1. Chapter2:FoundationsofR e l a t i o n s h i p Ma r k e t i n g S t r a t e g yThe current conceptualization of relationship marketing migrated from organizationalbehavior and industrial marketing where interdependence between firms has been thefoundation of successful business-to-business alliances. Morgan and Hunt definerelationship marketing as all marketing activities directed towards establishing,developing, and maintaining successful relational exchanges. In their definitions ofthese key constructs, Morgan and Hunt draw from social and clinical psychology,namely, social exchange theory, and the marriage literature. In their model, commitmentand trust are the key mediating variables because they encourage exchange partners topreserve relationship investments, resist attractive short-term alternatives, and maintainthe belief that partners will not act opportunistically. Morgan and Hunt describe 10discrete forms of relationships, and almost all (8 out of the 10) were typical of therelationships that firms have with their suppliers, strategic partners, employees, andamong functional units within a firm. Only two relationships described by Morgan andHunt involve customers or clients – the relationship between service providers such asadvertising agencies and their clients and the long-term relationships between servicefirms and their ultimate customers. Both of these assume a certain level ofinterdependence and history of interaction. Is relationship marketing only viable withinthese contexts? Iacobucci and Hibbard examine that question (13). They describe threetypes of relationships: business marketing relationships (BMR); interpersonalcommercial relationships (ICR); and business-to-customer relationships (Bto- C).Business marketing relationships are those similar to the ones described by Morganand Hunt where the relationships are typified by long-term, close, and intenseinteractions between relatively symmetric (in terms of power) partners. Theserelationships have had the longest history of study by marketers, which has resulted in arich and well-developed theory to describe them. In their review of the literature,Iacobucci and Hibbard reinforce the importance of commitment, trust, andinterdependency in understanding business relationships. These factors relate to thequality of relationship interactions and their definitions are presented in Table 1. Thesecond type of relationship examined by Iacobucci and Hibbard is the interpersonalcommercial relationships (ICR): the interactions between a service firm and the finalcustomer. These include business-to-business relationships (such as those between anadvertising agency and its clients) and retail transactions between a sales agent and acustomer. The service quality literature has studied these latter relationships and builttheory around them (Berry and Parasuraman’s Marketing Services). For the former,such as ICRs between attorneys and their clients or advertising agencies and theirclients, the interactions occur between two relatively symmetrical partners, are closeand long term in nature, and may also include a social component. The outcomes of thequality of relationship interactions are satisfaction, profitability, positive evaluations ofservice provider, intentions to generate referrals, and the ability to compromise orbargain fairly. The factors related to the quality of ICR relationship interactions arepresented in Table 2
2. Chapter2pages noted)CommitmentImplicit or explicit pledge of relational continuity between exchange partners;adoption of a long term orientation toward the relationship – a willingness tomake short-term sacrifices to realize long term benefits.TrustOne party’s belief that its needs will be fulfilled in the future by the actionsundertaken by the other party.Contingent on presence of uncertainty.PowerAbility of one party to get another party to undertake an activity that the otherparty would not normally do (23).Control (part of power)Outcome of power and results when a party is successful in modifying itspartner’s behavior.Balance of Power (part of power)Balance = symmetric powerImbalance = hierarchical; one party has dictatorial abilities over the other.InterdependenceMutual state of dependenceCommunicationFormal and informal sharing of meaningful and timely information betweenFirms.CooperationSimilar or complementary coordinated actions taken by firms to achieve mutualoutcomes.Idiosyncratic InvestmentsSunk costs that would not be recoverable in the event of a termination.Conflict ResolutionFunctionality of dispute resolution stimulates more creative and effectivepartnerships.Table 1: Business Marketing Relationship FactorsInterpersonalCommercialRelationship FHibbard pages noted)
3. CommunicationExchange of information.Similarities of Shared Belief SystemsSimilarities in preferences of apparent personality or demographic factors; similarities ingoals and beliefs, social closeness.Competence and Personal FactorsCapability of front line service providers such as service providers’ friendliness; samegender and physical attractiveness of provider.Absence of ConflictAbility to resolve disputes.Table 2: Interpersonal Commercial Relationship FactorsThe third relationship described by Iacobucci and Hibbard is the business-to-customerrelationships (B-to-C). These are defined as largely technology-driven interactionsbetween a business and an individual customer. Iacobucci and Hibbard note that thereis very sparse scientific research on these relationships. They conclude that what wehave learned from the BMR literature has limited application to the B-to-C worldbecause the concepts of trust and cooperation become meaningful if and only if there isinterdependence between the exchange partners. The lack of interdependence hasbeen the focus of the criticism of relationship marketing practice.RELATIONSHIPMARKETING IN PRACTICEFournier, Dobsha and Mick present a critical perspective on relationship marketingpractice. They question the actual amount of interactivity between a customer and acommercial firm. They warn that the premature death of customer relationshipmanagement (CRM) is likely because, in exploiting the ability to communicate one-to-one with a customer, the majority of the firm-generated communication with customersis often one-way from the business to the customer. With a few notable and well-publicized exceptions such as Amazon.com and Cisco Systems, there is rarely anyevidence of interaction. That is, even if a consumer does communicate with thebusiness, this information rarely impacts the nature of the future communications fromthat business. The solution to reducing this conflict is to understand the relationshipexpectations from the customer’s point of view. To achieve this, Fournier developed amodel of CRM from the consumer’s perspective building on the social and marriagemodels of relationships. She presents six factors that define the relationships thatcustomers can hold with brands. These are: intimacy, commitment, partner quality,attachment, interdependence, and love. She argues that business strategists shouldrecast their conceptions of the relationship from a revenue generating and cost savingdevice (the goals of the firm) into a vehicle to create meaning for the customer with the
4. brand. The relationship is the facilitator, the means to an end, and not the end-goal itselffor the customer. The notion of a consumer having a relationship with a brand (ratherthan with a person or group of people) is the key component in the brand equityconstruct mentioned in the first chapter of this monograph. Keller views relationship witha brand as part of brand equity. These brand relationships are based on the degree ofpersonal identification the consumer has with the brand and involve two dimensions ofattitudinal strength and a sense of community (similar to Oliver’s notions of immersedself-identity). But equating relationships between a customer and a commercial firm tobrand equity moves us far from the foundations of relationship marketing as describedearly in this chapter. Moreover, Iacobucci and Hibbard view the notion of a consumer’srelationship with a brand as a psuedo-relationship — there is no possibility ofinterdependence or interaction. According to a recent theory, the personal identificationof a consumer with a brand is a separate construct from a customer’s relationship with abusiness. In the book by Rust, Zeithaml, and Lemon, Driving Customer Equity, thethree constructs of brand equity, customer satisfaction and customer relationships withfirms are used to define a new construct of customer equity. Customer equity includes:1. Value equity – the customer’s objectiveassessment of the utility of abrand. This assessment is drivenby the product’s quality, price andconvenience.2. Brand equity – customer’s subjectiveand intangible assessment of thebrand built through image and meaning.This assessment is influenced bybrand awareness, consumer’s attitudetoward the brand, and the firm’scorporate citizenship.3. Retention equity – the tendency ofthe customer to ―stick with‖ a brandabove and beyond the objective andsubjective assessments.
5. According to Rust, Zeithaml, and Lemon,there are five drivers of retention equity (99).These are:• Loyalty programs• Special recognition programs• Affinity programs• Community programs• Knowledge-building programs.Chapter2To achieve the goal of understanding the customer’s view of the commercialrelationship, marketers should understand the customer’s attitudes towards theseprograms. The next chapter presents an exploratory study on the relationship marketingtactics from the consumer’s point of view.