The Center for Sales and Marketing Strategy provides resources for individual learning through its resources and referral library. The resources we provide range from publications on the leading marketing and sales topics to referral guides for consulting to video tutorials on implementing specific marketing and sales techniques.
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Samaha, Stephen, Robert W. Palmatier, and Rajiv P. Dant, (2011), “Poisoning Relationships: Perceive Unfairness in Channels of Distribution,” Journal of Marketing, 75 (May), 99-117.
Understanding how relationships are damaged is a critical component in building and preserving strong distribution channels. Using longitudinal data from a Fortune 500 firm and its channel members, this research shows that perceived unfairness truly acts as “relationship poison” by directly damaging relationships, aggravating the negative effects of both conflict and opportunism, and undermining the benefits of using contracts to manage channel relationships. Surprisingly, at low levels of perceived unfairness, conflict and opportunism have small or even insignificant effects on channel member outcomes, which implies that research investigating the negative impact of conflict and opportunism on exchange outcomes may need reevaluation because these effects are contingent in nature and may vary depending on the levels of perceived unfairness. In addition, the findings support the premise that using contracts to manage channel relationships represents a double-edged sword that suppresses the negative effects of conflict and opportunism while aggravating the negative effect of unfairness. Access the paper.
Fang, Eric, Robert W. Palmatier, Lisa Scheer, and Ning Li, (2008), “Trust at Different Organizational Levels,” Journal of Marketing, 72 (March), 80-98.
The authors explore the effects of trust at three distinct organizational levels in a marketing collaboration: interorganizational trust between collaborating firms, each firm’s agency trust in its own representatives assigned to a collaborative entity (co-entity), and intra-entity trust among the representatives assigned to the co-entity. Dyadic survey and longitudinal objective performance data from 114 international joint ventures indicate that trust at each level has unique effects but similarly influences the collaborating firms’ resource investments or the co-entity’s use of those resources. Interorganizational and agency trust motivate resource investments in the co-entity, particularly in the context of a differentiation strategy, whereas intra-entity trust promotes coordination within the co-entity, and interorganizational trust and a differentiation strategy magnify that effect. Intra-entity trust also can undermine co-entity responsiveness to environmental change, especially when joined by interorganizational trust between collaborating firms and formalized decision making within the co-entity. These findings demonstrate that managing and building trust at multiple levels is critical to the success of interorganizational marketing collaborations. Access the paper.
Palmatier, Robert W., Cheryl Jarvis, Jennifer Bechkoff, and Frank R. Kardes, (2009), “The Role of Customer Gratitude in Relationship Marketing,” Journal of Marketing, 73 (September), 1-18.
Most theories of relationship marketing emphasize the role of trust and commitment in affecting performance outcomes; however, a recent meta-analysis indicates other mediating mechanisms are at work. Data from two studies—a laboratory experiment and a dyadic longitudinal field survey—demonstrate that gratitude fully mediates the influence of a seller’s relationship marketing investments on performance outcomes. Specifically, relationship marketing investments generate short-term feelings of gratitude that drive long-lasting performance benefits based on gratitude-based reciprocal behaviors. The authors identify a set of managerially relevant factors and test their power to alter customer perceptions of relationship marketing investments to increase customer gratitude, which can make relationship marketing programs more effective. Overall, the research empirically demonstrates that gratitude plays an important role in understanding how relationship marketing investments increase purchase intentions, sales growth, and share of wallet. Access the paper.
Palmatier, Robert W., (2008), “Interfirm Relational Drivers of Customer Value,” Journal of Marketing, 72 (July), 76-89.
This article integrates social network and exchange theory to develop a model of customer value based on three relational drivers: relationship quality (caliber of relational ties), contact density (number of relational ties), and contact authority (decision-making capability of relational contacts). The results suggest the value generated from interfirm relationships derives not only from the quality of customer ties (e.g., trust, commitment, norms), as typically modeled, but also from the number and decision-making capability of interfirm contacts and the interactions among relational drivers. Moderator analysis of customer characteristics suggests that increasing contact density most benefits sellers with customers with high employee turnover rates, whereas building relationships with key decisions makers generates the highest returns among customers that are more difficult to access. The conceptual model of the impact of interfirm relational drivers on customer value receives support from dyadic data across 446 business-to-business exchanges. Access the paper.
Palmatier, Robert W., Rajiv P. Dant, Dhruv Grewal, and Kenneth R. Evans (2006), “Factors Influencing the Effectiveness of Relationship Marketing: A Meta-Analysis,” Journal of Marketing, 70 (October), 136-153.
