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Page 1: The External Contingency and Internal Characteristic of Relationship Marketing

This article was downloaded by: [Florida State University]On: 22 December 2014, At: 01:07Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954Registered office: Mortimer House, 37-41 Mortimer Street, London W1T3JH, UK

Journal of MarketingManagementPublication details, including instructions forauthors and subscription information:http://www.tandfonline.com/loi/rjmm20

The External Contingencyand Internal Characteristic ofRelationship MarketingCharles S. Chien & Luiz MoutinhoPublished online: 01 Feb 2010.

To cite this article: Charles S. Chien & Luiz Moutinho (2000) The ExternalContingency and Internal Characteristic of Relationship Marketing, Journal ofMarketing Management, 16:6, 583-595, DOI: 10.1362/026725700785045895

To link to this article: http://dx.doi.org/10.1362/026725700785045895

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Page 2: The External Contingency and Internal Characteristic of Relationship Marketing

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Journal of Marketing Management 2000, 16, 583-595

Charles S. Chien*and Luiz Moutinho 1#

Feng Chia University"

University of Glasgow'

Introduction

The External Contingency andInternal Characteristic ofRelationship Marketing

Exchange is a social as well as economic meansthat the consumer utilises to secure or managehis/her surroundings. Facilitating exchange ismatter of managing relations among the marketof networks. This study is a first attempt topursuing a structural explanation of relationshipmarketing through a conceptualisation groundedon a higher level metaphor, theorised fromderived abstraction and tested on empiricaldefinition. The research findings advance ourunderstanding of the internal characteristics andthe external contingency of relationshipmarketing.

The ideas of networks and relationships will be trend-setting realities in thenew context oftoday's business (Kotler 1999).

Relationship Marketing is a challenge to established marketingmanagement theory and practice Although relationship marketing has had aninternational breakthrough during the 1990s, the perceptions of it go farapart (Gummesson 1999).

Marketing experts postulate that the current interest in relationship marketingrepresents a "fundamental reshaping of the field" (Webster 1992), "a paradigmshift" (Kotler 1991), "life realities toward post-modernism" (Brown 1995), anddeserves new theory and language (Achrol 1991; Anderson, Hakansson, andJohnason 1994; Nevin 1995). Sheth and Parvatiyar (1993) believe relationshipmarketing theory offers the potential for a new "general theory of marketing".Researchers are theorising the central issues of relationship marketing beingtrust and commitment among distribution channel members (Morgan and Hunt1994).

Different streams of research are exploring the benefits of relationshipmarketing among retailers and consumers (Sheth and Parvatiyar 1995), service

I Correspondence: Professor Luiz Moutinho, Department of Management Studies,University of Glasgow Business School, 53-59 Southpark Avenue, Glasgow, G12 8LF

ISSN0267-257X/2000/060593+ 12 $12.00/0 ©Westburn Publishers Ltd.

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584 Charles S. Chien and Luiz Moutinho

marketers and their customers (Berry 1995), and business-to-business (Stanlyand Dickinson 1998). Other researchers find relationship marketing to be asubset of, or not substantially different from, prior marketing practices andtheories (Frazier and Autina 1995; McGarry 1951; Peterson 1995). Despite thatmarketing scholars and practitioners are interested in learning more about long-term relationships and much of efforts focus on trust and commitment(Gummesson 1999). Trust and commitment are necessary conditions for asuccessful long-term relationship but not sufficient (Chien 1998). Literature ofrelationship marketing is often developed in a patched-up manner, withoutadequately being grounded in a higher level of theoretical origin, and hence fewhas judiciously developed coherent conceptual models.

This research draws from exchange theory (Bagozzi 1979), contract norm(Macneil 1981), and value theory (Perry 1954) and synthesises several thoughtsof relationship research to form a theoretical framework of relationshipmarketing induding internal characteristics and external contingent factors. Aquest of internal characteristics of relationship marketing is to address theresearch question - what is relationship marketing? Besides, the stability of amarket relationship would be contingent on its external factors. Differentcontexts could impact internal characteristics differently.

This study further addresses (1) will relationship marketing be impacted byexternal contingent factors? (2) how does it do? Specific supporting objectivesentail the following research facets:

1. To establish a scientific conceptualisation for explaining the alternativeview of network and relationship.

2. To delineate a middle range framework which is as much wishful thinkingas reality, supporting the metaphor of relationship exchange.

