Download Relationship Marketing Across Value Delivery Network: A Literature

8th Global Conference on Business & Economics
ISBN : 978-0-9742114-5-9
Relationship Marketing Across Value Delivery Network: A Literature Review
Abstract
Contemporary Marketing Management identifies Relationship Marketing (RM) as a paradigm
shift from traditional marketing practices to a strategic function. It is not only concerned with
Customer Relationship Management (CRM) but also plays a significant role in value creation
process at all levels across the value delivery network. Effort is made hereby to further validate
this statement through secondary literature sources and various references taken out from current
industry practices. The focus of the study is to understand the concept of relationship marketing,
its evolution and its role in current business scenario. This study is proposed to understand the
basic research problem i.e. “How value is created in a value delivery network (Supply Chain)
through relationship marketing”? The study concludes by proposing a hypothetical model of
relationship marketing across a value delivery network.
Effort is being made hereby to identify various types of relationships that exist across value
delivery network, their functions, and finally to identify the key performance variables that add
value through relationship marketing in a value delivery network. The proposed model further
provides a scope for research by identifying various research questions and hypothesis to test its
applicability in various industries in the current business scenario.
Key Terms: Relationship Marketing, value delivery network, key performance variables
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“Relationship Marketing Across Value Delivery
Network: A Literature Review”
Author(s)
*Dr. Tripti Singh
Lecturer, School of Management Studies,
Motilal Nehru National Institute of Technology,
Allahabad, Uttar Pradesh-211004, India
[email protected], [email protected]
www.mnnit.ac.in
**Vibhava Srivastava
Research Scholar, School of Management Studies,
Motilal Nehru National Institute of Technology,
Allahabad, Uttar Pradesh-211004, India
[email protected]
www.mnnit.ac.in
October 18-19th, 2008
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Abstract
Contemporary Marketing Management identifies Relationship Marketing (RM) as a paradigm
shift from traditional marketing practices to a strategic function. It is not only concerned with
Customer Relationship Management (CRM) but also plays a significant role in value creation
process at all levels across the value delivery network. Effort is made hereby to further validate
this statement through secondary literature sources and various references taken out from current
industry practices. The focus of the study is to understand the concept of relationship marketing,
its evolution and its role in current business scenario. This study is proposed to understand the
basic research problem i.e. “How value is created in a value delivery network (Supply Chain)
through relationship marketing”? The study concludes by proposing a hypothetical model of
relationship marketing across a value delivery network.
Effort is being made hereby to identify various types of relationships that exist across value
delivery network, their functions, and finally to identify the key performance variables that add
value through relationship marketing in a value delivery network. The proposed model further
provides a scope for research by identifying various research questions and hypothesis to test its
applicability in various industries in the current business scenario.
Key Terms: Relationship Marketing, value delivery network, key performance variables
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“Relationship Marketing Across Value Delivery Network: A Literature Review”
INTRODUCTION
In the present era of intense competition and demanding customers, relationship marketing has
grabbed the attention of scholars and practitioners. It has its proponents not only in the marketing
academia but in industry as well. It had a major impact upon the marketing discipline, triggering
a paradigm shift away from transaction-based marketing towards a relationship focus (Kotler,
1992; Webster, 1992). A number of terms synonym to Relationship Marketing, have evolved
over the period of time. Some of these terms are relational contracting (Macneil, 1980),
symbiotic marketing (Varadarajan and Rajaratnam, 1986), relational marketing (Dwyer et al
1987), working partnerships (Anderson and Narus, 1990), strategic alliances (Day, 1990),
internal marketing (Arndt, 1983; Berry and Parasuraman, 1991) and co-marketing alliances
(Bucklin and Sengupta, 1993). Though all these proposed terms are encompassed in the concept
of Relationship Marketing, it is further used to reflect a variety of themes and perspectives
(Nevin, 1995).
EVOLUTION OF RELATIONSHIP MARKETING
The concept of Relationship Marketing has evolved gradually. It was first evident in service
marketing as customer was identified as an integral part of the marketing and delivery process
which subsequently necessitates a close relationship between the customer and the service
provider. The phenomenon Relationship Marketing was first identified by some of the insightful
writers like Berry (Berry et al, 1983), Gronroos (1990) and McKenna (1991).
Although
McKenna has often been credited with the term "relationship marketing", but it was Berry who
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first defined and analyzed in scientific literature. However there was also a parallel development
in industrial marketing which contributed to the development of RM (Gronroos, 1990).
According to Berry et al (1983) customer relationship can be best established around a core
service, which ideally attracts new customers through its need-meeting character. However,
creating customer loyalty among the old customers is one of the main goals of Relationship
Marketing. Finally, Berry et al (1983) define internal marketing as a pivotal relationship
marketing strategy, where employees are seen as customers inside the corporations. At the same
time, Gronroos (1990) developed several new concepts in service marketing, which were later
