Relationship Marketing In Services 9781845446895, 9780861767571

Citation preview

ISSN 0887-6045

J OURNAL OF S ERVICES M ARKETING

Volume 16 Number 7 2002

Relationship marketing in services Guest Editor: Jay Kandampully

This issue is part of a comprehensive multiple access information service Paper format Journal of Services Marketing includes seven issues in traditional paper format. The contents of this issue are detailed below.

Internet Online Publishing with Archive, Active Reference Linking, Key Readings, Research Register, Institution-wide Licence, E-mail Alerting Service and Usage Statistics. Access via the Emerald Web site: http://www.emeraldinsight.com/ft See overleaf for full details of subscriber entitlements.

Access to Journal of Services Marketing online . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 578 Editorial advisory board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579 Abstracts and keywords

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Guest editorial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 582 Relationship marketing and a new economy: it’s time for de-programming Evert Gummesson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585 The future of relationship marketing Jagadish N. Sheth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590 Customer-relationship levels – from spurious to true relationships Veronica Liljander and Inger Roos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 593 Building customer relationships: an inventory of service providers’ objectives and practices Cindy Claycomb and Charles L. Martin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615 Trust in industrial service relationships: behavioral consequences, antecedents and the moderating effect of the duration of the relationship Spiros P. Gounaris and Karin Venetis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 636 The effect of relationship marketing orientation on business performance in a service-oriented economy Leo Y.M. Sin, Alan C.B. Tse, Oliver H.M. Yau, Jenny S.Y. Lee and Raymond Chow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 656 Curing and caring in surgical services: a relationship approach Markus Orava and Pekka Tuominen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677 Executive summary and implications for managers and executives . . . . 692 Book review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700 Note from the publisher

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Index for volume 16, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 706

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Editorial Advisory Board Dan Ailloni-Charas Stratmar Systems Inc., Port Chester, USA Raj Arora University of Missouri, Kansas City, USA Emin Babakus Memphis State University, Memphis, USA Siva Balasubramanian Southern Illinois University, Carbondale, USA Steve Baron Manchester Metropolitan University, Manchester, UK Blaise J. Bergiel Nicholls State University, Thibodaux, USA William Bolen Georgia Southern College, Statesboro, USA John T. Bowen University of Nevada, Las Vegas, USA John R. Brooks Jr Houston Baptist University, Houston, USA David P. Campbell Valdosta State College, Valdosta, USA Carol A. Congram Bentley College, New York, USA Barry J. Davies University of Gloucestershire, UK Betty J. Diener University of Massachusetts, Boston, USA Dale Fodness University of Dallas, Dallas, USA Eugene H. Fram Rochester Institute of Technology, Washington, USA Douglas Fugate Western Kentucky University, Bowling Green, USA Myron Gable Shippensburg University, Shippensburg, USA Gopala Ganesh North Texas University, Denton, USA

William R. George Villanova University, Villanova, USA David J. Good Grand Valley State University, Ada, USA Peter Graham Graduate School of Management, Southern Cross University, Lismore, NSW, Australia Stephen J. Grove Clemson University, Clemson, USA Diane Halstead University of Tennessee, School of Business Administration, Chattanooga, USA George Hozier New Mexico University, Albuquerque, USA G. Tomas M. Hult Florida State University, Tallahassee, USA Lester W. Johnson Monash Mt Eliza Business School, Caulfield, Victoria, Australia Peter F. Kaminski North Illinois University, De Kalb, USA Jay Kandampully University of Queensland, Australia Geoffrey P. Lantos Stonehill College, North Easton, USA Richard C. Leventhal Regis University, Denver, USA Donald Lindgren Lindgren Research Association, La Mesa, USA Michael McBride Southwest Texas State University, San Marcos, USA Gary McCain Boise State University, Boise, USA W. Glynn Mangold Murray State University, Kentucky, USA Laura M. Milner University of Alaska, Fairbanks, USA

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Michael Minor University of Texas, Edinburg, USA Reza Motameni California State University, Fresno, USA Richard D. Nordstrom California State University, Fresno, USA Robert S. Owen SUNY Oswego, USA Dennis Pitta University of Baltimore, Baltimore, USA Nabil Y. Razzouk California State University, San Bernardino, USA John Richardson Pepperdine University, Culver City, USA Beheruz Sethna State University of West Georgia, Carrollton, USA Elaine Sherman Hofstra University, Hempstead, USA Richard Spiller California State University, Long Beach, USA Barbara Stern Rutgers, The State University of New Jersey, Newark, USA Robert Swerdlow Lamar University, Beaumont, USA Peter Tat Memphis State University, Memphis, USA Jeff Totten Bemidji State University, Minnesota, USA Kenneth Traynor Clarion University, Clarion, USA Lou Turley Western Kentucky University, Bowling Green, USA Jan Hendrik Vroom California State University, Long Beach, USA Jerry E. Wheat Indiana University SW, New Albany, USA

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Abstracts and keywords

Relationship marketing and a new economy: it’s time for de-programming Evert Gummesson Keywords Relationship marketing, Economics, Statistics, Theory Some economic conditions change gradually and sometimes sudden discontinuities occur whereas other conditions remain stable for decades, even centuries. In this sense there is always a new economy in the making. The author claims that marketing theory lags behind and that marketing as it is taught and researched today is a relic of the 1960s, patched up with decorations such as services, relationships and e-business. Academe is hiding behind an allegedly scientific front of deductive and reductionistic customer surveys, applying increasingly sophisticated statistical techniques that process data of decreasing quality. Generation of marketing theory requires more of inductive and systemic case study research allowing us to confront the complexity, ambiguity and dynamism of the real world with more common sense and less ritual. We need to keep developing marketing theory to avoid turning education into brainwashing. New marketing theory should focus on the value of the total offering; a balance between production-centric and customer-centric aspects; and should recognize relationships, networks and interaction as core variables. The future of relationship marketing Jagadish N. Sheth Keywords Relationship marketing, Trends The purpose of this paper is to discover factors that led to the rise of relationship marketing in practice and academics, and what factors are likely to reshape the future direction of relationship marketing. Customer-relationship levels – from spurious to true relationships Veronica Liljander and Inger Roos Keywords Relationship marketing, Customers, Trust, Commitment, Motor industry Relationship marketing (RM) has been widely accepted as an important determinant of long-term business success and is believed to be especially well suited for services because of the personal contact between customers and service providers. Past research has focused mainly on the advantages of RM for companies, while less attention has been paid to relationships from the customer’s point of view. We suggest that relationships may be described as ranging from spurious to true, depending on customer-perceived relationship benefits, trust and commitment. A qualitative study of customer relationships was conducted in a car dealership, where profitability depends on customer commitment to both after-sales services and the car brand. Customer relationships were found to be more spurious than true. The study revealed that behavioural commitment to after-sales services was high, but that affective commitment was low to moderate. Customers were satisfied but did not perceive the services to be superior to the competitors’ service offerings. They trusted authorised repair in general and did not feel that after-sales service would have more than a minor influence on their future car purchases. Building customer relationships: an inventory of service providers’ objectives and practices Cindy Claycomb and Charles L. Martin Keywords Relationship marketing, Customer satisfaction, Service A study of 205 US commercial service providers, representing 31 two-digit SIC codes, identified companies’ customer relationship-building objectives and practices. Of 42 possible relationship-building objectives, the four rated as top priorities were: encouraging customers to think of the firm first when considering a purchase; providing better service; encouraging customers to speak favorably about the firm; and encouraging customers to trust the firm. Answers to open-ended, exploratory questions revealed 18 categories of relationship-building initiatives. The findings suggest that ‘‘customer 580

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relationship-building’’ means different things to different people and that practices to build such relationships vary considerably. By inventorying the range of relationshipbuilding objectives, quantifying their priority levels, and identifying specific practices used to build customer relationships, a greater understanding of current practices was achieved. Thus, the findings promise to benefit researchers, practitioners and consumers in terms of knowledge development, prescriptions for success, and enhanced value and satisfaction, respectively. Trust in industrial service relationships: behavioral consequences, antecedents and the moderating effect of the duration of the relationship Spiros P. Gounaris and Karin Venetis Keywords Trust, Service quality, Relationship marketing, Empirical study Building on previous studies which suggested that trust is a critical factor in facilitating exchange relationships, the authors investigate with empirically derived data the role of service quality and customer bonding as antecedents of trust in relatively newer vis-a`-vis a relatively mature relationship between the provider of business-to-business services and the client. The findings presented here show that the time element is critical to the effect that both service quality and successful customer bonding bear in trust development. Furthermore, the results of the study suggest that not all dimensions of the quality of the service offered by the provider contribute equally in the provider’s trustworthiness. Similarly, specific customer bonding techniques foster the extent to which the client trusts the service provider while others do not have an impact on the trustworthiness of the provider. The effect of relationship marketing orientation on business performance in a service-oriented economy Leo Y.M. Sin, Alan C.B. Tse, Oliver H.M. Yau, Jenny S.Y. Lee and Raymond Chow Keywords Relationship marketing, Service industries, Hong Kong Although a large body of research theoretically asserts a positive association between relationship marketing orientation (RMO) and business performance, a valid measure of RMO has not yet been proposed and systematic analysis of its effect on business performance has thus far not been possible. This paper addresses some conceptual and measurement issues related to the study of RMO and its impact on business performance in a service context. It first reviews the concept of RMO and its important dimensions. Next, a measurement scale with acceptable reliability and validity is developed to capture the dimensions of RMO. In turn, analysis of data shows that RMO is positively and significantly associated with sales growth, customer retention, market share, ROI, and overall performance. The implications of these findings are discussed and the limitations of the study as well as future research directions are addressed. Curing and caring in surgical services: a relationship approach Markus Orava and Pekka Tuominen Keywords Services marketing, Relationship marketing, Medical professions, Health care The purpose of this study is to describe and analyse the quality of a professional surgical service process, and to reveal the main elements that constitute excellence in the experience of the surgical service of a private hospital. First, a theoretical framework for the surgical service process is created. Second, empirical research is conducted through a mail survey of surgical patients in a private hospital. A total of 240 questionnaires were delivered and the response rate was 83 per cent. Third, the underlying quality dimensions in the surgical service process are constructed using factor analysis. Finally, the main elements of excellence in a surgical service experience are revealed by utilising discriminant analysis. Empirical results indicate that, in private surgical services, the surgical procedure itself is the single most important element, but that it must be supplemented by quality dimensions in both output and process throughout the whole surgical service process.

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Guest editorial

About the Guest Editor Jay Kandampully is an Associate Professor in services management, UQ Business School, The University of Queensland, Ipswich, Australia, and a visiting Professor at the REIMS Management School, France. Jay also serves as the Editor of the international journal, Managing Service Quality. He holds a PhD in service quality management, and an MBA, specialising in services marketing, both from the University of Exeter, UK. His undergraduate degree was in Hotel Management from Salzburg, Austria. His educational qualifications have been well supported by nine years’ managerial experience in India, Europe and in the USA. Jay enjoys close alliance with leading service oranisations in the USA, the UK, Australia, New Zealand, Singapore, Malaysia and India, where he is often invited to conduct management seminars to update managers on nascent strategies. Jay has published over 50 refereed articles in international journals and international conference proceedings. His publication entitled ‘‘Competitive advantage through anticipation innovation and relationships’’, published in the journal Management Decision, received the 1999 Highly Commended Award and Citation of Excellence award. This article has also been identified as the 4th most read article of all the 140 MCB journals in the Emerald database in 1999. In January 2003 Jay will be taking up a position as Professor of Services Management at Ohio State University in the USA. The evolving significance of service relationships in the global marketplace Within a business context, the concept of relationships is as old as the phenomenon of trade itself. There is no question that the meaning and nature of these relationships has changed, but the catalyst in their evolution can be attributed to the transformation of business itself – in the way it operates and the realms within which it operates. Business relationships today have assumed numerous strategic roles, both within and outside the organisation – roles that were not conceived of and utilised in the past. Relationship marketing, once referred to as a ‘‘fad’’, is emerging as a discipline, and is well recognised by both academics and practitioners. Indeed, relationship marketing has brought about a paradigm shift in the business mindset – a shift away from the short term (financial focus) to that of a long term focus (win-win), the so-called ‘‘business wisdom’’ of the new millennium. Advances in technology have exposed business enterprises to the infinite opportunities now available with the creative utilisation of knowledge, time and distance. In fact, it is the philosophy (wisdom) of the relationship that has ultimately helped firms to transcend to an understanding of the infinite benefits of the collective mind. Relationships play a pivotal role in this global business market, with firms finding it imperative: to extend rather than expand, laterally rather than vertically; and to add value to their offer through strategic networks and alliances. The creative utilisation of this philosophy has seen partnerships established between firms across the globe in order to cater for a customer’s entire value chain (holistic needs), not only as it is of today, but also as it will evolve over time. Moreover, service innovation results only when a firm 582

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is able to focus its entire energies to think on behalf of the customer – for an outcome that surpasses customers’ present expectations of superior value. A firm’s leadership in the marketplace is attributed to their ability to think beyond the present (anticipate), to think for the customer (innovation), and to think outside the parameters of the firm (relationships). Today and in the future, competition per se may prove to be a less appealing alternative for firms. Increasingly, firms will effectively focus on enhancing the value of their offer to the customer. Given the fact that both products and services continue to become more complex, it has proved effective to seek expertise from outside the firm to add value. Recognising the expertise and developing working relationships with knowledge centres outside the firm has helped many leading firms to gain and maintain their market leadership. Firms that maintain consistent market leadership are recognised champions in managing relationships. Relationship strategy today is the essence of corporate strategy, as it seeks to gain competitive advantage by creating links among distinct but interrelated businesses. Thus the core competency of the firm (as valued by the customer) is creatively developed by the firm’s ability to nurture enduring relationships with various parties inside and outside the organisation. The experts inside and outside the firm can therefore essentially be deemed the firm’s ‘‘competency-contributing partners’’, since it is with their assistance that the design and delivery of the service is realised. While the customer remains the primary focus of the relationship in a business context, the firm’s competitive advantage can no longer be confined to the immediate organisational context. The firm’s success is increasingly contingent on its ability to successfully adopt a holistic perspective of business encompassing all stakeholders of the firm, for example: customer, employee, retailer, supplier and shareholder. Thus the firm’s ability to nurture collective efficiency will prove more valuable, not only to its customers but also to the stakeholders. In this increasingly complex and fragmented global market, a firm’s positive relationships with its network partners and other stakeholders will prove crucial. It is technology that renders it possible for these amorphous networks of expertise to come together in cyberspace, although they may be thousands of miles apart physically. Technology thus acts as an unparalleled tool that makes it possible for a service firm to extend its core competency and to forge networks of relationships across the globe. In the last two decades, services marketing has evolved into a wellrecognised discipline. This is indeed no coincidence as services dominate the global trade in both developed and developing economies. In this global marketplace, electronic networks proffer a unique opportunity for firms and individuals to work collectively for mutual benefit. This special issue of the Journal of Services Marketing, focusing on ‘‘Relationship marketing in the service sector’’, seeks to advance the knowledge on service relationships. This issue has incited established authors and emerging scholars to contribute excellent articles. I believe this special issue will add to our knowledge in the field of services marketing and relationship marketing. The authors and reviewers of this special issue have made an important contribution to the field of relationship marketing in the service sector. I sincerely appreciate and acknowledge their time, effort, co-operation and understanding in making this issue possible. Jay Kandampully JOURNAL OF SERVICES MARKETING, VOL. 16 NO. 7 2002

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Special issue reviewers Rod Brodie, University of Auckland, New Zealand Bernd Stauss, Katholische Universita¨t Eichsta¨tt, Germany Hans Kasper, University of Maastricht, The Netherlands Nicolle Coviello, University of Calgary, Canada Dwayne D. Gremler, Bowling Green State University, USA Evert Gummesson, Stockholm University, Sweden Tanuja Singh, Northern Illinois University, USA Ali M. Quazi, The University of Newcastle, Australia Nancy Stephens, Arizona State University, USA J. Brock Smith, University of Victoria, Canada Chad Perry, Southern Cross University, Australia Sara Parks, Pennsylvania State University, USA Paul G. Patterson, The University of New South Wales, Australia Laura Milner, University of Alaska, Fairbanks, USA Stephen J. Grove, Clemson University, USA Lou Pelton, University of North Texas, USA Robin Shaw, Deakin University, Australia Jochen Wirtz, National University of Singapore, Singapore Sheelagh Matear, University of Otago, New Zealand Nikolaos Tzokas, University of East Anglia, UK

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An executive summary for managers and executive readers can be found at the end of this issue

Relationship marketing and a new economy: it’s time for de-programming Evert Gummesson Professor, School of Business, Stockholm University, Stockholm, Sweden

Keywords Relationship marketing, Economics, Statistics, Theory Abstract Some economic conditions change gradually and sometimes sudden discontinuities occur whereas other conditions remain stable for decades, even centuries. In this sense there is always a new economy in the making. The author claims that marketing theory lags behind and that marketing as it is taught and researched today is a relic of the 1960s, patched up with decorations such as services, relationships and ebusiness. Academe is hiding behind an allegedly scientific front of deductive and reductionistic customer surveys, applying increasingly sophisticated statistical techniques that process data of decreasing quality. Generation of marketing theory requires more of inductive and systemic case study research allowing us to confront the complexity, ambiguity and dynamism of the real world with more common sense and less ritual. We need to keep developing marketing theory to avoid turning education into brainwashing. New marketing theory should focus on the value of the total offering; a balance between production-centric and customer-centric aspects; and should recognize relationships, networks and interaction as core variables.

Change demands de-programming Conditions in the economy and the market have changed, sometimes incrementally, sometimes through discontinuities and quantum leaps. They keep changing, in some areas at a progressively faster pace. A natural corollary to this declaration is: as marketing practitioners and marketing scholars we also need to change. This seems so evident that there should be no need to print it – if marketing was readily adaptable. Although we institute some change, it does not necessarily come naturally, either in academic research, or in marketing practice. Need to adapt mindsets

In two areas in particular, marketing has offered new approaches and explanations; services marketing has become a field of its own and so has relationship marketing with CRM (customer relationship management). These will form the springboard for a discussion about the future and the need to adapt our marketing mindsets. It is my contention that we cannot keep adding new knowledge on top of the old and call services marketing and relationship marketing special cases whereas in fact they dominate the real life arena. They are therefore the general case. Today’s ‘‘general’’ textbooks perpetuate the established marketing management epic from the 1960s with the new just added as extras. It is further my contention that marketing education has taken an unfortunate direction and has crossed the fine line between education and brainwashing. The countdown of a painful – but revitalizing – process of de-programming has to be initiated. What do we need in such a situation? A shrink? No, it is less sophisticated than that. All we need is systematic application of common sense, both in academe and in corporations. We need to use our observational capacity in an inductive The research register for this journal is available at http://www.emeraldinsight.com/researchregisters The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0887-6045.htm

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mode and allow it to receive the true story of life, search for patterns, and build theory. Yes, theory, general marketing theory that helps us to put events and activities into a context. This is all within the spirit of grounded theory, widespread in sociology but little understood by marketers. My interpretation of a recent book on the subject by Glaser (2001) is as follows: Take the elevator from the ground floor of raw substantive data and description to the penthouse of conceptualization and general theory. And do this without paying homage to the legacy of extant theory.

In doing this, complexity, fuzziness, and ambiguity are received with cheers by the researchers and not shunned as unorderly and threatening as they are by quantitative researchers. Oddly enough, natural sciences – which are by mainstream social scientists, including marketing researchers, looked on with envy as being rich in objectivity and orderliness – accept chaos and complexity (see further Stacey, 1996). Good theory

Anachronistic threefold division

Goods are actually critical

Good theory offers a context, a map, and a flashlight that help us find our way home in the dark. Good theory is useful for scholars and practicing managers alike (Gummesson, 2002a). Let us now approach some pivotal aspects of our de-programming and the possible content of future marketing theory. A new economy 1: goods + services + information technology The overriding division of economies into agriculture, manufacturing industry, and services – for occult reasons still upheld by economists and statisticians – must be dissolved. Giarini (2001) claims that the ‘‘tertiary sector’’ – services – is the core of a new economy. I agree that the tertiary sector designation is an anachronism, although one could argue what is the actual outcome of economic activity. In statistics, services are conventionally presented as a list of various sub-sectors (hotels, transportation, etc.) and even with this classification they account for 60-70 percent of all employment in Western countries. Then the services provided by companies allocated to the ‘‘manufacturing sector’’ are not counted. For a long time General Electric and General Motors have been huge in financial services. B-to-B (business-to-business) services have expanded, not least through outsourcing. IBM’s core business used to be computer hardware; today it is computer services. Furthermore, internal services in organizations are not properly pinpointed. If we add up all this, services may account for as much as 90 percent of all employment. In services, customer-supplier interaction and relationships in the service encounter stands out as the most distinctive feature separating them from goods. At the same time – and this is not appreciated in the service literature – we have more goods than ever before in the history of mankind. How can that be? It is because mass manufacturing systems are now so mechanized, robotized and digitalized that they need few workers; they need supportive services. So contrary to what the employment statistics indicate, goods are more critical than ever. Above all activities today hover the opportunities offered by the brain power and intelligence of information technology. Like all technology, it does not provide an automatic solution. It enables us to spawn the magic of a benevolent fairy or a sinister witch; who will dominate is up to us. Everything today being a combination of goods, services, and information technology, I like to propose – not for the first time – that we merge all these and zoom in on the total offering. We should leave the antiquated division in

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official statistics where it belongs, in an auction of memorabilia, or perhaps better in the Saturday flea market. In a new economy it has only ceremonial meaning, excluding such core phenomena as information; software; the Internet; and customer input in production, voluntary work, and do-it-yourself.

