chapter 7: Marketing principle #3 - managing relationship-based sustainable competitive advantage

Question 1

relationship marketing (RM)

Answer 1

= identifying, developing, maintaining, and terminating relational exchanges to improve performance

Question 2

customer relationship management (CRM)

Answer 2

= the managerially relevant, organization- wide, customer-focused application of RM, using IT to achieve performance objectives

Question 3

RM and CRM overlap

Answer 3

Focuses on building and maintaining barriers, or sustainable competitive advantages (SCAs), to competitive attacks, based on the premise that competitors react continually to a firm’s success

Question 4

relationship equity

Answer 4

= refers to the aggregation of relational assets and liabilities, associated with the firm’s boundary-spanning employees and social networks linked to the offering or experience, that add to or subtract from the value provided by the firm’s offering

Question 5

relationship marketing theory

Answer 5

–> social exchange theory: commitment and trust are central
–> Gratitude and reciprocity, together with trust and commitment, largely capture the effects of interpersonal relationship marketing and explain the strong empirical support for the impact of interpersonal relationships on customer decision making

Question 6

relational dimensions

Answer 6

1. Relationship quality= refers to diverse interaction characteristics, such as commitment, trust, gratitude, reciprocity norms, and exchange efficiency.
2. Relationship breadth= a measure of the number of relational bonds with an exchange partner, moreover many interpersonal ties provide information, profit, opportunities and protection against severed ties.
3. Relationship composition= does it include key decisions? A diverse contact portfolio increases a seller’s ability to effect change in its customers’ organizations
   –> all 3 converge towards seller performance outcomes

Question 7

RM activities effects

Answer 7

–> RM activities do not affect financial performance directly, instead they help build the relationship equity, which influences customer behaviours, which improves the seller’s financial outcomes.
–> This chain of effects operates through four mechanisms:
- Cooperative behaviours= complementary actions between partners to achieve a mutual goal.
- Relational loyalty= defined as the likelihood that the customer provides the seller benefits in the exchange process due to their relational attitudes and ties.
- Word of mouth (WOM)= referrals, reflecting the likelihood that a customer comments positively about a seller to others.
- Empathic behaviours= a greater likelihood of being influenced by perceptions of the seller’s position

Question 8

relationship marketing strategy

Answer 8

1. building relationships
2. maintaining relationships: bystanders, relationship orientation

Question 9

determinants of customer’s relationship orientation

Answer 9

1. Relationship proneness= the basic tendency of an individual to engage in relationships.
2. Exchange and product uncertainty= captures volatility, monitoring difficulty, and the speed of technological changes.
3. Product category involvement/ dependence= reflects the importance of and customer need for a particular product category, due to personal-, firm-, or role-related needs, values, and interests, which increase an entity’s relationship orientation.
4. Relational norms= broadly reflect the value placed on customer-seller relationships in an industry or shopping context.
5. Relationship-centric reward systems= encourage strong customer–seller relationships through evaluation systems, compensation programs, and policies.
6. Services= are less tangible and consistent but more perishable than products, such that they demand more customer and boundary spanner involvement.
7. Business-to-business markets= feature greater complexity, such that they require adaption and strong relationship governance structures.
8. Emerging markets= with fewer institutional protections to business exchange make RM more effective than in developed markets.

Question 10

relationship dynamics and lifecycle stages

Answer 10

1. Exploratory or early stage
   –> RM strategy; use gratitude-, communication-, and competency-based strategies to build reciprocity norms and explore potential
2. Growth or developing stage
   –> RM strategy; Use bilateral investments to exploit relationship potential, although the
   window for investments is small.
3. Maturity or maintaining stage
   –> RM strategy; don’t neglect (ongoing communication and investments) or betray
   (unfairness and conflict) customers.
4. Decline or recovery stage
   –> RM strategy; use communication together with compromise to rebuild relationships
   and avoid exchanges based solely on dependence.

Question 11

steps of managing relationship-based sustainable competitive advantage

Answer 11

1. Developing a strong relationship foundation
2. Implementing targeted relationship marketing and loyalty programs

Question 12

measuring relationship equity –> constructs

Answer 12

relationship quality:
1. commitment: enduring desire to maintain a valued relationship
2. trust: confidence in an exchange partner’s reliability and integrity
3. gratitude: feelings of gratefulness, thankfulness, appreciation toward an exchange partner for benefits received
4. reciprocity norms: internalized patterns of behaviors and feelings that regulate the balance of obligations between two exchange partners

inter-firm relationships:
1. relationship breadth: number of relational ties with an exchange partner
2. relationship composition: decision-making capability of the relational contacts at an exchange partner

other measures:
1. relationship orientation: customers’ desire to engage in a strong relationship with a partner to conduct an exchange
2. lifecycle stage: qualitative path-dependent phases through which a relationship transitions. Relationships typically expand during exploration and buildup stages, peak and remain relatively flat during maturity stage, weaken during decline stage