B2B Relationship Marketing

The performance of a relationship between two firms can be view in the following way. The Business-to-Business Relationship Performance scale is presented as a high order concept. Managers operating in a B2B e-marketplace, findings reveal that greater relationship performance results in better 1) relationship policies and practices, 2) relationship commitment, 3) trust in the relationship, 4) mutual cooperation, as well as 5) satisfaction with the relationship. The multi-dimensional scale shows strong evidence of reliability as well as convergent, discriminate and nomological validity.

It is also reveal that B2B relationship performance is positively and significantly associated with loyalty. While building on this scale. Today firms have a wide range of tools and metrics at their disposal to assess periodic performance, and they represent a critical topic in business literature and across different fields of management research. However, although both worlds are interested in the topic of metrics, the way academics and managers discuss it is quite different. Frequently practitioners have different expectations and work with different time scales than those of academics.

Moreover, it is not normally concerned with the analysis and development of metrics that might be applied at the managerial level and included in management periodic reports. The marketing trend towards a better understanding of relationship development with business partners continues to grow, as managers and researchers observe that better relationships result in a significant impact on business performance.

The development of customer relationship is an ongoing process during which relational policies and practices, trust, relationship commitment, mutual cooperation, and satisfaction with the relationship represent important dimensions to be considered. The need for enhanced corporate reputation and trust-based relationship becomes more crucial in an environment of less traditional relationship coalition, relational history, and interpersonal communication.

The new medium is fostering transitional relationship, and easy access to information and forum to critique, criticize or condemn an institution. The practice of hiding nothing is preferred because there is no where to hide. Ethics and truth, unqualified reputation and transparent honesty, therefore, become very important in the new marketplace made up of institutions and empowered consumers and stakeholders.

Proactively, rather than reactivity, becomes a very important business mantra in the postmodern digital world economy. It is easier to create and maintain reputation and trust than try to regain them. Computer technology has altered the power structure and the relationship between corporations and their publics, stakeholders and the media. Internet may be creating a shift from the traditional vertical and horizontal corporate communication paradigms.

Relationship Marketing Works Best in B2B

While Levitt and others in the 1980s heralded the beginning of relationship-oriented sales and marketing, the greatest examples of success in relationship marketing are in the business-to-business arena.

“Just in Time” (JIT) is a clear manifestation of the virtues of relationship sales and marketing. Here vendor and buyer work so closely that they are in lockstep with one another. The buyer is totally dependent on precise delivery schedules to maintain production and minimize inventory. The seller will often serve its JIT customer to the exclusion of other business. This is a marriage in Levitt’s truest sense.

Internet B2B purchasing is yet another manifestation. Here buyers and sellers have their computers linked to each other. When inventories reach a certain point, an electronic reorder command goes from the buyer’s computer to the seller’s and a purchase order and invoice is automatically generated without human participation.

Business-to-business sales people are trained to develop and nurture relationships. It’s so much more efficient to generate orders from existing customers instead of doing the time-consuming missionary work necessary to develop new customers. The fastest way a salesperson can meet or exceed quotas and earn bonuses is through re-orders from existing customers.

Business to Business (B2B) Relationship Marketing

As has already been mentioned, relationship marketing is not new in reality, and this is particularly true for B2B. For example, Marks and Spencer used to have a policy of dealing with a small number of ‘partner’ suppliers, some of which had been involved for many decades. When Marks and Spencer personnel visited a supplier, it was referred to as a ‘royal visit’ ; ‘Factories may be repainted … and machinery cleaned: this reflects the exacting standards’ (Jobber 2001: 106). Marks and Spencer may have moved away from that policy in recent years, but it has to be noted that the change did not coincide with a major improvement in the company’s fortunes.

In this type of relationship management, there are increased pressures put on to suppliers to maintain high levels of service and reliability. Customers, though, often provide increased technical support and expertise to suppliers. Because such partnerships are long term, the partners can invest in systems that ensure good communication, reduced risks and efficiency, such as Just in Time (JIT) and EDI (considered further in Chapter 8). For the supplier, such systems have the advantage of increasing switching costs; that is, making it expensive for the customer to change supplier. This is the sort of system used, for example, by Nissan in Sunderland (UK) in car production. The seats and upholstery are ordered from the supplier only forty minutes before they are required on the production line. In that time, they are assembled and delivered to where they are required. With such tight restraints on efficiency, reliability is enforced.

Mini case study: CISCO

Cisco Corporation is a world leader in integrated information exchanges based on Internet technology and a major provider of the infrastructure that makes the World Wide Web work. Its customer relationship systems include:

an online customer enquiry and ordering system taking 80 per cent of the company’s

orders;

a Web site on which customers can design and price-switch and router products;

an online customer care service so that customers can identify solutions from the data warehouse of technical information and download software directly. Cisco estimates that this has saved $250 million per year in distributing software plus $75 million in staffing customer care.

Wise to use the best information of wholesalers directory, include Business Management Textbooks Manufacturer, Textbook Price Regulation, Business and Finance Textbooks For Sale, Wholesale Detergent Suppliers, E-Business and E-Commerce Price, Beyond Software Architecture Price, Computer Books and Internet Books, Car Parts Online, Best Business and Finance Books, Professionalism Wholesale Price, Cheap Computer Science Textbooks and Other Business and Office Softwares Manufacturer, stand the first line to the giant of on-line drop shipper.

What Are Best Practices for Achieving B2B Marketing Loyalty?

Marketers who deploy the basics and best practices of direct marketing will be the ones to achieve success in establishing and maintaining long-term, profitable B2B relationships.

Posted Oct 18, 2004

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Succeeding in B2B marketing can be a tricky business. This is particularly so in an environment that demands every effort to demonstrate a measurable ROI.

Traditionally, customer acquisition is five times more costly than customer retention, so profitability depends largely on grooming satisfied customers. How is a B2B marketer ever to achieve such loyalty?

The fact remains that those marketers who deploy the basics and best practices of direct marketing will be the ones to achieve success in establishing and maintaining long-term, profitable B2B relationships. One key is to deploy a data-driven strategy towards understanding the wants, needs, and desires of the target audience. It may sound somewhat rudimentary, but the value of demographics, and data collection and analysis cannot be overemphasized.

In getting to know the audience remember that as a rule business consumers have specific business-related needs they are looking to meet, or defined problems they're required to solve--let's say for example, cost-effectively networking the computers of a remote sales staff. As a group business people tend to be more sophisticated and have both their own self-interest and the interests of the enterprise in mind. So one not only has to address the WIIFM--what's in it for me?--but also the WIIFMB--what's in it for my business--question as well.

Because direct marketing in a B2B environment often involves a multistep buying process and multiple purchase influencers, closing the deal can be more complicated. To truly know the business customer, it is beneficial to consider such factors as occupation type, technical competency, spending power, needs, and aspirations. The data will serve to complete the view of the audience as a marketing organization strives to meet individual business needs.

It is also essential to consider the unique dynamics of each business enterprise and how it makes purchase decisions. Will the communication be directed to the highest-level managers that gather and filter information to others, or will the communication be targeted directly to the line manager--a key influencer whose job it is to gather information and push it upwards? Who in the business customer's organization makes the final call? How many people, if any, have a say? Are they all being consulted, and engaged in the marketing process?

A few words about the role of influencers--those silent partners who may not be able to be the direct purchaser, but who have a clear say in the purchase decision. It's important to find out as much as one can about what makes the target's influencers motivated. For instance, at what level do they influence purchases? What is the relationship between the influencer and the decision-maker? Is it a casual peer-to-peer relationship? Or is the relationship more formal, such as between a direct report and supervisor? Learn about these relationships and their impact on the purchase of a given product or service. Then, develop a tone and message that is appropriate and persuasive.

Consider that a loyalty strategy must not only feed on data to meet customer needs, it must also be data-generating: This means that every contact or interaction with a customer--regardless of channel--affords an opportunity to collect data that will help in the crafting of tailored offers and messaging. This is unfortunately the place where many marketers--those focused on B2B and consumer audiences alike--falter, and therefore, where they fail to deliver benefit.

Achieving B2B loyalty is a worthy objective, and one that can be reached with direct marketing basics and best practices as a guide.

Bringing Relationship Marketing Theory into B2B Practice:

The B2B-RP Scale and the B2B-RELPERF Scorecard*

Luis Filipe Lages, Andrew Lancastre, and Carmen Lages**

22 March 2005

* This research was funded by a research grant from the 6th European Framework Program, Specific Support Action-CoCombine. Luis Filipe Lages is grateful to “Nova Égide”, Andrew Lancastre acknowledges the support of UNIDCOM/ IADE and Carmen Lages to UNIDE/ISCTE.