Relationship marketing (RM) has emerged as one of the dominant mantras in business strategy circles, though RM investigations often yield mixed results. To help managers and researchers improve the effectiveness of their efforts, the authors synthesize RM empirical research in a meta-analytic framework. Although the fundamental premise that RM positively affects performance is well supported, many of the authors’ findings have significant implications for research and practice. Relationship investment has a large direct effect on seller objective performance, which implies that additional meditated pathways may explain the impact of RM on performance. Objective performance is influenced most by relationship quality (a composite measure of relationship strength) and least by commitment. The results suggest also that RM is more effective when relationships are more critical to customers (e.g., service offerings, channel exchanges, business markets) and built with an individual person rather than a selling firm (which partially explains the mixed effects between RM and performance reported in previous studies). Access the paper.
Palmatier, Robert W., Srinath Gopalakrishna, and Mark B. Houston (2006), “Returns on Business-to-Business Relationship Marketing Investments: Strategies for Leveraging Profits,” Marketing Science, 25 (September-October), 477-493.
Firms invest heavily in different types of business-to-business relationship marketing activities in the belief that such programs bolster their bottom line. In this study, we develop and test a conceptual model that links customer-specific relationship marketing investments to short-term, customer-specific financial outcomes. Data from a matched set of 313 business customers covered by 143 salespeople of 34 selling firms indicate that investments in social relationship marketing pay off handsomely, financial relationship marketing investments do not, and structural relationship marketing investments are economically viable for customers serviced frequently. We conceptualize relationship marketing in a context involving nested participants (customers, salespeople, selling firms) and employ a hierarchical linear modeling approach to account for observations that are not independent. Across the three hierarchical levels, the impact of the financial, social, and structural components of relationship marketing investments and the potential moderating factors offer valuable insights into contextual factors and managerial strategies for leveraging relationship marketing investments. In an attempt to suggest normative guidelines to managers, we extend our analysis to a simple resource allocation model that describes the optimal mix of relationship marketing resources based on firm strategies. Access the paper.
Lee, Ju-Yeon, Shrihari Sridhar, Conor Henderson, and Robert W. Palmatier, “Effect of Customer-Centric Structure on Firm Performance,” Marketing Science Institute Working Paper Series, (12-111). Under review at the Journal of Marketing.
Customer-centric structures are posited to exhibit superior performance, though empirical support remains elusive. The authors define customer-centric structure as an organizational design where a firm’s highest-level business units are aligned to distinct customer groups; they examine how and when customer-centric structures affect firm performance. In two studies, this research evaluates longitudinal secondary data (1998–2010) linking Fortune 500 firms’ structures to performance. Study 1 features a mediation model with allowance for endogeneity in firm’s organizational structure choice, and reveals that a customer-centric structure improves performance by enhancing customer satisfaction, but it simultaneously degrades performance by adding coordinating costs. The increased customer satisfaction benefits generated by customer-centric structures also diminish as more competitors adopt customer-centric structures, competitive intensity increases, and industry profitability decreases. In Study 2, using a difference-in-difference modeling approach, the authors show that on average, firms that switched to a customer-centric structure initially perform worse than before the restructuring (customer-centric learning stage), but after about 9 or 10 quarters, perform better than they did before restructuring. Contact Professor Rob Palmatier for the latest version of this paper.
Gonzalez, Gabriel, Daniel Claro and Robert W. Palmatier, (Forthcoming 2014), “Synergistic Effects of Relationship Managers’ Social Networks on Sales Performance,” Journal of Marketing.
This article integrates relationship marketing and social network perspectives to develop and test a model that links the informational and cooperative benefits stemming from relationship managers’ social capital structure (brokerage and density) and relations (formal and informal networks) with objective sales performance. The authors demonstrate the effect of cross-network and overlap-network synergies on performance. Data about both formal and informal networks of 464 employees, including 101 relationship managers, demonstrate that relationship managers’ performance improves with cross-network synergy when informational benefits from wide-reaching, non-overlapping ties in the informal network combine with the cooperative benefits of a densely interconnected formal network. In addition, the effects of formal and informal social capital structure on performance increase significantly when relationship managers have a high degree of network overlap between their formal and informal networks. Contact Professor Rob Palmatier for the latest version of this paper.
Palmatier, Robert W., Lisa K. Scheer, Mark B. Houston, Kenneth R. Evans, and Srinath Gopalakrishna, (2007), “Use of Relationship Marketing Programs in Building Customer–Salesperson and Customer–Firm Relationships: Differential Influences on Financial Outcomes,” International Journal of Research in Marketing, 24 (September), 210-223.
