Robert W. Palmatier
Executive Summary
This article integrates social network and exchange theories to develop a model of customer value based on three relational drivers: relationship quality (the caliber of relational ties), contact density (the number of relational ties), and contact authority (the 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 is typically modeled, but also from the number and decision-making capability of interfirm contacts and the interactions among relational drivers. Understanding that relationship quality and authority behave synergistically is important to managers because unbalanced relationships result in degraded performance. For example, for customers with have low-authority contact portfolios but strong relational bonds, managers may want to reallocate relationship marketing investments away from enhancing existing relationships (e.g., entertaining customers) and toward making new contacts with key decision makers (e.g., asking customers for referrals to new “higher-level” contacts, executive retreats). The results also provide support for the need to take a contingent approach to customer relationship and portfolio management. More specifically, two customer factors leverage the effect of relational drivers on customer value. First, contact density has a greater effect on customer value for customers with high contact turnover, in support of the notion that multiple interfirm ties are more valuable when they can mitigate the loss of an interfirm bond by shifting the interaction to another bond or quickly rebuilding the bond with a replacement (assisted by norm diffusion). Thus, in line with the suggestion in existing literature to use team selling to respond to high salesperson turnover, a similar strategy appears to be effective for customer turnover. Sales managers dealing with companies that experience high employee turnover should aggressively expand the breadth of their contact portfolio to build a “customer team.” Second, contact authority has a greater impact on customer value among customers for which interfacing with decision makers is difficult. Sellers that overcome this hurdle enjoy a significant competitive advantage, which leverages the seller’s access with a key decision maker on performance. This finding represents a notable conundrum: Customers and contacts that are the most difficult to access and deal with may be the most valuable, whereas customers that are easy to access may generate the lowest returns, all else being equal. Thus, busy salespeople making their rounds to their favorite customers (who are often open to meetings) might be able to enhance performance by shifting their resources to firms or contacts that are more difficult to access. This finding is consistent with a resource-based view of interfirm exchange, which asserts that relational assets are most valuable when they difficult to imitate. The conceptual model of the impact of interfirm relational drivers on customer value receives support from dyadic data across 446 business-to-business exchanges.
Biography
Robert W. Palmatier is the Evert McCabe Faculty Fellow in the Michael G. Foster School of Business at the University of Washington. He holds bachelor’s and master’s degrees in Electrical Engineering from Georgia Institute of Technology, an MBA from Georgia State University, and a Ph.D. from the University of Missouri. His research interest focuses on relationship marketing theory and strategy with an emphasis on multilevel and multichannel customer relationships in the business-to-business and retail markets. His research has appeared in Journal of Marketing, Journal of Marketing Research, Marketing Science, Journal of the Academy of Marketing Science, and the International Journal of Research in Marketing. Before academia, he held numerous positions in industry, including president and chief operating officer of C&K Components and European general manager, director of worldwide marketing, director of worldwide strategic planning, and North American sales and marketing manager at multiple divisions of Tyco-Raychem Corporation. He has also served as a lieutenant onboard nuclear submarines in the United States Navy. He teaches executive MBA and MBA classes, including sales management and marketing strategy.
Journal of Marketing, Vol. 72, No. 4, July 2008
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