incorporated as part of the Nordic School of Services. He identified relationship marketing as a
central theme of service marketing with no separation between production, delivery, and
consumption, thus the buyer-seller interaction must be considered as part of marketing's task
which can be fulfilled through relationship with the customer. Strangely enough, traditional
marketing concepts omitted or ignored it.
Industrial marketing has traditionally been seen different from consumer or service marketing.
As Gronroos (1990) points out that some of the tasks other than traditional marketing functions
are important in industrial selling. These tasks may include repairs, servicing, maintenance,
delivery, product development, installation, training, etc. Performing these tasks necessitates a
close seller buyer connection and often involves partners other than the seller and the buyer.
Consequently, even if the term "relationship marketing" was not used in industrial marketing, the
nature of industrial marketing clearly demonstrates several of its core characteristics.
Thus it can be concluded that there have been in fact two routes to the present-day RM. The first
was a gradual realization of the importance of relationships, initially in service marketing and
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partly in industrial marketing. The second route was through a transformation of business in
general, due to rapid and radical changes in the environment. These changes resulted in an
emphasis on service, close customer contact, and a holistic view of the parties and processes
involved in marketing and business. The emphasis is on a holistic view of the suppliermanufacturer-customer chain and process quickly became visible (Aijo, 1996). Cravens and
Piercy (1994) suggested that the cornerstones of relationship marketing are 'customer retention'
and 'process orientation', two issues that are likely to strike a chord with every organization at the
present time. Relationship marketing is now considered to be a feasible strategy in mass
consumer markets (Christy et al 1996; Gronroos, 1996; Sheth and Parvatiyar, 1995).
RELATIONSHIP MARKETING: CONCEPTS AND DEFINITIONS
The earlier definition of marketing by American Marketing Association (1985), states that
“Marketing is the process of planning and executing the conception, pricing, promotion and
distribution of ideas, goods and services to create exchange and satisfy individual and
organizational objectives”. However, this view of marketing was considered outdated, and its’
relevance was found only to certain types of firms and markets (Hakansson 1982; Gummesson,
1987, 1994; Gronroos, 1989). Further, argument was made that this perspective is overly clinical
and based solely on short-term economic transactions (Moller, 1992). Such criticisms have led to
the suggestion that a paradigm shift in marketing is needed if marketing is going to survive as a
discipline (Gronroos, 1995) and companies must move from short-term transaction-oriented goal
to long-term relationship-building goal (Kotler, 1992). Relationship marketing has been viewed
as buyer–seller encounters that accumulate over time with opportunities to transform individual
and discrete transactions into relational partnerships (Czepiel, 1990). This view supports the
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notion that a relationship exists when an individual exchange is assessed not in isolation, but as a
continuation of past exchanges likely to continue into the future (Wong and Sohal, 2002). Thus it
is pertinent to say that RM ensures the continuation of exchange process between buyer and
seller by managing the existing relationship (Levitt, 1986). Nevin (1995) quotes that relationship
marketing has been used to reflect a variety of themes and perspectives which range from
industrial marketing perspective to service marketing perspective and has been defined in
numerous ways by different scholars and practitioners. Some of the selected definitions are
further compiled in Table 1 and analyzed to conclude a definition of relationship marketing in
current business practices.
Table I: Selected Definitions of Relationship Marketing
Key words that appear in contemporary definition of relationship marketing are identified as
follows:
Attracting/getting
customers,
Retaining
customers/loyalty;
Relational
exchange/mutual/reciprocity; Time dimension–extended time horizon; Value creation and
sharing; Personalized marketing process; Structural/social bonds; Asymmetrical marketing
process; Strategic orientation; Input-outcome and ongoing assessment
Proposed Definition for Relationship Marketing: On the basis of above-mentioned definitions
of Relationship Marketing and considering its applicability in current business practices, an
appropriate interpretation of the term is proposed as, “Relationship Marketing can be defined as
an strategic marketing approach which is oriented towards attaining long-term profitability and
value creation by interactions and mutual exchange among customers suppliers and other
stakeholders.”
RELATIONSHIP MARKETING MODELS
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Models give an explicit description of the various dimension associated with a particular aspect.
For the purpose of the aforesaid study effort is made to identify and select various models by
reviewing various literatures related to relationship marketing. These models have been
developed and tested by various authors. These models/literatures are based on different
dimensions viz, the process of relationship marketing, phases of its development, different
markets where relational exchanges take place, various types of relationships that can be
developed, managed and enhanced and finally identifying the variables of relationship marketing
for value creation leading towards attaining the long term profitability. In order to understand the
relationship marketing process and its applicability across value delivery network, following
models/literatures have been identified and selected, which are shown in Table 2.
Table 2: The Relationship Marketing Models/Literatures
These selected relationship marketing models/literatures suggest that:

These models have been developed as an extended perspective of relationship marketing. It
includes not only marketing as a discipline but also has various human resource implications
at different levels.

These models have been developed to identify different relationships which are to be
managed by a firm.

Different types of relational exchanges exists in form of different markets have also been
identified.

Key Relationship Marketing process can be identified as: Formation or development of
relationship, management of relationship, measurement of performances and finally
relationship enhancement or termination.
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
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Key performance variables of Relationship marketing is a synergy of various functional
areas.
VALUE DELIVERY NETWORK
Globalization and technological innovation are creating dynamic network or chain of
interconnected players to bring and deliver value to the end user. The notion that value can be
created by cooperation has led marketers to search for ‘‘win–win’’ positions as a way to enhance
profitability through collaborative value creation (Anderson, Hakansson, & Johanson, 1994;
Kanter, 1994). The idea of value creation and exchange is the foundation stone of relationship
marketing. This view is based on three different assumptions of value exchange potentialities
(Christopher et al., 2002). These value perspectives suggest that value is created; as an offering
and delivered through recurrent transactions within a supplier-managed relationship; through
mutually interactive processes and shared through negotiated agreement within the life of a
relationship and shared in interactions that emerge from within networks of relationships.
Thus value has been considered to be an important constituent of relationship marketing and the
ability of a company to provide superior value to its customers is regarded as one of the most
successful strategies. This ability has become a mean of differentiation and a key to the riddle of
how to find a sustainable competitive advantage (Ravald and Gronroos 1996; Heskett et al 1994;
Nilson 1992; Treacy and Wiersema, 1993).
Walters and Lancaster (1999a and 1999b) determine value as the utility combination of benefits
delivered to the customer less the total costs of acquiring the delivered benefits and is then a
preferred combination of benefits compared with acquisition cost. There seems to be an
agreement that value is a function of what a customer gets, the solution provided by an offering,
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and the sacrifice of the customer to get this solution. Consumer's overall assessment of the utility
of a product based on a perception of what is received and what is given, is known as perceived
value (Zeithaml, 1988). In a relational context the offering includes both a core product and
additional services of various kinds.
Many companies today have partnered with specific suppliers and distributors to create a
superior value delivery network, also called a supply chain (Magnet, 1994). Brown (1997) has
defined supply chain/value delivery network as a tool to disaggregate a business into
strategically relevant activities which enables identification of the source of competitive
advantage by performing these activities more cheaply or better than its competitors. It
comprises of larger stream of activities carried out by members like suppliers, distributors and
customers. Further Christopher (2002) defines a value delivery network/supply chain as the
network of organizations that are involved through upstream and downstream linkages in the
different processes and activities that produce value in the form of products and services in the
hands of the ultimate consumers. In order to gain competitive advantage value delivery
network/supply chain collaboration or integration is required i.e. the backward/upstream and
forward/downstream collaboration/integration. Mentzer (2001) says a value delivery network
comprises of number of players in which a firm whether manufacturing or service, holds the key
by creating and offering values in terms of output to its customers. This further can be justified
with the help of the notion that the core of relationship marketing is relations, maintenance of
relations between the company and the actors in its micro-environment, i.e. suppliers, market
intermediaries, the public and of course customers as the most important actor. Thus the more
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pertinent issue is not what kind of an offering the company provides - rather it is what kind of
relationship the company is capable of maintaining.
PROPOSED MODEL FOR RELATIONSHIP MARKETING ACROSS THE VALUE
DELIVERY NETWORK
Considering the significance of relationship marketing in a value delivery network it becomes
imperative to develop a model so that it can be explicitly described. The objective of the
proposed model is:

To identify various types of relationships across a value delivery network.

To find out the function of various types of relationship across a value delivery network.

To identify key performing variables for relationship marketing across a value delivery
network.
In order to justify these objectives a model for relationship marketing across the value delivery
network is proposed hereby which is based on literature study and other references drawn from
industry practices. It is shown in Figure 1.
Figure I: Relationship Marketing across Value Delivery Network
Feasibility of the model
Types of Relationships in a Value delivery network: The basic thrust of the model is how the
focal firm manages the relationship with the players at both the ends of network or in other
words how the focal firm practices relationship marketing across value delivery network. The
key and more visible relationships across the network can be identified as relationship of focal
firm with suppliers and with customers, which in the proposed model of value delivery network
has been identified as RI and RIV respectively. These relationships can be termed as Supplier
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relationship management (SRM) and customer relationship management (CRM) respectively. In
the proposed model of value delivery network, following various relationships can be identified:
Key Relations:
RI: Relationship between Focal Firm-Suppliers (B2B)
RIV: Relationship between Focal Firm-Customers/End Users (B2C)
Supporting Relations:
RII: Relationship between Focal Firm-Intermediaries (B2B)
RIII: Relationship between Intermediaries-Customers/End Users (B2C)
Function of various types of relationship across a value delivery network can be further
explained as follows:
RI: Relationship between Focal Firm-Suppliers: At the backward end/upstream of value delivery
network, supplier can be identified as the player supplying inputs to the focal firm which
subsequently provides value to the customer or end user. The usual approach of value adding
strategies is that the supplier adds technical product features or supporting services to the core
solution so that the total value of the offering is increased (Christopher et al, 1991). A firm's goal
is to establish and maintain a competitive advantage in its product markets (Walker, 1988) and
central to achieving this goal are the firm's sourcing policies and relationships with its suppliers
(Porter, 1979). Sheth and Sharma (1997) have identified four reasons for this phenomenon. First,
marketers or sellers are driving this change as firms have started identifying and catering to the
needs of specific customers. Thus, having a relationship with suppliers will enable firms to
receive better service and therefore be more efficient in procurement. Second, firms will
recognize that supplier relationships will allow them to be more effective and implement
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strategies such as quality platforms. Third, there are enabling technologies that allow firms to
select their best customers and suppliers through computer programs that allow firms to calculate
profitability associated with each customer or supplier. Finally, competition and the growth of
alliances will force firms to develop better supplier relationships to maintain a competitive edge.
Kalwani and Narayandas (1995) have found a positive correlation between long-term
relationships and profitability of suppliers, has yet empirically demonstrated the association or
correlation between a company's adoption of relationship marketing programs and its
performance. A successful relationship with supplier can result into a number of economic
consequences. Eccles (1991) has further identified various relationship benefits viz cost benefits
and revenue benefits to create value across the network.
RIV: Relationship between Focal Firm-Customers/End Users: Customer or end user at the
forward end/downstream consumes the offerings and decides whether the offering is up to
his/her perceived value. The relationship with customers is the foremost relationship which
ensures not only the growth prospects for a firm but also the profitability of a firm (Sheth, 1996).
More personalized, customized and valued offerings are made to the costumers to gain
competitive advantage. The impetus for managing relationships with customers came from
Reichheld (1996), who verified that dramatic increase in profits can be achieved from small
increases in customer retention rates. The need to better understand customer behavior and to
focus on those customers, who can deliver long-term profits, has changed the way marketers
used to view the world (Winer, 2001). Customer Relationship Management is a comprehensive
strategy and process of acquiring, retaining and partnering with selective customers to create
superior value for the company and the customer. It involves the integration of marketing, sales,
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customer service, and the supply-chain functions of the organization to achieve greater
efficiencies and effectiveness in delivering customer value (Parvatiyar and Sheth, 2002). The
overall purpose of customer relationship management is seemed to improve marketing
productivity and to enhance mutual value for the parties involved in the relationship. Improving
marketing productivity and creating mutual values can be achieved by increasing marketing
efficiencies and/or enhancing marketing effectiveness (Sheth & Parvatiyar, 1995a; Sheth &
Sisodia, 1995).
Key performance variables for relationship marketing in a value delivery network: Based on the
above mentioned literature references, it can be further concluded that various aspects of a value
delivery network can be identified in terms of value addition (R1), value perception (RIV) and
value offerings (RII and RIII). The performance variables for each of the relationships are further
identified, which are shown in Table 3.
Table 3: key performance variables in relationship marketing and value delivery network
These can be used to formulate hypothesis for further research study and exploration:

Competitive advantage can be gained through relationship marketing across a value
delivery network.

Profitability can be enhanced through relationship marketing across the value delivery
network.

Integration of various functions can be achieved through relationship marketing across
value delivery network.

Mutual values can be developed through relationship marketing across value delivery
network.
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CONCLUSIONS
Relationship Marketing has evolved as a strategic marketing approach which is oriented towards
attaining long-term profitability and value creation by interactions and mutual exchange among
customers, suppliers and other stakeholders. It is an approach which can be adopted to enhance
the competitiveness and profitability of a value delivery network. Better integration and shared
mutual values can be developed through relationship marketing across value delivery network.
Subsequently the present study based on literature review further provides a scope to explore and
test the following research questions:

To find out the nature of existing relationships.

To identify variables in different relationships that exists in a network.

To find out correlation among various types of relationships.

Role of Information Technology (IT) in relationship marketing.

Measuring return on relationships and evaluating the contributions to profits from the various
players in a network.

Indicators to monitor productivity and quality in a network.

Specific issues hindering relationship marketing practices.
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Table 1: Selected Definitions of Relationship Marketing
Authors
Berry (1983)
Jackson (1983)
Jackson (1985)
Turnbull and Wilson (1989)
Gronroos (1990)
Berry and Parasuraman (1991)
McKenna (1991); Shani and Chalasani (1991)
Morgan and Hunt (1994)
Evans and Laskin (1994)
Sheth and Parvatiyar (1995)
Cravens (1995)
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Definitions
Relationship marketing (RM) is attracting, maintaining and in multi-services
organizations enhancing customer relationships.
RM is managing strong, lasting relationships with individual accounts.
In industrial marketing Relationship marketing refers to marketing oriented
towards strong, lasting relationships with individual accounts.
The formation of long-term buyer-seller relationships through the creation of
structural and social bonds between companies.
The purpose of marketing in the new context is to establish, maintain, and
enhance relationships with customers and other partner, at a profit, so that the
objectives of the partners involved are met. This is achieved by a mutual
exchange and fulfillment of promises.
Relationship marketing concerns attracting, developing and retaining customer
relationships.
Relationship marketing attempts to involve and integrate customers, suppliers
and other infrastructural partners into a firm's developmental and marketing
activities.
Relationship marketing refers to all marketing activities directed toward
establishing, developing and maintaining successful relational exchanges.
The role of relationship marketing is to augment the vendor’s core product, i.e.,
to differentiate the firm’s total offering in the marketplace. They define
relationship marketing as a process that includes inputs (understanding
customer expectations, building service partnerships, empowering employees,
and total quality management); outcomes (customer satisfaction, customer
loyalty, increased profitability, and quality products); and ongoing assessment
(customer feedback, integrating relationship marketing into the firm’s strategic
planning framework).
Developing close interactions with selected customers, suppliers, and
competitors for value creation through cooperative and collaborative effort.
Relationship marketing, as a field of study, began to attract attention in the
early 1990s as firms began to enter into long-term associations to counter the
effects of increased customer demands and intensifying global competition.
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Perrien and Ricard (1995)
Sheth and Parvatiyar (1995b)
Morris et al (1998)
Evert Gummesson (1999)
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An asymmetrical and personalized marketing process that takes place in the
long-run results in some bilateral benefits and rests on an in-depth
understanding of customer needs and characteristics.
