RELATIONSHIP MARKETING: A CRITICAL EVALUATION OF RESEARCH STREAMS

RELATIONSHIP MARKETING: A CRITICAL EVALUATION OF RESEARCH STREAMS Ganguli, Shirshendu * Bentley University sganguli@bentley.edu Eshghi, Abdolreza Bentley University aeshghi@bentley.edu Nasr Bechwati, Nada Bentley University nnasr@bentley.edu * Shirshendu Ganguli is a doctoral student at the ICFAI University in Hyderabad, India and is currently a visiting scholar at Bentley University. Abdolreza Eshghi is Professor of Marketing at Bentley University. Nada Nasr Bechwati is Associate Professor of Marketing at Bentley University. The mailing address for all three authors is 175 Forest Street, Waltham, MA 02452; Tel. 781-891-2717; Fax 781-788-6456. Nada Nasr Bechwati is the contact person for this paper. ABSTRACT The purpose of this paper is to describe research streams in relationship marketing and offer a critical evaluation of each with reference to major themes, contexts, and weaknesses. We also identify what is common among all these streams. We conclude by offering a comprehensive definition of relationship marketing and a framework that integrates all relevant research streams in relationship marketing. More specifically, we state that the aim of relationship marketing is to have long term positive effects on the business with optimum resource utilization through constant interaction, extensive networking and cooperation among all members (employees, customers, suppliers, business partners etc.) with proper commitment to create superior value for all stakeholders in a trustworthy environment. Hence, our conceptualization of relationship marketing consists of four stages: (1) the planning (long term planning and proper resource use), (2) the process itself (interaction, cooperation and networking), (3) the output of the process (commitment is visible and trust is built), (4) the ultimate effect (value creation). INTRODUCTION Relationship marketing as a field of inquiry has attracted a great deal of attention among marketing scholars in recent years leading to development of various research streams. Several review articles have appeared in the literature in which authors have attempted to examine the state of what is known about relationship marketing (Palmer et al, 2005; Sheth and Parvatiyar, 1995; Sheth, 2002), but most of these have been limited to review of the evolution of the subject, discussion on the axioms of the different schools of relationship marketing and suggestions on some future directions of research. What is lacking is a critical analysis of the different research streams with reference to major themes, contexts and weaknesses (Table I) and an effort to link them through a common framework (Figure I).

It is somewhat difficult to pinpoint exactly when the concept of relationship marketing emerged in the marketing literature. One of the earliest works that we have been able to identify is that of McGarry (1951, 1953), who discussed the Contactual Function of marketing. To McGarry contactual function formed the basis of cooperation/collaboration between the buyer and seller. McGarry (1951) argued that having long-term, continuous relationship between buyer and seller that develop a bond of mutual interest, confidence and respect can reduce marketing cost by 10-20 percent. In this view, long-term cooperation/collaboration between the seller and buyer is seen as a mechanism to increase marketing efficiency from the seller s point of view. Much later, Bagozzi (1975) advanced the idea that exchange relationship can fall into one of three types of exchanges: restricted, generalized and complex. Restricted exchanges are about reciprocal relationships between two parties like customers and company or company representatives; generalized exchanges is about univocal reciprocal relationships between at least three actors like the middlemen, the company and its customers; complex exchanges are mutual relationships between at least three parties and are the closest to the concept of relationship marketing currently being followed (Bagozzi, 1975). Bagozzi, however, did not discuss the conditions under which relationships may be sustained in each of the three types of exchanges. Berry (1983) was the first to coin the term relationship marketing in the context of service organizations, when he emphasized the importance of maintaining and enhancing customer relationships with existing customers in addition to attracting new customers for long term marketing success. Berry also suggested five relationship marketing strategies which are core service, relationship customization, service augmentation, relationship pricing and internal marketing. At about the same time, Rosenberg and