Chapter 2
REVIEW OF RELATED LITERATURE
findings of related researches to this study. It shall provide a discussion on
the significance of this study to the existing literature. The contents of this
portion of the study is gathered and collated from its secondary data.
Introduction
Ten years
ago, personal salespeople in business-to-business activity would have scoffed
at the idea of using direct marketing techniques as a sales approach applicable
for an industrial customer. In fact, it was considered that these tools were
only for the use of companies selling items to mass markets. Today, these tools
have been integrated into the fabric of more than half of the Fortune 500
companies as part of their normal way of conducting business (Nash, E. L.
1986).
Business-to-business marketing is considered by
companies to be a sound business strategy and more so when the electronic means
is utilized (Ramsdell, 2000). For buyers, B2B marketplaces promise not only to
deliver more competitive prices but also to rid the supply chain of a host of
inefficiencies. For sellers, B2B creates a channel for their product
distribution thus minimizing the cost of transaction attained when they
themselves engage with the end-users of their products.
Factors such as trust and reputation are critical,
and there is also the notion of cooperative strategies based on mutual benefit
rather than the simplistic idea of maximizing revenues to individual
organizations (Farrely
and Quester, 2003; Archer and Yuan, 2000; Abramson and Ai, 1999). There is widespread research and anecdotal
evidence of the importance of relationships in business-to-business markets and
concepts such as the virtual value chain (Rayport and Sviokla, 1995) and
cooperative supply chain structures (
1996) extend the theory to market networks of separately owned organizations
choosing to work closely together.
practice, relationships in business-to-business marketing have come to mean
trust that results in protective and complementary relations in
resources (Hamzah-Sendut et al, 1990 in Abramson and Ai, 1999, p.10).
These factors are all part of the Asian concept of guanxi, the six key
constructs of which being: Mutual trust between parties; Commitment towards
mutual benefit; Empathy towards all parties; Maintenance of relationship;
Provision of favors to partners; and Full reciprocation of favors; (Abramson
and Ai, 1999, p.10).
In business-to-business trade among buyers and sellers,
the relationship involves complex products traded where there are high levels
of inter-dependencies. In these situations it is necessary to co-operate in
order to maximize the opportunities for the network of companies, and to build
in protection measures against opportunistic behavior, either through trust
developed over time, contracts, or a combination of both (Agrawal and Pak,
2001; Ramsdell, 2000; Hollad, 1996).
seller--usually share information at each stage of the supply chain and
transaction process, and the nature and amount of what they share depends on
the quality of their relationship (Agrawal and Pak, 2001). Thus, the successful
exchange of information in the transaction of B2B reflects the amount of
investment and trust buyers and sellers bestow to each other.
The B2B relationship is even more controversial in
the emerging market of B2B retailing. The business is lucrative where
reach $1.3 trillion by 2003 and; by 2004, business-to-consumer sales will reach
$100 billion (Lord, 2000). Aside from the potentially huge market offered by
the internet, E-commerce technologies provide effective and efficient
ways in which corporate buyers can gather information rapidly about available
products and services, evaluate and negotiate with suppliers, implement order
fulfillment over communications links, and access post-sales services (Chaston
and Mangles, 2003). From the supplier side, marketing, sales, and service information
is also readily gathered from business partners. Building and maintaining B2B
relationships is the key to success in e-commerce and, unless service is
maintained, customer loss may result, more than offsetting any cost
efficiencies due to introducing e-commerce technology (Archer and Yuan, 2000).
Since the core of e-commerce is information and communications, support for
managing customer relationships particularly trust is of primary consideration
in the buyer-seller relationship (Archer and Yuan, 2000).
Although there is some
evidence of a move towards electronic markets, there is also strong evidence to
support the hypothesis that electronic communication technologies will forge
closer relationships rather than create more fragmented ones. This is
particularly true in business-to-business markets where the levels of
interdependencies between buyers and sellers are typically extremely high
compared with business to consumer markets (Johnston and Lawrence, 1988,
Konsynski and McFarlan 1990).