Two sub-economies

A new economy 2: value + networks There are many views of what a new economy contains. Frequently used labels are the service economy, the knowledge society, and the information era, stressing that we have entered the post-industrial or even the postmodern age and left an old economy. The problem with these labels is that they are product-centric, not customer-centric; services, knowledge and information are means of production. My suggestion is that we offer two sub-economies within a new economy: (1) the value economy, stressing the desired output; and (2) the network economy, stressing the character of the input. At first sight one might take the value economy as being customer-centric and the network economy as being supplier-centric. But in a new economy and as research is teaching us, suppliers both produce and consume value and exist in networks, and customers do the same. Therefore they are both part of the value economy and the network economy.

Different concepts of value

The value economy Value is a ubiquitous and integral part of life, and as such hard to seize and define although we all experience it daily. There are overlapping labels and concepts; among the more frequently used are satisfaction, perceived quality, and utility. Many have written about it both in philosophy, economics, and marketing (see Oliver, 1996; Ravald and Gro¨nroos, 1996). For want of a more generic understanding of value and satisfaction, marketing usually settles for a proxy, namely perceptual data from consumer surveys. Value creation is traditionally associated with the supplier role, and consumption with the customer role. We must relax the distinction between the producer and the consumer and eventually grow up and take the consequences of the knowledge we have accumulated over decades. The consumer is not a passive recipient and a value destroyer but an active coproducer, user and value creator. Value is not present until an offering is used for something and experienced as satisfying a need for somebody. The network economy In focusing the input – the structure and organization of the resources necessary to produce value – research in services and relationship marketing point to the network as the basis. From a sociological angle, Castells (1996) has established at length the network properties of a new economy, reinforced by the networks of the Internet and mobile telecommunications. From a marketing angle, relationship marketing can be defined as ‘‘marketing based on interaction within networks of relationships’’ (Gummesson, 2002b). This is a more inclusive, generic and conceptual definition than the common ‘‘developing, maintaining and enhancing long term customer relationships’’, which is merely descriptive. CRM is a young offspring which I define as ‘‘applying the values and strategies of relationship marketing in practice, with particular emphasis of the customersupplier relationship, largely but not solely dependent on information technology.’’ A network approach emerged in B-to-B marketing and in Jackson’s research the terms transaction marketing and relationship

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marketing were defined as two complementary ways of doing business (Jackson, 1985). Relationship marketing

Fresh foundation

Research in both consumer goods marketing, services marketing and B-to-B marketing currently converge and come together under the label of relationship marketing. Within the spirit of grounded theory, relationship marketing could be appointed the core variable, with relationships, networks and interaction as sub-core variables, thus offering the beginnings of a general marketing theory. The relationship marketing label is perhaps new, the phenomenon is not. It had just not been properly observed and conceptualized; marketing professors seem to be the last to notice the reality around them. Directions in a new economy New knowledge is sometimes accumulated on old knowledge. At some point, however, we have to start with a fresh foundation; we have to shift the paradigm. To learn, we must unlearn. Even if part of the old merges with the new, it has lost its lead role and will have to step down to a humbler position. I have used the more theatrical language of brainwashing versus deprogramming to accentuate the gravity of the situation. Surveying perceived trends – not just falling in love with the popular hype but settling for the solid and sustainable – is a laborious task. Despite the uncertainty, we need to wrestle with the trends to design future scenarios in our marketing and business plans. The following review of conclusions and recommendations is here to serve as food for thought:

Healthier marketing theory

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Need for theory and context. Marketing management today suffers from theory anorexia and cannot properly feed on and digest what is happening in a new economy. Both practitioners and academics are vulnerable to con men offering panaceas and explanations supported by the ever-present media hype. There is need for more healthy and vitamin-rich feeding of the marketing mind. We need marketing theory, good theory, essential for scholars and practicing managers alike. There is currently no general theory of marketing in existence, just reminiscences of outdated microeconomics and fragmented models or concepts, often called theories but so out of management context that they do not survive beyond the shelter of an academic ivory tower.

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General marketing theory in the making. Relationship marketing and CRM with a focus on relationships, networks and interaction submit the most promising approach to a more valid and general theory of marketing, replacing a dinosaur marketing management and marketing mix consumer goods paradigm from an old economy. Relationship marketing and CRM help us give context on a comprehensive, conceptual and general level, that is, generate healthier marketing theory.

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The total offering. We must eventually learn to see the offering – previously referred to as goods and services but where I now find it necessary to include information technology as well – and its valueproducing potential and not get stuck in its constituents parts. To avoid CRM becoming a myopic eCRM we need the counterbalance of hCRM where ‘‘h’’ stands for human. We need to head for an optimal trade-off between eCRM and hCRM. We need to properly absorb the values of relationship marketing or CRM will forever be no more than an expensive computer system. JOURNAL OF SERVICES MARKETING, VOL. 16 NO. 7 2002

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Value and networks. A new economy has been described from two perspectives, as value output and network input. We need to think in those terms, but thinking is not enough; we also need to commit ourselves and take action. It includes viewing the roles of the supplier and the customer in a dimmer light. We must accept that a supplier can add value but the customer also adds value.

Viable research strategy

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Inductive research. It means that we also use our senses and our common sense, intuition, tacit knowledge, and experience in conjunction with systematic, scholarly research and everyday observations from practice. Grounded theory has already been mentioned as a viable research strategy. Personally I embrace its merger with action research, introspection, narrative research, and case study research packaged in what I recently named interactive research (Gummesson, 2000, 2001).

Complex and ambigous

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Complexity and ambiguity. The world is bewildering and so is marketing. It is complex and ambiguous. Research in marketing must put a halt to the excessive, even obscene indulgence in quantification and surveys. We need less deductive hypotheses-testing of isolated concepts out of context, and more inductive research where true observation is encouraged. Our observations as practitioners, consumers and researchers must be given priority over repositories of old theories, concepts, axioms and other claims of marketing. In discussions, a new economy is more often than not treated on the terms of an old economy, using its concepts and trying to squeeze a reluctant reality into it.

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Balanced centricity. The marketing concept, holding that companies should focus on customer needs and not become navel watchers of their own products and manufacturing, is the foundation of today’s interest in the customer. However, both perspectives are needed. Customercentricity and production-centricity need one another. They must shake hands and make friends in a balanced production-consumption centricity.

References Castells, M. (1996), The Rise of the Network Society, Blackwell, Oxford. Giarini, O. (2001), ‘‘Basic features of services and some fundamentals of the (new) service economy’’, Progress, No. 33, June, pp. 20-8. Glaser, B. (2001), The Grounded Theory Perspective: Conceptualization Contrasted with Description, Sociology Press, Mill Valley, CA. Gummesson, E. (2000), Qualitative Methods in Management Research, 2nd (revised) ed., Sage, Thousand Oaks, CA. Gummesson, E. (2001), ‘‘Are research approaches in marketing leading us astray?’’, Marketing Theory, Vol. 1 No. 1, September, pp. 27-48. Gummesson, E. (2002a), ‘‘Practical value of adequate marketing management theory’’, European Journal of Marketing, Vol. 36 No. 3, pp. 325-49. Gummesson, E. (2002b), Total Relationship Marketing, 2nd (revised) ed., ButterworthHeinemann, Oxford. Jackson, B.B. (1985), ‘‘Build customer relationships that last’’, Harvard Business Review, November-December, pp. 120-8. Oliver, R.L. (1996), Satisfaction, McGraw-Hill, Boston, MA. Ravald, A. and Gro¨nroos, C. (1996), ‘‘The value concept and relationship marketing’’, European Journal of Marketing, Vol. 30 No. 2, pp. 19-30. Stacey, R.D. (1996), Strategic Management and Organisational Dynamics, Pitman, London.

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An executive summary for managers and executive readers can be found at the end of this issue

The future of relationship marketing Jagadish N. Sheth Charles H. Kellstadt Professor of Marketing, Goizueta Business School, Emory University, Atlanta, Georgia, USA

Keywords Relationship marketing, Trends Abstract The purpose of this paper is to discover factors that led to the rise of relationship marketing in practice and academics, and what factors are likely to reshape the future direction of relationship marketing.

Energy crisis

Three antecedents were responsible for the popularity of relationship marketing in the late 1980s and early 1990s. First, the energy crisis of the 1970s and the consequent economic stagflation resulted in excess capacity and high raw materials costs. Competition intensified on a global basis. In fact, many US industries became casualties of foreign competition. This included consumer electronics, textiles, steel, chemicals, machine tools and shipbuilding. It became necessary to defensively focus on retaining customers and defocus customer acquisition related marketing expenditures and activities. In other works, customer retention became the corporate focus and this resulted in the emergence of ongoing relational exchange in contrast with the one-time transactional exchange (Sheth et al., 1988).

Emergence of services marketing

At the same time, services marketing was emerging as a popular new domain of research and understanding. Many articles were written to strongly argue how services were fundamentally different from products: intangible, perishable, simultaneous and mostly interactive. Furthermore, services such as legal, accounting, medical and personal care were ongoing and over time. Lenard Berry was the first scholar in services marketing to coin the phrase ‘‘relationship marketing’’ as early as 1983 (Berry, 1983). It made eminent sense because services are generally direct offerings to the end users (telephone, utilities, banking, etc.) and we have a direct record of transactions over time with each individual customer, enabling researchers to analyze and theorize about customer loyalty and one-to-one marketing (Peppers and Rogers, 1993).

Supplier partnering

Finally, in business to business marketing, most companies began to institute key account, national account and global account management processes and programs to consolidate and increase share of each account’s business to fewer suppliers preferably resulting in a sole source relationship. This was further stimulated by the quality drive in the 1980s (TQM philosophy) and a desire to reduce the number of suppliers in order to improve quality at a lower cost. The Japanese success in developing supplier partnering in the value chain especially in the automobile industry became the role model for the American industry. This collaborative as opposed to combative attitude toward the suppliers further resulted in treating business exchanges as relational and interactive. The emergence of IMP Group (Hakansson, 1982) The research register for this journal is available at http://www.emeraldinsight.com/researchregisters The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0887-6045.htm

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in Europe with a focus on interaction as opposed to transactions provided another impetus toward business-to-business relationship marketing. Consequently, relationship marketing exploded as a field of marketing enquiry in the late 1980s (Sheth and Parvatiyar, 2000). However, three new antecedents are likely to change the course and even the definition of relationship marketing in the coming decade. Impact of information technology

The first and probably the most significant antecedent is the impact of the Internet and information technology (IT), especially in all situations where there is a direct accounts receivable (customer) relationship. The automation of sales and marketing by Siebel Systems as well as cross-functional integration through enterprise resources planning (ERP) systems has shifted the focus to customer relationship management (CRM). As a consequence, marketing is once again not the driver. It is the IT function headed by chief information officer (CIO) who often reports directly to the CEO of a company. Marketing is once more getting marginalized as happened during the popularity of TQM philosophy, which diffused the focus on customers away from the marketing department. I believe CRM movement will continue to grow despite its early failures and shift the focus to tactical marketing such as loyalty programs, affinity marketing and campaign management.

Selective and targeted

A second major factor has to do with the bottom line question: Does relationship marketing pay? The empirical evidence is inconclusive despite all of our beliefs in lifetime value of the customer, and share of customer wallet concepts especially in business-to-business marketing. The largest revenue accounts are often found not to be the most profitable accounts. Consequently, there is emergence of a strong belief that a company must be selective in its use of relationship marketing; indeed it must consider segmenting the market into relational and transactional markets. In other words, relationship marketing is not nor should be a universal philosophy, but just one of several marketing relationships (El-Ansary, 1997). Therefore, unlike the TQM movement, relationship marketing is likely to remain more selective and targeted.

Outsourcing customers

Finally, although we all believe that the purpose of marketing (or business for that matter) is to create and retain customers, it is ironic that many companies are permanently outsourcing their customers. While this phenomenon began primarily for internal customers (employees) for such services as payroll and employee benefits, travel and data processing, it is now spreading to external customers (Sheth et al., 2000). Many companies are recognizing that as much as one-third of their customers will be unprofitable even in the long run. At the same time, they are unable to reduce the cost of serving these accounts. This is especially true in services industries such as banking, telephone and utility industries. Most customers do not provide enough purchasing power on an ongoing basis to justify the fixed cost of serving them. I believe we must now develop hypotheses and theories of outsourcing customers just as we have developed theories and hypotheses of customer acquisition and customer retention. To conclude, relationship marketing emerged as a popular new paradigm in the 1980s due to shift in focus from customer acquisition to customer retention. It is likely to shift once again and will transform into customer relationship management (CRM) with a hybrid of marketing relationship programs that range from relational to transactional to outsourcing market exchanges and customer interactions.

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References Berry, L.L. (1983), ‘‘Relationship marketing’’, in Berry, L.L., Shostak, G.L. and Upch, G.D. (Eds), Emerging Perspectives of Services Marketing, American Marketing Association, Chicago, IL, pp. 25-38. El-Ansary, A. (1997), ‘‘Relationship marketing: a marketing channel context’’, in Sheth, J.N. and Parvatiyar, A. (Eds), Research in Marketing, Vol. 13, JAI Press, Greenwich, CT, pp. 33-46. Hakansson, H. (Ed.) (1982), International Marketing and Purchasing of Industrial Goods: An Interaction Approach, John Wiley, Chichester. Peppers, D. and Rogers, M. (1993), The One-to-One Future: Building Relationships One Customer at a Time, Doubleday, Garden City, NY. Sheth, J.N. and Parvatiyar, A. (Eds) (2000), Handbook of Relationship Marketing, Sage Publications, Thousand Oak, CA. Sheth, J.N., Garder, D. and Garrett, D. (1988), Marketing Theory: Evolution and Evaluation, John Wiley, New York, NY. Sheth, J.N., Sisodia, R. and Sharma, A. (2000), ‘‘Antecedents and consequences of customer centric marketing’’, Journal of the Academy of Marketing Science, Vol. 28, Winter, pp. 55-66.

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An executive summary for managers and executive readers can be found at the end of this issue

Customer-relationship levels – from spurious to true relationships Veronica Liljander Assistant Professor, Swedish School of Economics and Business Administration, Department of Marketing and Corporate Geography, Helsinki, Finland

Inger Roos Researcher, Academy of Finland, Helsinki, Finland

Keywords Relationship marketing, Customers, Trust, Commitment, Motor industry Abstract Relationship marketing (RM) has been widely accepted as an important determinant of long-term business success and is believed to be especially well suited for services because of the personal contact between customers and service providers. Past research has focused mainly on the advantages of RM for companies, while less attention has been paid to relationships from the customer’s point of view. We suggest that relationships may be described as ranging from spurious to true, depending on customerperceived relationship benefits, trust and commitment. A qualitative study of customer relationships was conducted in a car dealership, where profitability depends on customer commitment to both after-sales services and the car brand. Customer relationships were found to be more spurious than true. The study revealed that behavioural commitment to after-sales services was high, but that affective commitment was low to moderate. Customers were satisfied but did not perceive the services to be superior to the competitors’ service offerings. They trusted authorised repair in general and did not feel that after-sales service would have more than a minor influence on their future car purchases.

Concept of relationship marketing

Introduction Relationship marketing (RM) has been defined as ‘‘the process of identifying and establishing, maintaining, enhancing, and when necessary terminating relationships with customers and other stakeholders, at a profit, so that the objectives of all parties involved are met, where this is done by a mutual giving and fulfilment of promises’’ (Gro¨nroos, 2000, p. 98). The term ‘‘relationship marketing’’ was first introduced by Berry in 1983 (Berry, 2000), but the concept did not attract broader attention until the 1990s (Gro¨nroos, 1996). Although the concept was new, the basic ideas can be traced back to early channel and business-to-business research (de Wulf and Odekerken-Schro¨der, 2001). Nordic researchers have also been emphasising the relational nature of services since the 1970s (Gro¨nroos, 2000). The positive benefits of RM for companies have generally not been contested, but can only be realised if customers are willing to engage in The authors wish to gratefully acknowledge the helpful comments and encouragements of the editor and two anonymous reviewers. At the time of writing this article Veronica Liljander was a Visiting Scholar at the Maastricht Academic Center for Research in Services (MAXX), University of Maastricht, The Netherlands. Inger Roos is associated with the Swedish School of Economics and Business Administration, Helsinki, Finland and the Karlstad University, Karlstad, Sweden. The research register for this journal is available at http://www.emeraldinsight.com/researchregisters The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0887-6045.htm

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long-term relationships (Berry, 2000; Sheth and Parvatiyar, 2000) and to perceive them as valuable (Ravald and Gro¨nroos, 1996; Sheaves and Barnes, 1996). Most research on RM has been conceptual and focused on company benefits, whereas research from the customer’s perspective has been scarce (Singh and Sirdeshmukh, 2000; Odekerken-Schro¨der, 1999). Interpersonal nature of services

Continuum of customer relationships

The interpersonal nature of services makes them particularly well suited for relationship building (Berry, 2000). RM offers customers individualised services, customised goods and other relationship benefits that are believed to increase satisfaction, trust and commitment (Berry, 1999, 2000; Garbarino and Johnson, 1999; Gwinner et al., 1998). Trust and commitment have been considered essential for understanding relationships (Singh and Sirdeshmukh, 2000; Garbarino and Johnson, 1999; Sharma and Patterson, 1999; Tax et al., 1998; Liljander and Strandvik, 1995; Morgan and Hunt, 1994). Relationships are believed to foster trust (Sheth and Parvatiyar, 2000; Gwinner et al., 1998), and true relationships cannot develop without a buildup of trust between the parties (Berry, 1999; Sheaves and Barnes, 1996; Bitner, 1995). Trust is particularly important in credence-based services, which are characterised by high performance ambiguity, significant consequentiality and high interdependence between the parties (Singh and Sirdeshmukh, 2000). Purpose and structure of the study This paper contributes to the literature on RM by studying relationships from the customer’s point of view. It is suggested that customer relationships can be described along a continuum, ranging from spurious to true relationships, based on relationship benefits, trust and commitment. A qualitative study was conducted among after-sales service customers of an authorised car dealer, i.e. a credence-based service. Car dealers within the European Union are exceptionally dependent on customer commitment to after-sales services for dealership profitability (European Commission, 2001; Autopolis, 2000). The aim of the empirical study was to identify customerservice relationship levels. The company offered customers two different types of interaction with service employees: (1) a personal relationship with an appointed service representative; and (2) a pseudo-relationship where different employees perform the service from one occasion to the next.

Personal service representatives

According to Gutek et al. (1999, 2000), customers with personal service representatives experience higher satisfaction, trust and commitment than customers in pseudo-relationships. For this reason, the study also focused on differences between customers in personal vs pseudo-relationships. The paper is structured in the following way. First, spurious and true relationships are defined based on past brand loyalty and commitment research. Second, relationship benefits and trust are discussed. Third, the study and its findings are presented. The article concludes with a discussion of the findings, the limitations and future research directions. Customer commitment: spurious or true relationships? Various but similar descriptions of loyalty and commitment are to be found in past research. Both have been portrayed as having a behavioural and an affective component (cf. Jacoby and Chestnut, 1978). For example, Morgan

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and Hunt’s (1994, p. 23) definition of commitment as ‘‘an ongoing relationship with another that is so important as to warrant maximum efforts at maintaining it’’ also implies strong affective and behavioural commitment to the company. In empirical research the term ‘‘loyalty’’ often refers to repeat patronage, while ‘‘commitment’’ is used to denote customers’ affective preferences (e.g. Odekerken-Schro¨der, 1999). Oliver (1999, p. 34), on the other hand, defines loyalty as: . . . a deeply held commitment to rebuy or repatronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same-brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior.

Outcomes of high affective commitment

Bloemer and Kasper (1995) also define loyalty as a commitment to buy a brand, but suggest that there is a continuum ranging from spurious to true loyalty, where spuriously loyal customers are less committed to the brand than the truly loyal ones. Only manifestly satisfied customers are believed to be truly committed (Bloemer and Kasper, 1995). These affectively committed customers buy the service because they perceive it to be superior to the competitors’ offerings and not because of habit (Oliver, 1999; Dick and Basu, 1994). Several positive outcomes of high affective commitment have been identified, such as higher return intentions (Garbarino and Johnson, 1999; Odekerken-Schro¨der, 1999; Barksdale et al., 1997), positive recommendation behaviour (White and Schneider, 2000; Berry, 1999) and enhanced customer co-operation and acquiescence (Berry, 1999; Morgan and Hunt, 1994).

Determinants of customer commitment

Given the results of previous research on spurious and true brand loyalty (Bloemer and Kasper, 1995; Dick and Basu, 1994), we propose that customer relationships may also be described along a continuum from spurious to true on the basis of customer commitment, trust, and positively perceived relationship benefits (Gwinner et al., 1998) or negatively perceived bonds (Liljander and Strandvik, 1995). Relational bonding with the seller (Berry, 2000; Gwinner et al., 1988), with the product (Oliver, 1999), and with other customers (Oliver, 1999) are believed to be important determinants of customer commitment to a relationship. Customers in true relationships experience more relationship benefits that tie them to the company in a positive way.

