Relationship Value in Business Markets

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Abstract

The realm of marketing is slowly shifting its focus from the former product centric paradigm to a base that is taking care of the value needs of the customers. The major aim of the relationship marketing is maintaining the relationship between the business and the company to its immediate micro environment.

These include the suppliers, intermediaries in the market, the public and the most important factor, the customers. When this is maintained, there should be prior creation of customer loyalty.

Value is a very important concept in relationship marketing. The ability of a given company to provide the best value to its customers is a critical and very successful strategy in business competition. The concept of value has led many companies to try and find out ways in which they can get the right competitive advantage for their customers.

When value is added to a certain product, the quality of the product s consequently improved and customer is achieved and therefore loyalty gained. With customer satisfaction, there is subsequent customer loyalty which is achieved.

This paper seeks to review “Relationship Value in Business Markets: Development of a Measurement Scale” by Eggert and Ulaga and seek to establish the authenticity of their research.

Introduction

The paper “Relationship Value in Business Markets: Development of a Measurement Scale”, checks on the underlying foundations of relationship value in marketing and also outlines some of the main dimensions of the relationship values. The author of the article has gone ahead to explain some of the factors that lead to the conceptualization of relationship value by different people.

To get the real way in which his conceptualization happens, the author has included a survey. The data in the survey is collected from various purchasing managers from a variety of organizations and develops a scaling process and ways in which to undertake future research in the field.

Strategic marketing

Marketing strategy is more about customer satisfaction in a way that the objectives of the organization get to be achieved. If companies were to focus more on the needs of their customers, there is a greater likelihood that the organizations will get what they require to achieve in the market place (Bollen, 1989).

According to the title of the article, “Relationship Value in Business Markets: Development of a Measurement Scale”, there is focus on the concept of customer satisfaction in various ways. The paper is about the conceptualization of the concept of relationship value. This conceptualization is then tested using data collected for a survey in order to develop a scale process and also a purification process for the conceptualized idea.

Development of the relationship value is thus a form or part of the more diverse marketing strategy which aims at improving the condition of the customer with a farfetched objective of achieving the goals that have been set by the company. Marketing strategy entails focus by the organization on a certain action that will lead to increased profitability through more sales and extra dominance in the market niche which is being targeted by that organization.

It combines all the goals of a certain organization and decides on how the goals will be achieved of a certain time period. Relationship value is a strategy that aims at strengthening the ties between a certain organization and its customers through improving the value of the products and relations to the customer to the satisfaction of that customer.

Organizational effectiveness concept entails the effectiveness of a particular organization in achieving its objectives. In order to increase the effectiveness of an organization, companies need to create competitive advantages that are sustainable with a proper alignment of the right business and marketing strategies.

In the article, the author aligns himself to the concept of organizational effectiveness and the realm of strategic marketing by taking into consideration one of the key underlying factors which has become a bone of contention in today’s world of marketing, the relationship value. This is a proper choice of subject considering that it is one of the key factors that decide whether customer satisfaction has been achieved and also whether the organization will be able to earn customer loyalty from the mentioned and hopefully satisfied customers.

Literature review analysis

In this article the author has received the concept of value from the different perspectives that it can assume. Value, in the view of marketing exchange, enhances the urge to go on with a certain type of exchange in the market. Value is therefore twofold and it affects both the customer and the seller. The seller is interested in the value of the customer to his business and also the value that he gives to the customer so as to be able to maintain that customer.

The author has gone ahead to discuss some of the characteristics that recur in the concept of value; the value of the customer is a concept that is subjective, in a conceptual manner, value is a tradeoff between the benefits that can be realized and the sacrifices that are made, both the sacrifices and the benefits have more than one phases, and that the conceptions of value and competition are relative.

According to the article, the author has criticized the current day trend in taking much concern on issues mostly related to products as opposed to issues related to the value of the customer. It is in this place that he claims that development should consider the value of the customer from the relationship marketing viewpoint. This is the main point behind relationship value.

The author has defined the concept of relationship value in accordance with different authors’ perspectives. According to Anderson et al, (1993, 75), value is ““the apparent worth in financial units of that set of economic, technological, service, and also the social benefits established by a client firm in swap over for the price remunerated for a produce offering, taking into contemplation the accessible substitute suppliers’, their offerings and their likely prices”.