Despite the conventional wisdom that relationship marketing will generate favorable financial results, extant marketing research provides inconsistent evidence of this effect. We investigate the important question: Does a firm’s relationship marketing truly payoff in enhance financial outcomes? We examine the effects of relationship marketing on a buyer’s concurrent person-to-firm relationship with the selling firm and his/her interpersonal relationship with the salesperson. Drawing on social judgment and attribution theories, we offer and test a theoretical model explicating (1) how a seller’s social, structural, and financial relationship marketing programs affect buyer relationship quality with the salesperson and the selling firm and (2) how those relationship qualities ultimately generate seller financial outcomes. Relationship marketing programs indeed build buyer relationship quality, but whether those relationship-building effects accrue to the salesperson or the selling firm depends on buyer perceptions regarding salesperson versus selling firm control of those programs. Buyer relationship quality with both salesperson and selling firm positively affect seller financial outcomes, but the effect of relationship quality with the selling firm is enhanced as perceived selling firm consistency increases. Employing triadic data from matched buyer, salesperson, and sales manager, this research presents an end-to-end empirical examination of how a seller’s relationship marketing affects its financial outcomes through the buyer’s relationships with salesperson and selling firm. Access the paper.
Palmatier, Robert W., Mark B. Houston, Rajiv P. Dant, and Dhruv Grewal, (2013), “Relationship Velocity: Toward a Theory of Relationship Dynamics,” Journal of Marketing, 77 (January), 13-30.
The dynamic components of relational constructs should play an important role in driving performance. To take an initial step toward a theory of relationship dynamics, the authors introduce the construct of commitment velocity—or the rate and direction of change in commitment—and articulate its important role in understanding relationships. In two studies, the authors demonstrate that commitment velocity has a strong impact on performance, over and above the impact of the level of commitment. In Study 1, modeling six years of longitudinal data in a latent growth curve analysis, the authors empirically demonstrate the significance of commitment velocity as a predictor of performance. In Study 2, the authors use matched multiple-source data to investigate the drivers of commitment velocity. Both customer trust and dynamic capabilities for creating value through exchange relationships (i.e., communication capabilities for exploring and investment capabilities for exploiting opportunities) affect commitment velocity. However, trust and communication capabilities become less impactful as a relationship ages, while investment capabilities grow more important. The authors offer three post hoc tenets that represent initial components of a theory of relationship dynamics that integrates two streams of relationship marketing research into a unified perspective. Access the paper.
Jonathan Zhang, George Watson, and Robert W. Palmatier, “Integrating Relationship Marketing and Lifecycle Perspectives: Strategies for Effective Relationship Migrations,” under review at Journal of Marketing.
This article advances theory by integrating relationship marketing and lifecycle perspectives within a single conceptual and empirical framework to identify the most effective state-specific relationship migration strategies. Using a multivariate hidden Markov model, applied to a longitudinal data set of 346 business-to-business relationships maintained by a Fortune 500 firm, the authors uncover latent and dynamic relationship structures and perform head-to-head tests of extant lifecycle theory across relationship state variables, state conceptualizations, and migration paths. On the basis of the relationship structure uncovered in Study 1, the authors then propose and test three positive (exploration, endowment, recovery) and two negative (neglect, betrayal) migration mechanisms to parsimoniously describe all state changes and empirically test state-specific migration strategies. This research moves beyond extant lifecycle research that describes “relationship states” to explicate “relationship state change,” thus providing managerial guidance related to the migration strategies that, individually and synergistically, are most effective at promoting interfirm relationship performance. Contact Professor Rob Palmatier for the latest version of this paper.
Samaha, Steve, Josh Beck, and Robert W. Palmatier, (2013), “International Relationship Marketing,” Marketing Science Institute Working Paper Series, (13-117). Paper in final stages at the Journal of Marketing.
International relationships are increasingly critical to business performance. Yet despite a recent surge in international research on relationship marketing (RM), it is unclear whether or how RM should be adapted across cultures. The authors adopt Hofstede’s dimensions of culture to conduct a comprehensive, multivariate, meta-regression analysis of 42,378 dyadic relationships across 144 studies, 29 countries, and 6 continents. To guide future theory, they propose four tenets that capture the essence of culture’s effects on RM. Study 1 provides evidence in support of these tenets and shows that the importance of different cultural dimensions varies. For example, controlling for simultaneous effects, individualism–collectivism has a 114–169% greater magnitude of effect on RM than other cultural dimensions, whereas masculinity–femininity has almost no effect. Then to guide managers, Study 2 adopts a country- and regional-level approach to reveal that RM is much more effective outside the United States. For example, relationships are 31% more effective overall in Brazil, Russia, India, and China than in the United States. Contact Professor Rob Palmatier for the latest version of this paper.
Palmatier, Robert W., Lisa K. Scheer, Kenneth R. Evans, and Todd Arnold, (2008), “Achieving Relationship Marketing Effectiveness in Business-to Business Exchanges,” Journal of the Academy of Marketing Science, 36 (June), 174-190.