Understand
Business-to-Business Markets
Bingham,
Jr. & Raffield III (1990) define business-to-business market as below:
business-to-business marketing transaction takes place whenever a good or
service is sold for any use other than personal consumption, and all the
activities involved in this process make up business-to-business marketing.
customers are usually organizations and may be public or private, end-users, or
reseller, and so would wholesalers, retailers, and other such resellers buying
goods and services in the operation of business.
non-profit institutions such as universities and hospitals are also seen as
business customers (Haas, 1992). Eckles
(1990) states that business products fit into seven classifications: (1) raw
materials, (2) installations, (3) auxiliary equipment, (4) component parts, (5)
processed materials, (6) supplies and (7) industrial services.
furnishing and customer electronics retailer
(buyer) buy auxiliary equipments
such as televisions, furniture, and computers from suppliers (sellers)
the business environment where according to Eckels (1990) that the demand for
business goods is derived. It is
argued that the business demand is relatively inelastic because demand
is not likely to change significantly in the short run and tends to be more
volatile than consumer goods and services demand.
Identify
Characteristics of Buyer-seller Relationship
relations operate within a highly complex organizational environment bordering
on a partnership where trust and respect for each other prevails (Eckels,
1990). It is argued that companies and
relationships in the business markets are inter-dependent
short-term social interactions that are influenced by the long-term business
process that bind the firms together.
Ford (2002) also argues that it would not make sense of companies by
looking at them in isolation, but only in relation to each other.
furnishing and customer electronics business markets can be analysed based on
the general characteristics of buyer-seller relationships identified by Gadde
& Hakansson (1993) as below:
& Hakansson (1993) state that the complexity of the relationship depends on
the number of people involved. In
general, the buying process in
home furnishing and customer electronics business markets involves buyers,
supplier’s salespeople, buyer’s and supplier’s marketing department with
extensive contacts to discuss and solve more or less advanced problem.
interface system lies in the fact that the ultimate actions may be controlled
by some individuals who do not involve in the original transaction.
planning, transportation, and inventory control people.
that could hole the ultimate authority over the dispensation of the
organisation’s finances.
et al (2002) argue that every action in a relationship should be seen in
a time perspective that the investment which may involve costs will be pay off
in the long run. Based on their
arguments, the cost of
home furnishing and customer electronics business buyer-supplier relationship
may involve contact/information cots and adaptation costs especially during the
beginning stage. The costs will fall
later when buyer is getting to know the suppliers and their abilities and
expertise through marketing and sales promotion activities.
to retain and maintain existing relationships than to seek out new ones that
may pose an obstacle to implementing changes.
Hence, buyers and suppliers should note that day-to-day activities
should remain at a relatively high level to maintain a long-term relationship.
occurs when one party in a relationship alters its processes or the item
exchanged to accommodate the other party (Gadde & Hakansson, 1993).
behaviour would vary over the life of the relationship.
develop trust, and in the mature state it will expand and solidify the
relationship. There are many types of
adaptations stated by Gadde & Hakansson (1993) such as technical,
administrative routines and knowledge-based adaptations.
electronics business markets should continuously increases their knowledge of
each other application of technology to give themselves an important
developmental boost. Besides,
administrative routines such as planning, supply and communications systems
need to be adapted by both parties for effective working relationship.
by Sheth & Parvatiyar (2000) argue that adaptation tend to bond the buyer
and seller in a tighter relationship and create barriers to entry for competing
suppliers.
and dependence may be unbalanced with regard to individual dimensions and
varies with the general state of the economy (Gadde & Hankansson,
1993). The buyer-seller relationship may
be more important to the buyer than the seller, or vice versa.
relationship with SAFE was more important to SAFE and the relationship was
struggled and characterised as distrust and both try to avoid vulnerability to
other. In 2001, the relationship was
dissolved due to negative and strong form of reciprocity.
there is no best strategy in any individual case of imbalance power and dependence
relationship. However, the awareness of
the problem, regular and systematic discussions are the first step to learn and
handle the questions better, and to build trustworthy relationship.
mutual goals can only be accomplished through joint action and the maintenance
of the relationship. Conflict may arise
if there is no goal and interest sharing.
