Antecedents and Consequences of Relationship Marketing Insights from Business Service Salespeople Arun Sharma Nikolaos Tzokas Michael Saren Panagiotis Kyziridis Relationships between suppliers and buyers are very important in effective marketing strategies. For example, General Motors, Xerox, Black & Decker, and Nieman Marcus are looking at relationships with their suppliers to achieve stronger marketing and competitive positions. We developed a model regarding the antecedents and consequences of relationship marketing concerning salespeople’s behaviors along with propositions. Using a theory-in-use perspective, we examined the insights of business service salespeople from three service industries in two countries analyzing their critical role as boundary spanning agents in relationship marketing. Through in-depth interviews, we explored the nature of salespersoncustomer relationships. This research suggests that relationship marketing is regarded by salespeople as a two-way path and the development of relationships requires engaged relationship building activities from both buyers and sellers. © 1999 Elsevier Science Inc. All rights reserved. INTRODUCTION Address correspondence to Arun Sharma, Department of Marketing, University of Miami, P.O. Box 248147, Coral Gables, FL 33124. E-mail: asharma@miami.edu Industrial Marketing Management 28, 601–611 (1999) © 1999 Elsevier Science Inc. All rights reserved. 655 Avenue of the Americas, New York, NY 10010 With increasing turbulence in the marketplace, firms clearly have to move away from transaction oriented 0019-8501/99/$–see front matter PII S0019-8501(98)00034-0 Relationships can have both positive and negative consequences. principles of short term, discrete exchanges and begin the development and maintenance of long-lasting relationships between firms and their customers [1, 2]. This is due to an increased recognition of the importance of customer satisfaction, retention strategies, and relationship marketing to the performance of a firm [3]. This shift is a consequence of research addressing transaction oriented marketing to research directed towards relationship marketing. In examining the marketing strategies associated with long-term relationships, the activities of the salesperson as a boundary spanning agent are regarded as critical in enhancing long-term relationships [4]. Personal selling is by and large an ignored area of research within the growing services discipline. Traditionally, the published research in personal selling has a product focus [5]. Selling of business services poses some special challenges that are worthy of research attention for two reasons: 1) salespeople may need to use unique sales strategies because customers perceive a higher level of variability and uncertainty in the purchase of services; and 2) the behavior of salespeople may influence customers’ perceptions of quality more in a service setting than in a product context [5]. This paper describes a model that explicates the effect of salespeople’s behaviors on relationships. Specifically, salespeople’s behaviors and the antecedents and consequences of customer “relationships” are examined and propositions developed. We concentrate on the antecedents of a relationship concerning the participation of salespeople and customers. We also examine the consequences of a relationship with customers and discuss the positive and negative consequences of relationships. Twenty-two business service salespeople from three firms and two countries were interviewed to develop a theoryin-use perspective. The results provide new insights into the relationship building process, specifically on the critical role of buyers in the development of relationships. RELEVANT LITERATURE In this section, we review the nature of relationship marketing and its importance. We then examine the importance of the salesperson in the development of long-term relationships with customers. The research on salespeople’s behavioral elements and their effect on the quality of relationships is then reviewed. Finally, to assure that these relationships are maintained and prosper, understanding the salespeople’s perspective on the process is important and is examined. IMPORTANCE OF RELATIONSHIP MARKETING ARUN SHARMA is Associate Professor of Marketing at the University of Miami. NIKOLAOS TZOKAS is a Senior Research Fellow in the Department of Marketing at the University of Strathclyde, Scotland. MICHAEL SAREN is Professor of Marketing in the Department of Marketing at the University of Strathclyde, Scotland. PANAGIOTIS KYZIRIDIS holds a MSc in Marketing from the University of Stirling, Scotland. Currently he is a sales and marketing consultant in Athens, Greece. 602 Recent research has highlighted the importance of developing relationships for effective marketing [6]. It has been suggested that academic research is undergoing a paradigm shift in marketing from transaction marketing to relationship marketing [2]. Regarding practice, firms are also considering relationship marketing as critical for sustaining a competitive advantage. The primary motivator for long-term relationships is satisfaction with past interactions. Satisfied customers tend to buy products from the same supplier [7]. If customers have a long and satisfactory relationship, then a single unsatisfactory experience does not influence the relationship. For example, brand loyal customers, even Salespeople have knowledge regarding the sales process that translates into their behaviors. after an unsatisfactory experience, tend to repurchase the product [8]. In contrast, the consequences of having dissatisfied customers are significant. In this case, customers may switch to a new supplier whose performance is closer to their expectations, or reduce the amount they are buying with their existing supplier [9]. The results of the benefits of relationships are higher profitability. This relationship has been tested in terms of the sales and profitability [10, 11] and in terms of the impact of selling costs [11]. PROPOSITION ONE Relationships lead to