According to Wilson and Jantaria (1995, 61), there is a cross examination of value creation in supplier and buyer relationships. In their research, there is an economic, behavioral and strategic categorization of value which offers the 3-D approach. They have agreed that it is hard to empirically assess the value concept though there is a joint conclusion that the concept of relationship value is problematic and cannot be simply ignored.

According to Hogan (2001, 342), expected relationship value, is the net worth of the perceivable benefits which can be derived during the existence period of a relationship. In all the above mentioned descriptions of the term relationship value from the different authors, it can be established that there has been so little empirical research ion the concept of relationship value. Gwinner et al (1998, 110), managed to come up with three categories which exemplified the customers’ perspectives of the relational benefits. These are special treatment, social benefits and confidence.

In this article, has summarized the various dimensions found in the realm of relationship value. He has grouped them into benefits dimensions and sacrifices dimensions. This has been as a result of the data collection done in the research. There is also a slight inclusion of marketing variables. In the discussions on the various dimensions, the author of the article has included a summary of previous research which had been done on some dimensions and conceptualizations of the relationship value.

In his review the author has addressed the seven dimensions which he got from his analysis in the literature review. Following the flow of the paper up to this area, it follows that the author was very keen in his literature review and that his discussions were completely dissected to deliver the purpose of the research. The literature can therefore be said to be properly up to date and the requirements of a good review have been met.

Data collection methods

The author used a primary method of data collection where he sourced his data from a survey by distributing a number of questionnaires to a group of purchasing managers. After dissemination and collection of the questionnaires, he was able to have a total of 207 questionnaires which he would get usable data from.

His questionnaires were based on a wide range of industries like food, metal products, chemicals, machinery and equipment, plastic products, office equipment and so on. Amongst the respondent firms, there was a diverse employment capacity with where some industries had over five hundred employees, some had between fifty and five hundred and a small group employed less than fifty people.

The loyalty of the customers was based on the number of years that they had been in a certain company. Some lasted for more than fifteen years and the rest ranged from 10-15, 5-10 and less than 2 years as buyers in a single company. There also was a range of the products and services that were offered by the companies. They ranged from raw materials, services, sub-contracting, manufacturing materials and MRO.

In structuring his questionnaire, the author divided into three parts which sought to compare the relationships between the buyers and the suppliers. Some other part of the questionnaire sought to get the relationship value dimensions that were in line with the dimensions discussed in the literature review.

In the comparison the author used a rating scale foe ease of data analysis. The last part of the questionnaire required a personal description of the buyers, the suppliers and their relationships. This was highly based on the knowledge of the dimensions under investigation (Dwyer, 1999).

Results analysis

The author employed the use of various mathematical models to construct the measurement scales and accordingly tabulated the results as they happened. Most of the models included mathematical calculations which gave results to be used in the discussion thereafter (Bollen, 1989).

Discussion of results

In discussing the results of his research, the author alienated himself from the traditional way where value perception is described in an abstract formulation. Such abstract formulations are statements like, “the supplier relationship in this firm has a high value”. This is a perception that has less validity and little reliability.

In this article, the author has described the relation value as a construct that is high order, multi dimensional and a formative one. According to the literature review put forward by the author, he was able to identify two categories of dimensions; five benefits and two sacrifice dimensions.

The benefits dimensions include, product related, service related, suppliers’ knowledge related, social related and those that are related to the ability of the supplier to improve the time required to market. Sacrifice dimensions are costs of process and pride. The variety of the industries that were used in the survey revealed the various dimensions that different stakeholders choose to adhere to in their dimension choice and value of the relationship.

Limitations

The author of the article has outlined all the limitations of his research in a clear and concise manner. This is a good way of indicating the authenticity of his research considering that not all pieces of research are perfect. He has also gone ahead to indicate the directions that should be taken for further research in this field.

Strengths and weaknesses of the article

This article can be dissected into various parts which can help us to get the strong points and the weak points of the paper. The arrangement of the paper has adhered to the proper research format. The abstract of the paper has explained the reason behind the research. It has introduced the flow of the paper and the contents of the preceding chapters in the article.

In the introduction, the author has a good hint on the background of the problem. There is a clear explanation of the past research and the methods that were used to explain the reasoning behind relationship value in the past.