Relationship marketing research and practice operate according to the paradigm that firms should invest in relationship marketing to build better relationships, which will generate improved financial performance. However, findings that relationship marketing efforts vary in their effectiveness across customers and may even be detrimental to performance challenge this belief. This article, therefore, offers a theoretical model that addresses three key issues: 1) what factors determine a customer’s need for relational governance (relationship orientation); 2) what mediating mechanism captures the negative effects of relationship marketing on performance (exchange inefficiency); and 3) how does a customer’s relationship orientation determine the effectiveness of relationship marketing, thus allowing for effective segmentation. The authors demonstrate in an empirical study that the trust in the salesperson and exchange inefficiency both mediate the effect of relationship marketing on seller financial outcomes. In addition, customers’ relationship orientation moderates the impact of relationship marketing on both trust and exchange inefficiency. Access the paper.
Fang, Eric, Palmatier, Robert W., and Evans, Kenneth R., (2008), “Influence of customer participation on creating and sharing of new product value,” Journal of the Academy of Marketing Science, 36 (September), 322-336.
This research applies an institutional arrangement perspective to develop an end-to-end model for the interaction between customers and upstream suppliers to develop a new product to understand how new product value is created and shared. The model is empirically tested by collecting primary data from 188 manufacturers across different industries. The research demonstrates that customer participation affects new product value creation by improving the effectiveness of the new product development process by enhancing information sharing and customer–supplier coordination and by increasing the level of customer and supplier specific investments in the product development effort. In addition, increasing the formalization of the customer participation process enhances both customer and supplier relationship-specific investments in the new product development process. The impact of customer participation on the customer’s share of the new product value pie is more complex then is first apparent. Based on the dependence and equity perspectives the results suggest that exchange partners’ power (relative dependence) positively influences a partner’s ability to capture new product value, but this power is offset by a desire of exchange partners to ensure the distribution of value is “fair” and reflects each party’s contribution to the value creation. Access the paper.
Fang, Eric, Palmatier, Robert W., and Evans, Kenneth R., (2004), “Goal-setting paradoxes? Trade-offs between working hard and working smart: The United States versus China,” Journal of the Academy of Marketing Science, 32 (Spring), 188-202.
This article proposes a model of the impact of goal difficulty and goal specificity on selling behaviors (selling effort, adaptive selling, and sales planning) and hence sales and behavior performance. The model suggests that goal-setting factors may have opposing effects on different sales behaviors. The empirical findings suggest that goal difficulty positively influences selling effort while negatively influencing adaptive selling behaviors. The results show that goal difficulty and goal specificity both have opposite effects on the two dimensions of working smart: adaptive selling and sales planning. The findings support the need for sales managers to account for the cultural context of the salesperson when determining optimal goal- setting strategies. With data collected from salespeople in the United States and China, the cross-cultural differences regarding the effects of goal-setting factors are also proposed and empirically supported. Access the paper here.
Samaha, Stephen A., Beck, Joshua T., and Palmatier, Robert W., (2014), “The Role of Culture in International Relationship Marketing,” ,Journal of Marketing, 78 (September), 78-98.
International relationships are increasingly critical to business performance. Yet despite a recent surge in international research on relationship marketing (RM), it is unclear whether or how RM should be adapted across cultures. The authors adopt Hofstede’s dimensions of culture to conduct a comprehensive, multivariate, metaregression analysis of 47,864 relationships across 170 studies, 36 countries, and six continents. To guide theory, they propose four tenets that parsimoniously capture the essence of culture’s effects on RM. Study 1 affirms these tenets and emphasizes the importance of taking a fine-grained perspective to understand the role of culture in RM because of the high degree of heterogeneity across different cultural dimensions and RM linkages. For example, the magnitude of individualism’s effect is 71% greater on RM than other cultural dimensions, whereas masculinity has almost no effect; however, accounting only for individualism ignores significant moderating effects of power distance and uncertainty avoidance dimensions. To guide managers, Study 2 adopts a country-level approach and reveals that RM is much more effective outside the United States such that relationships are 55% more effective, on average, for increasing business performance in Brazil, Russia, India, and China. Access the paper here.
Steinhoff, Lena and Robert W. Palmatier, (2016), “Understanding Loyalty Program Effectiveness: Managing Target and Bystander Effects,” Journal of the Academy of Marketing Science, 44 (January), 88-107.
Loyalty programs are a ubiquitous marketing tactic, yet many of them perform poorly and the reasons for loyalty program failure remain unclear to both marketing managers and researchers. This article presents three studies—two experiments and one survey—in support of the notion that a greater understanding of loyalty program performance demands an expanded theoretical framework. Specifically, researchers and managers must account for loyalty programs’ effects on both target and bystander customers in the firm’s portfolio, the simultaneous effects of three performance-relevant mediating mechanisms (gratitude, status, unfairness), and the contingent effects of program delivery (rule clarity, reward exclusivity, reward visibility) on specific mediating linkages. The results provide insights into why and when loyalty programs fail and into the complex trade-offs managers face. Loyalty programs have opposing effects on target and bystander customers’ loyalty and sales. While rule clarity suppresses both negative bystander as well as positive target effects, reward visibility enhances both types of effects. Exclusive rewards offer a means to alleviate negative bystander effects without affecting targets. The article both conceptually and empirically establishes a comprehensive analysis framework that can help marketing managers and researchers evaluate and improve loyalty program effectiveness. Access the paper.