Spread of consumer distrust

Furthermore, the intangibility and heterogeneousness of services, combined with the spread of consumer distrust in companies, ‘‘positions trust as perhaps the single most powerful relationship marketing tool available to the company’’ (Berry, 2000, p. 164). This sentiment is echoed by Hart and Johnson (1999), who advocate the absence of ‘‘trust defects’’ as the most important factor in explaining customer commitment to service companies. It can therefore be assumed that true relationships are characterised by strong trust while spurious relationships could have trust defects. Taking Bloemer and Kasper’s (1995, p. 313) definition as a basis, we propose the following tentative definitions of spurious and true customer relationships (alterations or additions are written in italics): A true customer-service relationship is (1) the biased (i.e. non-random) (2) behavioural response (i.e. purchase, word-of-mouth, information sharing[1] and other positive behaviours), (3) expressed over time, (4) by some decision-making unit, (5) with respect to one service provider out of a set of such providers, which (6) is a function of psychological (cognitive and affective) processes, including the presence of trust, relationship benefits

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and the absence of negative bonds, resulting in service-provider commitment. A spurious customer relationship is (1) the biased (i.e. non-random) (2) behavioural response (i.e. purchase), (3) expressed over time, (4) by some decision-making unit, (5) with respect to one or more alternative service providers out of a set of such providers, which (6) is a function of inertia, trust deficit, weak or absent relationship benefits and/or the existence of negative bonds. Degree of commitment

Customers in both true and spurious relationships continue to buy the service and may appear to be equally satisfied based on their satisfaction score. The main difference is their degree of commitment expressed as the number of service providers and affective commitment. Affective commitment stems from perceived service superiority compared to alternative providers, and a strong preference for the service provider in question. High affective commitment provides resistance to counter-persuasion from competitors’ offers (Oliver, 1999; Dick and Basu, 1994). Figure 1 illustrates different levels of affective commitment, relationship benefits and trust in a three-way matrix. Relationship benefits and different types of trust are discussed in more detail in the following sections. Although trust has been interpreted as a relationship benefit or bond by some researchers (Gwinner et al., 1998; Halinen, 1996), it is most often posited as an independent construct and determinant of commitment (e.g. Morgan and Hunt), and the two concepts are therefore discussed separately.

Extreme points on continuum

Spurious and true relationships are extreme points on a continuum and other more specific states could be conceived between the two end points. For greater simplicity, behavioural commitment is also omitted. Since it is a continuum, it is difficult to draw a sharp line between the two end states, and they should be looked on as relative. At the lower end, customers may be behaviourally committed to the service but satisfaction is only latent. At the higher end, customers are more manifestly satisfied and more affectively committed to the service. Cooperative behaviours, which characterise true relationships (Berry, 1999), are also less likely to be found in spurious relationships. Strictly speaking, only quadrants 2 and 3 characterise true relationships with strong attachment based on relationship benefits and trust. The other quadrants could be looked on as opportunities for development towards a stronger relationship. Many relationships are likely to be characterised by low-moderate attachment, benefits and trust. Relationship benefits and trust are discussed next.

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Perceived advantages

Relationship benefits Relationship benefits are perceived advantages that the regular customer receives over and above the core service (Gwinner et al., 1998). These are rewards that the individual has gained over time by being a regular customer. The benefits tie him or her to the company by making it unattractive to switch providers. They may take the form of loyalty programmes, which are offered to all customers, or benefits that can be customised to individual consumers. It is a relationship benefit only when it is not offered to any customer who enters the store, regardless of relationship length. Moreover, companies may believe that they are offering benefits, but only customers can tell if they are experiencing any.

Positive or negative bonds

Because relationship benefits act as bonds that tie customers to the service provider, there appear to be few conceptual differences between relationship benefits and positive relationship bonds. However, unlike relationship benefits, bonds could also be perceived as negative when they tie customers to a company in a negative sense (Bendapudi and Berry, 1997; Liljander and Strandvik, 1995). Customers with low affective commitment may continue purchasing a service because of being ‘‘locked in’’ by bonds (Bendapudi and Berry, 1997; Sheaves and Barnes, 1996; Liljander and Strandvik, 1995). For example, customers who take out additional warranty insurance for their car are forced to follow specific maintenance schedules at an authorised repair shop and cannot switch to any other shop.

Financial, social and structural bonds

Empirical research on relationship benefits in services has been scarce. Berry (2000) proposed three relationship levels based on financial, social and structural bonds. Financial bonds, such as loyalty programmes, are considered the weakest form and may only lead to spurious relationships. Social and structural bonds are more closely related to true customer relationships. According to Berry (2000), RM relies primarily on social bonds, which involve regular communication with customers and service continuity through a personal service representative. Structural bonds offer value-adding problem solutions that are not dependent on individual service representatives, and which are difficult for competitors to copy. Structural bonds may be easier to establish in business-to-business contexts than with private customers. Liljander and Strandvik (1995) listed ten types of bonds and suggested that some of these, such as social, knowledge and psychological bonds, were more likely to be perceived as positive by customers, whereas others, such as economic, legal and technological bonds, could have a more negative lock-in effect. An empirical study of different services by Gwinner et al. (1998) identified a number of relationship benefits that were reduced to three main categories: (1) confidence/trust; (2) social benefits; and (3) special treatment. Confidence/trust benefits were found to be the most important, followed by social benefits and special treatment. Furthermore, Hennig-Thorau et al. (2000) demonstrated that different customer segments experience different benefits. Relationships may also evolve from being more formal at the beginning, to becoming more close and social later on (Sheaves and Barnes, 1996).

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It is thus likely that highly-committed customers in true relationships will experience more positive benefits than customers in spurious relationships do.

Customer vulnerability

Simultaneous trust and distrust

Trust Trust may be defined as ‘‘confidence in an exchange partner’s reliability and integrity’’ (Morgan and Hunt, 1994, p. 23). It grows out of consistent and competent service and honest and fair treatment of customers (Johnson and Grayson, 2000; Berry, 1999; Morgan and Hunt, 1994). Trust is believed to be critical in long-term relationships (Berry, 1999; Bitner, 1995; Wilson, 1995; Morgan and Hunt, 1994), but there has also been evidence to the contrary (e.g. Grayson and Ambler, 1999; Doney and Cannon, 1997). Customer vulnerability, which is common in credence-based services, is believed to be the main driver of trust (Singh and Sirdeshmukh, 2000; Bigley and Pearce, 1998). Trust and distrust are believed to have distinct, asymmetric effects on customer commitment (Singh and Sirdeshmukh, 2000; Wilson, 1995), but simultaneous trust and distrust towards separate elements of the service is also possible (Lewicki et al., 1998). Trust is put to the test when the company does not live up to its promises (Bitner, 1995), or if the service fails in other respects. A study of complaining customers (Tax et al., 1998) showed that prior positive experiences mitigated the effect of poor service recovery on commitment but not on trust. Sources and types of trust. Different sources (Johnson and Grayson, 2000) and types of trust (Lewicki and Bunker, 1996) have been distinguished in the context of trust and distrust. Johnson and Grayson (2000) list four different sources of trust: (1) generalised trust, based on the firm’s reputation, for example; (2) personality-based trust; (3) system-based trust, focused on regulating authorities; and (4) process-based trust, arising from interpersonal or customer-firm interaction. Process-based trust is most often investigated in economic studies.

Three levels of trust

Lewicki and Bunker (1996) proposed three qualitatively different types of trust. These were derived from research on romantic relationships and adjusted to work relationships, but could, in our opinion, also be applied to customer services. The three proposed levels of trust are: (1) calculus-based; (2) knowledge-based; and (3) identification-based. The authors suggest that people may move from calculus-based to knowledge-based and identification-based trust, but customers may also remain at the same stage throughout a relationship. Although they stress that one stage is not necessarily inherently better than any other, there does appear to be a difference from a customer-relationship perspective, based on assumed customer reactions to violations of trust in the three stages. We have interpreted the stages as they could be applied to customer-service relationships.

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Calculus-based trust

Customers with calculus-based trust have trust in the service provider because they believe it to be in the provider’s best interest not to suffer the loss of reputation and profits that a violation of trust would lead to. They believe in the benevolence of the provider, but the belief is based on the cost of deterrence. Even small inconsistencies in performance could have a large detrimental effect on trust perceptions. Calculus-based trust may take different forms for different services, but we feel that it is unlikely to be combined with high affective commitment.

Knowledge-based trust

Knowledge-based trust, as the name suggests, is based on knowing the service firm well and being able to anticipate its actions. It could be related to knowledge bonds (Liljander and Strandvik, 1995) and confidence benefits (Gwinner et al., 1998), and represents a generalised expectancy that has progressed over a longer period of time. Effective two-way communication is important for knowledge-based trust to develop because it ensures that the parties exchange information about their preferences and approaches to problems. The relationship will be nurtured in the knowledge that if it is neglected, it will lose its strength and fade away. Customers have to be willing to share information with the company, and the company has to be willing to learn about customers’ needs and problems and to develop its services accordingly. The effect of a violation of trust depends on the extent to which the events were under the company’s control. Temporary events may be ignored and trust will eventually be restored.

Identification-based trust

Customers with identification-based trust have full confidence in the service company and believe that it will act in their best interests. The service provider has in-depth knowledge of customers’ needs and desires, and customers perceive that their desires are fulfilled. Shared values (cf. Berry, 2000; Morgan and Hunt, 1994) characterise this type of trust, and customers tend to defend the company against criticism from outsiders. Identificationbased trust may also be linked to identification benefits (Hennig-Thorau et al., 2000) and to cultural and ideological bonds (Liljander and Strandvik, 1995). A violation of trust needs to be of great magnitude to dissolve the relationship. Because of the strong attachment that can be related to identification-based trust, quadrant 9 is considered an unlikely combination. At the extreme points of the continuum from spurious to true relationships, customers at the spurious end are likely to express more calculus-based trust, while those in true relationships will be characterised by knowledge- or identification-based trust. Empirical study The empirical study is structured in the following way. First, the research method is discussed and then some background information on the company and its service concepts is provided. Thereafter, the customer data collection is described and interpreted, and the findings presented. Research method Qualitative research methods are particularly well suited to the exploration and discovery of new concepts and their interrelationships (Patton, 1990). Commitment and trust are well-researched concepts in business-to-business studies but much less is known about private customer relationships. Empirical research on relationship benefits and different types of trust is also scarce. Because of the complex nature of customer relationships and, more specifically, of spurious and true relationships, a qualitative approach was chosen for this study. Because data is interpreted from the theoretical

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perspective outlined above, the qualitative approach taken here is more orientational (Patton, 1990, p. 85f) than naturalistic (Lincoln and Guba, 1985). After-sales service

Diversified corporation

The study was designed to investigate customer commitment, benefits and trust in after-sales service relationships. Car-repair and maintenance services were chosen for several reasons. First, it is a credence-based service, which is difficult for customers to evaluate and customer trust is believed to be particularly important (e.g. Singh and Sirdeshmukh, 2000). Second, customers generally expect dependable car-repair services from all repair shops and other benefits will be needed to win higher customer commitment (Gwinner et al., 1998). Third, customer commitment to after-sales service for new cars is particularly important for dealers within the European Union, where an association between car sales and after-sales service has been upheld by a block-exemption agreement (regulation 1475/95, European Commission, 2001). Although the distribution of profits between car sales and services varies between car brands and countries, margins on new cars are typically low and customer commitment to after-sales service is crucial for dealer profitability. In the case company, the customer-lifetime value of after-sales service matches the average profit that the dealer makes on the sale of a new family vehicle. Private customers tend to use an authorised repair shop for their new car until it is approximately five years old. Thereafter, most customers opt for cheaper spare parts than those offered by authorised repair shops. Case service background The dealership is part of a well-known diversified corporation that enjoys a good reputation in Finland. At the time of the study it consisted of five outlets, each of which offered a fleet of new and used cars, and a repair shop on the premises. The first outlet was established in the 1970s, and since then the dealership has expanded to five outlets, all of which are located in major cities in the south of Finland. To gain a pre-understanding of the company, of differences between outlets and of customer relationships, interviews were conducted with 12 experienced company employees (the company director, managers, foremen, car sellers and mechanics) before customers were interviewed. The following descriptions of service concepts and employee perceptions of customer relationships are based on these interviews.

Choice of two types of service

Service concepts offered to customers. A unique feature of the dealership is that it offers customers a choice of two different types of services, namely a personal-mechanic relationship and pseudo-relationship (Gutek et al., 1999, 2000). Customers who want personal services are allocated a direct mechanic (DM). They make appointments directly with the mechanic, and deliver the car to and pick it up from him or her. Other customers deal with any available foreman in a pseudo-type relationship. In this case, customers either look at the car together with the foreman, who then distributes the work among the mechanics that he supervises, or they leave their car keys with a foreman at the reception desk. More detailed background information on the services is presented in the Appendix. Two of the outlets offer the same service alternatives to customers, but in other respects the outlets are individually designed and may offer different facilitating or supporting services, such as different opening hours or customer-contact services. When direct mechanics are available at an outlet, customers are presented with the available alternatives when they purchase

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their car. Thus customers are, at least in principle, able to choose the kind of relationship that they prefer. A summary of the services offered at the five different outlets is presented in Table I. Perceived as trusted company

Employee beliefs about customer relationships. Employees were questioned on their beliefs of what made customers committed to the dealership, what relationship benefits they believed that customers experienced and the role of trust in customer relationships. This information was used to formulate questions and probes in the customer interviews. The employees expressed very similar beliefs. Well-performed after-sales service was believed to affect customer commitment to both after-sales and car sales. Employees expected customers to have generalised trust in the dealership, but the reputation of the company was believed to have only a marginal effect on customers’ initial choice and future commitment. They believed that customers would perceive the dealership as a trusted company that delivered high-quality service at moderate prices. The following excerpt summarises this view[2]: Thinking generally of . . . the benefits customers receive from us, we represent trustworthiness and the confidence of being a big company that works according to written standards, following certain specified principles. Doing business with us is secure, and reliable for the customer in terms of, let’s say, returning after 2-3 years and we’ll still be in the market. The customer can trust our continuity. The name of the parent company entails responsibility. The customer expects better service than he’ll get from others. We’re also expected to offer competitive services in terms of other dealers and repair shops. . . . There’s a tremendous difference between carrepair services and car sales as a whole. You can sell almost anything to a customer once, but if the intention is to see the customer returning after two or three years for a new car, the service and the car repair have to be successful from the customer’s point of view (Sales manager).

Loyalty card

A loyalty card given out by the parent company that also featured special offers on cars, services and spare parts was mentioned as a potential relationship benefit. However, this card can be obtained by anyone regardless of relationship length, and thus constitutes a weak financial bond (Berry, 2000). Apart from the personal service given by direct mechanics, employees were unable to name benefits that were specific to the relationship or that would distinguish the dealership from its competitors. The employees were unanimous in their belief that DM customers were more satisfied and committed to the company than other customers. One direct mechanic described his experiences: I have worked as a direct mechanic for 25 years . . . with regular customers there’s no need to [give a price estimate], only if something unexpected or out of the ordinary happens, then [I] phone. . . . I’ve lost very few customers during my time as a direct mechanic. So, I assume that my customers are satisfied. I think that it’s

Dealership outlets Outlet Outlet Outlet Outlet Outlet

A B C D E

Pseudo relationship Foreman and Personal relationship customer examine car together Direct mechanic Yes Yes No No Yes

No Yes Yes Yes No

Pseudo relationship Foreman/other employee receives car keys Yes Yes Yes Yes Yes

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a good indication that if there are disagreements, we solve them right away, with flexibility on both sides.

Employees other than direct mechanics based their perception of DM superiority on general beliefs within the company and on past customersatisfaction surveys. DM customers had consistently exhibited a higher satisfaction index than the other customers.

Stratified personal sampling

Open-ended questions

Customer data collection and interpretation Personal interviews were conducted over the telephone with 34 customers in July-August 2000. Six to eight customers per repair shop were interviewed. Stratified purposeful sampling (Patton, 1990) was used to ensure variation in personal and pseudo-relationships. The sample was drawn from a population of 263 private car owners who had used any of the five car repair shops during one week in June 2000. A total of 90 customers had a direct-mechanic relationship, and of these 13 were interviewed. Of the remaining 173 customers who were categorised as having a pseudo-relationship with the repair shop, 21 were interviewed. Each customer was offered a voucher of FIM 50 for participation and only one customer declined to participate. The respondents’ ages ranged from 22-72 years, and nine of them were female. The interview guide included general themes and follow-up questions, and probes were used when needed. The customers were first asked a few warmup questions about their car, where they had bought it and which repair shop they used (even though the outlet was known to the interviewer), and if they used other repair shops. They were then asked questions on why they chose the dealer’s repair shop, on perceived service quality, perceived relationship benefits, comparison to other repair shops, trust in the repair services, overall satisfaction and behavioural commitment to after sales and the car brand. All the questions were open-ended and the customers were able to express their opinions freely. A list of questions for probes was prepared. For example, on relationship benefits the customers might be asked if they perceived any benefits from being a regular customer at the repair shop, if they believed the service they received differed in any way from the services received by new customers or other regular customers, and if they believed that the customer relationship differed in any way from what they would experience at other repair shops. The interviews lasted between 15-45 minutes. They were all transcribed immediately after completion and analysed separately by the authors. For example, behavioural commitment to after sales was interpreted as customers’ reported past and current usage, as well as future intentions to use the repair shop. Affective commitment was interpreted from the customers’ reported satisfaction, expressed enthusiasm over the services, perceived service superiority compared to other repair shops and experienced critical incidents. A software program for text analysis was used to organise the data according to relationship benefits, trust and commitment, and other themes that emerged from the data. The interviews were also analysed as a whole, and each part was compared to the whole. Any consistencies or inconsistencies were taken into account when the concepts were interpreted. Interpretations were compared and discussed for consistency among the authors, but interpretation of the data, as always, remains subjective. Findings The customers were categorised according to perceived relationship benefits, trust and commitment, and the results were compared with the information presented in Figure 1. The interpretations are relative rather than absolute. Complete commitment as described by Morgan and Hunt (1994) is rare and

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only one customer displayed it for the car brand itself. However, there were relative differences between customers and some could be interpreted as having a true customer relationship based on their past behaviour and current experiences. However, most customers were interpreted as having a satisfying but spurious relationship. Some general observations on customer commitment, relationship benefits and trust are followed by findings on the characteristics of customers in spurious and true relationships.

Small differences between customers

Customer relationships The interviews were analysed for customer commitment, trust and relationship benefits, but even when the whole interview was taken into account, differences between customers remained small. Construct levels are relative and based on the current customer sample. Examples of construct interpretations are provided in Table II. Commitment. In general, the interviewed customers were satisfied but perceived small differences between different authorised repair shops. Although several of them mentioned that very bad experiences would affect their future brand choice, satisfactory experiences were believed to have only a marginal effect. Customers’ behavioural commitment to after-sales services was high for all customers, but low in terms of future car-brand commitment. With the exception of one person who performed simple maintenance on the car himself, all said that they exclusively used the focal dealer’s repair and maintenance services and that they had every intention of continuing to do so during their current car ownership. Even those who expressed some degree of dissatisfaction with the services had no intention of going elsewhere. In contrast, affective commitment based on perceived service superiority and experienced satisfaction was lower than behavioural commitment. Twelve customers were very satisfied with the services, 18 were satisfied and four were somewhat dissatisfied, but none of them were prepared to ‘‘go the extra mile’’ to use the same repair shop in the future. They experienced hardly any benefits that could be interpreted as relationship benefits, but they trusted and used the repair shop because it was an authorised dealer. Car after-sales services are most often perceived as a necessary evil that does not easily arouse customer delight. However, delight is considered an important driver of customer loyalty and profits (Rust and Oliver, 2000).

Effect of car sales on service usage

The focal dealership has calculated that over 90 per cent of its car buyers who reside in the region also use its after-sales services. Thus car sales have a strong effect on the usage of these services, although after-sales service seems to have only a marginal effect on future car sales. Furthermore, contrary to expectations and bearing in mind the sample size, the interviews did not support the clear superiority of DM relationships. In general, DM customers liked the system and six of them were very satisfied, but they were not more satisfied than customers of the service outlets C and D, which had the most advanced ‘‘foreman examines car with customer’’ service. In a study of bank services, Colgate and Danaher (2000) also observed that pseudo-relationships may be just as successful as personal relationships if they are well implemented. Relationship proneness is known to vary between customers (Odekerken-Schro¨der, 1999; Fournier et al., 1998), although empirical research is still scarce. Moreover, in a dealership, customers who are relationship prone may establish personal relationships with employees other than direct mechanics.