Hence, reciprocal trust is a prerequisite for long-term relationships
(Gadde & Hankansson, 1993). It is
also argued by Michel, Naude, Salle & Valla (2003) that buyer-seller
relationship is built up through human effort and human contacts and in order
for them to survive they must be under continual development.
than Formality
has assumed a central role in the development of marketing theory as business
marketers placed greater emphasis on building long-term relationship (Dwyer,
Schurr, & Oh, 1987; Morgan & Hunt, 1994 cited by Doney & Cannon,
1997). Ford et al (2002) argue
that trust should not be built in a relationship by making promises, but only
by fulfilling them. He argued that it
could be easy to destroy a buyer’s trust when the seller demonstrates a lack of
commitment to a relationship. Doney
& Cannon (1997) discuss that seller should make significant investments to
develop and maintain customer trust. They
argue that for suppliers, the value of such efforts is most apparent when high
levels of buyer trust lead to more favourable purchasing outcomes for the
supplier. Although the process of
building trust is expensive, time-consuming, and complex, its outcome in terms
of forging strong buyer-seller bonds and enhance loyalty could be critically
important to supplier firms.
Analyze
Relationship Marketing
marketing is defined as all marketing activities directed towards establishing,
developing and maintaining successful relational exchanges (Morgan & Hunt,
1994). Anderson (2001) suggests that
organisations need to move away from the traditional one-off transactional
approach to a relationship marketing perspective and this point supports the
discussion in Hutt & Speh (2001) that a business marketer may begin with a
relationship from a supplier with transactional exchange to a preferred
supplier status with collaborative exchange.
long-term relationship, in which they share responsibilities and benefits,
trust each other and are engaged in some coordinated planning.
Parvatiyar (2000) that relationship must be mutual beneficial to both buyers
and sellers in order to exist, and adopting relationship marketing implies the
acknowledgement that each partner has a stake in the others activities.
to appropriately involve each other in strategy formulation and implementation
processes. Gronross (1991) cited by
Polonsky, Schuppisser & Beldona (2002) states that the traditional
relationship marketing literature emphasis the benefits of keeping existing
partners satisfied. Their discussion
supports the views of Doyle (2000) that customers who stay with the supplier
are assets of increasing value – each year they tend to generate higher and
higher net cash flow. Besides, the
rational factors that influence stakeholder relationship discussed by Polonsky,
Schuppisser & Beldona (2001) clearly supports the key characteristics of
buyer-seller relationship as discussed earlier.
Determine how trust of a selling firm and salesperson are
built and developed in business markets.
a)
Examine the antecedents and consequences of
trust of a supplier firm and salesperson focusing on characteristics of the
supplier firm, supplier firm relationship, salesperson and salesperson
relationship.
and trust are the foundation of relationship marketing as it encourages buyers
and sellers to make investment into a relationship, to resist taking advantage
of alternative which provide short-term benefits, and not to behave
opportunistically with regard to the relationship (Morgan & Hunt,
1994). It is argued that trust has
assumed a central role in the development of marketing theory as business
marketers placed greater emphasis on building long-term relationship (Dwyer,
Schurr & Oh, 1987; and Morgan & Hunt, 1994 cited by Doney & Cannon,
1997).
on the size, but also the reputation, willingness to customize, confidential information
sharing of supplier firm, and length of relationship with supplier firm and
salespeople (Doney & Conoon, 1997). In
general,
home furnishing and customer electronics retailers build trust with supplier
firms primarily relying on supplier firm’s size and reputation.
willingness to make idiosyncratic investments and share confidential
information provided evidence that they can be believed, they cared for the
relationship and willing to make sacrifices.
