer the king, focus on them, and consider their experience as important.
4. Create process-based rather than function based marketing department that would work well in the dynamic world.
5. Set SMART (specific, measurable, achievable, relevant and timely) objectives for the Spirit Bank to achieve with respect to building long-lasting customer loyalty.
McKenna, Regis, Relationship Marketing: Successful Strategies for the Age of the Customer, McGraw Hill, 2001.
Gordon, Ian, Relationship Marketing : New Strategies, Techniques and Technologies to Win the Customers You Want and Keep Them Forever, Prentice Hall, 2002.
Payne, Adrian, Relationship Marketing for Competitive Advantage: Winning and Keeping Customers (CIM Professional Development S.), NY random House, 2001.
Newell, Frederick, Why CRM Doesn’t Work: How to Win by Letting Customers Manage the Relationship, Wiley and sons press, 2002.
Silverman, George, The Secrets of Word-of-Mouth Marketing: How to Trigger Exponential Sales Through Runaway Word of Mouth, Barrons books, 2000.
Barnes, James, Secrets of Customer Relationship Management: It’s All About How You Make Them Feel, Penguin books, 1999.
Pelton, Lou, Marketing Channels: A Relationship Management Approach, Barnes & Nobles, 2002.
Godin, Seth, Permission Marketing : Turning Strangers Into Friends And Friends Into Customers, Oxford University Press, 2001.
Aaker, David, Strategic Marketing Management, 6th Edition, NY random House, 2001.
Dalrymple, Douglas, Marketing Management : Text and Cases (Marketing Management), UCLA Press, 2000.
Gorchels, Linda, The Product Manager’s Handbook : The Complete Product Management Resource, Wiley and sons press, 2002.
Peter, Paul, Marketing Management: Knowledge and Skills, McGraw Hill, 2000.
Allen, Cliff, One-to-One Web Marketing: Build a Relationship Marketing Strategy One Customer at a Time, Second Edition, Prentice Hall, 2001.
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