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Construct

Examples

Behavioural commitment after sales and car brand

Citations At least this time I didn’t think [about the repair shop when I bought the car] . . . Well, in the region there’s such a good choice of services that I don’t think it’s decisive. Of course, if it’s this brand and you have bad experiences of it, then it may influence you so that you consider switching brands. So it correlates with the brand (A20, PS)[3] Yes, as long as I drive [this brand], I guess I’ll use it . . . [What about when you want to switch cars, will the services affect your choice of car?] Well, not in that sense. It’s so little one needs to use them, hopefully. If there were other problems than the regular maintenance then you could easily find other repair shops if you’re in a hurry or otherwise can’t get there. But in these cases, when you can book an appointment so much in advance, and when you drive about 15,000km per year, there won’t be a lot of other repairs (E17, DM) I’ve been pretty brand loyal. This is my third or fourth [car brand]. The reason I use this outlet is because it’s the closest brand repair shop (C6, PS)

Affective commitment Low

Respondent description The customer has used several of the dealer’s outlets but cannot say that he perceives any differences between them or that the dealer’s services would be better than those of other brand repair shops. He has had a bad experience at outlet D but feels that services are OK at outlet C, which he now uses. He is satisfied but not ‘‘very satisfied’’ (5D, PS)

Moderate

The family currently owns two cars of the same brand and she has previous experiences of the brand but has only used the focal repair shop for about a year. She has a lot of experience of different repair shops but does not compare them. This repair shop is still new to her and she appreciates the personal service that she gets. She also has a neighbour who works for the dealer. She is very satisfied with the services so far but has always got good service from repair shops of the same brand (E18, D)

High

The customer was impressed at getting a personal mechanic. She would not take her car to anyone else but him. Everything has worked perfectly, she could not ask for anything more from the repair shop. When she bought the car, the seller arranged for her to get it much more quickly than she expected. She does not believe that she would have got the same service anywhere else. She is very satisfied (B24, D) Citations I don’t think that I benefit at all (from being a long-term customer except that I get the magazine with some offers. I don’t believe that I benefit at all (C6, PS)

Relationship benefits Not experienced

Experienced some

Well, what’s positive is that the car is seen to quickly. For example, when I bumped it a bit two years ago I got it into the repair shop quickly, and it was repaired completely. At least I’ve nothing negative to say, you can trust that everything works if it’s at all possible. When I had the accident, it was at a time when it was extremely slippery, which means that they had a lot of work, but they still fitted it in somewhere (D1, PS) Well, one benefit is that now that I’m looking for a new car for my wife, I was in there and greeted the seller and he said ‘‘that car isn’t worth buying’’. They tell you more about what’s worth buying if you want a used car (E16, DM) (continued)

Table II. Examples of construct interpretations 604

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Construct Maybe in future

Trust Calculus-based

Knowledge-based

Examples I’d say that it’s easier to get an appointment compared to some, at least if you really need it. At least that’s the belief I have, but I don’t know what it’s like in practice (A21, DM) Citations Of course you could pay less at a non-brand repair shop, a small workshop, but when you know that they don’t have the right equipment, and not necessarily the knowledge and skill either, you’d rather use a more expensive one. It will be cheaper in practice anyway. Then, the maintenance book is valuable if I want to sell the car, I mean, the buyer will want to know where it’s been serviced (C10, PS) Yes and here it’s quite the opposite [compared to another outlet]. Here they literally take you by the hand and go through all the problems, and then also after the repairs they tell you what they’ve done. Really good, I’ve really appreciated that you know all the time what has happened. . . . And then when you also notice that everything has been done that was supposed to be done, that they don’t pretend. That’s pretty important . . . . I trust them because they inspect the car so thoroughly when it’s taken there and then we negotiate about what should be repaired (D3, PS)

Identification-based Yes it (parent company’s name and reputation) has an effect because when you’re part of the personnel yourself you know that in (the company) they’re extremely obliging towards customers. I’m sure that not many shops or garages would do the kind of things that (the company) does. The customer always comes first there (B24, DM)

Table II.

However, direct mechanics seemed to deliver more consistently good service quality, since negative incidents were observed to be more common in pseudo-relationships. The only four customers who expressed some level of dissatisfaction also had pseudo-relationships. Importance of core service

Relationship benefits. Perceived relationship benefits were almost nonexistent, but customers did not seem to expect them either. Moreover, while the company placed high importance on cutting costs and keeping prices at a moderate level compared with other authorised repair shops, the moderate prices had only been noticed by two customers and most took it for granted that authorised repair shops were expensive. The customers were prepared to pay for authorised repairs and they were satisfied as long as the repair shop was conveniently located, they received a timely appointment, the price estimates held and the car was returned to them on time, and in good condition. In other words, the core service was most important. The overall impression from the interviews was that customers were not involved in after-sales services and were satisfied as long as they did not experience any problems. However, it is possible that positively surprising and delighting customers with relationship benefits would lead to higher commitment.

Marginal influence of generalised trust in parent company

Trust. The marginal influence of generalised trust in the parent company was confirmed in the interviews. Only after prompting did some customers say that it might affect their trust in the repair shop. This weak influence could also be explained by a lack of success in communicating the parent company’s values to the customers. This interpretation was supported by the fact that the only two customers who were certain that its reputation strongly affected their trust in the dealership worked for the parent company

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themselves. They had internalised the company values and were considered to have identification-based trust. Customer trust was found to be latent in most cases (Wilson, 1995) because it was taken for granted and not deliberated on. No major differences were found between customers in the early and later stages of a relationship. Those who had used the repair shop for only one year obviously had less experience of it, but they had generalised trust in authorised-brand repair shops (Johnson and Grayson, 2000). The same kind of trust was also paramount for customers with longer experience of the services. Feelings of uncertainty

Customer vulnerability is enhanced by the fact that only authorised repair shops have access to all technical information on new cars. Furthermore, warranty insurance forces customers to use authorised repair shops, even when they do not see the need for it. As one customer put it: . . . when you have a new car and there are these maintenance programmes, it feels a bit like, do they do anything at all to it? But at least when I’ve asked the boys what’s been done and what’s been checked, they’ve actually done it all. You feel that there really shouldn’t be any need to maintain the car at all yet.

Customers’ lack of ability to judge whether or not a service is necessary, or if a problem should be covered by the warranty or not, leaves them with a feeling of uncertainty or mild distrust. Customers’ generalised trust in authorised repair services was interpreted as a calculus-based type of trust and was related to expectations of future economic benefits by increasing the car’s second-hand value. Types of customer relationships

True-relationship customers. Table III gives sample descriptions of different types of customer relationships. Only four customers were categorised as having some characteristics of a true relationship, but for different reasons. Two worked for the parent company and had therefore internalised its values. The other two had developed knowledge-based trust in the company by using it for a long time and having a personal contact there. One customer had a close relationship with a car salesperson, who knew his needs well and who did special favours for him. He had established the contact before the current dealership took over the outlet and he had also noticed service improvements during the current ownership. The fourth customer was completely committed to the car brand, and only through that to the dealership, where he had a personal mechanic. Spurious-relationship customers. Most customers were categorised as having a spurious relationship with the dealership but there were also considerable differences between them, ranging from dissatisfied customers with very negative experiences to satisfied customers with positive experiences. However, none of them experienced the dealership or car brand as superior to other dealerships or car brands. They used the after-sales services of the focal outlet because it was an authorised-brand repair shop that was conveniently located.

Tolerance of service failure

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Most customers were interpreted as having calculus-based trust. They trusted the competence of the authorised repair shop but they did not show knowledge-based trust characterised by mutual disclosure between the parties (Lewicki and Bunker, 1996). However, contrary to the notions of calculus-based trust described by Lewicki and Bunker, they had a high tolerance of service failure, because of warranty insurance or because they believed that it would raise the second-hand value of their car, or that they would find it easier to sell. JOURNAL OF SERVICES MARKETING, VOL. 16 NO. 7 2002

Customer relationship True relationship High affective commitment, knowledge-based trust, some benefits

High affective commitment, identification-based trust, few relationship benefits

Spurious relationship Moderate-high affective commitment, knowledge-based trust, few or no benefits

Low-moderate affective commitment, calculus-based trust, no benefits

Summary description of sample customers The 39-year old customer owns a three-year old car, which he bought from the focal outlet because it was conveniently located and he was familiar with the outlet and sales persons from before. He’s had much experience from other repair shops through his work and perceives differences in both the car reception and repair. In the past, the focal repair shop also gave impersonal routine service, but this has changed for the better in recent years. He is very satisfied and generally trusts authorised repair services. He has a personal relationship with a car salesman who offers him special treatment benefits for both car sales and repairs The 22-year old customer owns a used car and has no experience of other brand-repair shops. He has used all of this dealer’s outlets and found them to be equally good. The two available service alternatives were not described to him when he bought the car, but he is very satisfied with the services that he receives and feels that he benefits from the relationship because ‘‘when you do business in the same place it becomes almost like a circle of friends’’. He chose the dealership because he works for the parent company and also gets a discount. He doesn’t know if he would get better after-sales services from some other company but he has found that the sales persons of this dealership are much more friendly than those in others. He has every intention of continuing to use the services of this dealership and he will buy his next car from the same company. (B25, PS)

The 72-year old customer has a one-year old car. He has bought cars from this dealer for as long as they have been selling the brand and he is familiar with the company, but he has only used their repair shop for six years. He is completely committed to the car brand, towards which he has nostalgic feelings from his youth, and the repair services do not affect his brand loyalty in any way. He uses the repair shop because it is closest to his home. He is satisfied with his personal DM, whom he has used for six years, but of course services could always be improved. He perceives the DM as good and reliable and has not had any negative experiences. He has not experienced any benefits of being a regular customer The 50-year old customer had bought the five-year old car as used and was satisfied with the repair services. However, he was not aware that the mechanic he used was a personally appointed direct mechanic. He was satisfied with the mechanic and had received good advice from him by phone when he experienced a problem with the car while driving in Europe. He was less satisfied with the fact that the car had broken down and he was still waiting for an answer from the dealership (and manufacturer). He could not think of any relationship benefits that he might have or get by using the same repair shop. He used the repair shop because it was an authorised repair shop (A19, DM) (continued)

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Customer relationship Low affective commitment, calculus-based trust, no benefits

Summary description of sample customers The 39-year old customer owns a two-year-old car and has experiences of other brands. He was very satisfied with the car seller but had experienced some minor problems with the repair shop, which were now forgotten. He was satisfied, but not very satisfied, with the after-sales services. Compared to other brand repair shops he feels that the current dealership sends him less information and has fewer offers. Having a direct mechanic is not important to him and it does not matter to him who maintains his car as long as it is an authorised repair shop, because then you know that you get it back in one piece. He has not experienced any benefits as a regular customer (E12, DM)

Low affective The 36-year old customer has a two-year old car, which she commitment, lack of bought from another dealer. She chose the repair shop because trust, no benefits it was close to her work place. The existing service concepts were not introduced to her. She does not trust the repair shop because she had to bring in her car several times before the fault was discovered, and then they got the wrong spare part and she was still waiting for the car to be repaired. Timetable promises that were made had not been kept and they did not communicate changes to her. She had received some kind of post-purchase satisfaction phone call and put her complaint to the caller, but the company had failed to react. Furthermore, she had needed to explain her problem repeatedly to new service representatives. Although she had considered switching repair shops, it is so conveniently located that she had not done so

Table III.

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No systematic information sharing

The company stores data on car repairs and maintenance, but not on consumers. Direct mechanics may remember customers and their preferences but there is no structure for systematic information sharing. Some customers were interested in improving their communication with the repair shop, while others admitted that they themselves were to blame for the lack of it. When customers pick up their car in the evening the foreman has most probably gone home and there is no one to discuss the car with.

Lack of competition

Customer relationships are not followed up within the company, so there are no records of switching customers. Complaining customers are generously compensated and customer-contact employees are empowered to make personal decisions on compensation, but the system sometimes fails and customers do not get a timely response to their complaints. However, even the four dissatisfied customers were going to continue using the dealer’s after-sales services. They had less trust in the company, but the threshold for switching was high. This is partly due to the current regulation (European Commission, 2001), which allows exclusive territories for car sales and after-sales services. A lack of competition means that customers would often have to travel far if they wished to frequent another authorised dealer. Customers are thereby effectively tied to the dealer and have little incentive to compare the services of different dealers. The lack of individual attention may create spurious customer relationships, but even customers in spurious relationships are likely to stay behaviourally committed to the service for a number of years. JOURNAL OF SERVICES MARKETING, VOL. 16 NO. 7 2002

Product-specific aspects

Discussion Brand-loyalty research suggests that customer relationships may be described along a continuum from spurious to true relationships based on customer commitment, trust and perceived relationship benefits. Trust has generally been considered central to customer relationships and is believed to have a positive influence on the zone of tolerance (Berry, 1999). However, in the focal case, it was not so much trust, as product-specific aspects that increased customer tolerance of failure. Customers are effectively tied to authorised repair shops even without experiencing relationship benefits.

Unique position of car dealers

Customers were found to be highly behaviourally committed to after-sales services but their affective commitment was in most cases interpreted as low or moderate. They were satisfied, but in general perceived no differences between the dealer’s repair shops and the competitors’ services. They had a positive attitude towards the dealer, but could not be said to have a high relative attitude (Dick and Basu, 1994). Furthermore, they experienced no or few relationship benefits by being regular customers. Since service intervals for cars have become increasingly longer, customers have few opportunities to form close relationships with the service personnel, even if they have a personal service representative. Since the company does not store customer data, it is difficult to implement RM strategies for rewarding long-term customers. When the customer buys a new car, the car is entered into a data file, but no data is stored on past behaviour with the previous car. It is difficult to say how the presence of relationship benefits would affect customer commitment for this service provider. The selective and exclusive distribution of cars and the link between sales and services, which the blockexemption provision allows (European Commission, 2001), puts car dealers in a unique position compared to other services. It severely restricts customers’ possibilities to choose between different service companies.

Delight-provoking service

Customers were also found to have a generalised but latent trust in authorised car repair as long as they experienced no major problems. Following Lewicki and Bunker (1996), trust was further classified as calculus-based, knowledge-based and identification-based. Most customers were interpreted as having calculus-based trust. Since customers’ trust in general extended to all authorised repair services, it had no effect on aftersales or car-brand loyalty. On the other hand, it has been observed that few companies are able to deliver the delight-provoking service that is needed to instil high trust and commitment (Berry, 1999; Hart and Johnson, 1999). Thus, companies that are able to delight customers and develop knowledgeand identification-based trust may find a stronger relationship developing between after-sales services and car-brand loyalty. Limitations of the study The study has several limitations. First, the sample of customers is rather small and limited to the context of one dealership. Differences between outlets and service designs make it difficult to draw general conclusions about any of the service concepts. Second, telephone interviews cannot yield the same depth of data as personal interviews. A relationship consists of many service encounters, each of which may affect customers’ overall impression. Although customers answered questions willingly and probes were used, they may still have wanted to keep the interview short by not going into detail. Thirdly, the study only included current customers and no conclusions can be drawn about what effects dissatisfaction with services compared with other brands or any lack of trust may have had on customers who had switched cars and/or after-sales-service providers. Finally,

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interpretations of the constructs are subjective and their validity and interrelationships should be determined in future research. Future research directions A multitude of studies have demonstrated that perceived service quality leads to future repurchase intentions, but research on actual customer commitment and its antecedents is still scarce. Although trust is believed to be imperative for relationship commitment, research results have been mixed. One reason for this may be that different types of trust have not been accounted for. Trust is important, but may lose its effect on future sales if it is latent and generalised. In the absence of other relationship benefits, customers could become more price conscious and switch service providers despite the presence of some form of trust.

610

Importance of trust vs distrust to commitment

Research is also needed on the importance of trust vs distrust to commitment. Customers may trust the after-sales services but distrust the car brand. There is also a lack of research on events that lead to customer distrust. Badly handled complaints or inadequate communication with customers may lead to a lack of trust (Bejou and Palmer, 1998), but little is known of how distrust affects customer commitment and switching behaviour. Although distrust has not been specifically addressed in empirical studies on switching (Keaveney, 1995; Roos, 1999), it is an area in which generalised and process-based distrust could be expected to play an important role. Customers’ tolerance of distrust, and their ability to avoid it or compensate for it within the relationship, are also important areas for future research.

Data mining and personal communication

Furthermore, two-way communication is an important but neglected area of relationship marketing (Gro¨nroos, 2000). Personalised service communication, including information sharing and sensitivity to customer need, is imperative for the development of knowledge-based and identification-based trust, customer satisfaction and commitment. However, employees often lack the necessary skill and motivation to engage in personalised selling and direct communication with individual customers (Sharma and Patterson, 1999; Ford, 1998). Berry (2000) observed that communication is especially important when customers are served by different service representatives each time. Customers in pseudo relationships cannot attain the same level of closeness as those with personal service representatives, but information sharing is still possible. For instance, telecommunication companies are typically characterised by pseudo relationships, but have found that combining data mining with personal communication reduces switching behaviour (Snell, 2000). Data mining gives companies the necessary background information on customer spending and usage patterns, while personal communication is used to find out what problems customers have encountered, and what information they need in order to fully enjoy the service.

Improving company’s profitability

Relationship-marketing efforts should be concentrated on aspects that improve the company’s profitability, and therefore research is needed on the actual effect of improvements in different aspects of service relationships on customer commitment. For example, will an improvement in the trust level have a larger impact on commitment than an improvement in relationship benefits? Can customers be profitably segmented according to relationship proneness and their need for individualised services? In what circumstances does the presence of personal service representatives lead to higher customer commitment, and is it profitable to implement such a relationship-marketing strategy? To conclude, several questions remain to be answered in order to JOURNAL OF SERVICES MARKETING, VOL. 16 NO. 7 2002

promote understanding of different types of customer relationship and the relationship-marketing strategies that will be most successful for increasing customer long-term commitment. Notes 1. Although not discussed further here, strong customer relationships rely on two-way communication, or dialogue (Gro¨nroos, 2000), between customers and the company. Communication is necessary for the company to be able to customise the service offering to the customer’s needs and desires. 2. All the interviews were conducted in Finnish or Swedish and therefore the extracts are not direct citations but translations. They reflect the interviewed person’s words as closely as possible. 3. Customers are numbered 1-34, A-E are service outlets (Table I), DM and PS denote direct mechanic and pseudo-relationships. References Autopolis (2000), ‘‘The natural link between sales and service. An investigation for the competition directorate-general of the European Commission’’, November, available at: www.autopolis.com Barksdale, H.C. Jr, Johnson, J.T. and Suh, M. (1997), ‘‘A relationship maintenance model: a comparison between managed health care and traditional fee-for-service’’, Journal of Business Research, Vol. 40, pp. 237-47. Bejou, D. and Palmer, A. (1998) ‘‘Service failure and loyalty: an exploratory empirical study of airline consumers’’, Journal of Services Marketing, Vol. 12 No. 1, pp. 7-22. Bendapudi, N. and Berry, L.L. (1997), ‘‘Customers’ motivations for maintaining relationships with service providers’’, Journal of Retailing, Vol. 73 No. 1, pp. 15-37. Berry, L.L. (1999), Discovering the Soul of Service, The Free Press, New York, NY. Berry, L.L. (2000), ‘‘Relationship marketing of services – growing interest, emerging perspectives’’ (reprint from Academy of Marketing Science (1995)), in Sheth, J.N. and Parvatiyar, A. (Eds), Handbook of Relationship Marketing, Sage Publications, London, pp. 149-70. Bigley, G.A. and Pearce, J.L. (1998), ‘‘Straining for shared meaning in organisation science: problems of trust and distrust’’, Academy of Management Review, Vol. 23 No. 3, pp. 405-21. Bitner, M.J. (1995), ‘‘Relationship marketing: it’s all about promises’’, Journal of the Academy of Marketing Science, Vol. 23 No. 4, Fall, pp. 246-51. Bloemer, J.M.M. and Kasper, H.D.P. (1995), ‘‘The complex relationship between consumer satisfaction and brand loyalty’’, Journal of Economic Psychology, Vol. 16, pp. 311-29. Colgate, M.R. and Danaher. P.J. (2000), ‘‘Implementing a customer relationship strategy: the asymmetric impact of poor versus excellent execution’’, Academy of Marketing Science, Vol. 28 No 3, Summer, pp. 375-87. de Wulf, K. and Odekerken-Schro¨der, G. (2001), ‘‘A critical review of theories underlying relationship marketing in the context of explaining consumer relationships’’, Journal for the Theory of Social Behaviour, Vol. 31 No. 1, March, pp. 73-102. Dick, A.S. and Basu, K. (1994), ‘‘Customer loyalty: toward an integrated conceptual framework’’, Journal of the Academy of Marketing Science, Vol. 22 No. 2, pp. 99-113. Doney, P.M. and Cannon, J.P. (1997), ‘‘An examination of the nature of trust in buyer-seller relationships’’, Journal of Marketing, Vol. 61, April, pp. 35-51. European Commission (2001), Report on the Evaluation of Regulation (EC) No 1475/95 on the Application of Article 85(3) of the Treaty to Certain Categories of Motor Vehicle Distribution and Servicing Agreements, available at: http://europa.eu.int/comm/ competition/ car_sector/ distribution/eval_reg_1475_95/report/en.pdf Ford, W.S.Z. (1998), Communicating with Customers: Service Approaches, Ethics, and Impact, Sage Publications, London. Fournier, S., Dobscha, S. and Mick, D.G. (1998), ‘‘Preventing the premature death of relationship marketing’’, Harvard Business Review, Vol. 76 No 1, January-February, pp. 42-51. Garbarino, E. and Johnson, M.S. (1999), ‘‘The different roles of satisfaction, trust, and commitment in consumer relationships’’, Journal of Marketing, Vol. 63, April, pp. 70-87. JOURNAL OF SERVICES MARKETING, VOL. 16 NO. 7 2002

