Relational Bonds

2.8.1.1 Relational Bonds

In this study, relationship orientation consists of three types of bonds; financial, social and structural bonds improve customer loyalty to a particular, in this case computer, retailer. These relational bonds start with ‘stayers’ who improve customer utilitarian and hedonic values that lead to enhancement of customer loyalty. Second, for

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dissatisfied ‘switchers’, only the structural bond has a significant impact on the customer’s utilitarian value which significantly improves customer loyalty. Third, for satisfied ‘switchers’ the social bond significantly affects hedonic value whereas the structural bond significantly affects utilitarian value (Chiu et al. 2005).

The nurturing of market relationships has emerged as a top priority for most firms, since firms realise that loyal customers are far more profitable than the price-sensitive, deal-prone switchers (Sheth & Parvatiyar 1995; Day 2000; Ryals 2005; Yi-Ling Chen & Hung-Chang Chiu 2009). In previous studies, researchers have suggested that RM can be practiced on multiple levels, depending on the type of bonds that a company uses to strengthen customer satisfaction and customer loyalty.

These bonds are financial, social and structural (Berry & Parasuraman 1991; Berry 1995; Peltier & Westfall 2000).

The main objective of RM is an increase in customer loyalty and customer consumption through interactive RM programs. Marketing tactics are always stressing ways to exploit new markets and gain new customers. Moreover, several authors have emphasised that RM practices are not effective in every situation or context (Kalwani

& Narayandas 1995; Day 2000; Odekerken-Schroder, Wulf & Schumacher 2003).

Many researchers have also addressed the concept that relationship bonding tactics are helpful in improving customers’ behavioral loyalty (Berry & Parasuraman 1991;

Berry 1995; Christy, Oliver & Penn 1996; Armstrong & Kolter 2000). At the same time, Berry and Parasuraman (1991) and Berry (1995) maintain that along with the upgrading of relationship bonding tactics, customer behavioural loyalty increases.

Garbarino and Johnson (1999) and Gruen, Summer and Acito (2000) address the idea that RM tactics effectively can increase the awareness of customers’ trust and commitment. Also, many researchers point out that relationship bonding tactics do have positive effects on customer satisfaction (Gengler, Leszczyc & Popkowski 1997;

Geyskens 1998).

Past studies have revealed that consumers in many service industries realise there are benefits in entering into relationships with firms and their salespeople. Also, some studies have indicated that the nurturing of market relationships has emerged as a top priority for most firms because loyal customers are far more profitable than switchers who see little difference among the alternatives (Page, Pitt & Berthon 1961; Day

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2000). Based on the existing literature, it is considered that businesses can build customer relationships by initiating one or more types of bonds; e.g., businesses can enhance customer relationships by delivering economic benefits. Researchers have argued that one of the motivations for engaging in relational exchanges is money-saving (Berry 1995; Peterson 1995; Gwinner, Gremler & Bitner 1998; Peltier &

Westfall 2000).

It has been suggested that the customers of financial service industries such as banking and insurance perceive long-term relationships as being more important.

These services are highly intangible, risky, vary in quality and require high customer involvement, but the continuity helps customers secure customised service delivery and a proactive service attitude (Berry 1995). However, in the retail industry, especially in the case of high-tech products, customer involvement is for a short period till they buy the product, and continuity is not as good as in the financial sector where transactions occur almost on a day-to-day basis. For example, a customer who buys a laptop also requires accessories at the time of the core product purchase and will buy the necessary cables and software at the time of the laptop purchase.

Therefore, it is unlikely that the consumer will return to the same retailer to get more products.

As global competition grows and customers become ever more demanding, managers in retail businesses have been forced to understand the meaning of, and approaches to, RM. Retailers should have a detailed knowledge of their customers, understand the approaches to meeting customers’ needs successfully, and prevent these valuable customers from switching to other providers (Dibb & Meadows 2001). Although relationship-based business in the retail industry is at an early stage compared to other sectors such as the industrial, financial, aviation, petroleum, mining, information, infrastructure, software and information technology industries, there is huge potential for retailers to build personalised relationships with their customers.

The way retailers integrate customer information into customer databases and design two-way communication varies (Dibb & Meadows 2001). The objectives of this study are to understand the marketing activities used in the retail industry, to empirically categorise the types of relational bonds that enhance RM and, moreover, to investigate the impact of relational bonds on customer trust and commitment.

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To lure new customers, as well as hold onto existing ones, businesses are investing heavily in information technology. The use of the internet, in particular the World Wide Web (WWW, or the Web), is the fastest growing area for businesses worldwide.