** Luis Filipe Lages is Assistant Professor of Marketing and International Business at Universidade Nova de Lisboa, Faculdade de Economia, Campus de Campolide, 1099-032 Lisboa, Portugal. E-

mail: lflages@fe.unl.pt; url: http://prof.fe.unl.pt/~lflages; Tel. +351.213801600; Fax: +351.213886073.

Andrew Lancastre is Assistant Professor of Marketing at IADE – Instituto de Artes Visuais, Design e Marketing, Av. D.Carlos I, nº4, 1200, Lisboa, Portugal. E-mail: alancastre@iade.pt

Carmen Lages is Assistant Professor of Marketing at ISCTE Business School- Lisbon, Av. das Forças Armadas 1649-026 Lisboa, Portugal. E-mail: carmen.lages@iscte.pt

Bringing Relationship Marketing Theory into B2B Practice:

The B2B-RP Scale and the B2B-RELPERF Scorecard

Abstract

This study presents a new measurement scale to assess the performance of a relationship between two firms. The Business-to-Business Relationship Performance (B2B-RP) scale is presented as a high order concept. When tested in a sample of nearly 400 SME’s purchasing managers operating in a B2B e-marketplace, our findings reveal that greater relationship performance results in better 1) relationship policies and practices, 2) relationship commitment, 3) trust in the relationship, 4) mutual cooperation, as well as 5) satisfaction with the relationship. The multi-dimensional scale shows strong evidence of reliability as well as convergent, discriminant and nomological validity. Findings also reveal that B2B relationship performance is positively and significantly associated with loyalty. While building on this scale, the authors develop the B2B-RP Scorecard intended to be included in periodic reports. At the managerial level, both the scale and the scorecard are expected to help disclose relationship performance, and act as useful instruments for periodic planning, management, controlling, and improvement of B2B relationships.

Keywords: Relationship Performance; Relationship Marketing; B2B-RP Scale; B2B-RELPERF Scorecard; Electronic Markets.

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Bringing Relationship Marketing Theory into B2B Practice:

The B2B-RP Scale and the B2B-RELPERF Scorecard

(Pls refer to a PDF file also in the same folder for Proper format study)

“Every firm, every activity, every worker needs metrics.” (Melnyk, Stewart and Swink, 2004: 209)

Introduction

As early as eight decades ago, Alfred Sloan and Donaldson Brown were interested in exploring the process of performance assessment at General Motors. Today, firms have a wide range of tools and metrics at their disposal to assess periodic performance, and they represent a critical topic in business literature (e.g., Cooke, 2001; Kerr, 2003; Melnyk and Christensen, 2000) and across different fields of management research (e.g., Beamon, 1999; Ittner and Larcker, 1998; Neely, 1999). However, although both worlds are interested in the topic of metrics, the way academics and managers discuss it is quite different (Melnyk, Stewart, and Swink, 2004). Frequently practitioners have different expectations and work with different time scales than those of academics (Likierman, 2004). Moreover, academic research is not normally concerned with the analysis and development of metrics that might be applied at the managerial level and included in management periodic reports (see Abdeen, 1991 as an exception). In this study it is our goal to develop solid instruments, both at the theoretical and methodological level.

The marketing trend towards a better understanding of relationship development with business partners continues to grow, as managers and researchers observe that better relationships result in a significant impact on business performance (Lemon, White, and Winer, 2002; Lages, Lages, and Lages, 2005). Nevertheless, although marketing academics and practitioners have been examining relationship marketing (RM) since the mid-80s, there has been significant criticism on

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the way most RM studies have been conducted, because of their use of only a single dimension, such as trust, to capture the nature of a relationship between buyers and suppliers (Yau et al., 2000). The development of customer relationship is an ongoing process during which relational policies and practices, trust, relationship commitment, mutual cooperation, and satisfaction with the relationship represent important dimensions to be considered (Dwyer, Schurr, and Oh, 1987; Jap and Ganesan, 2000).

It is our goal to develop a scale that allows one to assess relationship performance in B2B relationships (the B2B-RP Scale). This scale is then used to develop a relationship performance scorecard (the B2B-RELPERF scorecard) to be included in periodic business reports. Major reasons justify the fundamental need for the disclosure of relationship performance metrics in periodic reports. Relationship performance metrics help to plan and monitor. They might be used as a supporting tool to identify the way resources could be better administered and allocated to different customers, as well as to identify deviations against proposed objectives. These metrics might also help to establish annual priorities in terms of marketing efforts, given the development of the different customer relationship processes, and the definition of the firm’s main objectives. Moreover, relationship performance metrics may be used as a motivation and reward tool for managers and their teams (e.g. bonus, promotion) by relying on comprehensive data. Finally, these metrics are essential to support benchmarking, improvement and development of the customer relationship processes.

The Marketing Science Institute has recently underscored the need to concentrate efforts on the development of tools that may better assist managers and firms’ performance, in order to narrow the gap between scientific research and managerial needs. It has been further stressed that one of the highest priorities in the years to follow is the development of B2B metrics, namely in an e-commerce environment (MSI, 2004; Parasuraman and Zinkhan, 2002; Parasuraman, Zeithaml, 3

and Malhotra, 2005). To our knowledge there are no established scales that might be used as a basis to manage, develop and evaluate the relationships between buyers and suppliers in an Internet context. Moreover, despite the interest of both managers and academics in better understanding relationships in the electronic environment, concerted efforts have not materialized (Grewal, Comer, and Mehta, 2001). Our paper intends to contribute to filling these gaps in the literature. In the next section we start by presenting the five dimensions of the B2B-RP Scale. Then, the preliminary scale is refined through qualitative research and tested via a field survey of nearly 400 SME’s purchasing managers in an e-marketplace. The impact of the B2B-RP Scale on customers’ loyalty intentions is also analyzed. The scale is then used as a basis for the development of the B2B-RELPERF Scorecard, which allows the assessment of relationship performance on a periodic basis. Finally, research limitations, implications for practice and theory, and directions for future research are presented.

The B2B-RP Scale

We consider that relationship performance is a higher order construct made of several distinct, though related dimensions. As a result, the B2B-RP Scale reflects the performance of the buyer-supplier relationship marketing process, at a specific point in time, while taking into consideration the following five dimensions: relationship policies and practices, trust in the relationship, relationship commitment, mutual cooperation, and satisfaction with the relationship. Each of the five B2B-RP dimensions are presented below.

Relationship Policies and Practices Relationship policies and practices represent one of the most important dimensions to be considered during a relationship process (Jap and Ganesan, 2000). By establishing clear relational 4

policies and practices the supplier becomes motivated to behave in a way that is beneficial to the relationship as a whole, and as a consequence “emerging exchange partners start setting the ground rules for future exchange” (Dwyer, Schurr, and Oh, 1987:17). Despite the well-recognized significance of these policies, few studies have examined company behaviors and practices specifically or the mechanisms by which they may enhance relationships (Sirdeshmukh, Singh, and Sabol, 2002). Ethical values, such as the supplier showing respect for the customer, should be included in relationship policies and practices, as they contribute to the development of the relationship between customers and firms (Morgan and Hunt, 1994). In fact, the extent to which partners have common beliefs about what behaviors and policies are important or not, appropriate or inappropriate, and right or wrong, is an important fact in the process of relationship development. Strategic considerations motivate firms to better serve their customers, and technology is viewed as a means to build competitive advantage. In electronic markets strategic considerations such as “providing better customer service” are particularly significance, given the fact that the virtual world increases the possibility of suppliers acting opportunistically and the customer perceiving augmented risk and uncertainty (Grewal, Comer, and Mehta, 2001). It is then natural that providing better service through quicker and easier problem solving represents an added relationship value in the electronic context and a contribution to the buyer-supplier relationship.

Trust Since firms and marketers show increasing attention and efforts to build long-term relationships with their customers, trust plays a central role in the development of relationship performance (Dwyer, Schurr, and Oh, 1987), as trust is an essential ingredient in the creation, development, and maintenance of long-term relationships between buyers and suppliers (Anderson and Narus, 1990; Ganesan, 1994). Trust exists when one party has confidence in an exchange partner’s

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reliability and integrity (Morgan and Hunt, 1994). Once trust is established, firms learn that coordinated, joint efforts will lead to results that normally exceed what they would achieve if they acted on their own in their best interests. So trust is a key ingredient in a working relationship, and this fact has repercussions on the firm’s actions. These repercussions can be defined as the buyer’s belief that the supplier will act in a way that results in positive outcomes for the buyer.

