Relationship marketing strategies and customer retention

Relationship Marketing- Pepsi Cola

Customers play the most important role in determining a company's success and for this reason, great amount of attention has always been paid to attracting new customers. But in recent times, a shift has occurred and instead of only attracting new customers, companies are trying to build programs to retain old customer. This has given rise to the CRM programs or relationship marketing strategies (Pearson, 1994). A customer gained is thus a consistent source of income found provided the company knows how to keep that customer coming back. In other words, firms are now beginning to realize that it is more important to retain customers than attracting new ones since it costs less to achieve the former. Attracting new customers is certainly important for enhance sales but what if a company keeps losing its old customers because of unsatisfactory service or quality. Relationship marketing is a new concept that focuses on building a lasting relationship with the customers instead of believing in 'old goes-new comes' theory of sales. In other words, it can be defined as "a business strategy that proactively builds a bias or preference for an organization with respect to three audiences -- its individual employees, its channel partners, and its customers." (Gingrande, 2001) Relationship marketing therefore plays a huge role in customer retention and in building a life-long relationship with the customer. (Parker, 2001)

Most large companies today are aware of the importance of relationship marketing and no firm knows it better than Pepsi Cola Inc. The company whose products have become an integral part of our lives doesn't let complacency creep in and is therefore always on the look out for something that would make his customers feel important and turn them into loyal buyers forever. So how does Pepsi retain its customers or in other words what is the core idea behind its relationship marketing? Pepsi builds relationship with its customers by making becoming an important part of their lives. If we see Pepsi literally ruling the world of sports today, it is not only to advertise its products, but is also meant to build a bond with the customers who watch those sports. What is that one sport you are passionate about? Soccer? Cricket? Rugby? Super Bowls? No matter what the sport, chances are Pepsi would be there, splashing its big blue logos everywhere so no that you simply can't ignore its presence. Karen Goffe, Director of Marketing, Pepsi UK offered an insight into Pepsi relationship strategy when the company invested heavily in football clubs: "Investing back in football is a key part of Pepsi's strategy. We have beneficial alliances with Manchester United and Real Madrid, and strong long-term partnerships with players such as England captain David Beckham...we are passionate about providing unique experiences and access through these relationships, and believe that this helps establish our position as the number one soft drink in football." (PR Newswire, 2003)