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Grayson, K. and Ambler, T. (1999), ‘‘The dark side of long-term relationships in marketing services’’, Journal of Marketing Research, Vol. 36, February, pp. 132-41. Gro¨nroos, C. (1996), ‘‘The rise and fall of modern marketing – and its rebirth’’, in Shaw, S.A. and Hood, N. (Eds), Innovation and Change. Essays in Honour of Michael J. Baker, Macmillan, New York, NY, pp. 14-35. Gro¨nroos, C. (2000), ‘‘Relationship marketing: the Nordic School perspective’’, in Sheth, J.N. and Parvatiyar, A. (Eds), Handbook of Relationship Marketing, Sage Publications, London, pp. 95-118. Gutek, B.A., Bhappu, A.D., Liao-Troth, M.A. and Cherry, B. (1999), ‘‘Distinguishing between service relationships and encounters’’, Journal of Applied Psychology, Vol. 84 No. 2, pp. 218-33. Gutek, B.A., Cherry, B., Bhappu, A.D., Schneider, S. and Woolf, L. (2000), ‘‘Features of service relationships and encounters’’, Work and Occupations, Vol. 27 No 3, August, pp. 319-52. Gwinner, K.P., Gremler, D.D. and Bitner, M.J. (1998), ‘‘Relational benefits in service industries: the consumer’s perspective’’, Journal of the Academy of Marketing Science, Vol. 26 No. 2, pp. 101-14. Halinen, A. (1996), Relationship Marketing in Professional Services. A Study of Agency-Client Dynamics in the Advertising Sector, Routledge, London. Hart, C.W. and Johnson, M.D. (1999), ‘‘Growing the trust relationship’’, Marketing Management, Vol. 8 No. 1, Spring, pp. 9-19. Hennig-Thorau, T., Gwinner, K.P. and Gremler, D.D. (2000), ‘‘Why customers build relationships with companies – and why not’’, in Hennig-Thurau, T. and Hansen, U. (Eds), Relationship Marketing: Gaining Competitive Advantage through Customer Satisfaction and Customer Retention, Springer Verlag, Berlin, pp. 369-91. Jacoby, J. and Chestnut, R.W. (1978), Brand Loyalty Measurement and Management, John Wiley & Sons, New York, NY. Johnson, D.S. and Grayson, K. (2000), ‘‘Sources and dimensions of trust in service relationships’’, in Swartz, T.A. and Iacobucci, D. (Eds), Handbook of Services Marketing and Management, Sage Publications, London, pp. 357-70. Keaveney, S.M. (1995), ‘‘Customer switching behavior in service industries: an exploratory study’’, Journal of Marketing, Vol. 59, April, pp. 71-82. Lewicki, R.J. and Bunker, B.B. (1996), ‘‘Developing and maintaining trust in work relationships’’, in Kramer, R.M. and Tyler, T.R. (Eds), Trust in Organizations. Frontiers of Theory and Research, Sage Publications, London, pp. 114-39. Lewicki, R.J., McAllister, D.J. and Bies, R.J. (1998), ‘‘Trust and distrust: new relationships and realities’’, Academy of Management Review, Vol. 23 No. 3, pp. 438-58. Liljander, V. and Strandvik, T. (1995), ‘‘The nature of customer relationships in services’’, in Swartz, T.A., Bowen, D.E. and Brown, S.W. (Eds), Advances in Services Marketing and Management. Research and Practice, Vol. 4, JAI Press Inc., London, pp. 141-67. Lincoln, Y.S. and Guba, E.G. (1985), Naturalistic Inquiry, Sage Publications, London. Morgan, R.M. and Hunt, S.D. (1994), ‘‘The commitment-trust theory of relationship marketing’’, Journal of Marketing, Vol. 58, July, pp. 1-38. Odekerken-Schro¨der, G. (1999), ‘‘The role of the buyer in affecting buyer-seller relationships. Empirical studies in a retail context’’, doctoral dissertation, Maastricht University, Maastricht. Oliver, R.L. (1999), ‘‘Whence consumer loyalty’’, Journal of Marketing, Vol. 63 (special issue), pp. 33-44. Patton, M.Q. (1990), Qualitative Evaluation and Research Methods, 2nd ed., Sage Publications, London. Ravald, A. and Gro¨nroos, C. (1996), ‘‘The value concept and relationship marketing’’, European Journal of Marketing, Vol. 30 No. 2, pp. 19-30. Roos, I. (1999), ‘‘Switching processes in customer relationships’’, Journal of Service Research, Vol. 2 No. 1, August, pp. 376-93. Rust, R.T. and Oliver, R.L. (2000), ‘‘Should we delight the customer’’, Journal of Academy of Marketing Science, Vol. 28 No. 1, pp. 86-94. 612

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Sharma, N. and Patterson, P.G. (1999), ‘‘The impact of communication effectiveness and service quality on relationship commitment in consumer, professional services’’, The Journal of Services Marketing, Vol. 13 No. 2, pp. 151-70. Sheaves, D.E. and Barnes, J.G. (1996), ‘‘The fundamentals of relationships: an exploration of the concept to guide marketing implementation’’, in Swartz, T.A., Bowen, D.E. and Brown, S.W. (Eds), Advances in Services Marketing and Management. Research and Practice, Vol. 5, JAI Press Inc, London, pp. 215-45. Sheth, J.N. and Parvatiyar, A. (2000), ‘‘Relationship marketing in consumer markets’’, in Sheth, J.N. and Parvatiyar, A. (Eds), Handbook of Relationship Marketing, Sage Publications, London, pp. 171-208. Singh, J. and Sirdeshmukh, D. (2000), ‘‘Agency and trust mechanisms in consumer satisfaction and loyalty judgments’’, Journal of Academy of Marketing Science, Vol. 28 No. 1, pp. 150-67. Snell, R. (2000), ‘‘Keeping the customer. New technology is helping phone companies battle one of their biggest problems: high turnover’’, Wall Street Journal Europe, 19 September. Surprenant, C.F. and Solomon, M.R. (1987), ‘‘Predictability and personalization in the service encounter’’, Journal of Marketing, Vol. 51, April, pp. 86-96. Tax, S.S., Brown, S.W. and Chandrashekaran, M. (1998), ‘‘Consumer evaluations of service complaint experiences: implication for relationship marketing’’, Journal of Marketing, Vol. 62, April, pp. 60-76. White, S.S. and Schneider, B. (2000), ‘‘Climbing the commitment ladder. The role of expectations on customers’ behavioral intentions’’, Journal of Service Research, Vol. 2 No. 3, February, pp. 240-53. Wilson, D.T. (1995), ‘‘An integrated model of buyer-seller relationships’’, Journal of the Academy of Marketing Science, Vol. 23 No. 4, Fall, pp. 335-45.

Appendix. Background to the two service concepts Historical background The reasons for offering different service concepts both within and between the five outlets are to be found in the dealership’s historical development. From its creation, the first outlet served customers according to the direct-mechanic concept, and this system was also implemented in new outlets. During the recession at the beginning of the 1990s, the dealership found it easy to hire good mechanics who were willing to work directly with customers. The recession hit many dealers hard and the company was able to expand by acquiring other outlets. At that point, several factors affected the development of the concepts. First, the mechanics at the newly-acquired repair shops were not willing to work as direct mechanics. Second, car sales had started to pick up and it was now much harder to take on new skilled mechanics for additional direct customer interaction. Third, the appointed managers felt that the new premises were not suitable for the direct-mechanic concept, and fourthly, new instructions from the car manufacturer forced the company to implement pseudo relationships in its dealings with customers. Specifically, the car manufacturer wanted all warranty repairs to be decided on by an authorised foreman. At the time of the study, four of the five outlets had implemented this strategy, either as the only service concept or as an additional concept. As a result, no two outlets offer exactly the same service relationships to customers.

Efficient and/or personal service? Surprenant and Solomon (1987) suggest that companies might have to choose between efficient and personalised services. This certainly seems to apply to the focal company. Direct mechanics offer personal services but the combination of foremen and ‘‘anonymous’’ mechanics is unanimously believed to be the most efficient system within the company, based on how many cars are repaired per day. The mechanics’ time can be used more efficiently when a foreman divides the work between them, and they can concentrate on maintenance and repair. However, the dealer has also implemented a service concept that offers more personal contact between customers and foremen than the manufacturer’s guidelines demand. The new service is offered by three of the outlets where customers are encouraged to look at the car together with the foreman. However, only the two newest outlets (C and D) have been specifically designed for this purpose. Fifteen minutes are allocated to each customer, during which the foreman receives the car, looks at it with the customer and gives a price estimate. Each customer is given an exact time for an appointment and encouraged to keep the time. However, one problem has been that the customers are so used to the old system of simply leaving their JOURNAL OF SERVICES MARKETING, VOL. 16 NO. 7 2002

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keys that they do not understand the importance of keeping the appointed time. As some employees said, people would not arrive late for a dentist’s appointment, but they are not used to keeping appointments at repair shops. The same problem was also observed with new customers of direct mechanics. Since all the appointments could not be fitted into the early morning, some customers prefer to leave their keys at the reception desk. Although this service is more personal than just leaving the keys, it is not as personal as having a DM. When a foreman spends 10-15 minutes with a customer and his/her car, it does not follow that he remembers them the next time he sees them, and normally he does not. If a customer does not ask for one specific foreman, he/she will get anyone who is available. Therefore, the relationships between customers and foremen tend to be shallow. A direct mechanic spends much more time with the cars and customers. He may not remember all of the customers, but he tends to remember the car, sometimes as soon as he hears its registration number. However, the company can only offer direct mechanics if they find people who are willing to do the job, and this has become more difficult in recent years. All mechanics who work as DMs do it because they like it, but not every mechanic wants to deal directly with customers. On the other hand, the turnover of mechanics is almost non-existent and new ones are needed only when the business expands. Mechanics normally leave either when they retire or because they switch to another outlet within the company.

&

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An executive summary for managers and executive readers can be found at the end of this issue

Building customer relationships: an inventory of service providers’ objectives and practices Cindy Claycomb W. Frank Barton School of Business, Wichita State University, Wichita, Kansas, USA

Charles L. Martin W. Frank Barton School of Business, Wichita State University, Wichita, Kansas, USA

Keywords Relationship marketing, Customer satisfaction, Service Abstract A study of 205 US commercial service providers, representing 31 two-digit SIC codes, identified companies’ customer relationship-building objectives and practices. Of 42 possible relationship-building objectives, the four rated as top priorities were: encouraging customers to think of the firm first when considering a purchase; providing better service; encouraging customers to speak favorably about the firm; and encouraging customers to trust the firm. Answers to open-ended, exploratory questions revealed 18 categories of relationship-building initiatives. The findings suggest that ‘‘customer relationshipbuilding’’ means different things to different people and that practices to build such relationships vary considerably. By inventorying the range of relationship-building objectives, quantifying their priority levels, and identifying specific practices used to build customer relationships, a greater understanding of current practices was achieved. Thus, the findings promise to benefit researchers, practitioners and consumers in terms of knowledge development, prescriptions for success, and enhanced value and satisfaction, respectively.

Customer-seller exchanges

Introduction The study and practice of customer-seller exchanges have undergone major changes in the field of marketing. Historically, the exchanges were often viewed as arm’s length and adversarial, pitting the customer against the seller in a battle in which each sought to maximize immediate returns, while minimizing costs. Growing a business was thought of in terms of acquiring new customers with aggressive marketing and sales efforts, by offering new goods and services that appealed to a different target market, or by expanding geographically with additional locations. The perspective that gained momentum in the 1980s, however, was that, if marketing exchanges were developed into long-term, mutually satisfying relationships between customers and firms, this could be a strategic asset for companies (Webster, 1992). The interest in ‘‘relationship marketing’’ has continued through the 1990s and into the new millennium, prompting Research for this paper was partially funded by Wichita State University through the Department of Marketing and Entrepreneuship and a W. Frank Barton School of Business summer research grant. This paper was originally reviewed and accepted by Marketing Intelligence & Planning. It was published in Vol. 19 No. 6, 2001. This is a reprint of that article. The research register for this journal is available at http://www.emeraldinsight.com/researchregisters The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0887-6045.htm

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prominent marketing scholars to dub the movement as a ‘‘paradigm shift’’ (Gro¨nroos, 1994; Kotler, 1991, 1995) and leading one team of textbook authors to conclude that no other marketing topic has been written about as much during the 1990s (Mowen and Minor, 1998). Tremendous growth opportunity

The new paradigm asserts that astute marketers should view existing customers as a tremendous growth opportunity. Today, these customer-seller relationships are recognized as pervasive, inescapable and highly interdependent, with ties between consumers and businesses vital to the interests of both parties. Consumers benefit in terms of enhanced value, better quality, and increased satisfaction with their purchases (US Department of Commerce, 1994; File and Prince, 1993), while firms benefit from greater sales volumes, better operating efficiencies, positive word-ofmouth publicity, improved customer feedback, and decreased marketing expenses (Buttle, 1996; Reichheld and Sasser, 1990; Vavra, 1992).

Relationship marketing perspective

The relationship marketing perspective provides the basis for the study of building and enhancing relationships with customers, whether it is couched in terms of customer/client/guest/patient relations, customer retention, relationship marketing, relationship management, goodwill, customer loyalty, partnering, after-marketing, defensive marketing, or something else. Whatever it is called, the outcome is the recognition that stronger relationships with customers result in a number of competitive advantages. Despite the growing volume of literature in support of relationship building and the espoused (anecdotal) stories by its proponents, marketing ‘‘relationship’’ concepts seem to mean different things to different writers and to different practitioners (Duffy, 1998; Harker, 1999). Depending on the individual, ‘‘building customer relationships’’ can imply something about interdependencies or mutual interests, repeat patronage, loyalty, emotional sentiments (‘‘warm fuzzies’’), personalized treatment, interpersonal rapport, targeted ‘‘one-to-one’’ communications, after-sale service, customer satisfaction, word-of-mouth, or doing something long-term, to name a few. In other words, the practices of building customer relationships are interwoven with the consequences of those relationships, because it is not precisely clear just what a ‘‘relationship’’ with a customer is. Not surprisingly, little research has been conducted to find out what ‘‘relationship building’’ means in a services marketing context or what service firms systematically do to build relationships with customers. An inventory of relationship-building objectives and practices is needed to sharpen the discussion and evaluate the arsenal of relationship marketing practices currently in use. In short, the purpose of this article is to investigate what relationship-building means to practitioners and what they do to build relationships with customers.

Benefits of ongoing relationship

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Background In recent years, an increasing number of businesses have recognized the benefits of establishing and nurturing ongoing relationships with their customers. Many have begun to shift their emphasis from discrete transactions toward shaping longer-term, mutually beneficial exchange relationships. Often referred to as ‘‘relationship marketing’’ or ‘‘relationship management,’’ the foundation of this rapidly emerging business philosophy is the belief that strengthening ties with existing customers heightens customer satisfaction and businesses’ abilities to serve customers. This avoids the high costs both parties might otherwise experience in the search for new, acceptable exchange partners. Thus, one-shot purchase transactions JOURNAL OF SERVICES MARKETING, VOL. 16 NO. 7 2002

with limited profitability are transformed into continuous strings of repeat purchases with potential for greater long-term profitability (Arndt, 1979; Dwyer et al., 1987; Jackson, 1985; Levitt, 1986; Reichheld and Sasser, 1990; Sheth and Parvatiyar, 1995; Vavra, 1992). Value of relationships in service sector

The value of customer relationships is particularly noteworthy in the service sector, for a variety of reasons. First, because services are intangible, customers often have little to evaluate prior to making a purchase commitment. The service provider may be the most tangible aspect of the service and, in the eyes of customers, may be equated with the service itself. Customers’ perceptions of the quality of the relationship with the service provider may be commensurate with the quality of the service itself. Second, the difficulty of evaluating services prior to making purchase commitments often means that customers must rely on the credibility of service providers and their prior experiences with them to understand whether the promised service will meet their expectations. That is, customers generally do not purchase services, per se, but promises of services. A strong, healthy relationship between customers and service providers engenders the trust that is necessary for customers to commit to the service. Similarly, because it is often not possible to remove defective services before they reach customers, a strong relationship often helps to recover from inevitable mishaps. Customers trust service providers to take whatever corrective actions are necessary to ensure quality service and preserve the relationship. Next, the production of many services requires that customers and service providers interact with one another. Professional services, in particular, require a high degree of interaction. If rapport fails to materialize or if the relationship is otherwise strained, the quality of the interaction and the resulting service can suffer. Finally, many services are somewhat discretionary in the sense that customers can perform them themselves. For example, do-it-yourselfers often tackle their own income tax preparation, housework, lawnwork, and auto repair rather than seek the help of professionals. When customer relationships are strong, however, customers may be less inclined to perform the services themselves and may be quite hesitant to ‘‘fire’’ service providers they like and trust. For all of these reasons, customer relationships are critical to the success of service firms.

Increasing profitability of customer

In an analysis of over 100 service companies, Reichheld and Sasser (1990) confirmed the value of customer relationships in the service sector. They found that, the longer a customer stays with a firm, the more profitable the relationship to the firm. In all cases in the study, the profitability of the customer increased substantially in the second year and the years thereafter. Specifically, customer purchases rose and company operating costs (associated with establishing and servicing new customers and accounts) declined after the first year. Although Reichheld and Sasser found that the typical service firm loses about 20 per cent of its customers annually, those that can decrease their customer defection rates by 5 per cent (e.g. from 20 to 15 per cent) could increase their profits from 25 to 85 per cent, depending on the type of company. These revealing findings have prompted service companies to develop and implement marketing efforts aimed at establishing and strengthening ties with customers. The study Our investigation attempted to understand what customer relationshipbuilding means to service providers and what practices/programs service organizations use to develop and maintain relationships with customers. Data reported here are based on the ratings and comments offered by 205

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marketing managers in response to three duplicate waves of a mail survey sent to 1,100 potential respondents (19 per cent response rate). The respondents represent 205 commercial service firms from throughout the USA and from 31 two-digit SIC codes. Priority level

One part of the survey asked respondents to rate their priority level of 42 possible objectives for building customer relationships. The list was gleaned from an extensive literature review of more than 300 trade articles describing anecdotal accounts of relationship-building practices and a series of qualitative personal interviews with 83 service providers. Another part of the survey was much more exploratory, using an open-ended question to ask respondents to list and describe the customer relationshipbuilding practices they used in their organizations. Here, our research goal was not to quantify precisely the frequency with which each practice is used, but to identify the range of practices that tend to be top-of-mind and likely formalized within the surveyed organizations. Therefore, the findings should be interpreted with some degree of caution, recognizing that most surveyed firms probably utilize more relationship-building practices than those they articulated (this limitation is discussed further in the ‘‘Conclusions’’ section). Research findings and discussion Relationship-building objectives Learning what service providers’ specific objectives are for ‘‘building customer relationships’’ provides some indication of what the phrase means to them, and leads to potentially valuable insights as to their motivations for doing what they do to build customer relationships. Consequently, respondents were asked to rate 42 possible objectives on a scale ranging from one (‘‘very high or top priority’’) to seven (‘‘not a priority at all’’). Rankings, mean ratings, and standard deviations are listed in Table I.

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Wisdom of building relationships

Although the ratings clearly suggest that building relationships with customers means different things to different marketing managers, it is equally clear that very few of the respondents would question the wisdom of doing so. The respondents viewed the potency of relationship-building as multifaceted, capable of addressing an array of desirable marketing and service objectives. Recognizing the broad potential of relationshipbuilding, it is not surprising that no full consensus emerged. Still, more than 80 per cent of the respondents assigned high priorities (i.e. rating of one or two) to the first seven objectives listed in Table I. These seven items indicate that most marketing managers expect relationship-building programs to improve customers’ memory of the business, enhance customer service, increase the likelihood of customers spreading positive word-of-mouth about the company, build customer trust in the company, and enhance customers’ perceived value and enjoyment of conducting business with the firm.