Trust is the cornerstone of the strategic partnership and relationship development process (Moorman and Deshpandé, and Zaltman, 1993; Morgan and Hunt, 1994). Because perceived risk is more pronounced in an e-commerce environment than in traditional commerce, trust may represent greater importance due to the spatial and temporal separation between buyers and sellers that result from the Internet characteristics. In fact, the Internet transaction typically takes place from different locations at different times, and goods or services are delivered subsequently, after the buyer has confirmed payment. When selecting a supplier, a buyer must take into account the possiblity that the supplier may be an expert in attracting customers and cashing credit cards, but not in actually delivering goods or services (Smith, Bailey, and Brynjolfsson, 1999). So, given the higher perceived risks and uncertainty in the “marketspace”, trust could be even more critical in the buyer-supplier relationship development process than in the traditional marketplace. The buyer’s belief that the supplier delivers reliable information and advice represents an added contribution for trust developing purposes.

Relationship Commitment Commitment is essential for the development of long-term relationships (Anderson and Narus, 1990; Dwyer, Schurr, and Oh, 1987; Morgan and Hunt, 1994) and is an important indicator of relationship performance (Roberts, Varki, and Brodie, 2003). Commitment to the relationship is defined as the “desire to develop a stable relationship, a willingness to make short-term sacrifices 6

to maintain the relationship, and a confidence in the stability of the relationship” (Anderson and Weitz, 1992: 19). Moreover, relationship commitment is a means to differentiate successful relationships from unsuccessful ones (Morgan and Hunt, 1994). Suppliers in a committed relationship gain greater access to market information for selecting a better customer-oriented assortment (Anderson and Weitz, 1992), and buyers in an e-marketplace receive more relevant up-to-date market and product information, a better assortment choice, and order/payment automation (Weiber and Kollman, 1998; Smith, Bailey, and Brynjolfsson, 1999). Because both parties receive new benefits from each other, each one has a stronger motivation to build, maintain, and develop the relationship through committed efforts (Kumar, Scheer, and Steenkamp, 1995). Hence, there is evidence that strong relationships are “built on the foundation of mutual commitment” (Berry and Parasuraman, 1991: 139).

In an organizational environment, commitment may be affective commitment (attachment to an organization), continuance commitment (perceived cost of leaving an organization), or normative commitment (perceived obligation to stay with an organization) (Meyer, Allen, and Smith, 1993). Of the three kinds of commitment, only affective commitment influences the degree to which the customer “wants” to maintain a relationship with the firm (Roberts, Varki, and Brodie, 2003). Hence, in this research setting, we assume that relationship commitment is the buyer’s attachment to the supplier that leads to the development of stable and long-term relationships (Anderson and Weitz, 1992).

Mutual Cooperation Relationship marketing requires cooperative behaviors (Morgan and Hunt, 1994). Cooperation between partners in a relationship exchange process grows on the basis that they perceive greater benefits from working together than from pursuing similar benefits by working independently. Cooperation can then be defined as “similar or complementary coordinated actions taken by firms

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in interdependent relationships to achieve mutual outcomes or singular outcomes with expected reciprocation over time” (Anderson and Narus, 1990: 45).

The electronic marketplace is a “networked information system that serves as an enabling infrastructure for buyers and sellers to exchange information, transact, and perform other activities” (Varadarajan and Yadav, 2002: 297). Mutual cooperation in an electronic environment is seen in terms of the regularity of the interactions and the openness in communication activities between the buyer and the supplier (Hewett and Bearden, 2001; O’Keefe, O’Connor and Jung, 1998), and represents an important element in relationship performance planning, managing, and controlling purposes.

Satisfaction with the Relationship While taking into consideration past experience, satisfaction with the relationship refers to “the cognitive and affective evaluation based on personal experience across all […] episodes within the relationship” (Roberts, Varki, and Brodie, 2003: 175). Satisfaction with the relationship may then be seen as a positive emotional and rational state resulting from the assessment of the buyer’s working relationship with the supplier (Geyskens, Steenkamp and Kumar, 1999). Customer evaluation of satisfaction with the relationship with the supplier is important for the development of business exchanges (Cannon and Perreault, 1999). It summarizes customer’s past interactions with the supplier that influence expectations of future relationship development (Roberts, Varki, and Brodie, 2003), leading to long-term continuation of the relationship, and emphasizing why satisfaction with the relationship is essential to the improvement of relationship performance. The fulfillment of achieving the parties’ desired outcomes leads to satisfaction with the partnership (Anderson and Narus, 1990).

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Method

Research Setting

The unit of analysis for this research is the specific buyer’s relationship with the supplier, from the buyer’s perspective. We decided to collect customers’ data because it is usually the customer that ultimately makes the decision of whether to purchase from the supplier, and it is the customer’s view that is likely to be determinant to the relationship development and performance (Cannon and Perreault, 1999). Electronic business has added a whole new dimension to discussions of business relationships (Morgan and Hunt, 2003). In an e-market environment, business is conducted at a distance and risks and uncertainties are enhanced, namely because the Internet - which is a relatively new and complex technology - presents security problems frequently reported in the media. Beyond this fact, the online suppliers may easily register and track customer data, which increases the possibility for them to act opportunistically. Additionally, many online buyers might not yet have accumulated the necessary shopping experience and relevant knowledge about potential market suppliers or other partners within this new online shopping channel (Einwiller, Ingenhoff, and Schmid, 2003). Usually an e-market is sponsored by a market maker, whose main role is centered on gathering buyers and sellers in the marketspace (Grewal, Comer, and Mehta, 2001; Klein and Quelch, 1997). For the purpose of this project, we selected PMElink.pt and its small and medium enterprises’ (SMEs) customers. PMElink.pt is an online business center that sells office goods and services to SMEs, from office paper to consumables, computers to office furniture, recruitment services to customer credit reports, in areas that support their core businesses. PMElink.pt not only manages to significantly reduce product and services prices to its clients

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through bulk ordering and strategic sourcing of materials from key suppliers, it promises efficient and 24 hour delivery of goods. In addition to goods, PMElink.pt offers a range of business services, business expertise, advice and information online. As customers place their orders, PMElink.pt forwards them to their 30 suppliers; an express cargo carrier takes care of delivery logistics, and PMElink.pt bills the customer, promising a 99 percent success rate for goods being delivered within a 24 hour timeframe.

Survey Instrument Development Churchill’s (1979) traditional approach to scale development was adopted. The measures were refined through interviews with managers involved in the electronic market operations. Based on their feedback these measures were adjusted to electronic markets’ reality. Three SME customers then assessed the final set of items of the B2B-RP Scale for content and face validity. Based on the literature review and preliminary findings, the domain of the construct was specified to include five B2B-RP dimensions. A set of items designed to measure each of these dimensions was developed, some of them undergoing modifications while taking into consideration the e-commerce context. A full listing of the 14 final items and their scale reliabilities is seen in Table 1. The average internal reliability (Cronbach alpha) was .86.

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Insert Table 1 about here

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Data Collection

In order to test the B2B-RP Scale, primary data were initially collected through a qualitative exploratory stage followed by a survey, based on an online questionnaire, aimed at a sample of the SME customers, and directed to individuals responsible for the purchasing operations. The

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online survey, attached to the firm periodic online newsletter, provided 395 valid questionnaires,

above the minimum number (381) required for a 95% confidence level and a 5% sampling error1.

Sample Profile and Non-response Bias Respondents covered the main industry and economic activities, from the primary sector (5%), to the industrial sector (21%), and the services sector (74%). They also regularly purchased main product categories, as classified by the supplier: paper (74%); consumable goods (73%); other office products (57%); systems equipment (29%); office furniture (5%); and services (6%).

Based on the supplier database, the survey was directed to individuals that are primarily responsible for the SME’s buying centers. Although the job titles of the respondents ranged from general manager to financial manager, purchasing manager, and administrative manager, all of the respondents have in common the fact of being responsible for the purchasing operations. They are typically responsible for contacting and dealing with the supplier on a daily basis. In terms of profile, 20% of the respondent firms had less than 6 months of business experience with the supplier, 30% showed an experience that varied between 6 and 12 months, and the remaining 50% had more than 12 months experience. Of this last group, 70% had experience above 2 years. This result indicates that although the title of the respondents’ positions may be wide-ranging, the individuals appear to have significant knowledge in the specific purchasing activities of the firm. Non-response bias was tested by assessing the differences between the 75% early and 25% late respondents (Armstrong and Overton, 1977). No significant differences were found, suggesting that there was not a significant problem with non-response bias in the study. Data were then analyzed through exploratory factor analysis (EFA) followed by confirmatory factor analysis (CFA).

1 In line with previous studies conducted by PMElink.pt, we have used the online periodic newsletter to promote the on-line survey. Stratified sampling, based on the customers’ loyalty degree strata grouping, was accomplished.