higher levels of sales and profitability and lower selling costs. Importance of the Role of Salespeople in Business Services Buying Since salespeople are the primary source of communication, the boundary spanning role of the service salesperson is critical in relationship marketing [5]. The boundary spanning role of a salesperson is also highlighted by conflict that salespeople face when the selling firm expects them to represent the firm’s interest and the customer comes to rely on the salesperson to deliver what is in the customer’s best interest. Signaling theory would also suggest the importance of salespeople’s behavior in the evaluation of a service as signaling cues are specifically relevant when [12]: a) customers want to reduce the perceived risk [13]; b) customers are unable to evaluate quality [14]; c) quality is difficult or time consuming to evaluate [15, 16]; and d) customers have a need for information [17]. Buying of most services would reflect all four conditions to some degree. Under these conditions, the behavior of the salesperson operates as a signal that serves as a heuristic in assessing the quality of the merchandise being considered for purchase. OUR MODEL Salespeople as boundary spanning agents are the primary source of communication for customers in industrial, business, and retail market situations. To understand the effect of salespersons’ behavior on relationships, this study integrates past research to present a conceptual framework for long-term relationships (Figure 1). We adapt a model of relationship development process proposed by Dwyer and his colleagues [18]. In this paper we emphasize aspects of relationship building processes and the consequences of effective relationships. Again, based on earlier research, we further divide relationship building processes into salespeople behaviors, relationship enhancing behavior, and relationship threatening behaviors [19]. We discuss each of these aspects individually. In addition to past research, we also examine salespeople’s perceptions as in the last two decades a selling perspective labeled as the “cognitive sales perspective” has gained attention. The underlying premise of this perspective is that salespeople have knowledge regarding the sales process that translates into their behaviors [20]. Therefore, by examining the knowledge structure of salespeople, we can obtain insight into the “relationship building” process. RELATIONSHIP ENHANCING SALESPEOPLE’S BEHAVIORS In this section, we discuss three major salespeople’s behaviors that have been highlighted by previous research – customer orientation, customer trust and continuous customer satisfaction. 603 Mutual commitment reduces the uncertainties associated with opportunistic behavior leading to a higher level of relationship orientation. Customer Orientation Trustworthiness Research in cognitive selling paradigm suggests that a customer orientation distinguishes the performance of salespeople [20]. The primary determinants of customer satisfaction (and thus long-term relationships) are customers’ expectations of firm performance and the actual service accomplishment. These service performance expectations can be based on sales presentations, best brand norms and service norms [21]. Customer orientation suggests that salespeople understand customers’ needs and expectation, and design and adapt services to match their needs. Since customers’ needs evolve, successful salespeople constantly monitor the shifting needs of salespeople and adapt services to these evolving needs. Successful relationship marketing is associated with customer oriented strategies [22–24]. Trust is regarded as critical in the context of relationship marketing [6]. The importance of trust in relationships has been empirically determined in the distribution [6], merchandise buying [1], and services [25]. Doyle and Roth [26] suggest that for relationship marketing, salespeople need to engage in trust-building. Proactive Behaviors There is increasing research that pro-active behaviors are critical in relationship management [23, 24, 27]. Proactive behaviors include a constant reevaluation of the market as well as brand space of a service. In addition, rather than customers seeking solutions to problems that they may have, service marketers need to anticipate problems and develop service solutions for them [22]. Previous research has suggested that proactive behaviors generates attractive service innovations that genuinely enhances the bundle of satisfaction that firms provide to their customers [28]. The rise of computers with increased graphical and statistical analysis has made proactive behaviors easier with increased productivity and profitability gains [29]. PROPOSITION TWO Customer orientation, trustworthiness, and proactive behaviors positively affects relationships. Relationship Enhancing Behaviors FIGURE 1. 604 Salespeople’s relationship behaviors. Two common research themes discuss the issue of behaviors that enhance relationships. The first is the involvement of senior managers with mutual goal setting. Relationships give a strong competitive advantage to the seller. The second is the involvement of the customer in the relationship process. A mutual commitment to goals and top-level involvement are harbingers of strong relationships. Examples of Corning and Walmart are provided as indicators of how strong CEOs can influence the relationship building process of firms. The primary reason is that a mutual commitment reduces the uncertainties associated with opportunistic behavior leading to a higher level of relationship orientation. Unlike products, where specific assets may be used, services normally do not need idiosyncratic assets increasing the likelihood of defection. Therefore, research has shown a robust relationship between top-level involvement, mutual commitment to goals, and relationships [23, 24, 27]. Customers’ attitude toward the salespeople and firm should affect the nature of relationship. Research suggests that customer effort is directly related to performance and relationship