Watson IV, George F., Joshua T. Beck, Conor M. Henderson, and Robert W. Palmatier, (2015), “Building, Measuring, and Profiting from Customer Loyalty,” Journal of the Academy of Marketing Science, 43 (November), 790-825.
Achieving customer loyalty is a primary marketing goal, but building loyalty and reaping its rewards remain ongoing challenges. Theory suggests that loyalty comprises attitudes and purchase behaviors that benefit one seller over competitors. Yet researchers examining loyalty adopt widely varying conceptual and operational approaches. The present investigation examines the consequences of this heterogeneity by empirically mapping current conceptual approaches using an item-level coding of extant loyalty research, then testing how operational and study-specific characteristics moderate the strategy → loyalty → performance process through meta-analytic techniques. The results clarify dissimilarities in loyalty building strategies, how loyalty differentially affects performance and word of mouth, and the consequences of study-specific characteristics. Prescriptive advice based on 163 studies of customer loyalty addresses three seemingly simple but very critical questions: What is customer loyalty? How is it measured? and What actually matters when it comes to customer loyalty? Access the paper.
Beck, Joshua T., Kelly Chapman, and Robert W. Palmatier, (2015), “Understanding Relationship Marketing and Loyalty Program Effectiveness in Global Markets,” Journal of International Marketing, 23 (September), 1-21.
Relationship marketing (RM) and loyalty programs (LPs) are key differentiation strategies for firms facing increasing global competition. Accordingly, global interest in RM and LPs has surged, though researchers examining these marketing activities typically apply U.S.-centric frameworks to international research contexts. To understand how RM and LPs may be influenced by factors that distinguish global markets, this review offers a comprehensive framework of both RM and LP mechanisms and considers how cultural and developmental contingency factors may alter the effects of these mechanisms on seller performance. The results from this review produce eight propositions about where specific RM and LP strategies should be most effective. By considering these mechanisms jointly, the authors also simultaneously delineate RM and LP theories and broaden the scope of global research in both domains. Access the paper.
Eggert, Andreas, Lena Steinhoff, and Ina Garnefeld, (2015), “Managing the Bright and Dark Sides of Status Endowment in Hierarchical Loyalty Programs,” Journal of Service Research, 18 (May), 210-228.
In service industries, hierarchical loyalty programs are common relationship marketing instruments that award elevated status to customers who exceed a certain spending level (e.g., gold membership). In practice, service companies offer elevated status to some customers who do not meet the required spending level, in an attempt to profit from the profound allure of status. Relying on social psychology research and a mixed-method approach, this study analyzes the loyalty impact of status endowments, defined as awards of elevated status to customers who are not entitled to it. An exploratory qualitative study identifies customer gratitude and customer skepticism as positive and negative mediators, respectively, of customers’ attitudinal responses to endowed status. Quantitative studies—two experimental and one survey—substantiate these bright and dark sides of endowed status. The efficacy of status endowment is contingent on the context. To alleviate the dark-side effect, managers can allow target customers to actively choose whether to be endowed, especially those who are close to achieving the status already, and provide valuable preferential treatment to customers elevated by either endowment or achievement. These insights offer guidelines for whether and how to use status endowment in hierarchical loyalty programs. Access the paper.
Henderson, Conor M., Lena Steinhoff, and Robert W. Palmatier, (2014) “Consequences of Customer Engagement: How Customer Engagement Alters the Effects of Habit-, Dependence-, and Relationship-Based Intrinsic Loyalty,” Marketing Science Institute (MSI) Working Paper Series, (14-121). Winner of the 2016 Robert D. Buzzell MSI Best Paper Award. Under 2nd round review at the Journal of Marketing Research.