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Data Analysis

Confirmatory Factor Analysis CFA is performed to assess the measurement properties of the existing scales, using full-

information maximum likelihood (FIML) estimation procedures in LISREL 8.3 (Jöreskog and Sörbom, 1993). In this model, each item is restricted to load on its pre-specified factor, with the five first

order factors allowed to correlate freely. The chi-square for this model is significant (χ2=143.58, 67df, p<.05). Since the chi-square is sensitive to sample size, we also assessed additional fit indices: 1) Non Normative Fit Index (NNFI); 2) Comparative Fit Index (CFI); the Incremental Fit Index (IFI) and Standardized Root Mean Square Residual (SRMR). The NNFI, CFI, and IFI, of this model are .99 and the SRMR is .41. Since fit indices can be improved by allowing more terms to be freely estimated, we also assess the Root Mean Square Error of Approximation (RMSEA). The RMSEA of this measurement model is .054.

Unidimensionality was evidenced by the large and significant standardized loadings of each item on its intended construct (average loading size was .83). Additionally, as shown in Table 1, all constructs present the desirable levels of composite reliability (cf. Bagozzi, 1980). Table 1 also shows that Fornell and Larcker’s (1981) index of variance extracted was above the recommended level of .50 for all of the five constructs.

Evidence of discriminant validity is revealed by the fact that all of the construct intercorrelations are significantly different from 1, and the shared variance among any two constructs (i.e., the square of their intercorrelation) is less than the average variance explained in the items by the construct (Fornell and Larcker, 1981; MacKenzie, Podsakoff and Rich, 1999). The largest squared multiple correlation between any two constructs was .53 (.73 was the highest correlation --between satisfaction and commitment as well as between satisfaction and trust --), whereas the

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variance extracted ranged from .61 to .78. In order to assess nomological validity, we tested our measures with respect to a dimension to which our constructs are supposed to be theoretically related (cf. Churchill, 1995). There are well-grounded theoretical reasons to expect a positive relation between relationship performance and loyalty. Buyer loyalty can be defined as the intention to perform a set of behaviors that indicate a motivation to maintain a relationship with the supplier, including allocating a higher share of wallet, engaging in positive word of mouth, and repeat purchasing (Zeithaml, Berry, and Parasuraman, 1996). When suppliers are oriented to the relationship and act in a way that strengthens relationship policies and practices, trust, relationship commitment, cooperative activities and satisfaction, the perceived risk with the specific service supplier is likely reduced, enabling the customers to make confident predictions about the supplier’s future behaviors (Morgan and Hunt, 1994). Altogether, this helps to shape the customers’ perceptions about the relationship they hold with suppliers, and enhances their loyalty (Sirdeshmukh, Singh, and Sabol, 2002). We found that loyalty2 is positively correlated with relationship orientation (r=.50), relationship commitment (r=.64), trust (r=.53), mutual cooperation (r=.58) and satisfaction with the relationship (r=.80). Given that all of the coefficients are positive and significant (at p<.01 or better), we may conclude that the performance of the buyer-seller relationship has a positive impact on loyalty and, hence, the nomological validity of the five proposed measures is supported (Cross and Chaffin, 1982).

Higher Order Factor A second order factor model of B2B-RP is also estimated. This model includes the five first order factors along with their standardized coefficients, observable indicators and measurement errors.

2 Three items where used for measuring buyer loyalty (α=.93): a) buyer intention to make most future purchases from the supplier, b) intention to recommend the supplier to other firms, and c) intention to use the supplier the next time the buyer needs to purchase products or services. All items are 7-point likert scales anchored by “Strongly Disagree” and “Strongly Agree” (Sirdeshmukh, Singh, and Sabol 2002).

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Each of the first order factors has significant (p<.01) loadings of .54, .80, .79, .74, and .94 respectively, on the second order factor. Although the chi-square for the second order model is

significant (χ2=152.66, 72df, p<.05), the NNFI, CFI, and IFI are .99, the SRMR is .41, the RMSEA is .053, and the chi-square difference test between the first order and second order models is non-

significant (Δχ2= 9.08, Δdf= 5, p>.10). Overall, this suggests that the higher order model accounted for the data well. Further evidence is demonstrated by inspecting the correlations between the five constructs. All correlations are significant at p<.01 and the coefficients are large and positive, indicating that the five scales converge on a common underlying construct (Cadogan, Diamantopoulos, and De Mortanges, 1999; Lages and Fernandes, 2005).

The Fundamental Need to Bring Relationship Performance Metrics into Periodic Reports

Six major reasons justify a fundamental need for the disclosure of relationship performance metrics in periodic reports. The first reason is to thoroughly communicate the firm’s situation in the market. At a time when business relationships are instrumental in the determination of enterprises’ value and performance, most stakeholders (e.g., shareholders, investors, executives, and government) would be pleased to find information in periodic reports that allows them to evaluate the (un)success of each business relationship. In this way, the credibility and importance of the business operations could be promoted from the shareholders’ viewpoint.

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A second reason is to help to establish annual priorities. Despite managers’ intuition about which relationships to invest their efforts in, it may become very difficult to assign priorities and gauge the resulting benefits of relationships, the reason being that there is no established yardstick by which to measure the performance of individual relationships. Hence, the definition of a clear metric and the attribution of different weights to different performance measures, as well as to different relationships, might play a major role in defining where the focus should reside.

Third, planning and monitoring are essential. There is a need for a supporting tool in decision making that allows controlling the way resources are annually administered and allocated to the different business relationships. Relationship performance metrics would help managers to clearly define periodic objectives for particular products in specific markets, which would allow them to better control the cause of relationship (un)success. In particular, when addressing business problems, relationship performance metrics can be used as a guide to managers and employees. Metrics might also be used as a key monitoring and decision making tool in a vast range of situations, such as in international relationships and exploration of new markets, or when major changes occur, such as a firm’s restructuring or downsizing across divisions or when business performance has been substandard or has slipped from past higher levels and top managers try to keep tight controls on different aspects of the business operations.

Fourth, it can be a motivation tool for staff members. By relying on comprehensible data publicly presented in periodic reports, human resources can be rewarded (e.g. bonus, promotion) when achieving relationship goals. Moreover, when relationship performance is positive all the firm’s stakeholders are more likely to react positively, and managers are thereby in a better position to request more human and financial support (Lages and Montgomery 2004).

A fifth reason is to support benchmarking and improvement. Both companies and executives are under pressure to develop and apply systems that improve the business activity. Annual

15

disclosure of relationship performance might provide both with a benchmark to track the progress of business operations over time. Moreover, this benchmark might be the basis for sharing information between managers within and across firms as a way of identifying which business operations perform better, allowing benchmarking the best practices to the business relationships that are performing poorly.

Last but not least, the inclusion of relationship performance metrics into periodic reports would allow matching research with the frame of reference employed by managers. Since planning is typically undertaken on an annual basis and a significant share of managers’ time is spent in assessing annual performance of individual business operations, by developing relationship performance appraisals researchers might provide powerful managerial tools. Moreover, researchers cannot ignore the fact that managers’ frame of mind relates to annual results. Annual relationship performance relates directly to managers’ personal interests, as a positive/negative performance might have an immediate effect on them (e.g. having a salary bonus versus being fired) (Lages and Montgomery 2004). On the basis of these arguments, a credible disclosure of relationship performance information is a basic requirement in periodic reports.

The B2B-RELPERF Scorecard

In modern companies, there is an increasing need to access and establish goals for specific performance metrics, to measure efficiency, effectiveness, productivity, and annual performance, against objectives. Non-financial measuring is becoming increasingly popular in modern management, namely through the balanced scorecard developed by Kaplan and Norton (1992, 1993, 1996, 2001) because it can be understood as “innovative performance-improvement strategy that gets results” (Abernathy, 1997: 58). In this study, we use the B2B-RP Scale as a basis for developing the B2B-RELPERF Scorecard.

16

To balance the metrics, the scorecard should include both objective and subjective metrics, reflecting the relationship performance, as recommended by Kaplan and Norton (1996). In a B2B environment, sales, profits, and costs by customer are some of the general objective metrics that most firms plan on and monitor periodically. However, objective metrics may not be significant during the first stages of the relationship process (Peppers and Rogers, 1997, 1999; Reichheld and Sasser, 1990). Nevertheless, whenever available, a balanced B2B-RELPERF Scorecard may combine these objective/financial measures with the subjective metrics previously presented. Figure 2 presents our scorecard proposal.