From this knowledge, the author has introduced his concept of empirical analysis. The literature review is also concise and previous literature on the relationship value has been put into consideration.

The paper has also followed an organized academic writing style. The author employed the use of the Harvard style of citation and referencing. This is evident from the in text citations that are in the body of the paper. The use of the authors’ name, year of publication and the page number where applicable is a clear indicator of the Harvard referencing system. The reference list at the end of the document is also correctly placed to adhere to the system.

In the course of the paper, the author has followed the problem statement and definition. At the beginning of the paper, the author started with an abstract that sought to define the conceptualization of the relationship value in the world of marketing. In this realm, the author sated to include about 200 purchasing managers in his research survey.

This is followed by a concise introduction to the topic immediately after. As planned, it is evident from the paper that the research was done and the data which was gotten from the research was tabulated as required so as to give the reader a clear picture of the relationships.

The analysis of the data after the research has been done using mathematical models which have helped the researcher to come up with the measurement scales as stated in the problem statement. This is therefore a clear indication of the fact that the author was cautious in following the statement of the problem as defined and to the letter.

There is a proper analysis and conclusion to the article in that they have adhered to the problem statement. The author has analyzed the data collected data clearly. According to the title of the paper and the statement of the problem as in the beginning parts of the article, there was supposed to be focus on developing a measurement scale that can be used to quantify the relationship value in marketing.

This has been discussed throughout the paper and a survey done to conceptualize the concept. The conclusion of the paper has indicated clearly how the thesis of the paper was reached at and has also been supported by a proper reference to the survey and the results of the survey.

Contribution to the wider area of knowledge in strategic marketing

This point can be approached in a variety of ways. Most importantly is for a person to have the adequate knowledge required to analyze strategic marketing in relation to relationship value.

According to common definitions, strategic marketing is mainly concerned with how a company gets some competitive advantage over its competitors. In this realm the company takes into consideration factors that will lead to customer satisfaction as well as the final gain of attaining the objectives of the company.

The article under review only concentrated on one area of customer satisfaction which is the relationship value. Relationship value is a part of the greater strategic marketing which has some other core cornerstones. In the realm of strategic marketing, there has to be consideration of the market drivers which include among others the PEST factors; “political, economic, social and technological factors”.

At the core of the marketing strategy, there are other factors involved like impact of the market drivers, status of the strategic windows, competition, and the stage of the company in the lifecycle, and the skills and assets possessed by the market. Looking at these diverse factors and issues related to strategic marketing, the article only contributed to an area of strategic marketing.

Nature of the article

The article has been presented in a format that can be understood by a standard graduate level reader. The language command of the author is excellent and does not appear to have common and irresponsibly placed grammatical errors.

In presenting his results the author has properly tabulated all the relevant information such that it simplifies understandability to the reader. The author has also included diagrams in his work. These are essential components of a research paper as graphical figures are simpler to understand.

The arrangement of the paper is also clear. This has been enhanced by placement of appendices at the end of the document. The appendices have been correctly referenced in the document body making the reader not to encounter any confusion.

Conclusion

This article can be categorized as a good research work which can benefit both the academic personnel and practitioners in general. At the academic level, students can use the article as a sample to writing good research papers and the practitioners can apply it in their field of business to reinforce their relationship with their customers.

References

Anderson, et al. (1995) “Capturing the Value of Supplementary Services”. Harvard Business Review. January-February: 75-83.

Bollen, K. (1989) Structural Equations with Latent Variables. John Wiley & Sons, New York.

Dwyer, F. (1999). Business Marketing: Connecting Strategy, Relationships, and Learning, Irwin/Mc Graw Hill, Boston, MA.

Gwinner, K. et al. (1998) “Relationship Benefits in Service Industries: the Customer’s Perspective”. Journal of the Academy of Marketing Science 26(2): 101-114.

Hogan, E. (2001) “Expected Relationship Value: A Construct, a Methodology for Measurement, and a Modeling Technique”, Industrial Marketing Management, 30 (4), 339-351.

Wilson, T. and Jantrania, S. (1995) “Understanding the Value of a Relationship.” Asia-Australia Marketing Journal: 2 (1): 55-66.

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