Existing customers are commonly considered a relatively secure source of revenue and thus taken for granted. Yet complacency can result in missed opportunities to expand the business or, in the worst case, customer defection. Customer engagement—sellers’ initiatives to occupy the attention of an existing customer by providing special benefits and experiences that go beyond the core offering—is often promoted as a proactive solution to revive and deepen business with complacent customers. While customer engagement initiatives are potent, these firm-initiated stimulants to ongoing exchanges have potentially conflicting consequences for customer performance. In this study, Conor Henderson, Lena Steinhoff, and Robert Palmatier investigate the performance ramifications of customer engagement by identifying how these initiatives interact with customer loyalty mechanisms that already operate in the background, underlying ongoing business exchanges. They use a longitudinal field experiment with a service provider to understand how customer engagement alters, rather than simply augments, an existing customer–company bond, characterized by three intrinsic loyalty mechanisms (habit, dependence, and relationship). The results show customer engagement can have opposing performance implications for customers’ likelihood of expansion and defection, related to both habits and relationships. The results also provide greater insight into the power of each source of intrinsic loyalty. For instance, the loyalty benefits of relationship and dependence appear to be latent and become activated by external stimuli, such as an engagement initiative. Alternatively, habit’s power is in its inertia, which is disrupted by external stimuli such as an engagement initiative. These findings offer insights to managers to identify prototypical customer loyalty profiles for which engagement helps, hurts, or has mixed performance effects. The authors identify four unique groups of customers, on the basis of their intrinsic loyalty profiles, then use a spotlight analysis for each group to determine the local effects of engagement. For example, “loyalists” are characterized as the most appropriate target of customer engagement as there are benefits with no offsetting penalty (5.1% reduction in defection with no significant effect on expansion). Customer engagement initiatives signal the seller still cares, and thus activate latent dependence and relationship mechanisms. “Sleeping dogs” describe customers who are mainly bound by habit; awakening them with engagement initiatives can cause them to either play (expansion increases by 1.9%) or bite (defection increases by 3.3%). Firms might need to wait for them to become “leashed” by higher levels of dependence and relationship, which suppresses their defection likelihood, before attempting to engage them. If managers can determine the intrinsic loyalty profile of their existing customers, they can design, test, and target customer engagement strategies with maximal effectiveness. Access the paper.
Henderson, Conor M., Joshua T. Beck, and Robert W. Palmatier, (2011), “Review of the Theoretical Underpinnings of Loyalty Programs,” Journal of Consumer Psychology, 21 (July), 256-276.
A review of the extant literature reveals that the theoretical underpinnings of the majority of loyalty program research rest on psychological mechanisms from three specific domains—status, habit, and relational. We propose that to understand how loyalty programs actually work, a broader, more holistic research perspective is needed to account for the simultaneous effects across these three theoretical domains as well as both cross-customer and temporal effects. The contribution of this approach is a fresh research agenda advanced in 15 research propositions. Access the paper.
Palmatier, Robert W., Lisa K. Scheer, and Jan-Benedict E. M. Steenkamp, (2007), “Customer Loyalty to Whom? Managing the Benefits and Risks of Salesperson-Owned Loyalty,” Journal of Marketing Research, 44 (2) May, 185-199. Winner of the 2014 Louis W. Stern Award.
In a study of 362 buyer-salesperson dyads using triadic data (from buyer, salesperson, and sales manager), we examine both a customer’s overall loyalty to the selling firm and that customer’s loyalty vested specifically in his/her salesperson. We find that only salesperson-owned loyalty, a newly-identified construct, directly affects the more tangible seller financial outcomes of sales growth and selling effectiveness, while both salesperson-owned loyalty and loyalty to the selling firm increase the customer’s willingness to pay a price premium. A longitudinal study verifies that salesperson-owned loyalty’s positive effect on sales growth persists over time. However, as salesperson-owned loyalty simultaneously increases the seller’s risk of losing business if that salesperson defects to a competitor, managers need to manage effectively the benefit-risk trade-off. Increasing relationship-enhancing activities and value received by the customer builds both salesperson-owned loyalty and loyalty to the selling firm. The loyalty-building impact of relationship-enhancing activities is moderated by selling firm consistency and by the selling firm’s and salesperson’s loyalty-capturing strategies. Access the paper.
Further Select Recommended Readings
Wagner, Tillman, Thorsten Hennig-Thurau, T., and Thomas Rudolph, (2009), “Does Customer Demotion Jeopardize Loyalty?,” Journal of Marketing, 73 (May), 69-85. Access the paper.
Drèze, Xavier and Joseph C. Nunes, (2009), “Feeling Superior: The Impact of Loyalty Program Structure on Consumers’ Perceptions of Status,” Journal of Consumer Research, 35 (April), 890-905. Access the paper.
Kumar, V. and Denish Shah, (2004), “Building and Sustaining Profitable Customer Loyalty for the 21st Century,” Journal of Retailing, 80 (Winter), 317-330. V. Kumar is Senior Academic Advisor to the Center for Sales and Marketing Strategy’s Executive Advisory Board. Access the paper.
Reinartz, Werner J. and V. Kumar, (2002), “The Mismanagement of Customer Loyalty,” Harvard Business Review, 80 (July), 86-94. V. Kumar is Senior Academic Advisor to the Center for Sales and Marketing Strategy’s Executive Advisory Board. Access the paper.
Oliver, Richard L., (1999), “Whence Consumer Loyalty?,” Journal of Marketing, 63 (October), 33-44. Access the paper.
Palmatier, Robert W., Rajiv P. Dant, and Dhruv Grewal, (2007), “A Comparative Longitudinal Analysis of Theoretical Perspectives of Interorganizational Relationship Performance,” Journal of Marketing, 71 (October), 172-194.