***************************************

Insert Figure 2 about here

***************************************

Development of the B2B-RELPERF Scorecard

On the B2B-RELPERF Scorecard, the first step is to enter under “customer description” the customers that were identified as showing business potential for inclusion in a relationship process that are the object of specific marketing efforts. The second entry is under the “objective metrics” column(s) to identify existing financial metrics (e.g. sales, profits, or costs) and establish a ranking for each customer. Then, customers should be asked to assess the 14 items presented in the B2B-RP Scale on a 7 point scale (see Table 1). The next step is to assess the average score for each of the five

B2B-RP dimensions and multiply them by their weights3. These results should be presented under the column of “relationship performance dimensions”. The sum of the five weighted dimensions will represent the final RPScore per customer. The RPWeightedScore results from

3 The buyer-seller relationship process develops through mutual learning stages, where relationship policies and practices, trust, relationship commitment, mutual cooperation, and satisfaction with the relationship are critical issues. Depending on the relationship stage, different factors might present different weightings. Weightings should differ across the various customers’ relationship processes, depending on the different phases of development of each process. For this reason, it is important that the marketing team agrees on the weightings of each dimension, previous to its implementation and future assessment. 17

the multiplication of the final RPScore by the weight of each customer to overall relationship

performance. Each RP weight to overall relationships performance must take into consideration different factors, such as the firm’s mission and objectives, firm’s strategy, and the different insights from managers. A final RELPERFScore results from the sum of all RPWeightedScores.

Managers are often judged not only by the performance of different relationship processes but also by the priorities they assign to the relationships. We therefore propose that each current year (Y) weighted score should be compared with the one from the previous year (Y-1), as problems are easier to observe by the size of the gap between a current year’s metrics and the base score from the previous year. This annual feedback will allow marketers to make corrections and will help them define goals and priorities for the relationships in the following year. In order to define each relationship process goal and degree of priority, firms might also consider existing objective metrics and industry benchmarks. Another possibility is to set sub-goal intervals to the B2B-RELPERF Scorecard (e.g. on a quarterly or half-year basis). The major advantage of doing so is that quarterly or half-year feedback would enable marketers to review relationship performance trends and to make corrections more frequently as a response to the changing environment (Abernathy 1997). In this way periodic scheduled reviews with the B2B-RELPERF Scorecard might be extremely useful in monitoring and improving relationship and loyalty strategies.

In sum, the B2B-RELPERF Scorecard developed here is expected to ensure that attention is paid by marketing managers to both subjective and existing objective metrics, to each relationship process, and to overall relationship performance. The future inclusion of the B2B-RELPERF Scorecard in annual planning would make them more transparent and would improve the reliability of marketing efforts on specific relationship processes. 18

Research Limitations

There are some limitations to consider. Our research relies on the responses of the buyers only. Conceptually, a researcher can collect data from the supplier’s perspective, the customer’s perspective, or both. Ideally, researchers should collect data from both sides of the dyad. Since research in relationship marketing is still at an early stage, it is believed that with this approach we offer the buyer view as a starting point to better understand the components of B2B relationship performance. Another limitation is that our research instrument (i.e. the questionnaire) may have created common method variance. This could be particularly threatening if the respondents were aware of the conceptual framework of interest. However, they were not told the specific purpose of the study, and the construct items were separated and mixed (c.f. Jap 2001; Lages and Jap 2003). Furthermore, confidentiality was guaranteed to all survey participants for self-presentation reasons, which also helps to reduce the possibility of bias in issues such as relationship policies and practices, trust, commitment, cooperation and satisfaction (Singh 2000). Additionally, if common method bias exists, a CFA containing all constructs should produce a single method factor (Podsakoff and Organ, 1986). The goodness-of-fit indices (NNFI=.85, CFI=.87, IFI=.87, RMSEA=.191) indicate a poor fit, which suggests that biasing from common method variance is unlikely (Lages and Lages, 2004).

Managerial Implications

We argue that it is important to develop tools to assess the performance of a relationship between two firms so that managers might better understand and efficiently handle their relationships. We test this measure in a buyer-seller relationship in an e-business context. The e-marketplace is a particularly interesting environment to develop these metrics, as e-business relationships are conducted at a distance and risks and uncertainties are magnified. Moreover, since the 19

relationship process develops through various stages in the long run, where different dimensions assume different roles and contributions during the process, it is argued that the use of a B2B-RELPERF Scorecard, through which different dimensions are weighted differently, may capture that fact. This tool is expected to help practitioners planning, managing, monitoring, and improving their ongoing B2B relationships. By using the B2B-RELPER scale and B2B-RELPERF Scorecard to assess the performance of a buyer-supplier relationship process, at a specific point in time, managers may better understand the relationship process’ main constituent elements, which aids the manager in selecting, using, and controlling the most adequate marketing tools for each of them. The use of the B2B-RP Scale and B2B-RELPERF Scorecard may also help managers understand the difference that may exist in the relationship process development phases regarding different customers or groups, and to handle them more efficiently and effectively. By defining actions that address potential problems during the relationship marketing process development, managers might ultimately influence their firm’s relationship orientation, retention, and loyalty strategies.

Theoretical Implications and Research Directions

The performance of a B2B relationship process is central to marketing practice and research. The hierarchical structure of the B2B-RP Scale presents theoretical implications to both relationship marketing and technological literatures. Although we cannot claim to have fully captured the dimensions of relationship performance, it may be argued that we are close to it, because the second order factor extracts the underlying commonality among dimensions. In addition to obtaining respondents’ evaluations of the five dimensions, the second order factor model captures the common variance among them, reflecting an assessment of the buyer-supplier relationship performance process. While testing nomological validity, our empirical findings demonstrate that

20

relationship performance is strongly associated with loyalty. Hence, by using the B2B-RP Scale to assess the performance of a relationship, managers may better understand relationships’ main constituent elements, so that they may handle them more efficiently. By defining strategies and actions that address potential problems with relationship performance, managers might ultimately influence their firm’s performance. Additional research is required when analyzing the antecedents and consequences of the B2B-RP Scale. In addition to its relationship with loyalty, it is necessary to investigate how the scale is related to other established constructs in the relationship marketing field, such as transaction-specific investments.

Future research is particularly encouraged to further test the B2B-RP Scale and B2B-RELPERF Scorecard, namely by doing so on the other side of the dyad (i.e. the suppliers’ side) or on both sides of the dyad. Additionally, this scale should be tested in different settings, within a wide range of activities. As relationships in an international context transcend national boundaries, they are affected by social, cultural and other environmental differences. Hence, it would be important to test the B2B-RP Scale in other settings such as exporter-importer and franchiser-franchisee relationships. When applying it to different contexts, we encourage researchers to add new items and factors in order to continue refining the B2B-RP Scale.

In sum, as a direct response to a recent observation in the literature (Morgan and Hunt 2003), it is hoped that this article will help to cultivate further research on relationship marketing theory while helping to shed light on the B2B relationships supported by new information and communication technologies. Moreover, at a time when researchers are challenged to present studies with managerial implications (MSI, 2004), we expect that the B2B-RP Scale and B2B-RELPERF Scorecard helps to address the managerial needs of relationship performance planning, implementation, and control.

21

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23 TABLE 1: THE B2B-RP SCALE Scale Dimensions and Items, Reliabilities, and Variance Extracted Please rate your agreement with each of the following statements,

regarding your relationship with PMElink.pt (the supplier):

α / ρvc(n) / ρ

RPP: Relationship Policies and Practices

.81/.61/.82

(Adapted from Sirdeshmukh, Singh, and Sabol, 2002)

V1 The supplier has polices that show respect for the customer

V2 The supplier has practices that make solving problems easy

V3 The supplier solves my firm’s problems quickly

RCO: Relationship Commitment .86/.69/.87

(Adapted from Anderson and Weitz, 1992) V4 Our relationship with the supplier is a long-term

partnership

V5 We would not drop the supplier because we like being associated with it

V6 We want to remain as a customer of the supplier because we have pride in being associated with a firm that carries a technological image

TRUST: Trust in the Relationship .91/.78/.91

(Adapted from Morgan and Hunt, 1994) In our relationship, the supplier ...