These investments contribute to forging strong buyer trust in the
selling firm and they can be expected to pay off the long run (Ford
trust on a buying firm’s current supplier choice and future purchase intentions
& Canoon (1997) argue that a company sales representative who proves to be
dishonest and unreliable could jeopardize a long-term relationship between the
buyer and seller but trusted salespeople helps to preserve customer commitment
during difficult times. A close
interpersonal relationship helps to reduce customer firm’s costs in the long
run that can be a source of competitive advantage for supplier’s firm (Wathne,
Biong & Heide, 2001). This can be
done with emphasis on the supplier flexibility, product/service quality and
relationship-specific adaptation stated by Cannon & Homburg (2001).
account management programs, in which buyers are assigned a designated sales person
who acts as an intermediary between the buyer and supplier (Lovelock &
Wright, 1999). As supplier’s salespeople
plays an important role in developing customer relationship value, the supplier
firm should recognize the potential vulnerability if the key contact person
were to leave, be transferred or promoted and thus be unable to serve the
customer (Bendapudi & Leone, 2002).
Because turnover is bound to occur, there should be efforts to capture
the employees’ knowledge about their customers to transfer this information to
a replacement. Doney & Canoon
(1997), and Cannon & Homburg (2001) suggest that supplier firms should
emphasize customer satisfaction and note that the interpersonal trust
engendered by salespeople and transferred to the supplier firm plays a key role
in developing and maintaining enduring buyer-seller relationship.
New Trends
R. R. 1990)
world is developing. As the domestic marketplace moves toward a global
environment, mass markets will tend to disappear. Technology costs will decline
as capabilities expand, causing more prevalent use. As students who mature
using computers enter the work force in increasing numbers, the environment for
new methods of conducting business will continue to increase.
The
salesperson will continue to be an integral part of the environment, but not in
the same guise. Specialization in marketing techniques and presentation of
products will expand. "Blanket orders," "systems
contracts," and "electronic order-entry systems" will become
commonplace in customer facilities. End users will electronically network with
distributors' inventory systems, and prices will be electronically adjusted
without the involvement of the individual salesperson.
The
relationship between the manufacturers' representatives and the distributors'
will invert, that is, the distributors' will become more implicated in
buyer/seller interaction (Narus, J.A. and J.C. Anderson 1986). The field agent
will turn responsibilities for prospecting and prospect qualification over to
those who communicate by telephone or mail. The field agent will become a true
"agent" in that she/he will identify prospects and needs without
spending time in qualification. That activity will become the responsibility of
other team members who will also handle small and marginal accounts while
gathering marketing intelligence and solving minor technical problems. Instead,
the personal salesperson's time will be devoted to the development of product
and service recommendations, rather than the actual sale of product or service
individually.
are that by 1990 about half of a company's sales force will work inside. The
field person will continue to exist but in a different role. New roles will
include customer instruction and training, and technical advising instead of
taking orders. New salespeople should become more technical and specialized.
The importance of the personal contact between buyer and salesperson is continuing
to diminish as the inside group improves.
R. R. 1990) stated that corporate
customers are more often entering into buy/sell agreements by interacting
through inbound and outbound telemarketing, annual purchase agreements, and
free hot lines to solve problems. Some of the products now sold in this manner
include office supplies, pumping systems, and microcomputers and software. More
than 17 percent of the six billion dollar microcomputer software market was
sold through mail in 1986, along with five percent of the hardware market. Wang
uses catalogs, direct mail brochures, and outbound telemarketing in addition to
field agents who sell annual purchases agreements and offer discounts in return
for purchase commitments with the direct mail division.
selling systems now include personnel who specialize in the role of consultant,
negotiator, system seller, and team member. The consultant must be as sensitive
to the needs of the buyer as to those of the seller. In this role, it is
conceivable that the consultant will be placed in a position of rejecting the
position taken by her/his own company. (Sullivan R. R. 1990)
buyer. The "prospect" will become the "client." Time
commitments will be required of the field agent in order to become attuned to
buyer needs. In the true sense of the word, the purpose will be to provide
analysis and solutions. (Sullivan R. R. 1990)
order to create a common objective partnership and defense against the
competition of the buyer and the seller. The system seller will move beyond
product sales into a myriad of common problems. The result could be
recommendations which involve other functions, such as the buyers' production
function and/or communication flow. (Sullivan R. R. 1990)
sales teams will have functional expertise and be flexible enough as a group to
allow for modification of the team to match the circumstances. In other words,
the team literally becomes a matrix organization made up of those individuals
who could most effectively work with a particular buyer.