evaluations [30–33]. Increased effort and a positive attitude by customers enhances their knowledge and also increases their commitment to the firm [34]. PROPOSITION THREE Top-level involvement, mutual commitment to goals, and positive customer attitude and effort positively affects relationships. Relationship Threatening Behaviors Proposition one and two discuss relationship enhancing behaviors. Behaviors opposite to relationship enhancing behaviors should lead to relationship threats. There is an additional factor—salesperson socialization that should be understood. In our research we have found that “service deliverables” and “nature of relationship” to be important to customers. Within the relationship construct, “socialization” is becoming more important [35]. Within the framework of our model, the level of socialization between the customer and the salesperson is critical. Although important, when the level of socialization exceeds the business demands, we expect it to be a threat to relationships. These behaviors may include reliance on friendship rather than the quality of service and being excessively demanding. PROPOSITION FOUR Demands based solely on level of socialization negatively affects relationships. METHODOLOGY The exploratory nature of our research and the need to develop a theory-in-use perspective required the use of a qualitative research methodology [36]. Qualitative research is a particularly useful research approach when seeking to understand questions of process [37, 38]. To test the basic framework of our model, information from respondents was collected by means of personal in-depth interviews. A total of 22 salespeople were interviewed. The small sample may be an area of concern in an empirical study, but in the context of a theory-in-use perspective the sample is adequate. We conducted field interviews with eight salespeople from a Fortune 500 company in the U.S. that sells hightechnology services to business customers. To ensure that the context of our research was not based only on the values in the U.S., a national culture perspective was adopted. Hofstede [39] identified four major dimensions of national culture. These dimensions are individualism, power distance, masculinity, and uncertainty avoidance. Individualism refers to the relationship orientation of individual and collectivity within a society [39]. At one end of spectrum are societies where individuals have 605 Trust reduces customers’ feelings of risk and doubt. loose ties among members, i.e., high levels of self-interest are manifested in individual members (e.g., U.S.). On the other end are societies where individuals have strong ties within groups, i.e., individuals hold group values and beliefs and seek collective interests (e.g., Japan). Power distance refers distribution of power within an organization [39]. Masculinity refers to the greater value on achievement, tasks, and performance when compared to people, quality of life, and helping others. Finally, uncertainty avoidance emphasizes how societies try to devise strategies to deal with uncertainty. The United States is regarded as high in individualism, low in power-distance, medium in masculinity, and low in certainty avoidance. To get a better understanding of relationship processes in other countries, with different national cultures, we also interviewed salespeople and sales managers from two large service organizations in Greece regarded as “customer oriented.” Greece is regarded as low in individualism, high in power-distance, high in masculinity, and high in certainty avoidance. The responses from both countries would allow us to suggest a model valid in multiple national culture contexts. In the Greek sample, the first firm was a top five advertising agency in Greece. The second firm was a travel agency that is among the leaders in the Greek travel market. Interviews took place with six respondents (three account managers and three account directors) from the advertising agency, and eight respondents from the travel agency (one sales coordinator, two sales managers, and five salespeople). A general discussion guide was used for all interviews. We addressed salespeople’s perceptions regarding the establishment and maintenance of long-term customer relationships. To understand the underpinnings of long-lasting relationships, salespeople were asked to describe their long-lasting relationship with an actual customer. Data collected was transcribed, translated, and analyzed by pooling together the process of relationship formation between salespeople and their customers [36]. 606 RESULTS The results of the interviews revealed interesting insights. First, salespeople from both the U.S. as well as the Greek sample had fairly similar responses. This came as a surprise as we expected salespeople from different national cultures to emphasize different aspects of their relationship. For example, we would have expected U.S. to emphasize the “deliverables” of the relationship, whereas we expected Greece to emphasize the “nature of the relationship.” The data suggested that both samples felt that a personal relationship was important but that “deliverables” were critical. The modified model is presented in Figure 2. The specific responses are discussed below. Proposition One: Relationships Lead to Higher Levels of Profitability and Lower Selling Costs The proposition was supported. Salespeople suggested that the development and maintenance of some long-lasting, high quality relationships are very important for a firm. The primary benefits are in the areas of sales and profits, Salespeople’s knowledge regarding relationship behaviors. FIGURE 2. Effective relationships are contingent on the behaviors of both sellers and buyers. less tough negotiations and positive word-of-mouth. Salespeople feel that relationships give a strong competitive advantage to the seller. A satisfied customer who feels very close to the seller is “cash in the company’s coffers.” Therefore, through relationships, “the seller gains a loyal customer who increases the