Czepiel (1984) for the first time discussed the importance of customer retention by cultivating long-term relationships with them. Finally, Dwyer et al (1987) argued that buyer-seller exchanges ought to be treated as ongoing relationships rather than discrete exchanges. In short, while the concept of relationship marketing first entered the marketing literature, though not explicitly, in early 1950s, well formulated research streams did not emerge until the 1980s as scholars began to challenge the notion of conventional competitive marketing where the seller and buyer are pitted against each other in an adversarial relationship. RELATIONSHIP MARKETING AS SERVICE IN B2C MARKETS A fairly substantial body of research on relationship marketing has developed in services contexts in B2C markets. This stream is best known as the Nordic School. In this stream of research marketing s role is defined as... to establish, develop and commercialise long-term customer relationships, so that the objectives of the parties involved are met. This is done by a mutual exchange and keeping of promises (Gronroos, 1989). One of the prominent advocates of the Nordic School, Gronroos argues that marketing function should no longer be concentrated in marketing department as a specialist function, but should be viewed as cross-functional in nature with customer retention as the core objective to be pursued (Gronroos, 1989). Furthermore, Gronroos (1990) maintains that quality of service is the key in services contexts. Gummesson (1987) stated that most marketing theories have developed on the basis of consumer goods. The field has, however, evolved to involve new practices such as customer as coproducer. Hence, there is a need to advance the importance of services and related complexities. Further explicating the underlying premise of the Nordic School, Gummesson (1994) defines relationship marketing in terms of relationships, networks and interactions. He identifies 30 different types of relationships (30Rs) in a given market, including relationships with customers, competitors, government, investors, employees, media, supply chain etc. More recently, Gronroos (2004) has also emphasized the

importance of Customer Perceived Value on the core outcome of a successful relationship strategy based on interaction, communication and dialogue. The Nordic school offers a structured approach towards relationship marketing. However, it is a limited approach in that the issues of cross functional marketing, delivering customer value or the 30Rs revolve around service as the sole differentiating factor in building relationships. Finally, the Nordic School focuses on consumer markets only and ignores industrial markets, where relationship marketing is perhaps more relevant. RELATIONSHIP MARKETING AS SUPERIOR CUSTOMER VALUE Another research stream in relationship marketing focuses on delivering superior customer Value by integration of service marketing and quality management techniques. Crosby et al (1990) explored a relationship quality model from the customer viewpoint, as they looked at not only the nature and antecedents of relationship quality but also the consequences for marketing of complex services like life insurance. In this stream, customer perceived value is viewed as the core of relationship marketing process. Christopher et al (1991) offered an enhanced perspective of marketing, one that is based on quality and service, where increasing value is delivered to customers through enduring relationships with the company. This is based on the notion that customers judge the value of offering as the ratio of perceived benefits and costs of ownership and that competitive advantage in the market place depends, to a large extent, on a strong customer franchise and effective supply chain (Christopher, 1996). These ideas have been captured in a model known as six markets model (Christopher et al, 1991; Payne and Holt, 2001) which identifies five other markets surrounding the customer markets. These are internal, referral, supplier, recruitment and influence markets, which consist of all stakeholders (i.e., shareholders, government, employees, competitors, suppliers etc). In this model delivering superior value to customers is predicated on building and nurturing relationships among all these markets. This concept of relationship marketing based on delivering superior value emphasizes customer perspective as the focal point of relationship building activities and as such extends the Nordic School beyond internal marketing to the six markets model. It s shortcoming, however, is that it does not go beyond the customer value perspective to explore the depths of these multi-dimensional