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THE RELATIONSHIP MARKETING IN LUXURY BRANDS.
Literature Review: KIRAN KUMAR VATHADA
INTRODUCTION
Today Building & managing brand equity in the global economy with changing technology,
customer needs, buying power, competition has became key priority for small scale to large
scale industries & in different sectors. After all brand equity is all about customer loyalty,
customer retention and engaging the customer with right product & right communication.
This diverse and uncertain environment has forced organizations to restructure themselves in
order to enhance their chances of survival, growth and existences.
The paradigm shift has taken place in the marketing sector and relationship marketing
became now competition weapon for organization to gain heart share or mind share of the
today’s customers and becoming battle between the brands. “The new competition is not
between what companies produce in their factory in the form of packaging, services,
advertising, customer advice, financing, delivery arrangements, warehousing and other things
that people value.” (Marketing Guru – Theodore Levitt)
Luxury brands have been looking at the rise of new marketing concepts with influence of
information technology, such as social media and digital innovation. Customer Relationship
marketing is fact a unique opportunity for luxury brands with new era digital tools have a
chance to reconnect to their core values, employing marketing tactics that were at the grass
of history: building relationships towards the success.
Definition & Goal of Relationship Marketing:
Relationship marketing is concerned with the long-term and not merely to sell a product or
services to a customer one time and that is it. The goal is to have a satisfied customer and
establish an ongoing, personal and long-term relationship with him or her. This means that
the organization will have to understand the needs of the customer as they change over time.
A firm that believes in relationship marketing wants to establish a connection with the
customer. It is important to communicate with the customer and develop the relationship.
Without two-way communication, it is difficult to develop a relationship. What matters is the
lifetime value of the customer, not how much money a brand makes with one transaction.
Goal of relationship marketing is customer retention, i.e., to keep an organization’s existing
customers. The Cost of keeping an existing customer is a fraction of the cost of finding a new
customer. It is therefore foolish for a firm to ignore existing customers and focus solely on

2. finding new ones. Of course, if a organization only expects to sell a product to a customer
once, than relationship marketing may not be an issue. If a luxury brand expects to do
business with a individual for long term, there is question that is should be concerned about
having long-term relationship with customers.
More over Relationship marketing is the ongoing process of identifying and creating new
values with individual customers and then sharing the benefits from this over a lifetime of
association.
To conceptualize the traditional transactions approach versus the relationship marketing
approach is two way direction, which are, connects each other strategies, that are incorporate
elements from both approaches could be implemented.
Transaction Marketing Relationship Marketing
One-off Exchanges, Brand
Management
FOCUS Ongoing Exchanges, Customer
Management
Short-term Focus TIME PERSPECTIVE Long-term Focus
Mass Communication PRIMARY
COMMUNICATION
Personal Communication
Isolated Market Research CUSTOMER FEEDBACK
MECHANISM
Ongoing Dialogue
Mass Markets or Marketing
Segments
MARKET SIZE Market – of One
Market Share CRITERION FOR
SUCCESS
Mind share (i.e. share of
Customer)
Modified from Gronroos, C.(1991). The Marketing Strategy continuum, Management Decision (January), 7-13
Relationship Marketing Process:
Relationship marketing strategies are not new: several factors – including increased
fragmentation of markets, intense competition, high level of product quality, more customer
demands and changing buying patterns, having long term enduring relationships with
customers. With Internet & Information technologies have provided additional incentives for
organizations to adopt such strategies. One of the defining characteristic of the social media
is the simple fact that it is a network, each connection in the network, creating the possibilities
of relationships, whether it be between organizations and customers, organizations to
organizations, customer to other customer or customer to machines. With this it is recognizes
the importance’s of relationships even organizations employees, distributors, retailers, channel
partners which will deliver the best value to the customers.
“Marketing is everything and everything is marketing” (McKenna, 1991). He continues to
argue that marketing in modern times is not simply a function; but it is a way of doing
business. Marketing has to be all-pervasive, a part of everyone’s job description in order to

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integrate the customer into design of the product and a process for interaction. Payne, 2009
identifies the key principles of CRM as: emphasizing on retaining profitable customers,
emphasizing on a cross functional approach to marketing and emphasizing on multiple
stakeholders.
CRM seeks to focus marketing action on multiple stakeholder markets. A market consists of a
number of forces or elements like the government, suppliers, media agencies, unions,
customers etc. CRM recognizes that multiple market domains can directly or indirectly affect a
business’s ability to win and keep profitable customers (Payne, 2009)
With shift towards the relationship Marketing does not mean that companies abandon
transaction marketing, Organizations need to operate with a mixture of transactional and the
relational marketing approaches. Relationship marketing calls for new practices with
traditional 4P’s of marketing – product, promotion, placement/distribution & price,
PRODUCT
- More Products are customized to
the customer's preferences.
- New Products are developed and
designed cooperatively with suppliers and
distributors.
PRICE
- The company will set a price based on
the relationship with the customer.
- In business-to – business marketing,
there is more negotiation because products
are often designed for each customer.
PLACEMENT/ DISTRIBUTION
- RM favors more direct marketing to
the customer, thus reducing the role of
middlemen.
- RM favors offering alternatives to
customers to choose the way they want to
order, pay for, receive, install and even
repair the productions
PROMOTION / COMMUNICATION
- RM Favors more individual
communication and dialogue with customers.
- RM favors more integrated marketing
communications to deliver the same promise
and image to the customer.
- RM sets up extranets with large
customers to facilitate information exchange,
joint planning, ordering and payments
Copyright © 2003 by Philip Kotler. All rights reserved. Published by John Wiley& Sons., Hoboken, New Jersey
Due to lack of clarity over Relationship marketing definition and description, they vary greatly
among great authors and authorities. Customer Relationship Marketing has often
misinterpreted simply as an e-commerce application (Khanna, 2001) or Data Driven Marketing
(Kutner & Cripps, 1997). Payne, 2009 defines “ the business approach that seeks to create,
develop and enhance customer relationships with carefully targeted customers in order to
improve customer value and corporated profitability.”

