People sometimes ask me:
“What is relationship marketing? And how does it differ from ‘normal’ marketing?”
This comparison of two shirtmakers provides a textbook example of the difference between the two strategies of transactional marketing and relationship marketing – and illustrates an important lesson, especially for retailers.
Now, I’m not going to disclose who these shirtmakers are, partly because I don’t like to talk about where I buy my clothes, but more importantly because it doesn’t matter. The aim of this memo is not to criticise, but to share a specific business insight.
Both make an exquisitely beautiful product, and are priced near to the top of the market for bespoke shirts. Besides that, they are also wonderful businesses that each make an important contribution to their industry and their profession.
The first – let’s call it the “English” one – is based on Jermyn Street, in London, and makes shirts that are quintessentially English, i.e. stiff and structured.
The second – let’s call it the “Italian” one – is based in Bologna, and makes shirts that are quintessentially Italian, i.e. soft and minimalist.
I love both equally – which is why I have two shirtmakers!
However, what’s interesting is that each business has a very different marketing philosophy and, because of that, a very different “way of being” with its customers.
Let me explain.
I bought my first shirt from the English shirtmaker around May last year.
The whole experience was quite pleasant. I came into their shop, they offered me a cup of tea while I looked through the swatches, measured me up, and then, about five or six weeks (and few alterations) later, I had three perfectly-fitting shirts.
Since then, I’ve bought several more shirts and visited their store many times for various reasons. While they are nothing but polite, they still do not know my name, do not acknowledge me as a returning customer when I walk through the door, nor show any interest in who I am, what I do for a living, or what kind of life I lead.
On the other hand, I receive emails almost every week from them telling me about awards they have won or “VIP” clients who have patronized their shop.
Our relationship is a transactional one. I make an order and hand them my cash, they provide me with a shirt and politely say goodbye.
There is nothing wrong with that, per se, but as we’re going to see in a moment this stance comes with an opportunity cost.
Contrast it with the Italian shirtmaker:
I bought my first shirt from them a few months ago, when they last visited London. (The only reason I haven’t bought more yet is that it took a few attempts to get the fit perfect – something that is not at all unusual – and I only recently received my shirt.)
The proprietor, her right-hand woman, my wife Irina, and I shared a pleasant conversation over a cup of tea, and they seemed to take a genuine interest in who we are, what we do, and why we had become interested in bespoke shirts. Towards the end of our appointment, the proprietor told us that it would be her pleasure to take us out for dinner, if ever we should visit Bologna, and give us a tour of her factory.
Since then, I haven’t received a single bragging email about any of the VIP clients who wear their shirts – even though I happen to know that they are cherished by the Italian elite, including many famous business leaders, senators, and aristocrats.
Do you know what I did receive from them, though? A personal invitation to meet again over a cup of tea when they return to London in March.
Now – suppose I had a bad year and had to limit my sartorial investments, or suppose a dear friend of mine asked for a recommendation for his first bespoke shirt – which of these two shirtmakers do you think would command my loyalty?
As an interesting aside, the Italian shirtmaker is considerably older than the English one and appears to enjoy a larger market share. This doesn’t surprise me.
It could just be that the proprietor of the Italian shirtmaker is “just” a kind person. However, given her experience, I expect that investing in relationships in this way is a deliberate business policy. She understands that, in terms of future cash flows and referral business, a diamond relationship with a new customer is a gift that will keep on giving for decades to come and is easily worth the relatively small investment.
There are many wonderful shirtmakers in both England and Italy – and I’d wager that there are many more in other parts of Europe too. Yet, there are only seven days of the week on which I can wear a shirt, no matter how much I might value them.
If I were to find another shirtmaker on Jermyn Street whose shirts are marginally better than my existing shirtmaker’s – or perhaps just offered better value – who is to say I won’t take my business somewhere else without any warning?
On the other hand, if the Italian shirtmaker continues to nurture and invest in the bond they have with me, not only will I buy their shirts for the rest of my life, I’ll send new customers their way and sing their praises for years to come.
So – what is relationship marketing?
It’s a business philosophy where the focus of your marketing shifts so that, instead of investing in creating sales, you invest in creating relationships. When executed well, this shift results in more sales, more referrals, and deeper customer loyalty.
And that’s what we do here at Cashstream every day.