The B2B-RELPERF scale and scorecard: Bringing relationship marketing theory into business-to-business practice
Introduction
“If you do not measure it, then you cannot manage it!”
(Jack Welch, former CEO of General Electric)
At the beginning of the 21st century it is widely accepted that existing Customer Relationship Management (CRM) solutions have much room for improvement. The main reason may be found in a statement by Einstein: “everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted.” In order to measure what “cannot necessarily be counted”, existing CRM Information Technologies (IT) solutions employ tangible metrics to assess intangible dimensions (e.g. trust and cooperation). Many firm's intangible assets constitute unique opportunities for economic (added) value, such as customer relationships, and these can and should be scientifically assessed (Hunt, 1997).
As managers and researchers observe that good versus poor relationships significantly affect business performance, there is an increasing concern with achieving a better understanding of relationship development with business partners (Lages et al., 2005a, Lages et al., 2005b, Lemon et al., 2002). Although intangible metrics are of interest to academics and managers, these two worlds discuss the issue quite differently (Melnyk et al., 2004, Likierman, 2004). While most managers do not have the scientific knowledge to develop reliable measures, most academic researchers are not concerned with the development of scientific metrics for application at the managerial level (Weick, 2001). Within this context, the development of business performance metrics requires the exploration of synergies between researchers and managers in order to develop scientific and reliable measures that might be of interest to practitioners, bridging the gap. Moreover, although marketing academics and practitioners have been examining relationship marketing since the mid-1980s, a significant criticism of most relationship marketing studies is the fact that many studies are based on a single dimension or a single financial indicator, intended to capture the nature of complex relationships between buyers and suppliers (Yau et al., 2000).
A major priority for the upcoming years is the development of B2B metrics, namely in an e-commerce environment (Parasuraman et al., 2005, Parasuraman and Zinkhan, 2002). Despite both managers and academics' interest in understanding relationships in e-commerce, concerted efforts have not materialized (Grewal et al., 2001, Klein & Quelch, 1997). This article attempts to help bridge the gap by scientifically developing a new scale that enables, from a customer perspective, the assessment of relationship performance in business-to-business (B2B) relationships — named the “B2B-RELPERF scale”. Furthermore, the authors use the B2B-RELPERF scale to suggest the development and testing of the respective relationship performance scorecard for inclusion in periodic business reports and/or existing CRM IT solutions. It is believed that the scale (and future scorecard) might help firms to administer resources more efficiently, by allocating them to different customers, and identifying deviations from objectives. Given the development of different customer relationship processes, this can also help a firm to establish its annual priorities in terms of marketing efforts. Moreover, a firm can use relationship performance metrics as a motivation and reward tool for managers and their teams (e.g., bonus, promotion) by relying on comprehensive data. Finally, these metrics can support the development, monitoring, improvement and benchmarking of customer relationship processes (see Lages et al., 2005a, Lages et al., 2005b).
This paper starts by presenting the five dimensions of the B2B-RELPERF scale. We then refine the preliminary scale using qualitative research and testing it through a field survey of approximately 400 purchasing managers of small and medium-sized enterprises (SMEs) in an e-marketplace. We also analyze the impact of the B2B-RELPERF scale on customers' loyalty intentions. Finally, we present implications for theory and practice, suggest a B2B-RELPERF scorecard, point out research limitations and define directions for further research.
Section snippets
The B2B-RELPERF scale
A recent meta-analysis of relationship marketing literature (Palmatier, Dant, Grewal, & Evans, 2005) indicates that research in the field should follow a multidimensional perspective because there is no single or best dimension able to capture the full essence of this phenomenon. Indication of the main constituents of a relationship process can be found in the literature. While building on past RM literature, the B2B-RELPERF scale reflects the performance of a buyer–supplier relationship
Unit of analysis and research setting
The unit of analysis for this research is a specific buyer's relationship with a specific supplier. The analysis is conducted by examining the buyer's perspective. It was decided to collect customers' data because the customer ultimately decides whether to purchase from the supplier, and the customer's perception of the relationship is likely to predominantly determine its development and performance (Cannon & Perreault, 1999).