3. To develop a conceptual model at the first level of abstraction andoperationalise the model at the ground level of abstraction by(i) exploringthe exogenous contingent factors influencing relationship marketing; (ii)categorising exogenous contingent factors; (iii) developing the conceptualmodel to portray the effect of exogenous contingent factors onendogenous characteristics of relationship marketing; (iv) operationalisingthe hypothesised model; (v) substantiating the empirical causal linkbetween exogenous contingent factors and endogenous characteristics ofrelationship marketing; (vi) providing system explanations of relationshipmarketing

Conceptualisation

Much of the infrastructure necessary in determining the basic propositions ofmarketing science has been presented by Hunt (1983). He views marketing asthe behavioural science seeking to explain exchange relationships betweenbuyers and sellers. Exchange is the general theory of marketing discipline(Alderson 1965; Bagozzi 1979; Hunt 1983; Kotler 1984).

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The External Contingency 585

Marketing is a applied science to manage satisfactory exchange througheither (1) instrumental metaphor (McCarthy 1960), (2) organism metaphor(Alderson 1957), or (3) competitiveness metaphor (Porter 1980). Nevertheless,an inquiry of "why humans engage in exchange, in the first place?" has suffered adearth of research. Such up-stream inquiry could add fruitful explanation ofrelationship behaviour as an alternative world view to existing paradigms. Infact, why we spend money is because we have endless motivation to manage ourliving to be more secure and comfortable. When we are loyal to shop in Seven-Eleven because of the convenience benefit, we build a behaviour-net to theSeven-Eleven convenience store. The more satisfactory behaviour-net has beenbuilt the more comfort his/ her life is.

Based on the notions of Alderson (1965), Blalock and Wilken(1979),Hunt(1983), and KotIer{l984), this study re-identifies the conditions necessaryfor there to be the potential for exchange.

1. Human beings basically are need-fulfilling actors.2. There are at least two human parties.3. Humans engage in behaviour directed at managing daily life through

consummating exchange.4. Humans are able to create innovative behaviours directed at securing

sustainable surroundings through facilitating exchange.5. Each party is free to accept or reject the exchange.6. Institutional frameworks exist which are directed at consummating and! or

facilitating exchange.7. The potency of each party is increased as the consequence of exchange.

These basic propositions of marketing help us to view a market behaviourthrough the lens of network and relationship. The market displays itself as astructure of network not of segment (Thorelli 1986). Among a network, trustand commitment are necessary passwords or linkages to channel through nodeto node (Morgan and Hunt 1994). Opportunity of exchange derives from anemerging need to be fulfilled. Need is a function of living problems. To secure/manage living is a matter of controlling his/her value of space throughout a timespan. Value of space could refer to the physical and psychic measurement, but itis particularly relevant within the psychic dimension. The relationship prospectof marketing is seen as helping the customer's behaviour-net to secure his/herutility of potency and psychic domain throughout a time span.

A Conceptual Model

Time and contract-nonn are the two basic dimensions of relational exchange. Atthe beginning of time continuum, economic calculation or utilitarian comparisonis the focal point of exchange. At the other end of time continuum, theexpectation for the future or projection of benefits is important Relationalbehaviour is a social process. Although the human being is an opportunistic

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creature, he or she would inevitably be limited by social norms. On one side ofthe contract-norm continuum, internal contracts regulate exchange parties'behaviours, such as promissory and non promissory. On the other side, externalsocial norms govern the two parties' interrelationship, such as reputation andrecognition. Drawing on the works of Macneil (1979); Dwyer, Schurr, and Oh(1987); Oliver (1990); Wilson (1995); Bagozzi (1995); Nevin (1995); Morgan andHunt (1994); Doney and Cannon (1997), this study names utility andprojectability as the characteristics anchoring on two side of time continuum.Further this paper proposes reciprocity and legitimacy as the characteristicslanding on two side of contract-norm continuum.

Utility and Projectability

The starting point for a need to exchange with others is the utilitarian benefit ofliving. The human desires to maximise selfish benefits and to create andmaintain social solidarity with other participants are the underlying utilitarianbehaviours (Bagozzi 1995). It is the fundamental nature of choice-inducedexchange and all participants' exchange takes place only when an exchange-surplus is possible (Macneil 1980). The characteristics of measurement andspecificity in relational exchange reveal significant attention to measuring,specifying, and quantifying all aspects of performance, including psychic andfuture benefits (Dwyer,Schurr, and Oh 1987; Wilson 1995). Utility feature is thenecessary condition for a further reciprocal relationship and a long-termrelationship to be established (Berry and Thompson 1982).