quantity, frequency, or quality of buying.” Salespeople felt that customers develop an understanding that a good profit for the seller is a reasonable motivating factor in order for salespeople to perform their best. This is the result of the established trust of the buyer based on the feeling that they are not being “cheated.” Another obvious benefit of relationships is that it allows for an in-depth knowledge of customers’ needs without the use of sophisticated and costly research techniques. Customers in relationships are “less tough negotiators.” The primary reason is that customers concentrate on the high quality of service offered rather than the financial aspects of their business. Salespeople consistently felt that positive word-of-mouth was very good outcome of relationships. Proposition Two: Customer Orientation, Trustworthiness, and Proactive Behaviors Positively Affect Relationships This proposition was also supported and the responses were very common for all of the industries and nations. The salespeople’s behaviors associated with effective relationship building are listed below. CUSTOMER ORIENTATION. Salespeople consistently stated that effective relationships call for salespeople who are customer oriented. First, customer oriented salespeople expend effort to understand customers’ needs and concerns. Second, customer oriented salespeople use their knowledge of customers’ needs and concerns to develop services that match customers’ needs. Third, salespeople ensure the satisfaction of customers. Salespeople feel that their behavior should be driven by a “genuine concern” for the customer. It is essential for salespeople to be very close to their customers, have frequent contact with them, and develop an in-depth knowledge and understanding of their business. Salespeople ensure their concern by understanding their unique needs and making customers “feel very important.” Salespeople emphasized that for effective relationships, customers must also feel that the salesperson is expending effort to understand their needs and concerns. Salespeople should offer customers services that take into account their individual needs and concerns. This is critical in long-lasting relationships as an account director of the advertising company stated: “A professional salesperson gives excellent service to every customer and exceptional service to the customer with whom he has a long-lasting relationship.” Our interviews imply that customer satisfaction is embedded in the notion of customer orientation. As a salesperson stated “We make happy customers; at a profit if we can, at a loss if we must, but always happy customers!” CUSTOMER TRUST. Salespeople suggest that trust is critical in relationships. In addition, aspects of intimacy and empathy are also suggested by salespeople. Salespeople explained that their efforts are directed toward imbuing to customers a feeling of “security.” “The buyer can feel secure in effective relationship, never having the sense of being cheated and never doubting the quality of the outcome of the service that they are receiving.” Salespeople suggested that an honest and consistent behavior reflected salespeople’s genuine concern for customers’ needs and reduced customers’ feelings of risk and doubt. Salespeople perceived each interaction with the customer as a testing ground of the relationship. They outlined the need for “spontaneity” and “inspiration” from the salesperson in order for the customer to sense “honesty” and “authenticity” in the relationship. A salesperson stated: “If you pretend, then the customer will know about it and the relationship will collapse.” Effective salespeople also develop an intimacy with their customers. This allows them to make customers 607 Control, motivation, and compensation plans can be designed based on the salespersons’ customers. “feel at home.” As stated by a salesperson: “If someone hears me talking over the phone with this customer, he may think I am talking with a good friend.” Additionally, empathy was also regarded as important. An account director stated: “If you do not go out for a beer, and you do not feel like calling your customer at 2:00 a.m. for something that came to your mind, then no great ideas will be produced.” PRO-ACTIVE BEHAVIORS. Salespeople feel that “proactive behavior” is another key driver for effective relationships. This pro-active behavior was explained at two levels, namely the customer and the salesperson’s firm level. At the customers level, salespeople are continuously interacting with their customers to identify emerging needs. This allows salespeople to develop solutions for customers even before they are aware of the problems. At the firm level, salespeople ensure that the service design and delivery match the requirements of customers. This customer-focus may increase the friction in the organization as a salesperson observed the process to be “fighting with my own company to secure the delivery of the customer’s expected service.” of goals, mutual influence, common dreams, loyalty, and mutual satisfaction. The extensive use of the adjectives “mutual” and “common” suggests that both the seller and the buyer are “on the same side” with the feeling of working together as a team toward a common goal deeply embedded in their relationship. As stated earlier, a surprising finding of the research was that salespeople regard the attitude of customers as critical in the relationship. As a salesperson observed, “a warm, smiling customer motivates me to give my best.” This theme was repeated by most salespeople. As another salesperson observed “I go out of my way for customers that are nice to me.” Similarly, “If a customer complains a lot, I ignore him.” The above findings draw attention to the fact that the interactive elements of “relationships” influence the behavior of both customers and salespeople. Therefore, it seems that effective relationships are contingent on the behaviors of both sellers and buyers. Proposition Three: Top-Level Involvement, Mutual Commitment to Goals As Well As Positive Customer Attitude