Categories of initiatives

Relationship-building practices. Our next step in the study was to identify practices used by firms to establish and nurture relationships with customers. Although our efforts to inventory the range of relationship-building practices used by service providers resulted in a list of more than 900 specific tactics and myriad hybrid combinations, the multitude of practices was collapsed into 18 categories of initiatives – most having to do with the relationship between customers and the organizational entity as a whole, between customers and contact personnel, or between customers and products (as shown in Figure 1). A smaller number of service providers commented on the importance of relationship linkages between the organization and JOURNAL OF SERVICES MARKETING, VOL. 16 NO. 7 2002

Ranking 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

30 31

Objective Encourage our customers to think of us first when considering a purchase Provide better service to our customers Encourage our customers to speak favorably about us Encourage our customers to trust us Encourage our customers to enjoy doing business with us Add value to what our customers receive from us Encourage our customers to refer prospective customers to us Help our customers to feel appreciated for doing business with us Encourage our customers to be honest with us Encourage our customers to purchase a wider range of our products and services Make our business more appealing to prospective customers Encourage our customers to buy more frequently from us Encourage our customers to buy in greater volume from us Encourage our customers to appreciate the quality of our products and services Encourage our customers to buy solely from us, and not from our competitors Help our customers to be better informed about our company Help our customers to feel welcome in our facility Help our customers to be more effective partners when working with us Encourage our customers to enjoy interacting with our employees Give us the opportunity to learn more about our customers Encourage our customers to be receptive to trying new products and services Help our customers to know what to expect from us Encourage our customers to cooperate with us Encourage our customers to communicate more frequently with us Encourage our customers to communicate more frankly with us Encourage our customers to accept changes in our prices Encourage our customers to be more dependent upon us Encourage our customers to view us as a socially responsible company Encourage our customers to understand our business well enough so that they may offer feasible suggestions for improvement Discourage our customers from being too pricesensitive Encourage our customers to pay closer attention to our promotional messages

Mean

Standard deviation

1.71 1.75 1.80 1.84

1.39 1.29 1.42 1.47

1.89 1.96

1.36 1.36

2.01

1.46

2.14 2.23

1.41 1.46

2.28

1.58

2.32

1.53

2.35

1.57

2.43

1.62

2.45

1.45

2.48

1.48

2.50 2.55

1.37 1.94

2.60

1.48

2.61

1.51

2.68

1.41

2.78 2.80 2.86

1.58 1.33 1.53

2.98

1.34

2.98

1.48

3.06

1.41

3.09

1.55

3.12

1.78

3.34

1.69

3.40

1.66

3.44

1.62 (continued)

Table I. Descriptive statistics for objectives for establishing and nurturing relationships with customers JOURNAL OF SERVICES MARKETING, VOL. 16 NO. 7 2002

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Ranking

Objective

32

Encourage our customers to accept changes in our operating policies and procedures Encourage our customers to forgive us for our occasional mistakes Encourage our customers to upgrade to our premium line of products and services Encourage our customers to be friendly to our employees Encourage our customers to be patient Discourage our customers from comparing us with competitors Encourage our customers to play more active roles in providing portions of the service themselves Encourage our customers to interact well with other customers on the premises Encourage our customers to help acclimatize other customers to our facility Decrease our reliance upon new customers Encourage our customers to spend more time in the business facility

33 34 35 36 37 38 39 40 41 42

Mean

Standard deviation

3.49

1.57

3.51

1.72

3.67

1.88

3.78 3.78

1.75 1.62

4.24

1.72

4.31

1.78

4.33

2.07

4.59 4.70

1.92 1.82

5.07

1.70

Notes: 1 = ‘‘very high or top priority’’, 7 = ‘‘not a priority at all’’; n = 205

Table I.

customer-contact personnel, suggesting that employees are likely to treat customers the way they are treated by the organization. A few mentioned tactics or programs pertaining to the relationships between customers and other customers, recognizing that customers can influence the service expectations, experiences, and evaluations of other customers. These 18 categories of relationship-building practices are described in greater detail in the sections that follow, beginning with those that were most frequently mentioned and proceeding to those less frequently mentioned.

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Avoiding lengthy gaps in contact

Continuity of communications. Most service providers seem to subscribe to the principle that customers remember organizations that remember them. Thus, the most popular relationship-building practice seems to be the avoidance of extended periods of time during which customers are not contacted (Furlong, 1993; Lindgreen and Crawford, 1999). This was mentioned by more than 50 per cent of the survey respondents. The types of contacts mentioned varied greatly and involved both personal and non-personal media. Examples include the following: company newsletters to keep customers informed about updated capabilities, new products, new people, marketing trends, etc.; regularly scheduled personal letters and telephone calls; targeted direct mailers; management and sales representatives in the field calling on customers; mass media advertising designed to stimulate telephone calls about the firm’s offerings; open houses for clients; attendance at trade shows and conferences in which clients participate; and quarterly and annual user conferences.

Organisation as a valuable resource

In addition to keeping the service organization ‘‘top-of-mind,’’ ongoing contact with customers positions the organization as a valuable resource for them, and as a leader ready to serve and convenient to contact. The longer the typical time period between purchase and repurchase, the more important contact between sales seems to be. However, enhancing the effectiveness of the communications seems to involve more than just frequency per se. Several service providers recognized the importance of communications JOURNAL OF SERVICES MARKETING, VOL. 16 NO. 7 2002

Figure 1. Customer relationship-building practices and linkages

between sales efforts, for example: ‘‘Customers get tired of seeing us if the only time they do is when we want to make a sales pitch.’’ Relationshipbuilding contacts involve following up on past sales to ensure that promised benefits have materialized, checking to see if customers’ needs, interests or circumstances have changed, recognizing important events or celebrations in customers’ lives (e.g. birthday and anniversary cards), passing along helpful information, or just saying ‘‘hello.’’ Making communications meaningful

Another key to enhancing the impact of continuous communications is to make them meaningful to customers. Creative hype may catch prospects’ attention and entice them into a relationship, but helpful information nurtures the relationship and further enhances the credibility of the service provider (Fisher, 1998). Newsletter proponents in particular subscribed to this philosophy. Finally, a number of service providers believed that the effectiveness of the communications is enhanced when the process is interactive (Murphy, 1996). Obviously, personal contact lends itself to engaging customers in dialogue, but less personal forms of communication can invite interactivity too. For

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example, newsletters, direct mail pieces, and trade advertisements can express the company’s willingness to respond to customers’ questions, encourage customers to fill out reply cards to receive additional information or surveys to help the company assess customer needs, invite customers to call or visit their store, log-on to the company’s Web site, and so on. Improving service performance

Service quality. Although promises of quality may attract customers, service providers frequently expressed the belief that delivery of quality is essential to building and maintaining customer relationships. Delivering on promises is the essence of mutually satisfying service relationships (Bitner, 1995). Service quality refers to the consistency with which customers’ expectations are met and the general superiority of the service relative to that of the competition (Gilpin, 1996). Accordingly, this initiative includes any practices focused on identifying what services and service attributes customers want (doing the right things) and providing them to customers’ satisfaction and better than the competition (doing things right). Comments referring to efforts to raise standards and improve service performance, listening to customers’ preferences, and ensuring that customers’ requirements are met are included in this category. Some of the quality initiatives mentioned dealt more with the technical aspects of quality (‘‘what’’ is delivered), while others were more relevant to the personal aspects of service delivery (‘‘how’’ it is delivered) (Gro¨nroos, 1994).

Consistent, fair and reliable service

Clearly, if a service organization cannot consistently satisfy customers’ expectations better than the competition, other aspects of a relationshipbuilding program are likely to accomplish little (Pine et al., 1995). As such, over 45 per cent of the survey respondents identified a service quality relationship-building practice. Respondents said that providing friendly, professional, courteous service that was consistent, fair and reliable is one of the best ways to establish and maintain customer relationships. This is exemplified by making on-time deliveries, supplying a wide range of goods and services, having a knowledgeable staff, and providing technical competence. Service quality also includes listening to customers – knowing the market and understanding customers’ needs. The most common method associated with listening to customers was some form of gathering customers’ ideas (e.g. telephone and mail surveys, focus groups, comment cards, advisory groups). Finally, consistently meeting customers’ expectations includes responses focusing on providing high quality goods and services. About one-quarter of the respondents using service quality practices found that top management must support these practices and gain widespread cooperation throughout the firm to successfully implement the service quality initiative.

Each customer treated as unique

Personalization. Personalization refers to the customization of some aspect of the service or its delivery, treating each customer as a unique individual with a unique set of service requirements – thereby creating unique fits between customers and services (Goldsmith, 1999). As such, personalization initiatives provide direct linkages between customers and service personnel and between customers and services themselves. Of the survey respondents, 45 per cent identified personalization practices as part of their relationshipbuilding programs. Of those, over one-quarter identified personalization as one of their most successful relationship-building initiatives used. Interestingly, personalization practices were recognized on three different levels – interpersonally, operationally, and organizationally. Examples of interpersonal aspects include learning and using customers’ names, building rapport by encouraging face-to-face contact between employees and

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customers, ‘‘getting to know’’ customers in informal social settings, and acknowledging customers’ backgrounds and achievements (Fisher, 1998). The operational level involves efforts to obtain a detailed knowledge of customers’ processes and requirements. This allows the service firm to provide unique ideas to help their clients. Additionally, employees are empowered to deviate from rigid procedures when serving customers who have special needs or unique requests (Bowen and Lawler, 1995; Ledford et al., 1995). At the organizational level, respondents said that their firms assigned employees the responsibility of serving specific customers (e.g. as personal bankers or project managers) rather than assign the responsibility of performing specific tasks. This encourages close personal relationships between the firm’s representatives and the customer. Although many aspects of personalization hinge on the interpersonal skills and enthusiasm of individual service providers, the choice to employ it is not entirely an individual decision. Rather, full implementation requires top management to structure organizationally the firm in order to assign employees the responsibility of serving specific customers, and to empower employees to treat each customer as a unique individual. Personalization efforts require widespread cooperation, as employees must work together to serve customers rather than focus on performing individually assigned tasks. Memorable experience for customers

Service differentiation and augmentation. Service differentiation means enhancing perceived value by providing services or service attributes not provided by the competition. The closely related concept of service augmentation involves giving customers something extra (Gilpin, 1996). If points of differentiation and augmentation are meaningful to customers, their perceptions of value are enhanced (Duffy, 1998; Shaw, 1996). Also, some competitive advantages are gained. The idea is essentially to eliminate competition by meaningfully differentiating the company’s goods and services to the point where, in the customer’s mind, other companies’ offerings are not comparable. This means that firms need to make the customer’s experience more memorable than the competition. This is usually something customers appreciate but do not necessarily expect (Fisher, 1998). Almost 40 per cent of the surveyed respondents identified service differentiation or augmentation practices. They commented on: .

[being] creative in what we do;

.

developing a niche;

.

offering services exclusive to us; and so on.

In addition, survey respondents identified practices that had to do with giving customers something extra in the form of ‘‘give-aways’’ such as sales promotions (i.e. sponsoring workshops and seminars of interest to customers, giving away gifts and trinkets, providing free training), entertainment (e.g. hosting breakfast, taking customers to lunch or sporting events), and affinity clubs (e.g. establishing senior clubs that offer travel opportunities). These practices were noted by almost 20 per cent of those using them as requiring top management support and being dependent upon employee cooperation. Building additional value

Many of the personal interviews revealed a more generalized interest in building additional value in the service on a day-to-day basis – for example, by augmenting the service with warranties, maintenance checks, telephone helplines, and miscellaneous amenities such as restaurants that provide free after-dinner mints or sport medicine clinics that provide tips sheets to help injured patients treat themselves. Obviously, the success of

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this type of differentiation through augmentation depends on whether the augmentation is perceived as such and is truly valued by customers. The added value should exceed the added cost of providing it. Other considerations include: Can the augmentation be easily and quickly duplicated by competitors? How likely is the ‘‘augmentation’’ to become a customer expectation? If likely, is the firm prepared to retain the augmentation permanently or face disgruntled customers when it is removed? Evoking emotional responses

Affective engineering. Affective engineering is the label we assigned to a range of efforts designed with the intention of evoking customers’ emotional responses to make them feel good about the company and otherwise warm and cosy in the relationship with the firm. Research suggests that customers’ affective commitment (i.e. emotional attachment to the service provider) is positively related to their willingness to remain in a relationship with a service provider (Shemwell et al., 1994). More than 20 per cent of the surveyed respondents identified practices that included community and civic events involvement, monetary sponsorship of community events, employee volunteerism, image advertising, and cause-related advertising as part of their relationship-building programs. Involvement in community events and support for charitable organizations or social causes can generate favorable media publicity and word-of-mouth, thereby helping to position firms positively in their communities – as good corporate citizens interested in giving back to the communities that support them. Image-related or ‘‘feel good’’ advertising frequently avoids rational appeals altogether (Alreck and Settle, 1999), for example, omitting any information about price or product attributes. Instead such advertising tends to engineer affect through associations between the business (or its products, employees, or good deeds) and family values, patriotic themes, holidays, nostalgic memories, and other emotionally laden contexts.

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Vital role of employees

Employee relations. Employee relations refer to relationship-building practices designed to support the frontline employees who serve customers. About one of every six surveyed respondents mentioned some aspect of employee relations as part of their relationship-building practices. Most of the references were to well-trained employees. While this may be a broad or indirect view of customer relationship-building, it recognizes the vital role that employees play in the service delivery and relationship-building processes. Labor-intensive service firms that invest the necessary time, money and effort to recruit, train, equip and motivate their customer-contact employees are likely to enjoy stronger relationships with customers than those that fail to establish frontline employees as a top priority (Gilpin, 1996; Lindgreen and Crawford, 1999).

Importance of internal marketing

Not surprisingly, almost one-half of the firms using employee relations practices found them to be dependent upon employee cooperation and widespread cooperation throughout the firm. This recognition emphasizes the importance of internal marketing – a philosophy that views employees as internal customers who consume the roles and responsibilities of their jobs (Frost and Kumar, 2000; Gro¨nroos, 1981). The philosophy is based on the intuitive notion that frontline employees are unlikely to cheerfully, enthusiastically and competently contribute to the process of satisfying customers, if they are not satisfied with their jobs. Just as it is common practice to aggressively seek out prospective external customers, it is also JOURNAL OF SERVICES MARKETING, VOL. 16 NO. 7 2002

appropriate to take a marketing approach to find and recruit well-qualified job applicants (Reynoso and Moores, 1996). Similarly, just as it is appropriate to be sensitive to the needs and preference of external customers, it also pays to avoid a heavy-handed approach when dealing with employees. Rewarding loyal customers

Relationship pricing. Rewarding loyal customers with better prices may be the oldest tool for relationship building (for example, see Gilpin, 1996, and her discussion of the hospitality industry). Several survey respondents (over 15 per cent) referred to some type of special or competitive pricing as part of their firms’ relationship-building practices. Relationship pricing was specifically mentioned by respondents in terms of special deals based on the strength of customers’ relationships with the firm, preferred customer programs for the 20 per cent of the customers who generate 80 per cent of the business, loyalty programs (e.g. discount services for loyal customers), and special pricing for customers who use multiple services. In addition to cementing relationships with customers by rewarding them for their loyalty, many of these programs generate enormous amounts of useful customer and purchase data. Customers may be required to complete a ‘‘membership application’’ prior to receiving discounts and present an ID card that is electronically swiped prior to each purchase (Duffy, 1998). Thus purchase patterns can be linked to customer characteristics, and specific advertising and promotional efforts can then be customized for specific groups of customers (Clayton-Smith, 1996; McMillin, 1999).

Top management support

Of those identifying relationship pricing as an initiative, over one-third said that it is typically dependent on top management support, because it requires discounts on prices to select customers. Furthermore, sophisticated relationship pricing programs that involve establishing, maintaining and mining a database do not run themselves (Clayton-Smith, 1996). They require management direction and dedicated resources.

Easy and convenient

Systems friendliness. Systems friendliness refers to practices that make it easy and convenient for customers to conduct business with the company. This involves making company representatives accessible, removing contact barriers, ensuring that customer interfaces with technology are not overwhelming, and not making customers wait for service unnecessarily or perform tasks (e.g. fill out paperwork) they would rather avoid (Peppers et al., 1999). Understandably, customer relationships can suffer when unfriendly systems leave customers feeling frustrated, unwelcome and convinced that there must be a better way to acquire the service. Ideally, system interfaces should leave customers with a sense of looking forward to doing business with the company in the future (Shapiro, 1988). Of the survey respondents, 15 per cent identified system-friendly practices as part of their relationship-building philosophies. Specifically, they mentioned the following: .

quick decision making by local decision makers;

.

24-hour a day, seven-day a week service;

.

‘‘hot’’ lines;

.

toll-free telephone lines;

.

customer support staffs;

.

convenient locations of new facilities;

.

lobby greeters whose job it is to educate customers;

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Difficult to lure away

.

free parking;

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prepaid and pre-addressed return envelopes; and

.

fast response to customers’ inquiries.

Pioneer advantage. Formulating programs to reach and cultivate relationships with prospective customers before competitors approach them can create a ‘‘pioneer advantage’’ in that, once the relationships are established, it becomes increasingly difficult for competitors to lure satisfied customers away (Shaw, 1996). Indeed, classic studies investigating consumers’ relationships with specific brands have found that people first exposed to brands as children are more likely to be loyal to those brands as adults than are consumers not exposed to the brands until adulthood (Guest, 1955, 1964). A total of 12 per cent of the surveyed respondents specifically sought to create pioneer advantages by beating competitors to new consumers (e.g. children, teens), to consumers new to the community, or to consumers with new needs. Specific examples mentioned included banking programs for children who some day will need a broad range of banking services, using ‘‘welcome wagon’’ services to reach new residents, and holding ‘‘coffee talks’’ about trust accounts at senior centers.

Promises of service

Trust. To build trust is to ensure that customers know that the business will stand behind its promise of service and honor its commitments (Buttle, 1996). Trust is often described as the cornerstone of any healthy relationship (Scanzoni, 1979). In the service sector trust is particularly relevant, because customers often do not buy services per se. What they buy are implicit and explicit promises of service – for example: .

promises that insurance companies will honor future claims;

.

promises that banks will accurately process checks;

.

promises that home security systems will promptly contact the police when burglars break in, and so on.

Customers must trust service providers before they are willing to pay for promises. Therefore, trust is an important element of a relationship-building program, because it builds confidence, fosters cooperation, and gives the service provider a second chance when inevitable mishaps occur (Morgan and Hunt, 1994). It may not be possible to rebuild customer relationships when trust is broken (Gilpin, 1996). Keeping commitments

Accordingly, more than 10 per cent of the survey respondents acknowledged the importance of trust, when they mentioned or alluded to trust-related concepts such as trustworthiness, honesty, integrity, or ethical behavior in their list of relationship-building practices. More specifically, service providers build trust by keeping their commitments, not overpromising (e.g. keeping advertising claims and sales pitches realistic), otherwise managing customers’ expectations (e.g. clearly clarifying what the service does and does not entail), maintaining open channels of communication with customers so that misunderstandings and mishaps can be quickly identified and remedied, and establishing codes of ethics to promote trustworthy actions throughout the organization. Cross-selling. The sale of additional services to existing customers accomplishes obvious objectives such as building total sales volume and profitability (Ennew and Hartley, 1996). From a relationship-building

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perspective, however, cross-selling also tests the strength of the relationship in that dissatisfied customers are less likely to purchase additional services than are satisfied customers. Customers’ hesitancy in purchasing additional services provides opportunities to identify and remedy dissatisfactions that threaten the relationship. Cross-selling also builds the relationship in that the sale of each additional service encourages the customer to incrementally invest more resources, more time, or more trust in the relationship (Worthington, 1996). When customers become bored with some services or outgrow the need for others, cross-selling promises to rekindle or extend the relationship. The relationship potency of cross-selling was highlighted in one study that found a 0.15 likelihood that banking customers who used only one bank product would remain in the relationship for five years. In contrast, a 0.45 likelihood of a five-year relationship was found among customers who purchased two products and a 0.80 likelihood for those with three (Furlong, 1993). Consequently, 10 per cent of the survey respondents mentioned cross-selling of products to meet customers’ needs as a relationship-building practice. These responses included exposing customers to the firm’s full product line, using direct mail to let customers know about additional products, and training employees in cross-selling techniques. Consumption chain

The concept of the ‘‘consumption chain’’ is a particularly appealing crossselling tool. It is based on the notion that customers’ needs, interests, and possibly spending power often evolve in a logical, predictable sequence, and that a ‘‘chain’’ of products can be developed to satisfy those needs and preferences. Using the concept, sales staff first locate a customer’s position on the chain and then focus cross-selling efforts on adjacent links in the chain (Slight, 1995). For example, relationships with teenaged banking customers may be initially established with passbook savings accounts or checking accounts. As their lives unfold and they progress along the chain to develop interests in credit cards, car loans, IRAs, home mortgages, business loans, brokerage services, estate planning, and so on, sales reps assist them at each link. Further, understanding these links, their sequence, and the growth of the chain reduces the likelihood that customers may outgrow the business’s ability to serve them and thus sever the relationship.

Simple act of thanking customers

Reinforcing ‘‘thank yous’’. Reinforcement practices are those that encourage customers to repeat desirable behaviors and are based on the principle that reinforced behaviors are more likely to be repeated than those not reinforced. In the context of serving customers and strengthening relationships with them, the seemingly simple act of thanking customers may be the most potent reinforcement tool available to service businesses. For example, one study found that insurance customers were more likely to renew their policies, if they received a thank you letter prior to receiving a renewal notice (Bergiel and Trosclair, 1985). In another study, jewelry store customers were more likely to purchase additional items within the next 12 months, if they received a follow-up phone call thanking them for their original purchase (Carey et al., 1976). Still another study found that thanked customers were more likely to be satisfied with their shopping/service experience than non-thanked customers (Martin and Adams, 1999a). Although the practice of thanking customers would seem to be commonsense, studies involving mystery shoppers estimate that between 14 and 34 per cent of customers are not thanked (Martin and Adams, 1999b).

