Drivers of Relationship Marketing Effectiveness

ConnectionsPalmatier, R. W.; Dant, R. P.; Grewal, D.; Evans, K. R. · 2006Journal of Marketing
Topicsrelationship marketing·meta-analysis·trust·commitment·relationship quality·b2b·customer loyalty·seller performance

Relationship marketing means building and keeping customer relationships. Programs can give mixed results. Relationship strength covers customers' commitment, trust and satisfaction; relationship quality combines them. Imagine setting your relationship budget for a business services firm. Which programs and customers deserve priority?

Relationship marketing's links to relationship strength and performance vary by strategy and setting.

Data chart

Conflict has the strongest link to weaker customer relationships

Average correlation across studies between each factor and the strength of the customer's relationship with the seller, from -1 to 1; zero means no link, and negative values mean weaker relationships.

No measured linkConflict with customers (weakerrelationships)-.67Seller expertise.62Communication.54Relationship investment.46Similarity to customers.44Relationship benefits.42Dependence on seller.26Contact frequency.16Relationship duration.13
  • Conflict's link is negative, unlike the relationship builders.
  • Longer relationships and more contact have the weakest overall links.

Conflict's link to relationship strength is negative and larger than any positive factor's; relationship duration and contact frequency have the weakest links.

Table 3, printed p. 30 of the January 2005 accepted manuscript; averages corrected for measurement error and weighted by sample size. Expertise uses 19 reported effects versus 67 for communication and includes two components based on a single effect each. Correlations do not establish causation.

Data chart

Customer loyalty links are stronger in services, channels and personal relationships

Average correlation across studies between customer relationship strength and customer loyalty in each setting, from -1 to 1; zero means no link, and larger positive values mean a stronger link.

OfferingProduct offeringsService offerings.43.58Sales channelDirect exchangesChannel exchanges.46.65MarketConsumer customersBusiness customers.46.56Customer relationshipFirmPerson.46.56
  • Customer ties to a person have a stronger loyalty link.

The relationship link to customer loyalty is stronger for services, channel exchanges, business customers and ties to a person.

Table 5, printed p. 32 of the January 2005 accepted manuscript, combines relationship measures for each customer-loyalty comparison. Channel exchanges' .65 rests on two reported effects. The values are correlations, not increases in loyalty or proof of causation.

Action guide

  1. Match each relationship program to its goal and setting.Aim it at the weakness behind your goal; when cooperation needs more trust, favor communication and contact frequency.
  2. Put conflict resolution, staff expertise and communication first.Select and train your customer-facing staff for expertise and communication.
  3. Put relationship spending first into services, channel exchanges and business markets.Relationships there are more closely linked to customer loyalty.
  4. Track combined relationship quality, not commitment alone.It has a stronger link to sales, share of wallet and profit. Relationship duration and contact frequency are weakly linked to relationship strength, and make poor stand-ins for it.
  5. Extend relationship programs where cooperation or referrals matter.Run them where growth depends on word of mouth, and pilot them in alliances or internal teams where cooperation decides success; the study did not test that.
  6. Review centralization and team-selling plans.With a low-turnover sales force, require any new model to keep customer-salesperson ties.

Evidence

  • Conflict has the largest link to relationship strength (-.67); expertise (.62) and communication (.54) have the largest positive links. Relationship duration (.13) and contact frequency (.16) are weakest. Correlations run from -1 to 1; zero means no link.
  • Relationship strength has stronger links to customer loyalty in services than products and in channel than direct exchanges. The link is .56 for business customers and .46 for consumers. Customer-salesperson relationships also have a stronger loyalty link than customer-company relationships.
  • Relationship quality's link to sales, share of wallet and profit is .63, against .27 for commitment alone.
  • Relationship benefits link more to commitment (.51) than trust (.33), and contact frequency mainly to trust. Trust has the strongest link to cooperation (.73).
  • Strong relationships link positively to sales, share of wallet and profit (.35), and more strongly to cooperation (.70) and word of mouth (.61).
  • Relationship investment (.34) and dependence (.22) have direct links to performance larger than relationship strength's (.16), in standard deviations of performance per standard deviation of the driver. Dependence is weakly linked to relationship strength (.26), so it is not an effective relationship strategy.

Key takeaway

Match each relationship program to its goal and setting.

Limitations

The studies cover customer-seller, channel and business relationships from 1987-2004 and measure links, not program costs or payback. They do not establish cause or cover digital channels.

Source

Palmatier, R. W., Dant, R. P., Grewal, D., & Evans, K. R. (2006). Factors Influencing the Effectiveness of Relationship Marketing: A Meta-Analysis. Journal of Marketing, 70(4), 136-153. https://doi.org/10.1509/jmkg.70.4.136. Figures are from the January 2005 accepted manuscript.

https://doi.org/10.1509/jmkg.70.4.136