relationships to build a holistic view. Moreover, most of the empirical studies focused on B2C contexts. RELATIONSHIP MARKETING IN B2B MARKETS This stream of research was founded by Adler (1966) when he introduced the concept of symbiotic marketing. In this view, improving marketing efficiency and effectiveness is very much a function of resource sharing between organizations (through licensing, franchising, joint venture etc.) in the supply chain. Arndt (1979) extended the concept of symbiotic marketing by introducing the idea of domesticated markets where he emphasized long term relationships not only with the suppliers or other companies but also with the key customers. Then, the Industrial Marketing and Purchasing (IMP) group emerged and led to a series of systematic research efforts in industrial markets or B2B markets. The underlying premise of this research stream is that as buyers and sellers gain experience in working with each other and learn to adapt to each other s working styles, their commitment to one another increases over time (Ford, 1980). Later, Hakansson (1982) introduced what he considered to be four cornerstones of relationship marketing: interaction process, networking, adaptation for scale- effective production and proper resource utilization by partnering companies. In this stream, researchers argued that commitment plays a critical role in building long lasting customer relationships in industrial markets (Jackson, 1985). Hallen et al (1991) further explored the issue of interfirm adaptation and concluded that reciprocal adaptation helps to build a better competitive position

through stronger customer-supplier relationship. Anderson et al (1994) emphasized connected relations in case of dyadic relationship leading towards business networks. Bensaou and Venkatraman (1995) have discussed the patterns of interorganizational relationships based on information exchange between two parties as well as matching of information processing needs (environment, partnerships etc.) with its capabilities (process, IT etc.). In this stream of research, relationship marketing is viewed as a network of contacts in maintaining complex business relationships. However this stream mainly focused on the business relationships in B2B contexts and empirical research is very little. RELATIONSHIP MARKETING AS RELATIONAL EXCHANGE Relational Exchanges form the basis for yet another stream of research in relationship marketing. The core concept in this research stream is partnering relationships. The focus is on exploring the variables to model the buyer seller relationships. Varadarajan and Rajaratnam (1986) extended Adler s (1966) concept of symbiotic marketing and argued that partnerships among firms in the supply chain is an ideal way to achieve firm s growth objectives in uncertain economic conditions and changing consumer preferences. Heide and John (1992) explored the importance of norms (supportive, relational or control based) in structuring economically efficient relationships between firms. Morgan and Hunt (1994) explained ten relational exchanges (forms of marketing) forming the basis for relationship marketing with firm as the focal point. Commitment and trust were also theorized to be the key mediating variables in a relationship marketing model with a number of precursors (costs, communication, shared values etc.) and outcomes (conflict, propensity to exit a relationship, cooperation etc.) for each. Wilson (1995) suggested an integrated model of buyer-seller relationships in B2B context by integrating relationship variables (commitment, trust, cooperation, adaptation, interdependence, bonds etc.) with the process variables (from partner selection to relationship maintenance). These types of inter-organizational cooperation have led to the development of a rich body of literature under the rubric of strategic alliances (Varadarajan and Cunningham, 1995). This stream of research is somewhat similar to the IMP group; the difference being that IMP focuses on conceptual foundations while the relational exchange perspective is more exploratory and empirical in its approach. Partnering in business markets is the core concept of this stream of research and as such it explores different variables to measure the relationships in business markets. Its shortcoming, however, is that it has not ventured into domains of relationship variables in consumer markets. CUSTOMER RELATIONSHIP MANAGEMENT AS CORPORATE STRATEGY As a key strategic initiative at the corporate level (Webster, 1992), Customer Relationship Management (CRM) has gained prominence as a legitimate area of scholarly inquiry. Parvatiyar and Sheth (2001) define CRM as a comprehensive strategy