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In the present study, 8 per cent of the surveyed respondents specifically referred to relationship-building practices that thanked customers for their business or their suggestions. Of course, as mentioned previously, it is quite likely that many service providers do reinforce customer behaviors in general and thank customers in particular, but may not consider it as a formal part of their relationship-building programs. Rekindling tired relationships

Innovations. Innovations can play important roles in establishing and building relationships with customers (Kandampully and Duddy, 1999). For example: innovations help position firms as market leaders or ‘‘winners’’ with whom customers want to associate. They enhance customers’ perceptions of value when customers know that they are purchasing the ‘‘latest’’ and ‘‘most advanced.’’ They rekindle tired relationships when product lines become too familiar, and they extend the relationship life cycle, as customers’ needs change and outgrow the current line. Innovations give customers reasons to continually revisit, overcome boredom, and repurchase. When innovations are introduced and others are promoted as being on the horizon, customers are reminded that the present is not an opportune time to sever the relationship. But customers will deliberately try to seek variety by exiting a relationship if they get bored (Sheth and Parvatiyar, 1995). As a result, 7 per cent of survey respondents indicated that providing innovative product lines and offering the latest technology are part of their relationshipbuilding programs.

Rewarding customers for loyalty

Linking of purchases. Linking of repeated purchases is a broad category of practices mentioned by 6 per cent of the survey respondents. The result is connected purchases designed to reward customers for their loyalty and to ensure that transactions are not discrete. When purchases are linked, there is no opportune time for customers to sever relationships (Liebermann, 1999; Worthington, 1996). Often there are customer benefits or incentives to link purchases – a form of relationship equity that is lost if the relationship is broken (Gilbert, 1996). Examples from survey respondents include rewarding multi-service, long-time customers with special advantages (e.g. free computer link), bundling products and services (e.g. bank package account including a variety of services), offering product of the month promotions, offering frequent shopper programs (e.g. free haircut program – purchase eight haircuts, get the ninth free), and reminding customers about renewals (e.g. certificate of deposit renewals). Other examples include membership packages such as season tickets to sporting events, bounce-back coupons distributed at time of purchase but not redeemable until the next purchase, collectible promotional items such as tableware pieces that are more valuable as a complete set than as individual pieces, and frequency promotions that reward purchases with points or ‘‘miles’’ that have value only if accumulated (Albert, 1997; Gilbert, 1996).

Long-term commitment required

Many of the continuity, collection and frequency programs that link purchases together require a long-term management commitment. Not only do many of the more elaborate programs require establishing and maintaining an extensive database to keep track of each customer’s status in the program, but also typically the commitment must be sustained over a much longer time period than that involving typical coupon promotions. Otherwise such programs can backfire when customers become disgruntled after they have accumulated a significant number of points, punches or miles, only to have the program terminated unexpectedly. Service recovery. For most service businesses there are simply too many details involved in service delivery to expect flawless operations at all times.

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And, unfortunately, when mistakes do occur, it is not uncommon for customers to find out before service providers. While efforts to minimize occasional (but inevitable) mishaps are appropriate, efforts to enable both the business and customers to recover from the errors are needed as well (Brown et al., 1996). Researchers have found that 91 per cent of unhappy customers will never buy again from the company that dissatisfied them and, furthermore, they will tell nine other people about their dissatisfaction (Vavra, 1992). Service recovery involves practices companies use to aggressively correct mistakes when they occur and offset customers’ inconveniences and other negative consequences caused by these mistakes (Fabien, 1997). Through service recovery, service failures can be transformed into positive acts that strengthen customers’ attitudes toward the firm (Bejou and Palmer, 1998; Bitner et al., 1990). In fact, customer satisfaction with the process of service recovery is often more important than the initial service attributes in influencing overall customer satisfaction, future purchase intentions, and positive word-of-mouth communication by customers (Spreng et al., 1995). In the present study, only 6 per cent of the survey respondents explicitly recognized the necessity for customer complaint procedures and quick follow-up action to resolve problems as part of their relationship-building programs. No excuses of hurdles

Unconditional guarantees. Related to service recovery systems are unconditional service guarantees that provide and honor commitments to customers without excuses or hurdles. In other words, companies guarantee services without excessive conditions, limitations, excuses, or hurdles for invoking guarantees (Fabien, 1997; Hart, 1988). Some service providers guarantee a broader concept than the service itself by guaranteeing customer satisfaction with the service. A total of 6 per cent of the survey respondents mentioned consistently honoring commitments to every customer, guarantees of performance with financial remuneration for errors, and following-through on customers’ requests.

Further assurance for customers

Although many firms, especially smaller ones, may not have formally articulated and promoted unconditional service guarantees, they do stand behind their products through refunds and exchanges as if they have. It may be that promoting their practice would provide further assurance to customers and thereby strengthen relationships (Davis et al., 1995). Customer-to-customer relationships. Customer relationships are generally thought of in terms of the relationships between customers and the firm (or the firm’s representatives or products/services). Indeed, most of the relationship-building initiatives focus on these three linkages (see Figure 1). Another linkage that also influences customers’ experiences and their inclination to patronize the business in the future is the relationship between customers and other customers. Customers influence one another in at least two interrelated ways: (1) through word-of-mouth communications; and (2) by customers’ degree of compatibility with one another.

Word-of-mouth communications

Word-of-mouth communications between customers are rich in information and opinions, and referrals are generally perceived to be among the most influential and unbiased sources of marketplace influence. For example, in a study of retail store shoppers, Davies et al. (1995) found that consumers were more likely to seek reassurance from other customers than from

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employees. Such communications affect customers’ purchase decisions, consumption experiences and satisfaction. Word-of-mouth is particularly influential when the quality of service varies or when services are difficult for customers to fully evaluate prior to purchase (Langeard et al., 1981; Quelch and Ash, 1981; Schlissel, 1985). Thus, one would expect service providers to be interested in influencing the content and transmission of word-of-mouth communications – stimulating positive and minimizing negative word-of-mouth. Customer compatibility

Customer compatibility refers to the extent to which customers get along with one another in the service environment (Martin and Pranter, 1989). The management of customer compatibility involves influencing customer-tocustomer interaction – largely by fostering desirable, while minimizing undesirable customer behaviors (Pranter and Martin, 1991). In retailing, the relevance of the positive social dimension of shopping with others has long been recognized (Tauber, 1972; Woodside and Sims, 1976). For example, one study revealed that 42 per cent of the 600 mall shoppers surveyed reported having ‘‘socialized with friends or others’’ while at the mall and 23 per cent ‘‘had a conversation with other shoppers I just met today’’ (Bloch et al., 1991). However, an undesirable negative dimension exists as well. Customers may feel uneasy, threatened, or otherwise dissatisfied, if they find themselves to be incompatible with other customers with whom they share the business’s physical environment. For example, patrons may not be willing to tolerate other customers who smoke, shout, have strong body odor, stare, jump the queue, have an untidy appearance, or fail to supervise their children (Grove and Fisk, 1997; Martin and Clark, 1996). Because the degree of compatibility between customers can spill over to affect the relationship between the firm and its customers, proactive efforts to shape or manage customer compatibility are highly relevant. Slightly over 5 per cent of the survey respondents mentioned their efforts to influence or manage customer-to-customer relationships. Specifically mentioned were the use of referrals from customers, testimonials from customers, and visits to customers’ sites by potential customers as relationship-building practices. These word-of-mouth behaviors both perpetuate and foster customer compatibility, because existing customers are prone to communicate with others with whom they are compatible and new customers learn from the existing customers about appropriate customer expectations and behaviors.

Reciprocity

Vulnerability. Building and maintaining customer relationships may mean accepting some risk, trusting customers, and giving customers something of value without any certainty of making a sale or receiving any sort of reciprocal consideration or commitment. Free samples, diagnoses, advice, meals, gifts, and personal or confidential disclosures are typical vulnerabilities (Martin, 1996). Although somewhat risky, the practice is based on the established principle that people frequently do feel compelled to reciprocate in some way after someone else has helped them or given them something of value (Christensen, 1983). Of the survey respondents, 5 per cent reported vulnerable practices as part of their conscious relationship-building efforts. They indicated that their firms provided consultative advice and technical support prior to customer commitments to purchase. The implication is that these service providers believed that this was the ‘‘right thing to do’’ to show that they want a partnership with the customer.

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Choosing the right combination

Concluding thoughts and recommendations There seems to be widespread agreement that long-term business success depends on organizations’ abilities to build positive relationships with their customers. However, as our research indicates, there are numerous objectives available for specifying one’s definition of ‘‘relationship-building’’ and myriad potential practices from which service firms can choose and blend to customize unique customer relationship-building programs for their firms. Although we have attempted to inventory the objectives and practices that service firms consciously employ, each service firm must decide which combination is right for its organization – given its unique circumstances involving resource constraints, health of existing customer relationships, competitive environment, growth opportunities, internal strengths, and so on. In much the same way as a generic marketing mix cannot be justified for all firms, it would be inappropriate for us to recommend a single recipe or ‘‘cement mix’’ for service organizations to cement relationships with their customers. Still, our inventories provide frameworks for developing customer relationships – from which a number of recommendations stem. First, the range of possible relationship-building objectives and their priority ratings (Table I) challenge service providers to more fully articulate what ‘‘relationship-building’’ means or could mean to their firms. Is relationshipbuilding defined differently throughout the organization? Is it defined too narrowly? Are the firm’s relationship-building objectives clearly communicated throughout the organization? Given the variation in priority ratings among respondents in the present study, it is only a small inferential leap to suggest that service providers within a specific service organization are likely to vary substantially too. Until relationship-building priorities are clearly established and uniformly recognized throughout the organization, relationship-building practices are likely to be misdirected and their effectiveness impossible to measure.

Full range of linkages

Second, service firms should consider relationship-building practices in light of the linkages they provide. As shown in Figure 1, some of the relationshipbuilding practices represent direct linkages between customers and the organizational entity itself, while others link customers to the organization through its products, personnel, or other customers. A comprehensive relationship-building program that reinforces all of these linkages would seem to be more capable of producing stronger relationships than programs that focus on less than the full range of linkages. Third, firms should examine their repertoire of specific relationship-building practices. Although most surveyed firms recognized that opportunities to build customer relationships extend far beyond simply being nice to customers, most reported a limited range of initiatives, begging questions such as: what emphasis do they place on some of the most frequently reported practices, such as continuity of communications, service quality, personalization, and service differentiation/augmentation? If appropriate, are these practices fully utilized? The reality that these four categories of relationship-building practices were mentioned more frequently than other practices implies that there is enough merit to them for other firms to consider their use. The review of other practices mentioned less frequently may be highly relevant as well. They may be adopted outright, combined with other practices, or their underlying principles creatively applied in a unique fashion. A fourth recommendation is implied by the study’s chief limitation, the limitation being that the survey’s open-ended format used to identify relationship-building practices tended to evoke responses primarily related to

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only formalized or ‘‘top-of-mind’’ practices. For example, although not frequently reported, we suspect that many respondents’ firms do make an effort to thank customers, or introduce innovative new products to keep customers interested in the firm, or leverage word-of-mouth communications, but that these and many other practices were not thought of in the context of relationship-building and therefore were omitted by many respondents. Given the exploratory nature of this part of the study, we accept this sort of inherent limitation. However, to the extent that it suggests that service providers are not fully aware of the range of relationship-building practices or possibilities in their respective firms, we recommend that service firms conduct systematic, company-wide relationship-building audits of their organizations. Indeed, the range of relationship-building practices that was collectively identified by the 205 respondents seems to justify such an audit in that the practices cut across numerous functional areas – involving marketing, operations, customer service, R&D, human resources, and accounting. The head of any one of these functional areas is not likely to realize the full extent and the full potential of company-wide relationship-building efforts without such an audit. Further, such audits promise to elevate the entire organization’s consciousness of relationship-building and lay the foundation for fully integrating and coordinating relationship-building practices throughout the organization. Benefits of findings

To conclude, the findings of this research promise to benefit both service firms and the interests of the customers they serve. Service providers will benefit from the inventory of relationship-building objectives and initiatives, as they consider developing, implementing or expanding their efforts to build relationships with customers. As a result, customers will see the benefits of dealing with firms that seek stronger relationships – benefits such as enhanced value, improved product quality, open communication with service providers, and greater satisfaction. References Albert, S. (1997), ‘‘Customer loyalty programs: rewards for customers and retailers’’, Business Geographics, Vol. 5 No. 10, pp. 20-4. Alreck, P.L. and Settle, R.B. (1999), ‘‘Strategies for building consumer brand preference’’, Journal of Product & Brand Management, Vol. 8 No. 2, pp. 130-42. Arndt, J. (1979), ‘‘Toward a concept of domesticated markets’’, Journal of Marketing, Vol. 43, Fall, pp. 69-75. Bejou, D. and Palmer, A. (1998), ‘‘Service failure and loyalty: an exploratory empirical study of airline customers’’, Journal of Services Marketing, Vol. 12 No. 1, pp. 7-22. Bergiel, B.J. and Trosclair, C. (1985), ‘‘Instrumental learning: its application to consumer satisfaction’’, Journal of Consumer Marketing, Vol. 2 No. 4, pp. 23-8. Bitner, M.J. (1995), ‘‘Building service relationships: it’s all about promises’’, Journal of Academy of Marketing Science, Vol. 23 No. 4, pp. 246-51. Bitner, M.J., Booms, B.J. and Tetreault, M.S. (1990), ‘‘The service encounter: diagnosing favorable and unfavorable incidences’’, Journal of Marketing, Vol. 54 No. 1, pp. 71-84. Bloch, P.H., Ridgway, N.M. and Nelson, J.E. (1991), ‘‘Leisure in the shopping mall’’, in Holman, H.R. and Solomon, M.R. (Eds), Advances in Consumer Research, Vol. 18, Association for Consumer Research, Provo, UT, pp. 445-9. Bowen, D.E. and Lawler, E.E. III (1995), ‘‘Empowering service employees’’, Sloan Management Review, Vol. 36 No. 4, pp. 73-84. Brown, S.W., Cowles, D.L. and Tuten, T.L. (1996), ‘‘Service recovery: its value and limitations as a retail strategy’’, International Journal of Service Industry Management, Vol. 7 No. 5, pp. 32-46. Buttle, F. (Ed.) (1996), Relationship Marketing: Theory and Practice, Paul Chapman Publishing, London.

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An executive summary for managers and executive readers can be found at the end of this issue

Trust in industrial service relationships: behavioral consequences, antecedents and the moderating effect of the duration of the relationship Spiros P. Gounaris Lecturer of Marketing, Department of Management Science and Marketing, Athens University of Economics and Business, Athens, Greece

Karin Venetis Strategy Director, Proximity-Amsterdam, Amstelveen, The Netherlands

Keywords Trust, Service quality, Relationship marketing, Empirical study Abstract Building on previous studies which suggested that trust is a critical factor in facilitating exchange relationships, the authors investigate with empirically derived data the role of service quality and customer bonding as antecedents of trust in relatively newer vis-a`-vis a relatively mature relationship between the provider of business-tobusiness services and the client. The findings presented here show that the time element is critical to the effect that both service quality and successful customer bonding bear in trust development. Furthermore, the results of the study suggest that not all dimensions of the quality of the service offered by the provider contribute equally in the provider’s trustworthiness. Similarly, specific customer bonding techniques foster the extent to which the client trusts the service provider while others do not have an impact on the trustworthiness of the provider.

State of inertia

Limited academic research

Introduction In many occasions with business-to-business exchanges, a sale signals the beginning of a relationship, not the result. This tendency to form long-term relationships eventually leads to a state of inertia between the seller and the buyer, that is, an unwillingness of both parties to bring the relationship to an end unless something in the relationship goes exceptionally askew. It appears thus that developing trust in the relationship is a significant task for the business-to-business marketer in order to gain and sustain its clients (Webster, 1991). Despite the importance of trust though, the scholarly inquiry on the issue is rather impeded in two ways. One is the limited academic research to empirically document the factors that affect trust in marketing exchange relationships. A second reason is the failure to distinguish trust from related factors, i.e. factors that precede the development of trust and influence it (Moorman et al., 1993). On the contrary, with the notable exception of the study conducted by Morgan and Hunt (1994), many empirical studies assess The authors would like to acknowledge the assistance provided by the two anonymous reviewers and the editor in improving the quality of this manuscript The research register for this journal is available at http://www.emeraldinsight.com/researchregisters The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/0887-6045.htm

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trust by measuring sincerity, goal congruence (Sullivan and Peterson, 1982), honesty, and beliefs about information sharing (Crosby et al., 1990) etc. Contradictory studies

Furthermore, when it comes to the marketing of services, and specifically for business-to-business markets, with the noticeable exception of the study of Moorman et al. (1993), the empirical documentation of the antecedents of trust is even more hampered. In view of these difficulties to underpin our understanding of trust development in marketing relationships, we attempt an investigation of two specific factors: the quality of the service as it is perceived by the client and the customer bonding techniques used by the provider. In doing so, we also investigate the effect of the time factor. That is, the extent to which the influence (if any) of the service quality and of the bonding efforts over the perceived trustworthiness of the provider, is moderated by the newness of the relationship between the client and the provider. Studies reporting on this issue are rather contradictory with some reporting that trust develops over time (Rempel et al., 1985) while others assert that trust can be present even from the very beginning of a relationship (Berg et al., 1995). The rest of the paper is organized as follows. First we present the conceptual framework underpinning our study. Then we develop formal hypotheses based on the reviewed literature. Next we explain the methodology of the research we carried out in order to test our hypotheses. We then proceed with the testing of the hypotheses and, finally, we discuss the results, the limitations of the study as well as suggestions for future research. Conceptual framework of the study Figure 1 depicts the trust development model that is advanced and tested in this study. The major constructs in the model are ‘‘trust’’, ‘‘relationship intentions’’, ‘‘service quality’’ and ‘‘customer bonding’’.

Extent of trust

According to the conceptual framework, the client’s decision to maintain its relationship with the service provider and to further invest in this relationship is influenced by the extent to which the client trusts the service provider. The extent to which trust is developed in their relationship depends on the quality of the service offered by the provider and on the success with which the provider develops bonds with its client. However, the length of the relationship that the provider has with the client is conceived as moderating the influence of both the service quality and the customer bonding on the extent to which the client trusts the service provider.

Figure 1. Conceptual framework of the study JOURNAL OF SERVICES MARKETING, VOL. 16 NO. 7 2002

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Characteristics of organizational markets

Research hypotheses Trust and relationship intentions Business-to-business marketing theory suggests that specific and unique characteristics of the organizational markets differentiate them from consumer ones (Brown, 1984). For instance derived demand, reciprocity, fewer buyers and larger buyers are, among others, some of the characteristics that are unique in business-to-business markets and distinguish them from consumer ones (Kotler, 1997). In order to better comprehend the nature of the decisions taken within the context of organizations’ buying behavior, one has to appreciate the inclination of organizational buyers to form trusted, long-term relationships with their suppliers (Hut and Speh, 1995).

Transaction costs

One reason for this attitude of industrial clients is the transaction costs that are related to the exchange relationship. Transaction costs include the cost of reaching an agreement satisfactory to both parties, adapting the agreement to contingencies and enforcing the terms of the agreement (Ganesan, 1994). To that end, many industrial clients show a preference for long-term relations. Yet, this attitude of the industrial clients does not ensure, per se, the longevity of the relationship with their provider. Creating dependencies and locking-in customers is one way to ensure the longevity of the relation (Anderson and Narus, 1990; Anderson and Weitz, 1992). However, the highly dependent will resent it and seek to escape from this state (Anderson and Weitz, 1992). This results in interactions of a distributive nature, i.e. a behavior which is directed towards self-gains at the expense of the other party in order to reduce the dependency, thus endangering the relation (Walton and McKersise, 1965; Schurr and Ozane, 1985). To that end, in order to achieve a long-lasting relationship the service provider of industrial services needs to cultivate more than merely a state of dependence. One promising tool to achieve this is trust since the latter is a central element of the effort to forge strong and lasting relationships (Morgan and Hunt, 1994).

Definitions of trust

Different writers have given different definitions of trust. Anderson and Narus (1990) have defined trust as the belief that another company will perform actions that will result in positive outcomes for the firm while not taking actions that would result in negative outcomes. Moorman et al. (1993) as well as McKnight et al. (1990) offered definitions of trust which pivot around the same notions and describe a state between two parties that are involved in a relationship. One of the parties is perceived by the other as possessing or controlling assets (e.g. resources, know-how) that the other party values while remaining convinced that the possessor of these assets will continue sharing them in a mutually beneficial manner. This conviction leads to integrative behavior which, in turn, reinforces the relationship and helps sustain it. This kind of behavior eventually prolongs the duration of the relationship (Ganesan, 1994) by enhancing the commitment in the relationship (Morgan and Hunt, 1994). To that end, trust can be regarded as a valuable component of any successful relationship (Morgan and Hunt, 1994) by functioning as a lever for reducing the risk associated with partnering, the development of long-term relationships and increasing the commitment in the relationship (Anderson and Weitz, 1992; Ganesan, 1994; Geyskens and Steenkamp, 1994). On this basis we investigate the following hypothesis:

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H1. Trusting the service provider will have a positive influence on the client’s willingness (a) to maintain the relationship and (b) to further invest in strengthening the relationship.

Relationships between companies

Antecedents of trust Service quality as a trust antecedent. The issue of trust development has been the focus of quite a few empirical research studies. However, with some exceptions, trust development is usually examined with regard to relationships that grow within the organization and between either colleagues or departments. Nonetheless, some empirical work has focused on the relationships between companies and studied what it takes for the involved parties to trust each other. Morgan and Hunt (1994) investigated the antecedents of trust in the NTDRA and found that trust is positively associated with the extent to which the firms involved in the relation share the same values and timely information to solve disputes and align perception and expectations. Opportunistic behavior on the other hand, i.e. the violation of implicit or explicit promises about one’s required behavior, was found to have a negative impact on trust.