Four theoretical perspectives currently dominate attempts to understand the drivers of successful interorganizational relationship performance: (1) commitment–trust, (2) dependence, (3) transaction cost economics, and (4) relational norms. Each perspective specifies a different set and distinct causal ordering of focal constructs as the most critical for understanding performance. Using four years of longitudinal data (N = 396), the authors compare the relative efficacy of these four perspectives for driving exchange performance and provide empirical insights into the causal ordering among key interorganizational constructs. The results demonstrate the parallel and equally important roles of commitment–trust and relationship-specific investments as immediate precursors to and key drivers of exchange performance. Building on the insights gleaned from tests of the four frameworks, the authors parsimoniously integrate these perspectives within a single model of interfirm relationship performance consistent with a resource-based view (RBV) of an exchange. Managers may be able to increase performance by shifting resources from “relationship building” towards specific investments targeted to increase the efficacy or effectiveness of the relationship itself in order to improve the relationship’s ability to create value. Moderation analysis suggests managers may find it productive to allocate more relationship marketing efforts and investments to exchanges in markets with higher levels of uncertainty. Access the paper.
Kozlenkova, Irina, Steve Samaha, and Robert W. Palmatier, (Forthcoming 2014), “Resource-Based Theory in Marketing,” Journal of the Academy of Marketing Science.
The use of resource-based theory (RBT) in marketing research has increased by more than 500% in the past decade, which suggests its importance as a framework for explaining and predicting competitive advantages and performance outcomes. This article provides a comprehensive review of RBT, including a contemporary definitional foundation for relevant terms and assumptions and a synthesis of empirical findings from marketing literature. This multidimensional analysis of RBT also evaluates extant marketing research according to four perspectives: the marketing domains that use RBT, the characteristics and uses of market-based resources that differentiate it from other research contexts, the extension of RBT to the “marketing exchange” as a unit of analysis, and the connection of RBT to related theories. This analysis also reveals some common pitfalls associated with prior research, offers tentative guidelines on how to improve the use of RBT in marketing, and suggests research directions to advance the theorization and empirical testing of RBT in the future. Access the paper.
Palmatier, Robert W. (2008), “Relationship Marketing,” monograph on relationship marketing published by Marketing Science Institute: Cambridge, MA, (1-140).
Relationship marketing and customer relationship management have taken a central position in marketing strategy in the past two decades. A confluence of factors, including the transition to service-based economies; advances in communication, logistics, and computing technologies; increased global competition; and faster product commodization have enhanced the salience of “relationship-based loyalty” to sellers compared with other marketing mix factors. Moreover, some of these trends are simultaneously increasing customers’ desire for the unique characteristics found in relationship-based exchanges (e.g., reduced perceived risk, higher trust, enhanced cooperation, and greater flexibility). Thus, in many situations, both sellers and customers are becoming more interested in conducting business transactions embedded within relationships.
For firms who use—or wish to use—relationship marketing in their business, the primary question is, How can relationship marketing be implemented to improve customer loyalty and seller’s sales and profits? Several important managerial takeaways, discussed at length in the monograph, are summarized below. Access the paper.
Palmatier, Robert W., Houston, Mark B., Dant, Rajiv P., and Grewal, Dhruv, (2013), “Relationship Velocity: Toward A Theory of Relationship Dynamics,” Journal of Marketing, 77 (January), 13-30.
The dynamic components of relational constructs should play an important role in driving performance. To take an initial step toward a theory of relationship dynamics, the authors introduce the construct of commitment velocity— or the rate and direction of change in commitment—and articulate its important role in understanding relationships. In two studies, the authors demonstrate that commitment velocity has a strong impact on performance, beyond the impact of the level of commitment. In Study 1, modeling six years of longitudinal data in a latent growth curve analysis, the authors empirically demonstrate the significance of commitment velocity as a predictor of performance. In Study 2, the authors use matched multiple-source data to investigate the drivers of commitment velocity. Both customer trust and dynamic capabilities for creating value through exchange relationships (i.e., communication capabilities for exploring and investment capabilities for exploiting opportunities) affect commitment velocity. However, trust and communication capabilities become less impactful as a relationship ages, while investment capabilities grow more important. The authors offer three post hoc tenets that represent initial components of a theory of relationship dynamics that integrates two streams of relationship marketing research into a unified perspective. Access the paper.
Gonzalez, Gabriel R., Claro, Danny P., and Palmatier, Robert W., (2014), “Synergistic Effects of Relationship Managers’ Social Networks on Sales Performance,” Journal of Marketing, 78 (January), 76-94.