and process of acquiring, retaining, and partnering with selective customers to create superior value for the company and the customer. It involves the integration of marketing, sales, customer service, and the supply-chain functions of the organization to achieve greater efficiencies and effectiveness in delivering customer value. What is clear from this definition is that CRM as a strategic imperative requires a formal process model to operationalize the components of relationship marketing. The process framework of CRM consists of four processes: formation, management and governance, performance, and evaluation (Parvatiyar and Sheth, 2001). The essence of CRM lies in customer selectivity (Sheth and Sisodia, 1995) and there are certain tools of data warehousing and data mining which are crucial to CRM systems (Parvatiyar and Sheth, 2001). The CRM concept has helped relationship marketing to evolve as a domain based on certain unique aspects like one-to-one buyer-seller relationship, interactive process and interdependence and collaboration

between suppliers and customers leading to value addition (Parvatiyar and Sheth, 2001). However, CRM has a problem of becoming more of an IT function because of its process-based approach (Sheth, 2002). In effect, more emphasis has been put on the process rather than the outcome or underlying mechanisms. RELATIONSHIP MARKETING AND CUSTOMER ADVOCACY Most recently, relationship marketing has evolved towards the concept of Customer Advocacy. (Urban, 2004, 2005a, 2005b). Although the concept has attracted a great deal of attention in the past few years, it was first popularized by McDonald (1993) who discussed customer advocacy efforts by Dell. Later, Gruen (2000) advanced the idea that making the customers members of organization is key to building strong relationships with them. Consumer empowerment has led many forward-looking companies to provide customers with complete information and help them find the best products (even if that means recommending a competitor s product). In other words, companies are urged to take their customers best interests in mind (Urban, 2004). If companies advocate for their customers, customers will reciprocate by advocating for the company by not only buying the products but also telling other customers as well as helping to produce better products (Urban, 2005b). Customer advocacy can be envisioned as 3-layer pyramid where the bottom layer revolves around TQM (for quality products) and satisfied customers. Building on a foundation of TQM and satisfied customers, the firm engages in relationship management whereby it gains an in-depth understanding of its customers, leading to customer advocacy at the ultimate goal on the top of the pyramid (Urban, 2004). Customer advocacy represents a major shift in mind-set from competitive rivalry around quality and price to cooperation and collaboration around shared goals and objectives (Urban, 2005a). Companies can develop a long-lasting competitive advantage through becoming a trusted advisor for their customers and in the process, optimize allocation of their scared resources (Urban, 2005a, 2005b). Advocacy as a corporate strategy needs intra-departmental coordination as trust is built through transparency, quality, customer partnering, product comparison, supply chain (trusted business partners), pervasive advocacy (company culture of trust) etc. (Urban, 2005b). Research on this topic began to appear in scholarly journals (Huetteman, 2005; Lawer and Knox, 2006); we expect this trend to continue as scholars and practitioners alike show increasing interest in exploring this concept. TABLE I Comparison of the Research Streams Research Stream Main Theme Context Important Issues and Concepts Nordic School Cross functional Service in the Service marketing; marketing with Consumer (B2C) 30Rs; Internal quality of service markets marketing; Customer as basis of perceived value; differentiation Interaction, communication and Superior Customer Value Delivering customer value based on service marketing and quality management Customer perceived value in B2C markets dialogue Process to deliver relationship quality; Six markets model; Value as ratio of perceived benefits and ownership costs Weaknesses Service is the only basis for differentiation; No mention of B2B markets Does not go into depths of the relationships in six markets to build a holistic view; Studies focus on B2C only