V7 ... is someone to whom I give my confidence

V8 ... has high integrity

V9 ... gives us reliable information and advice

MCO: Mutual Cooperation .82/.71/.83

(Adapted from Hewett and Bearden, 2001)

V10 My firm and the supplier regularly interact V11 There is an open communication between our

firms

SAT: Satisfaction with the Relationship

.88/.71/.88

(Adapted from Cannon and Perreault, 1999)

V12 Overall, we are satisfied with the supplier

V13 We are pleased with what the supplier does for us

V14 If we had to do it again, we would still choose to use the supplier

The Relationships in Marketing:Contribution of a HistoricalPerspective(Pls refer to PDF file also in the same folder for proper format of the article)Teresa M. FernandesJoão F. ProençaP.K. Kannan

FEP WORKING PAPERS ResearchWork in

FEP WORKING PAPERS Progressn. 274, May 2008The Relationships in Marketing: Contribution of a Historical PerspectiveJoão F. Proença, University of Porto, Faculty of Economics, PortugalTeresa M. Fernandes, University of Porto, Faculty of Economics, Portugal*P.K. Kannan, University of Maryland, Robert H. Smith School of Business, USAThis paper presents an historical analysis of relationship marketing. We discuss theroots and the directions of relationship marketing that are considered relevant: theirorigins, the Industrial Marketing and Purchasing group (IMP) approach to businessrelationships, the Nordic approach to services relationships and, the managerial andCustomer Relationship Management (CRM) approach of relationship marketing.

The paper highlights that the boundaries of relationship marketing as defined incontemporary literature have been permeable and elastic. Relationship marketingconsists of a fragmented collection of different approaches, partly independentpartly overlapping, inspired by different theories, with a multitude of aggregationlevels and several units of analysis. We clarify the scope of this domain and wepresent a number of critical issues that remain unresolved. Is the concept ofrelationship marketing ubiquitous and can it be applied to every context? Arerelationships alike whatever the market considered? Do they describe the samephenomena or are they different phenomena resulting from different contexts? Wepresent a historical analysis of relationships marketing that could contribute to abetter understanding of what relationships are in marketing.Keywords: relationships, business-to-business relationships, relationshipmarketing, CRM*tfernandes@fep.up.pt, +351.91.8373725; +351.22.55050502INTRODUCTIONDuring the 1980s, relationships, particularly in the business-to-business context, became one ofthe main issues in marketing, with several authors emphasizing the importance of relationships inbusiness. Although, as Möller and Halinen (2000, p. 31) admit, “marketing relationships asphenomena are probably as old as any trade relationship”, the Industrial Marketing andPurchasing (IMP) Group was the first to view relationships not as a process of actions andreactions, but interactions between actors (about the IMP research group and its work, seewww.impgroup.org). To the IMP, relationships were considered strongly interdependent and

reciprocal, based in cooperation, trust and commitment, and were supposed to evolve over timeaccording to the combined (and unpredictable) experience of the participants (Håkansson 1982).This concept deals mainly with business contexts, where sellers and buyers exist in smallnumbers and are not easily changeable. Along with this approach, in the early to mid 1990s,another concept, “Relationship Marketing” (RM), evolved into one of great interest both toacademics and practitioners (Buttle 1996; Payne 2000; Sheth and Parvatiyar 2000; Wilkinson andYoung 1994), becoming probably the major talking point in business management (Egan 2003)or “the hot topic of the marketing discipline” (Möller and Halinen 2000, p. 29).As the growing interest in RM picked up pace, it led to a more mature and sophisticated phase ofresearch on it along with increased recognition of its benefits in the context of rapid advances ininformation technology (Berry 2002). Many marketing academicians accepted RM as the latestgospel and began spreading it faithfully as loyal disciples (O’Malley and Tynan 2000). Oftendescribed as “the emperor's new clothes” (Egan and Harker 2005), RM began to dominate themarketing agenda, with numerous articles and special journal issues. A paradigm shift inmarketing at the expense of four Ps was foreshadowed (Grönroos 1990), and soon vindicated bythe work of Gummesson (2002) who replaced the four Ps of transactional marketing by the 30 Rsof relationship marketing. Firms started to aim for customers’ “share of wallet” instead of shareof the overall market. The idea of managing the client lifecycle appeared (Palmer and Bejou1994) and terms such as “partnerships”, “alliances” and “key accounts” were commonly used tocharacterize customer relationships and loyalty.However, as the dust begins to settle, inevitably questions are being asked about how much ofRM is reality and how much is pure rhetoric (Fournier, Dobscha and Mick 1998; Shrivastava and3Kale 2003). Much of the research to date appears selective and frequently designed to support a

particular (often consultant-based) perspective. According to Gummesson (1994, p. 9), the basicvalues of the manipulative marketing mix theory have not changed: technology is only beingused to make it more difficult for the customer to “slip the hook”, much like “the fisherman’srelationship to the fish”. RM may be considerably easier said than done (Egan 2001): is itpossible to achieve this “customized massification” through sophisticated informationtechnologies or is it just a paradox of opportunistic intentions? In fact, although all exchanges, bydefinition, involve a relationship, do we all share the same understanding of it? How manytransactions equate a relationship - one, two, repeated, sporadic? Is it implied that bothparticipants have to be active? Can passive customers ever be involved in “real” relationships(Zolkiewski 2004)? What level of interaction is required to consider a particular exchangesituation a transaction or the beginning of a relationship (Pels 1999)? Some researchers arealready trying to prevent the premature death of the construct, due to the over-use, misuse andeven abuse of the term in marketing (Zolkiewski 2004). Fortunately, recent research provides amore balanced view of relationship marketing by highlighting that relationships are two-waystreets – as much as marketers look for value from customers, customers too are very cognizantof the value they derive from the marketers (Rust, Lemon and Narayandas 2005).Against the backdrop of the above discussion, our objective in this paper is to trace the originsand development of relationship marketing, discuss the various approaches associated with it andset a stage for examining the nature of marketing relationships. Our contribution in this paper isto provide, thereby, an understanding of the conceptual underpinning of relationship marketing,its scope and the appropriate perspective under which it can be successfully used. In the nextsection, we look at the origins and development of RM, and we present the different approachesassociated with it.THE ROOTS AND THE DIRECTIONS OF RELATIONSHIP MARKETING

The origins and the concept of relationship marketingIn marketing there is a long lasting tradition that has always valorized relationships. Grönroos(2004) states the phenomenon itself is as old as the history of trade and commerce. In fact, buyersellerrelationship is an old-fashioned way of doing business from the pre-industrial era (Sheth4and Parvatiyar 1995). Sellers knew each of their buyers individually and suggested appropriate,customized product offerings. This situation changed during the industrial era, in whichmarketers shifted their concerns towards sales and promotions of goods instead of relationshipenhancement and when individualized practices were replaced by mass marketing. Meanwhile,marketers started realizing the limitations of their transaction-oriented strategies under pressureof eroding repeat purchases and intensified competitive pressures in increasingly saturatedmarkets (Sheth and Parvatiyar 1995). Advocates go so far as to maintain that a clear shift tookplace from marketing to anonymous masses of customers to developing and managingrelationships with more or less well-known, or at least somehow identifiable, customers(Grönroos 2004; Bejou 1997), using highly sophisticated information technologies. Severalmarketing scholars, like for instance Grönroos (1990), Sheth, Gardener and Garrett (1998), Shethand Sharma (1997) or Sisodia and Wolfe (2000) believe that we are witnessing the birth of analternative paradigm to the prominent exchange paradigm, dominant in mass consumer goodsmarkets, already obsolete and insufficient to explain the current market context. These scholarshave been welcoming RM as a “saviour from the detrimental impact of traditional marketing ormarketing mix theory” (Möller and Halinen (2000, p. 30) and new scientific empires are beingbuilt on its shoulders (“shoulders of giant”, as Egan (2003, p. 148) observes). Recently, Vargoand Lush (2004) and Lush and Vargo (2006) present and discuss the service-dominant logic ofmarketing. These authors consider the service provision as the core element in the exchange

process. According to them the boundaries between goods and services become blurred and thedifferences between goods and services are considered artificial (Vargo and Lush, 2004;Lovelock and Gummeson, 2004). The new perspective considers products as distributionsmechanisms for service provision, i.e., customers buy products to obtain the services that theyprovide. Thus, marketing strategies are moving away from strategies based upon brands andproduct lines to strategies based upon relationships (Rust and Thompson, 2006). In sum, since theearly 1980s, a new phrase has entered the marketing literature: “Relationship Marketing” (RM).This philosophy is said to have replaced the old short term marketing practices, defined asstressing sales and promotions instead of relationship enhancement, and conveniently labeled“transactional marketing” by RM proponents.One school of thought maintains that there is nothing new in relationship marketing – it is justsetting up a straw man to make the concept of RM as something of a paradigm shift. As Stephen5Brown (1998) puts it, “to insinuate, as some weird and wonderful teRMites are wont to do, thatestablishing trust and commitment, or retaining customer loyalty, or tackling cross-functionalintegration was not a component of the original marketing concept is arrant nonsense. In fairness,many of the converts to the RM cause acknowledge that it involves re-emphasizing certainneglected aspects of the marketing concept, although supporting evidence is conspicuous by itsabsence. A somewhat superior way of interpreting the RM shift is to accept its content as nodifferent from the original marketing concept”. In fact, many of extant thought on marketing as aconcept and marketing orientation (Hollander 1986; Fullerton 1988; Kohli and Jaworski 1993;Jones and Richardson 2007) subscribe to this school of thought, which at best implies that RM isnothing but an emphasis on certain aspects of marketing necessitated competitive pressuresbrought about by the advances in information technology.