The research setting has two main characteristics we believe to be
CFA
CFA was performed to assess the measurement properties of the scales, using full-information maximum likelihood estimation procedures in LISREL 8.3 (Jöreskog & Sörbom, 1993). In this model, each item is restricted to load on its prespecified factor, with the five first-order factors correlating freely. The chi-square for this model is significant (χ2 = 143.58, d.f. = 67, P < .05). Because the chi-square is sensitive to sample size, we also assessed additional fit indices: (1) non-normed fit index
Main findings and discussion
In this study we propose the B2B-RELPERF scale as a broad conceptualization and specific operationalization of relationship performance. Although we cannot claim to have captured the dimensions of this concept fully, we argue that we have come close to doing so because the second-order factor extracts the underlying commonality among the five dimensions, as CFA results suggest. The hierarchical structure of the B2B-RELPERF scale reveals that relationship performance is composed of five
The B2B-RELPERF scorecard
At a time when B2B relationships are instrumental in the determination of enterprises' value and performance, the B2B-RELPERF scale has the potential to help practitioners plan, manage, monitor, and improve their ongoing B2B relationships if properly integrated with objective metrics through a balanced scorecard – often available through existing Enterprise Resource Planning (ERP) and traditional CRM solutions – (see Appendix).3
Limitations and further relationship marketing research
Although this study provides a number of new insights, it is important to note its limitations. A first limitation regards the specificities of this study's research context and respondents — Portuguese SMEs' relationships with an internet-based supplier. While enhancing the focus of this research, it may limit the generalization of the results to some degree, at the same time creating the need for further research, in this environment and other contexts. Another limitation results from the
Conclusions
In this economic environment when corporate budgets are being squeezed, Chief Marketing Officers are kept up at night by worry, trying to justify their expenditures and their existence. They believe that what they are doing has value, and they have to figure out how to demonstrate that value to skeptical CEOs and CFOs (Reibstein, 2004).
As a direct response to a recent observation in the literature (Morgan & Hunt, 2003), we hope that this paper will help cultivate knowledge on relationship
Acknowledgements
This research was funded by the following research grants to the first author: NOVA FORUM, NOVA EGIDE, and 6th European Framework Program while affiliated with Universidade Nova de Lisboa; FCT-EU while a Visiting Scholar at London Business School and MIT's Deshpande Center for Technological Innovation. Andrew Lancastre thanks UNIDCOM/IADE, and Carmen Lages thanks UNIDE/ISCTE. The authors acknowledge IMM editor, three IMM anonymous reviewers, and the participants and reviewers of 2005 CRM
Luis Filipe Lages (PhD, Warwick) is Associate Professor of Marketing and International Business at Faculdade de Economia, Universidade Nova Lisboa, Portugal and Visiting Scholar at MIT's Deshpande Center for Technological Innovation, USA. His research interests include measurement and monitoring of intangibles, international marketing, innovation/disinnovation strategy, and technology-market transfer. His publications appeared in Industrial Marketing Management, Journal of International
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Luis Filipe Lages (PhD, Warwick) is Associate Professor of Marketing and International Business at Faculdade de Economia, Universidade Nova Lisboa, Portugal and Visiting Scholar at MIT's Deshpande Center for Technological Innovation, USA. His research interests include measurement and monitoring of intangibles, international marketing, innovation/disinnovation strategy, and technology-market transfer. His publications appeared in Industrial Marketing Management, Journal of International Business Studies, Journal of International Marketing, Journal of Business Research, European Journal of Marketing, MSI Reports, among others.
Andrew Lancastre (PhD, ISCTE) is Associate Professor of Marketing at IADE-Instituto de Artes Visuais, Design e Marketing in Lisbon, and Visiting Professor of Marketing Strategy at Faculdade Economia, Universidade Nova Lisboa, Portugal. Previously, he was a marketing manager at British Petroleum and Renault. Main areas of interest cover relationship marketing, B2B activities, SMEs, and international marketing. His work is published in Industrial Marketing Management and in the proceedings of leading conferences in the marketing field.
Carmen Lages (PhD, Warwick) is Assistant Professor of Marketing at ISCTE Business School-Lisbon, Portugal. Her research interests include relationship marketing, social marketing, and marketing communications. She has published in the Journal of Business Research, European Journal of Marketing, Journal of International Marketing, among others.
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Editor's note: Three days after this paper was accepted for publication, Andrew Lancastre passed away due to leukemia. This issue of IMM is dedicated to his memory.