The utilitarian benefit of living will not be maximised without projecting thisbenefit into the future. Projectability is the characteristic that does occur inrelations and it must occur if relations are to continue, and hence ought to occurso long as their continuance is valued (Macneil 1979). Projectability can bedefined as expectations respecting the future in the exchange linking.Projectability in relationship consists the notions of (1) planning (Macneil 1979),(2) adaptation (Wilson 1995), (3) preservation of the relation (Macneil 1979), (4)expectations for relations (Dwyer, Schurr, and Oh 1987), and (5) timing ofexchange (Dwyer,Schurr, and Oh 1987; Macneil 1979). The more the companyis able to achieve a closer bond with its customers, the more likely the projectingefforts will grow as an essential means of relationship-building in the marketplace for marketers (Kotler 1991). Projecting strategies have been found to havea significant impact on business performance (Chien and Moutinho 1997).

Reciprocity and Legitimacy

Exchange, as a social means, is a great revolutionary discovery by our ancestors.It is built on an infrastructure of promissory. Reciprocity is dyad matter of norms.Whereas, legitimacy is triad contract in our public. Norms of contract become amajor part of our mental space.

Relationships occur for the purpose of pursuing common or mutually

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The External Contingency 587

beneficial goals or interests. Morgan and Hunt (1994) postulate thatcommitment and trust are key mediating variables for successful reciprocityrelationship. Crosby and Stephens (1987) found a significant path coefficient(.358) from satisfaction with contact person to overall satisfaction. In anotheralternative view, the benefits of trust-building are seen in the client'sacquiescence for relations or preservation of continued benefit On the basis ofreciprocal relationships, various projecti ng efforts can be facilitated.

Institutional theory (Fennel and Alexander 1978; Hirsch 1975; Meyer andScott 1983) suggests that institutional environments impose pressures on socialactors to justify their activities or outputs. These pressures motivate social actorsto increase their legitimacy in order to appear in agreement with the prevailingnorms, standards of proper conduct, rules, beliefs, or expectations of externalconstituents (Oliver 1990). Bharadwaj, Varadarajan and Fahy (1993) suggestthat the greater the intangibility of a service, the greater the importance oflegitimate image as a source of information for consumer to assess his/herpurchasing risk Wilson (1995) postulated that the reputation variable is in thefirst phase of the relationship development process.

Involvement

Consumers are more likely to be involved in a product decision when theproduct (1) is important to the consumer because of its functional significanceor because of its symbolic significance;(2) entails significant risks (e.g., thefinancial risk. the technological risk. the social risk;(3) has emotional appeal;(4) isidentified with the norms of a group (Assael 1987).

High involvement purchases are purchases that are important to theconsumer. Such purchases are closely tied to the consumer's ego and self-image.They involve some risk to the consumer. In such cases, it is worth the consumer'stime and energies to consider product alternatives more carefully. The highinvolvement hierarchy (beliefs/ evaluation! behaviour) represents the model ofcomplex decision making (Petty and Cacioppo 1981).

On the other hand, a low involvement purchase is one where the consumerdoes not consider the product sufficiently important to his or her belief systemand does not strongly identify with the product In such cases, it may not beworth the consumer's time and effort to search for information about brands andto consider a wide range of alternatives. Therefore, a low involvement purchasegenerally entails a limited process of decision making (Petty and Cacioppo 1981).In this vein, involvement status of a consumer could affect his /her belief ofcorporate legitimacy, and evaluation of utility, reciprocity and future projectability.

Culture Context

According to Hall (1976), a high-context (HC) society, communication or messageis one in which most of the information is either in the physical context orinternalised in the person, while very little is in the overt coded and explicit part

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of the message. Whereas a low-context (LC) communication is the reverse, mostof the information must be in the transmitted message in order to make up forwhat is missing in the context

There are excellent examples of high-low context such as restricted, yetsimplistic, intimate conversation in the home (HC) and a highly specific,elaborated code of law (LC) (Bernstein 1964; Hall 1976). High-context actionsare by definition rooted in the past and the forms that are used are importantFurther, in the high context culture, the bonds that tie people together arestrong, and hence word-of mouth, social formality are highly valued (Hall 1976).

The Chinese language reflecting an oriental norm is on the high-context endof the scale. In Taiwan, the overall approach to life, institutions and governmentis high-context People raised in high-context systems are more relationshiporiented in exchange activities.

Model Operationalisation

The proposed model following the above discussed hypotheses among theconstructs is illustrated in Figure 1.