Vendors and buyers

Ganesan (1994) has also studied trust development between vendors and buyers in distribution channel relationships. The effect of reputation, satisfaction with past exchanges, experience with the partner and the perception of the other party’s investment in the relationship were investigated. The findings were somehow mixed. From the buyer’s perspective the vendor’s reputation and its investment in the relationship were identified as trust builders. From the vendor’s perspective though only the satisfaction with past exchanges was found to influence the buyer’s trustworthiness. Moorman et al. (1993) investigated the relationship between the market research agency and its client examining trust development from the client’s perspective. The analysis showed that the agency’s task-related abilities influence positively the extent to which the client trusts the agency. Most of the agency’s non-research abilities (with the exemption of dependability and collective orientation) were also identified to have a contribution to the agency’s trustworthiness.

Specific cues

When jointly considered, the findings of these studies point towards specific cues that cause trust to develop within a relationship. According to some other writers, however, most of these cues have been identified as specific dimensions of the broader notion of service quality. Reputation, for example, which Ganesan (1994) identified to influence the trustworthiness of the vendor, may easily fit with Gronroos’ (1988) perception of service quality at corporate level. The non-task related abilities identified by Moorman et al. (1993) as contributing to the service provider’s trustworthiness may well fit the conceptualization of service quality at service provision level suggested by Parasuraman et al. (1985). Similarly, the lack of opportunistic behavior suggested by Morgan and Hunt (1994) also fits the notion of reliability in the Parasuraman et al. (1985) model of service quality. In other words, it seems that the quality of the service offered by the provider influences the degree of trust that the client places on the provider and, on this basis, we investigate the following hypothesis: H2. The degree of trust that the client shows to its service provider depends on the client’s perception of the quality of the service the provider offers.

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Before proceeding with the rest of the hypotheses, it is important at this point to discuss the notion of service quality in a business-to-business setting. Table I summarizes some of the most representative approaches in conceptualizing service quality. Business-to-business markets

The approaches described in Table I were, however, developed based on empirical research conducted in consumer markets. One may reasonably expect that, for reasons already discussed, the marketing of services in consumer markets will be rather different from the marketing of services in business-to-business markets. The services purchased from organizations are provided by qualified professionals whose expertise and skills are key elements of the quality of the service provided (Yorke, 1990). What actually organizations purchase is a solution to a specific problem which, in many occasions, is customer-specific. Hence, the clients for business-to-business services have significant difficulties in evaluating the actual quality of the solution they purchased, even quite some time after the exchange (Patterson, 1995). Also, industrial services clients cannot easily tell whether a different provider could have outperformed the selected provider (Gummesson, 1978; Nilessen, 1993).

Three-level conception of service quality

Thus, it would seem necessary to reconsider the conceptualization and some of the principal dimensions of service quality. A rather recent attempt in this direction has been taken by Szmigin (1993). Based on the work of Gronroos (1982), she suggests a different three-level conception of quality: (1) hard quality, pertaining to what is being performed during the service process; (2) soft quality, pertaining to how the service is performed during the service process; and (3) outcome quality, pertaining to the eventual accomplishment of the provider. According to Szmigin (1993), hard and soft quality are two dimensions that describe the service process itself with the latter pertaining to the contact personnel and the interaction it develops with the client while the former Authors Dimensions of quality

Gronroos (1982)

Lehtinen and Lehtinen (1991)

Corporate level

Technical

Corporate

Security

Reputation

Service provision

Functional

Physical Interactive

Reliability Competence Courtesy Empathy Accessibility

Reliability and trustworthiness Attitudes and behaviour Accessibility and flexibility Professionalism and skills

Service outcome

Technical

Physical Interactive

Responsiveness Recovery Communication Tangibles Credibility

Parasuraman et al. (1985)

Gronroos (1988)

Table I. Most common approaches in conceptualizing service quality 640

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Figure 2. Dimensions of service quality in business-to-business markets

refers to the service blueprint the provider uses, the accuracy with which the service is delivered and so on. Outcome quality

Outcome quality, on the other hand, refers to the client’s evaluation of the end-results of the hard and soft parameters. This dimension is responsible for the difficulty that, according to Patterson (1995) and Gummesson (1983), organizational buyers have in relating a specific service provider with service performance, since outcome quality may well be influenced by a number of factors exogenous to the provider.

Five dimensions

Given these limitations in relating outcome quality to the efforts and success of the provider, Halinen (1994) suggested the distinction between immediate outcome quality and final outcome quality. With regard to the former, immediate outcome quality relates to the success of the provider to provide the client with a solution to its problem. Final outcome quality, on the other hand, describes the effects that the solution offered created for the client, after it has been implemented. Figure 2 summarizes the five dimensions of service quality which seem more appropriate for understanding how business-to-business clients evaluate their service providers and, consequently, the dimension upon which the service quality of the providers is evaluated. Customer bonding as an antecedent to trust. Many writers view trust as a behavioral intention or behavior that reflects a reliance on a partner and which involves vulnerability and uncertainty (Giffin, 1967; Coleman, 1990; Moorman et al., 1993). More specifically, Coleman (1990) suggested that trust involves a behavior of voluntarily putting resources at the disposal of another or transferring control over resources to another.

Minimum guarantees

Apart from the inherent inclination one may have to trust someone (Cross and Smith, 1996) this view suggests that before trust develops, minimum guarantees should exist. Efficient customer bonding techniques may serve in this direction by reducing the uncertainties of the outcome of the relationship. In defining the notion of bonding Cross and Smith (1996) describe it as a process through which the provider and the buyer develop and sustain a mutually rewarding relationship. Within this context, Wilson and Mummalaneni (1988) suggested a process model that explains how relationships between two parties grow. In their work they suggest two broad categories of bonds: structural and social. Structural bonds have been conceptualized as the corporate ties that are created in a relationship, which, if severed, incur considerable costs for the party that has broken them. These bonds last beyond the relationships that grow between the individuals from the two organizations that interact within

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the context of the relationship (Wilson and Mummalaneni, 1998; Turnbull and Wilson, 1989; Han et al., 1993; Moller and Wilson, 1995). Types of structural bonds

Such bonds may include ties resulting from economic, technical, time-based, knowledge or other similar reasons (Paliwoda and Thomson, 1986; Halinen, 1994). Although inferior service performance may represent one of the reasons that motivate customers to switch providers, it is not the only one. For example, Bitner advocates the effects of the time and money constraints, access to information, habit and so on, which may affect loyalty and commitment to the relationship (Bitner, 1990). Similarly, Halinen (1994), in a study of the bonds that develop in the advertising industry, apart from the social bonds identifies three more types of bonds: the confidential information the agency gains about the client’s goals, internal policies or business; the inter-organizational agreements, routines and norms of conduct that develop in a relationship making coordination easier and more efficient; and the costs (monetary and not) that the client can expect to suffer if switching from its current agency. The stronger such bonds are the harder it will be for the client to break the relationship with an existing provider. Knowledge-based trust theorists (e.g. Lewicki and Bunker, 1995) suggest that trust develops over time. Thus, when such structural bonds exist and clients are forced into the relationship, as the relationship matures, they eventually come to trust their service provider (Hut and Speh, 1995).

Social bonds

Social bonds on the other hand have been conceptualized as the inevitable by-product of any business relationship (Wilson, 1990). According to Wilson and Mummalaneni (1988) the relationships that foster between the interacting individuals from the two organizations are important because they enhance inter-organizational communication and information exchange which, in turn, upgrades the relationship as a whole. Social bonds include feelings of liking, acceptance, friendship, social interactivity and so on. However, although buyers with strong social bonds with their providers are more committed to maintaining the relationship (Wilson and Mummalaneni, 1988), it is rather rare that companies can justify poor performance or an inferior decision on friendship alone (Han et al., 1993). Thus, social bonds, compared to structural bonds, though not less important, are easier to break. Empirical evidence has shown that both structural and social bonds are always present in a successful relationship. For instance Wilson et al. (1995), when studying the antecedents of relationship commitment, included both structural and social bonds and found that they were both directly and statistically significantly influencing the commitment shown to the relationship. On these grounds we investigate the following hypothesis: H3. Developing bonds with the customer will have a positive influence on the extent to which clients trust their service providers. The moderating effect of the length of the relationship Knowledge-based trust theorists propose that trust develops over time while the parties involved in the relationship acquire experience between them and come to know what one can expect from the other (Lewicki and Bunker, 1995). Empirical studies have validated this posture by showing that trust develops over time either as the partners involved in the relationship cooperate and manage conflict episodes successfully (Schurr and Ozane, 1985)

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or as the parties perceive that their relationship is bound to last and they eventually learn to trust the other parties involved (Hut and Speh, 1995). Moderating effect of relationship length

Then it can be proposed that the length of the relationship between the service provider and the client has a moderating effect on the impact that both service quality and customer bonding have on the degree of trust that the client places on the provider. On this ground we investigate the following hypothesis: H4. The influence of the perceived service quality and of customer bonding on the trustworthiness of the service provider is likely to vary depending on the length of the relationship between the provider and the client. Research methodology Research population, sample size and data collection The data used to test the hypotheses were secured by means of a mailed questionnaire sent to 340 companies. In order to identify the respondents we approached 73 advertising agencies operating in the greater metropolitan area of Athens, Greece. The agencies were selected randomly by including every second agency listed in the Union of Advertising Companies of Greece.

Most important customers

We then asked each agency we contacted to name five of their most important customers, not necessarily the oldest ones but in terms of the annual income they generate for the agency. We also asked for the details of the line manager of their client with whom they usually do business and liaise more closely. The idea was to contact the manager working more closely with the agency since he or she would be able to assess both the quality of the service offered by the agency and evaluate the effectiveness of the agency’s bonding techniques. In total, 68 agencies responded positively and collaborated. This process produced a list of 340 companies from various sectors of the economy and from various regions of Greece because, apparently, many companies use agencies located in Athens since from the 178 listed agencies 147 operate in greater Athens. The line management positions that we were more frequently instructed by the agencies to contact ranged from middle management levels (e.g. group brand managers) to more senior positions (e.g. marketing and/or advertising manager), depending on their customers’ organizational structure. Two mailing waves produced in total 152 usable questionnaires giving a response rate of about 45 per cent. In order to investigate whether nonresponse bias exists in the data, the t-test was used to examine differences in the responses between early and late (follow-up mailing) respondents (Avlonitis and Gounaris, 1997). This statistical analysis indicated that there were no significant differences between early and late respondents.

Diversified industries

Including in the sample companies from diversified industries may increase the levels of heterogeneity in the sample. Although increased heterogeneity has been argued to induce negative effects on the quality of the findings (Dubinsky and Ingram, 1982; Bilkey, 1978) cross-sectional samples with increased levels of heterogeneity are frequently used in research efforts in order to increase the researchers’ ability to generalize (Hooley et al., 1990; Kohli and Jaworski, 1992).

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Research instrument In order to collect the data, a detailed and lengthy questionnaire was designed. In doing so, particular emphasis was placed on avoiding leading questions as well as complex or sensitive ones (especially in the beginning of the questionnaire) that could influence the respondent negatively (Kumar et al., 1999). Prior to mailing it, the questionnaire was pre-tested in order to increase the content validity of the research instrument. For that purpose, ten personal interviews were conducted with a sub-sample of the respondents who had agreed to provide assistance and comments. Variables measurement development Service quality. The first step was to develop items for each dimension of the service quality. For that purpose we relied on the work of Kaynak et al. (1994), Bochove (1994), Akviran (1994) and Asubonteng et al. (1996). In total, 30 items were developed and respondents were asked to use a fivepoints scale (ranging from 1 = ‘‘I strongly disagree’’ to 5 = ‘‘I strongly agree’’) in order to show the degree of their agreement with each statement (see the Appendix for statements and descriptive statistics). Their answers were then weighted against the significance (five-points scale ranging from 1 = insignificant to 5 = very significant) attached by the respondent to each item. Exploratory factor analysis

Exploratory factor analysis of the weighted items was used to purify the scales. Items showing high factor loadings (>0.40) and not loading on multiple factors were retained (see Table II). The resulting set of items was tested for unidimensionality and convergent and discriminant validity using confirmatory factor analysis (AMOS 4.0). The goodness of fit index (GFI) and the squared multiple correlations were used to identify the final set of items representing the dimensions of service quality. Though the overall chisquare test of the five factors model was statistically significant (2 = 326, 199 df) the GFI of 0.9 and the root mean square residual (RMSEA) of 0.049 suggested a good model fit. A four and a six factors model of service quality were also tested. A chi-square test of both models with the five factors model suggested acceptance of the five factors one. Once unidimensionality was established, internal consistency was calculated using Cronbach’s alpha. Customer bonding. In measuring the different dimensions of customer bonding we developed initial items based on the work of Halinen (1994) and Wilson (1990), particularly for producing the social bonds scale. A total of 16 statements were originally developed and respondents were again asked to use a five-points scale (ranging from 1 = ‘‘I strongly disagree’’ to 5 = ‘‘I strongly agree’’) in order to show the degree of their agreement with each statement. To purify the scales we then followed the same approach as we did with the service quality dimensions. The results of the exploratory factor analysis are presented in Table III.

Confirmatory factor analysis

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Confirmatory factor analysis was again employed. The initial solution of the confirmatory factor analysis did not produce satisfactory results and the items comprising the third factor (integration bonds) had to be dropped. A second attempt with the remaining two factors (interpersonal bonds and contractual bonds) was more successful. Though again the overall chi-square test was statistically significant (2 = 23.662, 11 df) the GFI of 0.915 and the root mean square residual (RMSEA) of 0.05 suggested a good model fit. Once unidimensionality was established, internal consistency was calculated using Cronbach’s alpha. JOURNAL OF SERVICES MARKETING, VOL. 16 NO. 7 2002

Factors produced by the analysis

Items loading in each factora

Factor 1: immediate outcome quality (explaining 16.272 per cent of total variance)

Worthwhile the cost Creative and innovative Aligned with strategy Accepted in the company Delivers what promised

0.702 0.695 0.686 0.548 0.546

Factor 2: soft process quality (explaining 15.101 per cent of total variance)

Say opinion when disagree Friendly Understand what we need Foresee problems and offer solutions Give attention we need Listen carefully to ideas Keep us informed

0.738 0.709 0.689

Factor 3: hard process quality (explaining 14.625 per cent of total variance)

Keeps time schedules Follows agreements Checks details Stays in budget Adapts

0.792 0.701 0.671 0.564 0.496

Factor 4: potential quality (explaining 9.780 per cent of total variance)

Specialised equipment Relations with media Uses network Full service

0.719 0.645 0.644 0.643

Factor 5: final outcome quality (explaining 8.188 per cent of total variance)

Influences target market Positively influences sales and image Achieves objectives

0.695

Loadings

0.586 0.565 0.520 0.518

0.686 0.474

Notes: Kaiser-Meyer-Olkin measure of sampling adequacy: 0.902; Bartlett’s test of sphericity: 2 = 1687.287 significant 0.000; Total variance explained: 63.965%. a Translation from the Greek questionnaire

Table II. Exploratory factor analysis of the service quality dimensions

Factors produced by the analysis

Items loading in each factora

Factor 1: interpersonal bonds (explaining 26.517 per cent of total variance)

Personal relationship Personality match Classified information Agency adjusts to client’s needs Knowledge exchange Investment of the agency

0.763 0.721 0.640 0.629 0.615 0.564

Factor 2: contractual bonds (explaining 16.105 per cent of total variance)

Contractual agreements Tied by internal policies Invested effort/time

0.790 0.774 0.535

Factor 3: integration bonds (explaining 15.499 per cent of total variance)

Contact frequency Intensity contact

0.886 0.840

Loadings

Notes: Kaiser-Meyer-Olkin measure of sampling adequacy: 0.905; Bartlett’s test of sphericity: 2 = 1423.200 significant 0.000; Total variance explained: 58.121%. a Translation from the Greek questionnaire

Table III. Exploratory factor analysis of the customer bonding dimensions JOURNAL OF SERVICES MARKETING, VOL. 16 NO. 7 2002

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Scale for measuring trust

Trust. In measuring trust we relied on the work of Moorman et al. (1993) as well as on the work of LaBahn and Kohli (1995) which was also based on the scale of trust developed by Moorman et al. (1993) and confirmed and validated a scale for measuring trust in the relationship between the advertising agency and its client. Respondents were then again asked to use a five-points scale (ranging from 1 = ‘‘I strongly disagree’’ to 5 = ‘‘I strongly agree’’) in order to show the degree of their agreement with each statement in the scale. Relationship intentions. With regard to the client’s relationship intentions, the measurement was based on the scales developed and validated by Kumar et al. (1994) adjusting the items to advertising agency – client relationship with the assistance of the ten managers who had agreed to help in the development of the questionnaire. Length of the relationship. Finally, in order to assess the novelty of the relationship between the agency and the client we asked the respondents to indicate the number of years they had been working with their advertising agency. A more detailed presentation of each scale employed in this study along with pertinent descriptive statistics and reliability coefficients is offered in the Appendix. Data analysis and findings H1 suggests a positive relationship between the extent to which the client trusts the service provider and the client’s willingness to maintain the relationship as well as to invest in further strengthening the relationship. To investigate H1 we calculated Pearson’s two tails correlations. Table IV shows the results of this analysis. As can be seen from Table IV, both coefficients are particularly high and statistically significant giving support to H1.

Regression analyses

H2 and H3 explore the effect of service quality and customer bonding respectively on the service provider’s trustworthiness, as the latter is perceived by the client. To investigate these hypotheses we run two regression analyses: one with trust as dependent variable and the various dimensions of service quality as independent variables, and a second with trust as dependent and the various dimensions of customer bonding as independent. The standardized coefficients of the two regressions are presented in Table V. As can be seen from Table V the regression equation regarding the effect of the various dimensions of the service quality is statistically significant at 0.000 level. However, only three coefficients, those for immediate outcome Additive scale of trust Additive scale of staying Significance

0.529 0.000

Additive scale of investing Significance

0.366 0.000

Table IV. Pearson’s correlation coefficients between trust and relationship intentions 646

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Method ENTER

Standardized Beta

Quality dimensions (Constant) Immediate outcome Soft process Hard process Potential quality Final outcome Adjusted R2

1.562 0.402* 0.589* – 0.471* – 0.342*

Customer bonding dimensions (Constant) Personal Contractual Adjusted R2

4.440 0.213** – 0.112

Notes: Dependent: trust; *p < 0.001; ** p < 0.050. Dash indicates coefficient not significant at 0.100 level

Table V. Regression coefficients of service quality and customer bonds with trust as dependent variable

quality, soft process quality and for potential quality are significant. On this basis we can only partially accept H2. The second regression equation, which was modeling the effect of customer bonding on trust, was not found to be statistically significant (F = 2.156 p = 0.121). This indicates that customer bonding fails to explain the trustworthiness of the service provider, thus leading us to reject H3, despite the fact that the standardized coefficient for personal bonds is significant at the 0.050 level. H4 explores the potential effect that the length of the relationship exercises on the influence that service quality and customer bonding bear on the service provider’s trustworthiness. This hypothesis was tested by subgroup analysis (Arnold, 1982). The sample was first sorted in ascending order in terms of the length of the relationship between the advertising agency and its client (moderating variable). Two subgroups

Then, consistent with standard econometric conventions (Golfeld and Quandt, 1965; Kohli, 1989) the top and the bottom 35 per cent of the cases were selected so as to obtain two subgroups reflecting rather novel relationships (relationships of short-length) and rather mature relationships (relationships of long-length) with the provider respectively. The middle 30 per cent of the cases were omitted to improve the contrast between the subgroups and hence the power of the subsequent statistical tests. For each set of independent variables (service quality and customer bonding) a second regression was performed, this time allowing the regression coefficients estimates to take on different values across the two subgroups (unrestricted run). The differences in the sums of squared residuals from the restricted and the unrestricted regression runs was incorporated in the Chow test (Chow, 1960) to assess the statistical differences in the regression coefficients of the independent variables. Table VI depicts the results of this procedure. As can be seen from Table VI, the results of this analysis support H4. More specifically, with regard to the effect of the perceived service quality on the provider’s trustworthiness, this is significantly different depending on the

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Method Enter

Mature relationships (Standardized beta)

Novel relationships (Standardized beta)

Quality dimensions (Constant) Immediate outcome Soft process Hard process Potential Final outcome Adjusted R2 Chow test

4.746 0.386 * 0.384 * 0.299 ** – 0.218 *** 0.339

4.759 – – – 0.305 *** – 0.066

Bonds (Constant) Personal bonds Contractual bonds Adjusted R2 Chow test

4.778 – – 0.067

F: 46.776*

4.878 0.349 ** 0.232 ** 0.123 F: 50.600*

Notes: *p < 0,001; **p < 0,050; ***p < 0,100. Dash indicates coefficient not significant at 0.100 level

Table VI. Regression coefficients across low and high levels of moderator variable (length of the relationship) – unrestricted run

length of the relationship, as suggested by the statistically significant difference in the sums of squared residuals between the restricted and the unrestricted runs (F = 46.776, p