4. Information technology in Relationship Marketing:
With technological changes and advancement of marketing environment is affects relationship
marketing success. It is obvious that now a days organizations and consumers will find it
difficult to separate a relationship from information technology and other technological
advances. “Marketing evolves as technology evolves” (McKenna, 1991), Customers has
advantage or rethink and change their mind very fast at one click of a button, if they see a
better or new product or offering from competitior. The markets have never been static and
the needs to anticipate and respond to change has been a basic prerequisite for survival ,
since business start. Today, Marketing management is faces a greater challenges of complex
nature and from wider number of resources. Technological changes are one of the most
serious challenges in the relationship marketing.
Yet information technology (IT) and information systems (IS) are most essential to provide the
information needed for successful relationships or partnering (Cashet al 1992; Achrol, 1991;
Konsynski and Mc Farlan, 1990; Pawar and Sharda, 1997)
Luxury Market & Customer Relationship Marketing:
Luxury brands have often been associated with the core competences of creativity, exclusivity,
great craftsmenship, high quality, precision, innovation and premium value. These product
attributes gives the consumers, satisfaction, pleasure of desire, esteem, prestige and sense of
high status that associates to different group.
According the wealthy consumers, luxury is defined by three elements
- 73% believe superior quality is the most important attribute
- 54% consider a brand’s design that most important quality
- 47% say its customer service.
Luxury brands such a s Louis Vuitton or Chanel have built their initial success within a close
community with the Paris fashion community. Most creators still today have built their initial
success by building strong relationships with a small community of clients in show biz or
fashion industry. In a word, relationship has always been vital to success of luxury brands.
Successful Luxury brands largely focusing on the new marketing paradigm shifts and to stand
in an environment with increasing competition and the stagnation of purchase power, growing
penetration on existing customers has become key business objective, customer engagement.
With New Media & E-commerce, luxury retailers has the opportunity to develop & to establish
new business models to maintain, preserve their brand image & identity, market
product/services globally and create, maintain & enhance unique relationships with the
customers. Electronic marketing (e-marketing) through the use of electronic communications
technology such as internet, email, databases and mobile devices improves customer loyalty
(smith & Chaffey, 2001)

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With information technology & digital tools, we could identify more about the customer
through database analysis and organizations can know more about their customers
individually by tracking their purchases, likes, dislikes, reactions, behaviors during promotions,
communication, styles and purchases cycle. With this Organizations can improve, make new
product/services, more attractive, more unique, more desirable.
Relationship Marketing Challenges in Luxury Retail:
Chu & Pike, 2002 came out with experience that the key factor of satisfaction in retail sector,
especially the experience of feeling of belongingness in society. Chu & Pike, 2002, argues
that best experience can be delivered by perfect implementation of Customer Relationship
marketing. Perfect implementation of CRM and experience will result to higher customer
loyalty and customer satisfaction(Chu & Pike, 2002). The ultimate goal of CRM is to provide
an one-to-one personalized service to each other customer. CRM initiative should be to
enhance the customer experience.
CRM Value cycle
CRM value cycle provides an over all framework and approach for understanding how a
company needs to transform the luxury retail experience from customers point of view. This
framework was proposed for retailers, regardless of their level of CRM Sophistication. Primary
goal of the value cycle is to create strong, unique and continuously improved customer
experience.
CRM Frameworks for the Luxury Retail
Several Authors, researcher argues that marketing is altimate customer satisfaction. In current
markets, customer satisfaction is key factor in business strategy . Authors study the
satisfaction of customer, such as Wikie (1991), Bolton (1995), Perkins (1991) and many others.

6. Samanta(2010) and Ghavami & Olyaei(2006) see the impact of CRM activity towards customer
retention, customer loyalty and customer satisfaction.
Chu & Pike, 2002 developed a pyramid framework of customer centric strategy
“ the key to customer retention is customer satisfaction” Kotler (1994), some more authors
shared similar views and arguments (Rust & Zahorik, 1993; Fornell, 1992, Fornell et.al., 1994)
CRM strategy gives impact of customer satisfaction, and to implement perfect CRM strategy it
is necessary to collect information about the customer and analyze it (Fornell, 1994)
Marketing and Communication help company connect with customer and to implement
perfect CRM(Rust & Zahorik, 1993).
Further Research
The functional model of relationship marketing in luxury retail sector is associated with
importance and impact of CRM to influence buying behavior of customer. Luxury retailer should
align their CRM strategies to focus on nurturing the value that customers continued satisfaction creates,
not simply on creating attractive promotions. A great deal more research is necessary and full usage of
relationship marketing will emerge only when theories help us understand luxury marketing, luxury
customers in their full complexity.
Conclusion
Relationships are among the most important and powerful aspects of luxury marketing. In this
article, synthesize the observations and analyses into a framework & value cycle for using and
managing CRM tools as the most important factors to effectively and efficiently create,
develop and sustain mutual profitable business-business and business to consumer long-term
relationships associated in luxury retail.

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