Figure 1. PPM Model

HI: the better the utilitarian value perceived by customer, the betterreciprocal trust that can be established between customer and company.

H2: the better the reciprocal trust to be established, the more perceived valueof the projecting can be obtained.

H3: the better the legitimate image perceived by a customer, the greater thechance for the customer to try utilitarian value.

H4: there is a positive association between projecting and overall satisfaction.H5: there are positive associations between involvement of buying behaviour

and(a) reciprocity,(b) legitimacy,(c) utility(d) projectability

H6: there are positive associations between the culture context of buyingbehaviour and(a) reciprocity(b) legitimacy(c) utility(d) projectability

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E

Method and Procedure

The External Contingency 589

Sampling and ResponseThis research has selected personal computer purchasing behaviour amongcollege students as the context of this study, because it would enable thenarrowing of focus to the appropriate relationship settings and frame questionsthat would have a common meaning among the respondents. In order tosubstantiate the causal linkages of the hypothesised model, exploratory in-depthinterviews were conducted with fifteen participants and five owners of computerstores. A two-stage pretest was launched to purify the scale items. In the firststage, the draft questionnaire was administrated to fifteen participants on thecampus of a university located in the central Taiwan. In the second stage, input

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from 5 academic experts was obtained. Departments and classes of fouruniversities situated in central Taiwan were used as the sampling frame for thisstudy. Random sampling was used to pick the target classes for survey. The finalquestionnaires were distributed by interviewers to a sample (N=500) of tendepartments with twelve classes during the Spring of 1999. The total 240completed data cases, includes 15 pretest responses, and represents a 48%response rate.

Analysis and Results

The unidimensionality of each construct is assessed simultaneously withconfirmatory factor analysis (Gerbing and Anderson 1988). Onceunidimensionality was achieved, internal consistency was assessed usingCronbach's alpha. The results support unidimensional concepts for utility (tenitems), reciprocity (eight items), legitimacy (nine items), projectability (sevenitems), involvement (three items), context culture (four items), and satisfaction(five items). The proposed model, then, were evaluated using LISREL 8 Ooreskogand Sorbom 1988) with the sample covariance matrix as the input matrix.

The overall assessment of the PPM model fit was found adequate (Table 1).The chi-square value was statistically nonsignificant (X202) =19.35, P > 0.05),which indicated the differences between the model-implied covariance matrix !:and data-observed S were nonsignificant The goodness-of-fit index (GFn was0.959, and the adjusted goodness-of-fit index (AGFI)was only 0.903. These highindices, GFI and AGFI, indicate a high construct validity of the PPM model, inwhich 90.3% of the variances and covariances in the observed data (8) werepredicted by the estimated model. In the summary statistics for standardisedresiduals, the largest standardised residual was 2.64 and the smalleststandardised residual was -1.11. The values of standardised residuals were onan acceptable range (+ 2 to - 2) of criteria Ooreskog and Sorbom 1989).

With regard to the proposed model, the hypotheses HI, H2, H3 and H4 wereaccepted. These interactions describe moderate levels of impact between thedirection of legitimate image to utilitarian value (~13 =0.915, t-value = 6.398),utilitarian value to reciprocal trust (~21 = 0.985, t-value = 4.294), and reciprocaltrust to projecting efforts (~42 = 0.626, t-value =7.065), finally, projectability tosatisfaction (~54 = 0.968, t-value =10.928). The construct "legitimate image"seems to initiate the total relationship quality development process whichsubsequently impacts on the provision of a total utility and then goes on to havean effect on the policy of reciprocity management, followed by a consolidationeffect on projecting activities. Satisfaction of a purchasing experience could beenhanced by projecting benefits into the future.

The hypothesis H5 comprised four hypothesised associations. Upon

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inspection of Table!, it was found that the result of Y21 = -0.454 and t-value = -1.867 does not lend support for this hypothesis H5a. This finding can beinterpreted as one standard deviation increase in the degree of involvement isexpected to lead to a decrease of 0.454 standard deviation in the core service,with all other variables left untouched at their original values. This implies thatthe higher involvement behaviour of purchasing a personal computer the lessthe consumer will depend the on personal trust of the store owner as a decisioncriterion. The second component of Hypothesis Five delineated the associationbetween involvement and legitimacy. The result (Y31 = 0.811, t-value = 8.298)provides support for hypothesis H5b that the higher the involvement of pcpurchasing behaviour, the more one relies on legitimate information.