This article integrates relationship marketing and social network perspectives to develop and test a model that links objective sales performance with the informational and cooperative benefits that stem from relationship managers’(RMs’) social capital structure (brokerage and density) and relations (formal and informal networks). The authors demonstrate the effect of cross-network and overlap-network synergies on performance. Data about both formal and informal networks of 464 employees, including 101 RMs, demonstrate that RMs’ performance improves with cross-network synergy when informational benefits from wide-reaching, nonoverlapping ties in the informal network combine with the cooperative benefits of a densely interconnected formal network. In addition, the effects of formal and informal social capital structure on performance increase significantly when RMs have a high degree of network overlap between their formal and informal networks. Access the paper.
Fang, Eric, Robert W. Palmatier, and Rajiv Grewal, (2011), “Effect of Customer and Innovation Asset Configuration Strategies on Firm Performance,” Journal of Marketing Research, 48 (June), 587-602.
Both customer and innovation assets are important to firm performance. Past research has mostly examined these assets at the firm level and has not distinguished between effects of asset depth relative to competitors and asset breadth across different segments. Using configuration theory and the resource-based view of the firm, the authors propose that how these assets interact to influence performance depends on both depth and breadth, as these features reflect whether the assets are likely to create and/or appropriate value when deployed. Empirical results from two studies—one using secondary data and another using primary data from a survey of senior manager—indicate that performance is highest when firms employ configurations using deep customer and broad innovation assets or deep innovation and broad customer assets. In contrast, firm performance variability decreases in the presence of deep–deep and broad–broad asset configurations. The effect of configuration strategies on firm performance also is typically greater in dynamic than in stable environments. Access the paper.
Arnold, Todd, Eric Fang, and Robert W. Palmatier, (2011) “The Effects of Customer Acquisition and Retention Orientations on Radical and Incremental Innovation Performance,” Journal of the Academy of Marketing Science, 39 (April), 234-251.
The effect of a firm’s strategic focus on acquiring new customers and/or retaining existing customers (customer acquisition and retention orientations) on innovation performance is evaluated. With dyadic primary data collected from 225 strategic business units, the authors demonstrate that a firm’s focus on customer acquisition enhances its radical innovation performance but hinders its incremental innovation; a firm’s strategic orientation toward customer retention has the opposite effects. These effects are mediated by both customer knowledge development and the firm’s resource configuration decisions. In addition, the authors provide insight into the impact of managerial decision trade-offs when implementing customer engagement strategies. The results suggest that the effect of customer acquisition and retention orientations on customer knowledge and investment decisions, and ultimately on innovation performance, is amplified when a firm consistently implements a specific engagement strategy. Implementing a dual strategy by attempting to focus on both acquiring and retaining customers undermines resource configuration decisions, with diverse effects on both radical and incremental innovation. Access the paper.
Fang, Eric, Robert W. Palmatier, and Kenneth R. Evans, (2008), “Influence of Customer Participation on Creating and Sharing New Product Value,” Journal of the Academy of Marketing Science, 36 (September), 322-336.
This research applies an institutional arrangement perspective to develop an end-to-end model for the interaction between customers and upstream suppliers to develop a new product to understand how new product value is created and shared. The model is empirically tested by collecting primary data from 188 manufacturers across different industries. The research demonstrates that customer participation affects new product value creation by improving the effectiveness of the new product development process by enhancing information sharing and customer-supplier coordination and by increasing the level of customer and supplier specific investments in the product development effort. In addition, increasing the formalization of the customer participation process enhances both customer and supplier relationship-specific investments in the new product development process. The impact of customer participation on the customer’s share of the new product value pie is more complex then is first apparent. Based on the dependence and equity perspectives the results suggest that exchange partners’ power (relative dependence) positively influences a partner’s ability to capture new product value, but this power is offset by a desire of exchange partners to ensure the distribution of value is “fair” and reflects each party’s contribution to the value creation. Access the paper.
Fang, Eric, and Palmatier, Robert W., “Relationship Network Effects on New Product Success: Strategies for Leveraging Network Position,” revising for Journal of Marketing Research.
Many firms engage in interfirm collaborative agreements, with the expectation that a vast network of partnerships will enhance their new product performance. This article investigates two key research questions in such settings: (1) How does a firm’s position in an industry network affect its radical and incremental new product performance, and (2) How do a firm’s marketing and R&D capabilities help leverage its industry network position? In two experiments, with MBA student samples, Study 1 identifies mediating mechanisms that link network positions to new product performance. Study 2 then relies on a unique data set gathered from multiple consumer packaged goods firms. The combined results suggest that both betweenness and closeness centrality are double-edged swords that improve incremental but hinder radical new product performance. A firm’s marketing and R&D capabilities also can leverage its network positions. Thus the effect of closeness (betweenness) centrality on radical new product performance switches from negative to positive as marketing (R&D) capability increases; the parallel effect on incremental new product performance transforms from insignificant to positive. Contact Professor Rob Palmatier for the latest version of this paper.