RM can be defined as the process of developing cooperative and collaborative
relationship with customers and other market actors.
Relationship Marketing is a strategic orientation adopted by both the buyer and
seller organizations, which represents a commitment to long-term mutually
beneficial collaboration.
Relationship marketing is marketing based on interaction within networks of
relationships.
Table 2: The Relationship Marketing Models/Literatures
Author (s)/Model (s)/Literature Review
Triplet of Relationship Marketing by
Gronroos (2000)
Key issues
For a successful relationship marketing strategy, three processes are required:
Interaction, Dialogue and Value Process
Relationship Marketing Process Model by
Parvatiyar and Sheth (2000)
Relationship Marketing Process comprises of four sub processes: Formation;
Management and Governance; Performance Evaluation and Relationship
evolution/enhancement.
Relationship between/among buyer and seller evolve through five general
phases viz, Awareness, Exploration, Expansion, Commitment and Dissolution.
Each phase represents a major transition in how parties regard one another.
Six different market domains have been identified where an organization can
direct their marketing activities: Customer Market; Internal Market;
Supplier/Alliance Market; Referral Market; Influence Market and Recruitment
Market
10 distinct forms of intra and inter-organizational relationships have been
identified:
Buyer partnerships with Intermediate Customers and Ultimate Customers
Supplier partnerships with Good Suppliers and Service Suppliers
Lateral partnerships with Competitors, Nonprofit Organizations and
Government
Internal Partnerships among Various Business Units, Functional Departments
and Employees of the Firm
Relational constructs are trust, commitment, relationship satisfaction, and/or
relationship quality.
Trust and Commitment, both are key to predicting exchange performance.
Identified an extended list of relationship variables: commitment, trust,
cooperation, mutual goals, interdependence/power imbalance, performance
satisfaction, and comparison level of the alternative, adaptation, nonretrievable investments, shared technology, summative constructs, structural
bonds and social bonds.
Proposed six important relationships construct: Relationship dependence, trust,
commitment, communication, cooperation and equity.
The construct of relationship is not a universal concept.
It may be different across different segments of the market.
Trust is alone the critical relational construct.
Relationship Development Process Model by
Dwyer et al (1987)
Six Markets Model by Payne, A. (1997)
The Relational Exchanges in Relationship
Marketing by Morgan and Hunt (1994)
Dwyer, Schurr, and Oh’s (1987) ; Crosby,
Evans, and Cowles’s (1990)
Morgan and Hunt (1994)
Wilson (1995)
Lewin and Johnston (1997)
Bejou (1997)
Doney and Cannon (1997); Sirdeshmukh,
Singh, and Sabol (2002)
Anderson and Weitz (1992); Gruen, Summers,
and Acito (2000); Jap and Ganesan (2000)
De Wulf, Odekerken-Schröder, and Iacobucci
(2001); Kumar, Scheer, and Steenkamp (1995)
Leo et al (2005)
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Commitment alone is the critical relational construct.
The construct of relationship quality is a combination of commitment, trust,
and relationship satisfaction.
Proposed Relationship Marketing Orientation (RMO) which is a onedimensional construct consisting of six components: trust, bonding,
communication, shared value, empathy, and reciprocity.
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Table 3: key performance variables in relationship marketing and value delivery network
Performance variables
Competitive advantage
-Technical product features or
supporting services
-Better service, quality
-Enabling technologies
Profitability
Integration of marketing, sales,
customer service, and the
supply-chain functions
Mutual values
Literature
References
Relationship Marketing
Christopher et al (1991);
Sheth and Sharma (1997)
for
Literature references for Value Delivery
Networks/SCM
Ravald and Gronroos (1996); Heskett et al (1994);
Nilson (1992); Treacy and Wiersema (1993)
Kalwani and Narayandas (1995);
(Winer, 2001); and Eccles (1991)
Parvatiyar and Sheth (2002)
Anderson, Hakansson, & Johanson (1994); Kanter
(1994)
Brown (1997)
Parvatiyar and Sheth (2002)
Mentzer (2001)
Figure I: Relationship Marketing across Value Delivery Network
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