The third component of hypothesis H5c concerned the effect of involvementon utility. The result shown in Table 1 revealed a non-significant path frominvolvement to utility (Y41 = 0.091, t-value =0.95) which offered no support forH5c. This suggests that the involvement factor fails to distinguish a good or badexperience of purchasing a personal computer. The fourth component ofHypothesis Five (H5d) stated that the higher the involved efforts on purchasing apersonal computer, the more likely the consumer will project their relationshipinto future. The result indicates that a significant positive loading (Y41= 0.380,t-value =4.255) was found to support this hypothesis H5d.

There are four hypothesised associations within H6. Upon inspection ofTable!, it was only found that H6a was supported with the result of Y22 = 0.381and t-value = 2.613 and rest of the hypotheses (H6b, H6c, H6d) were notsignificantly supported. The evidence shows that the higher context perceived bythe consumer the more likely he/she would emphasise on reciprocal relations tosecure exchange benefits. This finding is parallel to the assertion of Hall (1976).

Discussion and Conclusions

McKenna (1992) suggests that a superior marketing strategy in today's times is tofind a way to sustain an existing relationship and increase its scope over time.More and more firms are adopting this strategy and moving toward buildingcloser relationships with customers. This study is a first attempt to pursuing astructural explanation of relationship marketing through a conceptualisationgrounded on higher level metaphor, theorised from derived abstraction andtested on empirical definition. The research findings advance our understandingof (1) the internal characteristics and the external contingency of relationshipexchange (2) inter-supported natures of relationship variables; and (3) causalassociations between relationship marketing and satisfactions. Exchange is asocial as well as economic means that the consumer utilises to secure or managehis/her surroundings. Exchange behaviour, consisted of market activities, is a

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network formation. Facilitating exchange is a matter of managing relationsamong the market of networks.

Table 1. Results of the LISRELAnalysis for PPM Model

1.532.437

3.0372.815.853

T-ValueEstimate.054.361.312.246.165.257.163.051.342.166.063

Path£22£33£44£54011

022

T-Value6.3984.2947.065

10.928.950

-1.8678.2894.2552.613

Path Estimate~13 .915~21 .985~42 .626~54 .968Yll .091Y21 -.454Y31 .811Y41 .380

Y22 .381Ayll .664Ay22 .973Ay33 .799Ay44 .830Ay55 .868d 1 .559

# All the Ax and AY are fixed parameters at '1' value.

PPM : X2(12) = 19.35, p >0.05, CFI was 0.959, ACFI [adjusted goodness-of-fitindex] was 0.903

The fundamental dimensions of relational exchange are related to time andcontract norms. This study names utility and projectability as the characteristicsanchoring on the two sides of the time continuum; and proposes reciprocity andlegitimacy as the characteristics landing on the two sides of the contract-normcontinuum. Legitimate image is important as a proxy for quality and assurance.Without a positive awareness of legitimate image as a foundation of pre-relationship, there is little chance for the company to overcome the threshold forprospects to enter into an exchange relation. Customers who do notacknowledge the other values of legitimacy, reciprocity and projectability, will actas opportunists. Such opportunist relationships may be short-lived andeventually costly. Therefore, it is suggested that the company should be alertedwhen approaching a potential client with utilitarian value features without anypre-establishment of legitimacy. Features and outcomes of utilitarian value aredecisive factors in relationship building. A satisfactory experience of utilitarianvalue will reinforce a customer's perception of legitimate image and lead to thetrust-building stage of relationship. Without the pre-conditions of positive

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awareness of legitimate image and satisfactory utility, efforts of reciprocal trustseem discourteous and burdensome.

Findings also suggest that utilitarian value does not automatically render itselfto overall satisfaction, and intermediary activities, such as reciprocal trust andprojecting efforts, are necessary in capitalising utilitarian values, and thus lead tosustainable satisfaction. Exogenous variables such as involvement and contextculture are found to have impact on overall satisfaction, but indirectly. Thehigher the involvement of purchasing behaviour, the more it relies on legitimateinformation as the buying criterion and consequently will lead to satisfaction.The higher the context perceived by the consumer the more likely he/she wouldemphasise reciprocal relations to secure exchange benefits. External contingentfactors are certainly not limited to involvement and cultural context only.Demographic as well as psychographic variables could also be seen as exogenousinfluences on satisfaction, but have to be channelled through utility, reciprocity,legitimacy and projectability. These propositions pinpoint the future researchdirection.

Acknowledgements

Charles S. Shien appreciates the sponsorship of this research by the NationalScience Council of ROC, Taiwan.

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