Even though the “new” RM term has achieved popularity only in the nineties, the idea has existedfor much longer and to ascribe it a history only 25 years or so is clearly untenable. Now, historyseems to be repeating itself. What is perceived to be a different practice today has, in fact, been inuse for several decades, without having been articulated (Hollander, 1986). Long beforerelationship marketers emerged, pioneers in the field knew very well that it was crucial tomaintain good relationships with its clients (Fullerton, 1988). They may have lacked some of thesophisticated tools of contemporary marketers (Hollander, 1986), but these are matters oftechnology rather than orientation. Although RM is being presented as “the wheel reinvented”, itmay just be a recent spin on an old marketing concept, re-emphasizing some of its temporarilyneglected aspects (Brown, 1998).Regardless of whether RM is a new concept or a re-emphasis of certain older or neglected aspectsof marketing orientation, the concept of RM is still in an uncertain stage of definition, currently“enjoying” the unusual status of being an overused and underdeveloped concept at the same time.For instance, Egan (2003), Rao and Perry (2002) and Shrivastava and Kale (2003) note that acontent analysis of 117 different sources done by Harker (1999) produced as many as 26substantial definitions of RM with seven conceptual categories, proving there is no consensusover it and reflecting the development and evolution of RM over the last three decades startingwith the notion of marketing orientation. Mainly because of the multidimensional character andthe relative newness (or the new re-emphasis) of RM, literature has not yet agreed upon a6common definition, resulting in quite different conceptualizations of RM between variousscholars.The roots of the term “relationship marketing” can be found over two decades ago (Möller andHalinen 2000). In a conference paper on service marketing, Berry (1983) first introduced the term

relationship marketing, defining it as attracting, maintaining, and enhancing customerrelationships. Two years later, Jackson (1985) used it in a business-to-business context. Duringthe 70s, the channels literature introduced the discussion about efficient channel relationships(Dwyer, Schurr and Oh 1987). Later, Morgan and Hunt (1994) suggested that relationshipmarketing refers to all marketing activities directed towards establishing, developing andmaintaining successful relational exchanges. Gummesson (2002) described relationship marketingas marketing based on interaction within networks of relationships. More recently, some narrowfunctional perspectives emphasize database marketing, interactive marketing, customer retentionand one-to-one marketing (Buttle 1996). But a term such RM, involving a vague notion of theterm “relationships” was bound to generate multiple definitions. While bookstores areoverflowing with an ever-increasing number of tomes on RM, and with managerial suggestionsof what relationships should be (instead of what they are), more questions are being placed aboutits domain of application and definition. Möller and Halinen (2000, 34) state that “what we haveis a variety of partial descriptions and theories focusing on the broad content of the phenomenaresearchers have labeled relationship marketing”. Trying to shed some light on the nature of RM,Aijo (1996) ponders whether it is a fad, a new area of marketing, a new marketing strategy, a newmarketing concept, a new emerging school of marketing, or a new marketing paradigm. Thisbrings us back to the issue of newness which Stephen Brown (1998) alluded to. Whether it is anew concept or a re-emphasis of an older concept, the shift towards relationships took place overa decade ago and it is that time frame which we can trace to find the roots of key concepts of RM(Möller and Halinen 2000). Three of the main approaches and schools of thought aboutrelationships and RM spanning that time frame will be discussed below.The IMP industrial approach to business relationshipsThe “relationship” concept was a part of the interaction approach of the Industrial Marketing and

Purchasing Group (Ford 2004), which was based upon a buyer-seller cooperation paradigminstead of the traditional view of buyers and sellers as adversaries. The IMP approach aims to7understand how relationships develop between organizations at a dyadic level in a networkcontext, how these nets of relationships evolve and how markets work and evolve from a networkperspective (Ford 2003; Håkansson and Snehota 1995). Business markets are seen as arenaswithin which buying and selling companies interact with each other, and where previousexperiences in that relationship are important influences on attitude and behavior. This view is incontrast with previous traditional studies which tended to see markets as atomistic and consistingof a large number of more or less anonymous customers with whom marketers dealt at a distance(Ford 2003). This relational perspective was initially conceived as an alternative to mainstreammarketing, a new approach more suited to marketing in inter-organizational and service situationswhere markets were heterogeneous, where buyers and sellers were both active, and whereinteraction and relationships were important. The idea of “interaction” was first drawn up by theIMP Group during the 1980s, thus stressing the importance of relationships in business networks.The “Interaction Approach” (Håkansson 1982) was a model based upon buyer seller cooperationinstead of the traditional view of buyers and sellers as adversaries. The main idea was that theprocess of establishing business relationships could not be characterized as a process of actionsand reactions, but interactions, which happened at multiple levels in the organization. Thisapproach was neither management-only nor consumer-only, but rather interorganisationallyorientedand descriptive of the marketing processes (Möller and Halinen 2000), and focused onrelationships as how they were, and not how they should have been (Mattsson 1997). Instead offocusing solely in relationships between the marketer and the individual customer, assumed to

exist in a large number and to be substitutable, this approach deals with exchanges betweensuppliers and buyers of various levels of heterogeneity, and even between several actors at a time.Inspired by concepts from the social exchange theory, the IMP’s interaction approach viewsinter-organizational relationships as strongly interdependent and reciprocal based on variablesthat moderate the impact of potential struggles for power - cooperation, trust and commitment(Axelsson and Easton 1992). The interaction approach takes the relationship as its unit of analysisrather than the individual transaction. Each episode is affected by and affects the overallrelationship. The relationship between companies is the “catch-all” for the combined experienceof the participants. Furthermore, relationships evolve over time and can be considered to traversea series of stages, characterized by increasing mutual adaptation, reduced distance and increasing8commitment (Turnbull, Ford and Cunningham 1996). Industrial networks can be regarded ascomplex aggregations of relationships, hard to plan, predict or manage.The Nordic approach to services relationshipsBased on entirely different empirical data, service research found the same concepts –relationships, networks and interaction – to be in the core of services marketing (Gummesson2004). The Nordic school of services marketing was relationship-oriented from its birth, stressing(although in a basic managerial perspective) its interactive nature and long-term view (Möller andHalinen 2000). The Nordic school was also one of the first to propose a paradigm shift inorientation from transaction to relationship. By combining the traditional marketing managementvision with the interaction and network approaches developed in the business-to-businesscontext, the Nordic school researchers have broadened their range of vision to more generalconcepts of marketing-oriented management and to RM. Gummesson (2002) sees RM asinteractions, relationships and networks and Grönroos (2000) lets RM to be the general definition

of marketing: marketing is to manage the firms marketing relationships. Grönroos (2000) arguesthat services are inherently relational and that the critical factor is whether or not firms want tomake use of these relationships in the way that they can manage their customers. At that time, themajority of marketing definitions were associated with sales, promotions and mass consumermarkets, and related with the marketing-mix theory introduced by Borden (1964). Marketing wasconsidered a “melting pot” where several “ingredients” were supposed to be combined accordingto formula of guaranteed success in a homogeneous, passive and anonymous market, wherebuyers and sellers did not interact in a long-term context. This vision obviously did not apply tointer-organisational and service contexts.IT, CRM and the one-to-one approach of database marketingFrom the mid 1980s onwards, rapidly developing information technology has been creating aprimarily practice-based and consultant-driven literature on managing long term consumerrelationships through databases and direct marketing activities (Gummesson 2002; Möller andHalinen 2000; Peppers, Rogers and Dorf 1999; Rao and Perry 2002), with a heavy emphasis oncustomer loyalty and one-to-one marketing (Buttle 1996). The intention is to treat consumers notlike a homogeneous market but as individuals (Gummesson 2004; Sisodia and Wolfe 2000). But9although managers espouse RM as a new important concept, in reality there is little differencefrom what was done before, i.e. to target mass market customers more accurately, besides the useof database advanced technology. Little is done by this narrow functional perspective to tacklethe dynamism of relationships as evidenced in the application of RM to the direct marketingcontext.In short, the relational perspective was initially conceived in literature as an alternative tomainstream marketing, more suited to marketing in inter-organizational and service situationswhere markets were heterogeneous, where buyers and sellers were both active, and where

