The Relationship Marketing Scam

It’s been well over a decade since the idea of “relationship marketing” became fashionable with the Fortune 500, and the time has come to switch perspectives on this concept from optimism to skepticism – as for most firms, there has been little more than lip-service and hype.   They say they wish to be a relationship company, but what they have done shows little change from the traditional practice of taking their customers for granted.

The concept of relationship marketing became pressing when it was realized that markets have become highly competitive – for most products, there is no longer just one vendor at a given price point, but several whose offerings are commoditized, and there was no practical reason to choose one over another – and customers routinely switched providers to whomever had the lowest price.  Around the same time, it was noticed that smaller companies tend to have much more loyal customers who support them even when their product was not the lowest price.   Larger firms were covetous of these close relationships, wanted very much to have the kind of loyalty that smaller firms received, and recognized that there was a sense of relationship between buyers and sellers who did business regularly.

But while they adopted the rhetoric of relationship marketing, they never quite got around to adopting the practices.   To this day, there are few industries and fewer firms who treat customers who have been doing business with them for decades any differently than a new customer who’s made their first purchase – and in fact firms remain more attentive to the new customer than the old customer, figuring that repeat business from the “old” customer could be taken for granted and no special attention was needed on their part.   They remain very much transactional companies who consider each sale to be an isolated event, and the established customer to be no more valuable or important than the first-time buyer.

There is no firm of which I am aware that offers any additional benefits to veteran customers.   Nowhere have I ever seen published a table indicating what perks are offered for customers who have been giving business to a firm for five, ten, twenty, or more years.   The only formal instance I am aware of in which loyalty is rewarded is in the insurance industry, where firms provide a small discount to customers who do not switch very often – but this is not a reward to their veteran customers because any new customer who has been with their current insurer for a sufficient period of time will be granted the same discount immediately.

So it is perhaps time to view firms that claim to be “relationship” companies and that mouth slogans about their appreciation of their existing first with a degree of skepticism – to look at what they do as a way to validate whether what they say is really true.   My sense is that in the vast majority of instances, it simply is not.