This technology has many potential uses such as being a source of information, a communication tool and a distribution channel depending on the objectives and capabilities of the user (Ranchhod & Gurãu 1999). As a communication tool, it plays an ever-increasing role in understanding customer needs, serving customers better, responding faster to customer inquiries, communicating more efficiently with customers and developing new opportunities (Murphy 1996). As a result, it is eminently appropriate for heightening the interactions between buyers and sellers, and managing customer relationships (Angelides 1997). The excellent capabilities of the internet help marketers resolve the lack of customer intimacy in traditional marketing tools (Deighton 1997). Communication is no longer just broadcast — the content and format of the information transferred can be different for individual receivers. The number of retailers that are going online is increasing rapidly. The web site is becoming an important channel for consumers to buy high-tech products online (Aladwani 2001).

Based on the existing literature, it is considered that businesses can build customer relationships by initiating one or several types of bonds. For example, businesses can enhance customer relationships by delivering economic benefits. Researchers have argued that one of the motivations for engaging in relational exchanges is money savings (Berry 1995; Peterson 1995; Gwinner, Gremler & Bitner 1998; Peltier &

Westfall 2000). Retailers may reward loyal customers with special price offers. For example, offering interest-free terms to consumers who buy high-value items on a regular interval; also, offering loyalty points and giving rewards to consumers for their loyalty towards the retailer is a very effective tool. In addition to monetary incentives, a non-monetary time saving is also proposed by scholars—customers that have developed a long-term relationship with a service provider could get quicker service than other customers (Gwinner, Gremler & Bitner 1998).

According to Kaltcheva et al. (2010), financial or economic drivers involve customer perceptions of (1) the economic value obtainable from their interactions with the marketer (i.e., the sum of the monetary and other utilitarian benefits less all the costs),

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and (2) the costs involved in switching to a competing marketer (Lacey 2007). Social drivers involve interpersonal relationships with marketer representatives such as sales associates (Berry & Parasuraman 1991; Morgan 2000). More specifically, social drivers include (1) customer recognition (the frequency with which marketer representatives can identify the customer and address him or her individually) and (2) shared values (the extent to which the customer and the marketer have similar values) (Lacey 2007). Finally, structural or resource drivers represent a distinctive combination of resources that is available only from one marketer and cannot be obtained through other firms. Resource drivers involve (1) confidence in the marketer, (2) preferential treatment from the marketer, and (3) corporate reputation (the overall reputation of the firm, not its individual brands, with respect to its ability to deliver valued outcomes to customers and to install trust) (Lacey 2007). The relational driver research stream suggests that the more resources a retailer offers customers and the more diverse are those resources, the less likely the customer will be to defect (Berry

& Parasuraman 1991; Morgan 2000). Thus, defection is typically high for retailers that offer only financial resources. The rate of defection is likely to decrease when social resources are offered in addition to financial resources. Finally, retailers that offer all three types of resources to their customers are likely to have the highest retention rates.

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Table 2.5: Relational Bonds and Associated Items (Referent Sources)

Sr. Bonds Reference

Economic bonds

1 Provides discounts for regular customers Berry (1995), Gwinner et al. (1998) 2 Offers presents to encourage future

purchasing Delphi technique

3 Provides cumulative point programmes Berry (1995) 4 Offers rebates if I buy more than a certain

amount Berry (1995)

5 Provides prompt service for regular

customers Gwinner et al. (1998)

Social bonds

6 Keeps in touch with me Berry (1995), Dibb & Meadows

(2001),Tzokas, Saren & Kyziridis (2001) 7 Concerned with my needs Crosby et al. (1990), Dibb & Meadows

(2001), Tzokas, Saren 8 Employee helps me to solve my personal

problems Gwinner et al. (1998)

9 Collects my opinion about services Delphi technique 10 I receive greeting cards or gifts on special

days Berry (1995), Crosby et al. (1990)

11 Offers opportunities for members to

exchange opinions Berry (1995), Zeithaml & Bitner (1996)

Structural bonds

12 Provides personalised service according to my needs

Berry (1995), Gwinner et al. (1998), Crosby et al. (1990)

13 Offers integrated service with its partners Hsieh, Lin & Chiu (2001) 14 Offers new information about its

products/services Gwinner et al. (1998), Crosby et al. (1990) 15 Often provides innovative products/services Dibb and Meadows (2001)

16 Promises to provide after-sales service Berry (1995) 17 Gives a prompt response after a complaint Delphi technique 18 Provides various ways to deal with

transactions

Berry (1995), Dibb & Meadows (2001),Hsieh, Lin & Chiu (2001) 19 I can retrieve information from the firm in

various ways ? direct rewards can be discounts on products, interest-free terms, deferred payment in payment terms, exchange of goods when the customer is not happy, and acceptance of cash on delivery (COD). Markets everywhere are tightening, and consumers need to get benefits from their retailer for the patronage and relational attitude they have shown by engaging in relationship with the retailer.

Service providers may reward loyal customers with special price offers; e.g., banks may offer higher interest rates for long-duration accounts and airlines may design