Industrial Marketing and Purchasing (IMP) Group Relational Exchanges Customer Relationship Management Customer Advocacy Relationship (networking) between the firms to increase marketing efficiency and effectiveness Partnering relationships and buyer seller relationship models Process of creating value for both the company and customers through integration of different organizational functions Customers best interests is the firm s top priority Business relationships in the Industrial (B2B) markets Relationship variables in the B2B markets Customer Selectivity and Corporate strategy Customers as integral part or members of the organization and thus firms are trusted advisors for them Interaction; Adaptation; Resource Utilization; Commitment; Interorganizational relationships and Business networks Firm partnerships; Norms; Relational exchange as forms of marketing; Model of relationship building process and variables; Commitment and Trust as key mediating variables Formal process model (framework); One-to-one buyerseller relationships; Interaction and collaboration; Value addition Complete information; Best products (even competitors ) for customers; Mutual advocacy; Resource allocation Focus only on business relationships in B2B context and less empirical research Variables and models of relationships limited to B2B markets and not ventured into the domain of consumer markets Limited to being an IT function and more focus on the process rather than the outcome or underlying factors Still a very new concept and needs further explorations to be established as a research stream NEW INTEGRATIVE FRAMEWORK OF RELATIONSHIP MARKETING The research streams reviewed here all have something new to offer, but they suffer from some shortcomings. Most of them are limited in that they focus on a particular context (e.g. either B2B or B2C). However, a critical evaluation reveals certain common concepts among the research streams either explicitly or implicitly. These common concepts are value, long term effects, interaction, cooperation, networking, resource utilization, trust and commitment. Hence, we argue that the aim of relationship marketing is to have long term positive effects on the business with optimum resource utilization through constant interaction, extensive networking and cooperation among all members (employees, customers, suppliers, business partners, etc.) with proper commitment to create superior value for all stakeholders in a trustworthy environment. This comprehensive definition of relationship marketing integrates the research streams reviewed here and can be captured in the framework presented in Figure I below. The framework consists of 4 stages (Refer to Figure I) (1) Planning (long term planning and proper resource use), (2) the Process itself (interaction, cooperation and networking), (3) Output of the process (commitment is visible and trust is built), and (4) the Ultimate effect (value creation). FIGURE I The Four-Stage Framework

Planning Process Output Ultimate Effect - Long term planning - Proper resource utilization - Interaction - Cooperation - Networking - Commitment is visible - Environment of Trust Value creation for all the involved parties REFERENCES Adler, Lee (1966). Symbiotic Marketing. Harvard Business Review, Volume 44, Issue 6 (November December), 59-71. Anderson, James C., Hakan Hakansson and Jan Johanson (1994). Dyadic Business Relationships Within a Business Network Context. Journal of Marketing, Volume 58, Issue 4 (October), 1-15. Arndt, Johan (1979). Toward a concept of domesticated markets. Journal of Marketing, Volume 43, Issue 4 (Fall), 69-75. Bagozzi, Richard P. (1975). Marketing as Exchange. Journal of Marketing, Volume 39, Issue 4 (October), 32-39. Bensaou, M. and N. Venkatraman (1995). Configurations of Interorganizational Relationships: A Comparison between U.S. and Japanese Automakers. Management Science, Volume 41, Number 9 (September), 1471-1492. Berry, Leonard L. (1983). Relationship Marketing. In Leonard L. Berry, G. Lynn Shostack and Gregory D. Upah (Eds.), Emerging Perspectives on Services Marketing, American Marketing Association, Chicago, 25-28. Christopher, Martin (1996). From brand values to customer value. Journal of Marketing Practice: Applied Marketing Science, Volume 2, Number 1, 55-66. Christopher, M., A. Payne and D. Ballantyne (1991). Relationship Marketing: Bringing Quality, Customer Service and Marketing Together, Butterworth-Heinemann, Oxford. Crosby, Lawrence A., Kenneth R. Evans and Deborah Cowles (1990). Relationship Quality in Services Selling: An Interpersonal Influence Perspective. Journal of Marketing, Volume 54, Issue 3 (July), 68-81. Dwyer, Robert F., Paul H. Schurr and Sejo Oh (1987). Developing Buyer-Seller Relationships. Journal of Marketing, Volume 51, Issue 2 (April), 11-27. Ford, David (1980). The Development of Buyer-Seller Relationships in Industrial Markets. European Journal of Marketing, Volume 14, Issue 5/6, 339-353. Gronroos, Christian (1989). Defining Marketing: A Market-Oriented Approach. European

