The third type of relational bond is structural bonding which helps to enhance customer loyalty and offers target customers value-added benefits that are difficult or expensive for businesses to provide and that are not readily available elsewhere (Berry 1995). Where the structural bond strategy involves services like mailing information, price discounts and gift options, it can be difficult for customers to obtain this elsewhere. Structural bonds raise the customer’s cost of switching to a competitor (Peltier & Westfall 2000). According to Han (1991, p.56) structural bonding is defined as “the degree to which certain ties link and hold a buyer and seller in an economic, strategic and organisational sense regardless of personal matters”.
When building a relationship, structural bonds must be developed first. Two firms pooling their assets must perceive clear economic and strategic benefits from the association; when a relationship develops; explicit economic and managerial benefits for the partners are a positive predictor of affective ties between managers of the new organisation (McAllister 1995; Nielson 1998). They are necessary to satisfy a minimum level of dependability and reliability before a deeper emotional investment can exist in the relationship. As such, structural bonds are not sufficient for the maintenance and continuation of the relationship, because in the presence of weak social bonds there is the possibility of opportunism (Madhok 1995). For example, negotiated transactions typically linked to economic or strategic exchanges may not lead to cooperation if they are not supported by an affective bond that reduces risk during exchanges (Kollock 1994; Madhok 1995; McAllister 1995). Seabright, Levintbal and Fichman (1992) suggest that relationship capital engenders some elements of social ties. Affective bonds reduce risk by carrying expectations of trust and abstention from opportunism (Gundlach, Achrol & Mentzer 1995), lowering conflict and coordination costs (Madhok 1995) and encouraging product resource exchange and thus promoting innovation (Tsai & Ghoshal 1998). Social bonds lubricate the workings of the relationship. Both economic and social dimensions in the relationship support the existence of shared values, non-opportunistic behavior (Morgan & Hunt 1994; Madbok 1995) and timely communication (Moorman,
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Zaltman & Deshpande 1992). In summary, timely interactions between actors build commitments and bonds through this social exchange process (Fichman & Levinthal 1991; McAllister 1995).
Customers that have developed a long-term relationship with a firm or retailer could get quicker service than other customers (Gwinner, Gremler & Bitner 1998; Reynolds
& Beatty 1999); also, service firms may use structural bonds to maintain customer loyalty. Structural bonds are present when a business enhances customer relationships by designing the solution to customer problems into the service-delivery system.
These solutions are valuable to clients and not readily available from other sources (Berry 1995). For example, businesses may provide an integrated service with its partners or offer innovative products/services in accordance with customer needs (Hsieh, Lin & Chiu 2002). From case studies on retail banking, Dibb and Meadows (2001) found that some firms have invested in structural bonds such as an innovative channel, integrated customer database and two-way information exchange technologies. These investments offer customers a more convenient and customised environment to consumer services and are seen as a key advantage over competitors.
Finally, business relationships require a correct balance between social, financial and structural bonding. These bonds may change over time and need continuous monitoring to allow for an acceptable minimum level of trust to generate commitment and explicit behavior to invest in the relationship as part of the value-creation process.
Figure 2.7: Conceptual Model of Relationship Orientation with Other Major Variables
Customer purchase intentions are believed to be guided by some higher-order global evaluations towards service suppliers. For decades, one of the key global constructs that predicts consumer behavior in marketing research has been customer satisfaction.
Relationship Orientation
Trust
Commitment
Involvement Social Bond
Economic Bond
Structural Bond
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As the marketing emphasis has shifted from short-term transactions to long-term relations, some researchers have added constructs such as trust (Moorman, Deshpande
& Zaitman 1993; Morgan & Hunt 1994; Garbarino & Johnson 1999) and commitment (Garbarino & Johnson 1999; Gruen, Summers & Acito 2000; Morgan & Hunt 1994) to predict future intentions. Therefore, the current study focussed on the roles of the three relational bonds in predicting customer trust and commitment.
