Definitions
Transactional marketing is the traditional method of selling a product or service that has been taught for years: focusing on the four Ps of product, place, price, and promotion to maximize the benefit of the transaction for each party. With this method, the salesperson is not concerned with future trades, customer satisfaction, or customer loyalty to the business. An example of this would be the company that makes a statement about its product (We have the best X in the world!) and sits back and watches consumers choose its product over its competitors. Relationship marketing, on the other hand, seeks to build a friendship with the target market and focuses on customer retention and lifetime value for the desired market segment. Examples of relationship marketing might be the car dealer giving out free oil change coupons after a new car purchase, or the restaurant letting customers join an email list that sends discounts or promotions for frequent dining out.
Relative advantages and disadvantages
While the basic elements of product, price, etc. will always be important, the obvious disadvantage of transactional marketing is that it is shortsighted and does not value the consumer that the company so desperately needs to buy its product. As customers become more sophisticated, they are less likely to be swayed by the usual hype (Ours is the best!) and more influenced by the company they believe cares about them. The long-term “friendship” advantage of relationship marketing is weighed against the challenge of knowing your target segment. To succeed with this model, companies need to know more about their customers than ever before in order to create effective marketing campaigns and win over customers for life. Companies will need a personal, intimate and practical knowledge of their target market sector to make the transition to relationship marketing.
So what is to be done?
Since relationship marketing is the only real option to produce stronger, lifelong buying and word-of-mouth activity for your product, companies that are successful today will need to reach their target markets with the desired messages. And they will need to identify these messages to drive brand identity, loyalty and a deep emotional attachment to the product or company. While traditional advertising mediums like TV, radio, print, and out-of-home will always be viable options, they are dwarfed in their reach, reach, and ability to segment audiences over the Internet. The World Wide Web is an advertising giant that has the global reach and the ability to target any segment on earth to build that desired relationship.
And the good news is that these relationships can be built with little or no advertising budget by those who have the knowledge to do it. Web 2.0 sites like Facebook, Twitter, MySpace, YouTube and many others allow companies to build their brand and generate excitement for their products at no cost. And this doesn’t just work for big companies. These sites give Ohio’s John Smith, who sells homemade widgets, the same global reach as Microsoft or Wal-Mart. So as savvy businesses and mom-and-pop sole proprietors invite consumers to follow us on Twitter or become a fan on Facebook, they’re embracing relationship marketing principles and building lasting friendships with their desired customers. And companies that say “We’ll be successful in marketing because we’ve been around for 100 years” and don’t embrace these new methods will soon find that no one follows them on Twitter, no one is a fan on Facebook, and no one wants the products that sell the most.