Journal of Marketing, Volume 23, Issue 1, 52-60. Gronroos, Christian (1990). Relationship Approach to Marketing in Service Contexts: The Marketing and Organizational Behavior Interface. Journal of Business Research, Volume 20, Issue 1 (January), 3-11. Gronroos, Christian (2004). The relationship marketing process: communication, interaction dialogue, value. Journal of Business and Industrial Marketing, Volume 19, Number 2, 99-113 Gruen, Thomas W. (2000). Membership Customers and Relationship Marketing. In Jagdish N. Sheth and Atul Parvatiyar (Eds.), Handbook of Relationship Marketing, Sage Publications, Thousand Oaks, California, 355-380. Gummesson, Evert (1987). The New Marketing Developing Long-term Interactive Relationships. Long Range Planning, Volume 20, Number 4, 10-20. Gummesson, Evert (1994). Making Relationship Marketing Operational. International Journal of Service Industry Management, Volume 5, Number 5, 5-20. Hakansson, H. (1982). International Marketing and Purchasing of Industrial Goods, Wiley and Sons, New York. Hallen, Lars, Jan Johanson and Nazeem Seyed-Mohamed (1991). Interfirm Adaptation in Business Relationships. Journal of Marketing, Volume 55, Issue 2 (April), 29-37. Heide, Jan B. and George John (1992). Do Norms Matter in Marketing Relationships? Journal of Marketing, Volume 56, Issue 2 (April), 32-44. Huetteman, Janet (2005). Getting customers to advocate for your company. Westchester County Business Journal, Volume 44, Issue 9 (February 28), 58-58. Jackson, Barbara B. (1985). Build customer relationships that last. Harvard Business Review, Volume 63, Issue 6 (November December), 120-128. Lawer, Christopher and Simon Knox (2006). Customer advocacy and brand development. Journal of Product and Brand Management, Volume 15, Number 2, 121-129. McDonald, Laura (1993). Setting New Standards for Customer Advocacy. Journal of Business Strategy, Volume 14, Issue 1 (January-February), 11-15. McGarry, Edmund D. (1951). The Contactual Function in Marketing. The Journal of Business of the University of Chicago, Volume 24, Number 2 (April), 96-113. McGarry, Edmund D. (1953). Some new viewpoints in marketing. The Journal of Marketing, Volume 18, Issue 1 (July), 33-40. Morgan, Robert M. and Shelby D. Hunt (1994). The Commitment-Trust Theory of Relationship Marketing. Journal of Marketing, Volume 58, Issue 3 (July), 20-38. Palmer, Roger, Adam Lindgreen and Joelle Vanhamme (2005). Relationship marketing: schools

of thought and future research directions. Marketing Intelligence and Planning, Volume 23, Number 3, 313-330. Parvatiyar, Atul and Jagdish N. Sheth (2001). Customer Relationship Management: Emerging Practice, Process, and Discipline. Journal of Economic and Social Research, Volume 3, Number 2, 1-34. Payne, Adrian and Sue Holt (2001). Diagnosing Customer Value: Integrating the Value Process and Relationship Marketing. British Journal of Management, Volume 12, Issue 2 (June), 159-182. Rosenberg, Larry J. and John A. Czepiel (1984). A marketing approach for customer retention. Journal of Consumer Marketing, Volume 1, Issue 2, 45-51. Sheth, Jagdish N. (2002). The future of relationship marketing. Journal of Services Marketing, Volume 16, Number 7, 590-592. Sheth, Jagdish N. and Atul Parvatiyar (1995). The Evolution of Relationship Marketing. International Business Review, Volume 4, Number 4, 397-418. Sheth, Jagdish N. and Rajendra S. Sisodia (1995). Improving Marketing Productivity. In J. Heilbrunn (Ed.), Encyclopedia of Marketing in the Year 2000, American Marketing Association / NTC Publishing, Chicago. Urban, Glen L. (2004). The Emerging Era of Customer Advocacy. MIT Sloan Management Review, Volume 45, Issue 2 (Winter), 77-82. Urban, Glen L. (2005a). Customer Advocacy: A New Era in Marketing? Journal of Public Policy and Marketing, Volume 24, Issue 1 (Spring), 155-159. Urban, Glen L. (2005b). Don t Just Relate Advocate! A Blueprint for Profit in the Era of Customer Power, Wharton School Publishing, Upper Saddle River, New Jersey. Varadarajan, P. Rajan and Margaret H. Cunningham (1995). Strategic Alliances: A Synthesis of Conceptual Foundations, Journal of the Academy of Marketing Science, Volume 23, Number 4 (Fall), 282-296. Varadarajan, P. Rajan and Daniel Rajaratnam (1986). Symbiotic Marketing Revisited. Journal of Marketing, Volume 50, Issue 1 (January), 7-17. Webster, Jr., Frederick E. (1992). The changing role of marketing in the corporation. Journal of Marketing, Volume 56, Issue 4 (October), 1-17. Wilson, David T. (1995). An Integrated Model of Buyer-Seller Relationships. Journal of the Academy of Marketing Science, Volume 23, Number 4 (Fall), 335-345.