Bonds are the psychological, emotional, economic or physical attachments in a relationship that are fostered by association and interaction and serve to bind parties together under relational exchange (McCall 1970; Turner 1970). While previous researcher’s conceptualised two types of bonds, structural and social (Han 1992;
Wilson 1995), Smith (1998) proposed that functional bonds also serve to bind parties to a relationship. Besides, Berry and Parasuraman (1991) have divided the ways retailers stimulate customer behavioral loyalty into three levels: financial, social and structural bonding tactics. Meanwhile, many researchers (Williams et al. 1998;
Armstrong & Kolter 2000) have also suggested RM classification levels similar to those defined by Berry and Parasuraman (1991). Most recently, Wulf et al. (2001) distinguished among four types of RM tactics; level one RM is tangible rewards, level two RM is direct mail, level three is preferential treatment and level four is interpersonal communication.
Generally speaking, investing time, effort and other irrecoverable resources in a relationship creates psychological bonds that encourage customers to stay in that relationship and sets an expectation of reciprocation (Smith & Barclay 1997). When a supplier makes any kind of relationship investment on behalf of a customer, the customer ought to be favorably impressed (Hart & Johnson 1999). Therefore, Wulf et al. (2001, p. 36) define perceived relationship investment as “a consumer’s perception of the extent to which a retailer invests resources, efforts and attention aimed at maintaining or enhancing relationships with regular customers that do not have outside value and cannot be recovered if these relationships are terminated”.
In the current study, the mediating role of perceived relationship investment, accounting for the connection between perceived service quality, RM tactics and relationship quality are investigated. In line with the theoretical perspective of reciprocation (Huppertz et al. 1978), the measurement items of relationship
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investment emphasise an aim for reciprocation by consumers that is based on the retention efforts made by a retailer. Besides, many researchers have stated that relationship bonding tactics are helpful in improving customers’ behavioral loyalty (De Young 1996; Christy et al. 1996; Armstrong & Kolter 2000) as are relationship bonding tactics on relationship quality (Geyskens et al. 1996; Gengler et al. 1997;
Garbarino & Johnson 1999; Gruen et al. 2000). Finally, Wulf et al. (2001) suggested that RM tactics would affect relationship quality indirectly through the perceived level of relationship investment. Therefore, service and quality relationship bonding tactics applied by the retailer as antecedents of relationship investment are positioned to provide managerial guidelines as to what affects perceptions of relationship investment. Relationship quality (customer satisfaction, trust/commitment) that ultimately influences behavioral loyalty is positioned as a consequence of relationship investment. A positive path between relationship investment and relationship quality implies that the consumer reciprocates a retailer’s actions.
Lowering customer defection rates can be profitable to companies and research has shown that this is a more profitable strategy than gaining market share or reducing costs (Fornell & Wernerfelt 1987, 1988; Reichheld & Sasser 1990). Therefore, the longevity of a customer’s relationship favorably influences profitability. Customers who remain with a firm for a period of years because they are pleased with the service are more likely than short-term customers to buy additional services and spread favorable word-of-mouth information. Furthermore, several studies (Woodside et al.
1989; Anderson & Sullivan 1990; Cronin & Taylor 1992) offer some evidence that customer satisfaction and/or service-quality perceptions positively affect intentions to build relationships with retailers.
Many RM researchers have addressed the proposition that relationship bonding tactics are helpful in improving customers’ behavioural loyalty (Berry & Parasuraman 1991;
Berry 1995; Christy, Oliver & Penn 1996; Armstrong & Kolter 2000). In addition, Henning-Thurau and Klee (1997) suggest that relationship quality is the main factor that affects customers’ repurchasing behavior. Furthermore, both Bolton (1998) and Macintosh and Lockshin (1997) address the idea that there is a positive connection between relationship satisfaction and customer behavioral loyalty. Finally, Wulf et al.
(2001) also suggest the same results.
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Following this literature, it is suggested that economic, social and structural bonds are important factors that encourage customer commitment. Economic and structural bonds are expected to have substantial effects on the instrumental component because they raise the customers’ costs when the relationship is terminated. The social aspect of the relationship between customers and service providers may help to develop shared values and a psychological attachment and lead, over time, to commitment.
Therefore, these bonds may reinforce a customer’s decision to become involved in a long-term relationship.