and Effort Positively Affects Relationships Proposition four was supported. Specifically, three issues emerged with respect to relationship threats—lack of creativity, balance of professionalism and friendship, and unreasonable demands. A concern among salespeople was that a long-lasting relationship may lead to “routine” and “non inspiring creative work.” Salespeople suggested that after having secured an account, salespeople need to be aware that getting an account may negatively influence the quality of the service offered. In business services, keeping a relationship “fresh” and “productive” is regarded as critical by salespeople. This is more specific in the advertising sector where inspiration and creativity play a crucial role, and a long-lasting The proposition was generally supported. Two interesting results were stated. First, no salesperson suggested a top-level involvement. Second, customers’ positive attitude toward customers was regarded as being critical for relationships. Salespeople suggest that a “relationship” is characterized by mutual interest rather than a focused self-interest. The phrases that we most often heard were—positive attitude, mutual flexibility, common vision, common sense of partnership, mutual achievement 608 Proposition Four: Demands Based Solely on Level of Socialization Negatively Affect Relationships relationship may lead to routine and non inspiring creative work. Salespeople also suggested that after having secured an account, salespeople need to be aware that getting an account may negatively influence the creativity of the service offered. In addition, some salespeople suggested that although they develop close and friendly relationships with some of their customers, they are always aware that there is a limit “in the balance of professionalism and friendship; the friendship should never exceed the professionalism.” The final problem highlighted by salespeople is that some customers may become very demanding even posing irrational and unachievable demands. Customers try to take advantage of a relationship at the expense of the seller. These “irrational” demands are due to the customer’s confidence that the relationship is more important to the seller than the customer. Similarly, aggressive selling techniques destroy relationships as “selling encounters should be viewed as receiving presents—when we receive a present in a beautiful package, the best moment is before opening it.” IMPLICATIONS This research suggests that relational selling provides direct and clear benefits to firms in the continuity of assigned jobs, diminishing importance of price during negotiations, increased learning, positive word of mouth communications, and increased performance and efficiency from the point of view of the supplier. This research has identified salespeople’s behaviors that affect relationships. These behaviors were customer orientation, customers’ trust, and pro-active behaviors. Relationships were enhanced when customers had a positive attitude toward the salesperson and common goals were established. Salespeople stated that a lack of freshness, lack of professionalism, and unreasonable demands were threats to relationships. We suggest training to make salespeople more customer oriented, specifically in the selling of services. The results also suggest that the role of salespeople is more critical in a service setting than a product setting. Salespeople perceive sales interactions as part of the service production and consumption process. In other words, the sales encounter is a distinguishable, yet integral part, of the product/service that is also consumed. Literature on sales management has mainly been concerned with the characteristics and behavior of the sales- person and how they affect the outcome of the sales. However, our findings direct attention to the fact that the performance of salespeople is dependent on customers’ behavior and disposition during the sales encounter. Relationship marketing promotes an intimate relationship between salespeople and their customers. A friendly relationship that overcomes professionalism may jeopardize the business relationship. Customers may become excessively demanding and therefore not profitable to the firm. Also, salespeople may become overconfident in the customers’ loyalty and therefore reducing the continuity and novelty of their efforts to keep this customer satisfied. Implications for Sales Managers The results and the previous discussion have implications for marketing and sales managers. First, and most important, it provides a method for describing the business services relationship processes. Second, it was also shown that salespeople feel that specific sales actions enhance or reduce relationships. This provides marketers with a procedure for relating behaviors of salespeople to relationships. The results suggest that presentation strategies be continuously adapted for customers. For example, when presenting to an established customer, the salespeople should expend effort similar to new accounts. This is critical as different customers may seek different types of presentations. Some customers may prefer that the presentation is made by a sales team because it fosters the impression that thorough planning has gone into the presentation and all-important issues will be addressed by the presenters. Similarly, other customers may prefer individual or dyadic presentations and may be intimidated by team presentations because it does not reflect their own decision-making style. The control, motivation, and compensation plans can be designed based on the salespersons’ customers. For example, if a salesperson has relationships with primarily small customers, he would have a steady flow of small orders. On the other hand, salespeople who have relationships with large government customers, will usually have long lead times that result in infrequent but large orders. The first group should have a higher commission to base pay ratio when compared to the second group. 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