Definitions

Transactional marketing is the traditional method of selling a product or service that has been taught for years: focus on the four P’s of product, place, price, and promotion to maximize the benefit of the transaction for each party. With this method, the seller is not concerned about 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 down to watch 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 dealership 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 downside of transactional marketing is that it is myopic and fails to 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 likely to be swayed by the company they think cares about them. The long-term “friendship” advantage of relationship marketing is weighed against the challenge of knowing your target segment. To be successful 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. Businesses will need personal, intimate, and practical knowledge of their target market sector to make the transition to relationship marketing.

So what needs to be done?

Since relationship marketing is the only real option for producing stronger, lifetime word-of-mouth and buying activity for your product, companies that are successful today will have 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 such as television, radio, print and outdoor 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 so. Web 2.0 sites like Facebook, Twitter, MySpace, YouTube and many others allow companies to build their brand and generate buzz for their products at no cost. And this doesn’t just work for big companies. These sites allow John Smith of Ohio, which sells homemade widgets, to have 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 fans on Facebook, they’re embracing the principles of relationship marketing 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 they sell the most.