interaction and relationships were important. Yet, today, RM seems to be emerging as a general“umbrella philosophy” with numerous variations (Egan 2003, 147). With the diversity inoperational approaches employed, and the lack of accepted definitions, it has become impossibleto delimit its domain (O’Malley and Tynan 2000). Perhaps it is the allure of such a theory thatrecently tempted some scholars and practitioners to import variables from the business domainwith impunity to consumer markets (Shrivastava and Kale 2003), and to call it “relationship”marketing despite having little commonality in application. The attempt to create“individualized” relationships with a massive market, where no close interactions are likely tooccur, appears to be misplaced. In fact, the application of RM in such situations, although verypopular in concept and management application, seems to lack the essential: the nature anddevelopment of relationships. This approach is perhaps best characterized as a practice, withlimited conceptual efforts to tackle the dynamism of relationships.RELATIONSHIP MARKETING AND THE NATURE OF MARKET RELATIONSHIPSGiven RM’s undoubted popularity and intuitive appeal, the diversity in operational approachesemployed, and the lack of accepted definitions, it has become impossible to limit its domain.Today, RM is embraced by both practitioners and academics in a wide range of markets andcontexts (O’Malley and Tynan 2000). Whereas some scholars are convinced of the existence ofone overall RM theory, others argue that RM is context-specific. For instance, Reinartz andKumar (2000) present empirical findings that show that the contractual vs the noncontractualsetting have consequences on relationships. These authors challenge the RM literature showingthat long-life customers and relationships are not necessarily profitable (Reinartz and Kumar2003). But, the current discussion has been characterized more by rhetoric than by rigorous10examination of what the concept actually involves, bypassing sound theory development. As

Palmer (2000) refers, only a limited amount of empirical work has been conducted and till nowthe concept is only something ambiguous and not-specific. Researchers seemed, however,suggesting that a term such RM, involving a vague notion of the term “relationships” was boundto generate multiple definitions. According to Egan (2003, 151), although “breadth of domain”has always been an issue, arguments appear to be coalescing around two, perhaps, irreconcilable,camps of researchers. First is a narrower viewpoint (solely concerned with the customer-supplierdyad or market-based theory) but with a distinctly broader application (even to consumermarkets, extending the term relationships to non-personal, technology driven contact associatedwith direct marketing and lately CRM). The second is a broad definition of RM (embracing awide range of relationships or network-based theory), but with a narrow application (its benefitsappear limited to certain industries and situations) (Payne 2000). A second feature of this divideappears to be between the non-American (Nordic and Anglo-Australian approaches) andAmerican researchers, which appear to be leading the move to a narrower form more than theirEuropean and southern hemisphere colleagues, who defend a holistic, multi-dimensionaldefinition of RM (Sheth and Parvatiyar 2000).It is important to underline that relationships both drive and are driven by the context where theytake place (Fournier, Dobscha and Mick 1998), that “marketing is context driven” (Egan 2003,154) and that it is “important to recognize the context in which exchanges take place” (Möller andHalinen 2000, 41). But, many within the academy constituency remained skeptical, arguing thatdue to the size of consumer markets, the nature of competition, the anonymity of customers, thelimited interaction between consumer and organization and the difficulties associated withpotentially intrusive technology, developing relationships (or, at least, interpersonal relationships)in consumer markets was inappropriate (O´Malley and Tynan 2000; Thompson et al 2000).

Maybe it would be better to view relationships as being diverse rather than adhering to onecommon format of development from arms-length to increasingly close relationships. Thus, it isimportant to re-consider what a relationship in a consumer market context means. However, inthese markets, the concept rarely is defined at all, constituting a “glaring omission” (Bagozzi1995, p. 275). The term “relationship” is often used to underpin a supplier’s marketing activities,to the neglect of the customers’ perspective, although a relationship takes two (Fournier, Dobschaand Mick 1998). The establishment of customer relationships appears to have been equated with11the concept of customer retention (which includes loyalty programs and database marketing).However, viewing the establishment of customer relationships as something as simple as the nextstage in the manipulation of consumer data will detract from a relationship approach and does adisservice to the complexity of the concept (Dibb and Meadows 2001). Also assuming that a“relationship” is what customers’ want or need, even when sometimes they are not even awarethey are participating, might mean a new kind of marketing myopia (Fernandes and Proença,2008).Thus, RM practices may not be effective in every situation or context. Not every exchange has thepotential to grow into a relationship, especially if consumers and/or firms do not perceive“equitable exchange”. This area is in its initial stage of development and this relationshipperspective in consumer marketing can open new doors to deepen our understanding of massmarkets. A research tradition exists within industrial markets, but those findings and constructsshould not be uncritically imported and readily applied by marketers within the context ofconsumer markets, without conceptual and empirical justification. The underlying assumptionwhenever such inappropriate application is carried out is that consumer relationships are similarto business relationships, which in turn are similar to interpersonal relationships, where social

exchange theory applies. But the differences between the two domains range across (although notlimited to) issues such as switching-costs, availability of alternatives, type and frequency ofinteractions, level of interdependency, underlying motives, relative size and the overallimportance buyers and sellers attach to relationships. These differences have consequences on thepatterns of buyer-seller relationships that exist in both markets. Social exchange theory has a roleto play in situations where relationships are recognized by both marketers and consumers, whereproduct involvement is high, demand is inelastic and interaction frequent (O’Malley and Tynan2000). However, the majority of consumer relationships need not be close and long-term, ratherthey are distant and discrete. Furthermore, it is neither possible nor profitable to create close,personal and long-term relationships with all consumers in all product markets as Rust, Lemonand Narayandas (2005) advocate. The interaction approach argues that in most industrialrelationships both parties are positively committed. The analogy used is that of a marriage - anexclusive, enduring and personal relationship between two people, which forsakes all others(Tynan 1997). However, this kind of relationship is not usual in consumer markets. Therefore,the explanatory power of social exchange theory is reduced and the normative values associated12with the popularized marriage metaphor limit understanding of relationships in consumercontexts, where other metaphors, like polygamy could be more usefully employed (Tynan 1997).While research about relationships in industrial marketing contexts often emphasize theintegration of both supplier and customer’s perspective, consumer relationship marketingliterature, by and large, disregards this crucial aspect (with the notable exception of Rust, Lemonand Narayandas 2005). Instead, the literature - as for instance the cited Reinartz and Kumar (2003and 2000) - deals mostly with the lifetime value of customers and the links between loyalty,

revenue and profitability or the costs and benefits of retained customers vis-à-vis new customers(Zolkiewski and Lewis 2003). Moreover, RM has been viewed mainly as being concerned withthe behavior of consumers or of firms, but not of both simultaneously. Several authors emphasizethe importance of integrating both sides of the relationship. For instance, Fournier, Dobscha andMick (1998, 343) refer that “…the basic questions of whether, why and which forms consumersseek and value ongoing relationships remain largely unanswered.” Sheth and Parvatiyar (1995,256) advocate that “…taking the consumer perspective and understanding what motivatesconsumers to become loyal is important.” Also Dwyer, Schurr and Oh (1987) recognized thatbuyer and seller investments in a relationship jointly determine relationship outcomes. Rust,Lemon and Narayandas (2005) argue that customer equity (value of customers as seen from theview of firms) cannot exist without the notion of value equity, brand equity and relationshipequity (value that the customers derive from the firm) being in balance. This strengthens our ownpremise that relationships are two-way streets – they involve concepts of “reciprocity” and“equitable exchange”. Both firms and consumers need to realize value in a relationship, and RMas a concept focuses on ensuring that this prevails.Thus, this discussion helps to clarify the question of whether there are several sets of languageand research being used to describe the same phenomena or in contrast, the state is that there aredifferent phenomena resulting from different contexts, consumers and sellers (Zolkiewski andLewis 2003).CONCLUSIONRM has reached a critical juncture. The historical analysis of the concept shows that there aredifferent underlying bases and various RM approaches. These approaches are so discrepant that is13difficult to see any unification into a “general theory of relationship marketing”. We analyzerelationships in industrial, services and consumer setting, and we argue that the application of the

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---- and Barbara Lewis. 2003. An assessment of customer service in B2B relationships: aliterature review and methodological issues. Proceedings of the 19th Annual IMP Group Conference,CD-ROM edition, Lugano.

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_##_______:_.__ ___.___7________!_____ __!(_______<$_8____$_____________0_!_! ________!____________ ______1__ __9__##_______<_ 1_____.*_3*_=_______<7_____________________ ___________________ _____________________________________________8____##/______________+_____=________! _____!*_+*_,_-_____<$__0_______/____ ________/__(_____$_____ ____0__________________.____;_$__$________9_______&_______2________________8____##/_Editor: Sandra Silva (sandras@fep.up.pt)Download available at:http://www.fep.up.pt/investigacao/workingpapers/workingpapers.htmalso in http://ideas.repec.org/PaperSeries.html

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