the business environment moves towards an increasingly complex situation, the
salesperson may be the individual who becomes the team manager or coordinator,
using a variety of blandishments -- which could only be administered by someone
in close proximity to the end user. (Sullivan R. R. 1990)
The World of the Future
should be redefined in such a way that it is described as a process whereby the
seller ascertains, activates, and satisfies the needs or wants of the buyer to
the mutual, continuous benefit of both the buyer and seller. The process should
involve helping the customer identify problems, supplying information on
potential solutions, and providing after-the-sale service to ensure long-term
satisfaction. This should be done in the most convenient manner and at the
lowest possible cost, using whatever means and methods necessary to satisfy
customers' needs and wants. (Sullivan R. R. 1990)
sales effort must now be re-examined in light of the new techniques and
pressures that are faced by those interacting in buying and selling. The field
sales agent must move toward the kind of expertise that used to be within the
domain of the master salesperson. Few salespeople have the time or capabilities
necessary for handling the sales of business products without help from many
various sources. (Sullivan R. R. 1990)
conclusion, the cost of personal selling has reached prohibitive levels. It is
now time for sales oriented institutions to develop their sales efforts in such
a manner that they truly become "interdynamic" and
"integrated." The total selling effort should include interactive,
supplemental, and impersonal selling methods in order to truly offer the
customer the wherewithal of the selling company. If traditional barriers to
cooperation within the company can be destroyed, then synergism can occur and
true success is possible. (Sullivan R. R. 1990)
longer personal. It is true that the role of the individual is important in the
overall process of selling. However, she/he must assume a position among a team
of sellers involved in a complicated process of moving products from the manufacturer
to the end user. (Sullivan R. R. 1990)
Price Information
Price
information is another part of the advertising message that may differentiate
business-to-business services advertising from consumer services advertising.
Researchers have not compared the frequency of occurrence of price information
in the context of the two types of services advertising; however, LaBand,
Pickett, and Grove (1992) found that services ads were more likely than
tangible product ads to contain information about price. In contrast, Abernethy
and
(1992) reported that only 19.4% of the services ads in their sample made
price-value claims, a significantly smaller proportion than the 78.7% they
found for tangible product advertisements.
The
conflicting evidence about the frequency of use of price information in
services and tangible product advertising does not provide even indirect
insight about the relative frequency of use of price information in
business-to-business and consumer services advertising. However, price
information gives buyers a rational criterion on which to base their purchase
decisions. Further, price is generally viewed as a strong influence on
organizational buying decisions (Dobler and Butt 1996). The rationality of the
organizational buying process suggests that business-to-business services ads
are likely to include price information in their message content more
frequently than consumer services ads.
of the most basic elements associated with an advertising strategy is the
choice of an appeal. Advertising appeals are commonly categorized into two
broad types, rational and emotional.
and Day (1995) note that the traditional view in advertising has been that the
effectiveness of a particular message appeal is contingent on the type of
product being advertised.
services is contradictory on appeal usage. Several researchers have argued on a
variety of conceptual grounds that services advertising lends itself to use of
emotional appeals. For example, Young (1981) contended that services have a
different hierarchy of effects than goods, which makes emotional appeals more
effective for services advertising. Firestone (1983) noted the importance of
developing a service personality through services advertising. Again, emotional
appeals seemingly would be most effective in conveying a service personality to
consumers. Upah (1983) noted the importance of services advertising to
communicate the emotional end-benefit the firm is providing. Finally, Legg and
Baker (1987) and Stern (1988) cited the need for dramatizing abstract offerings
through service advertising.
to previous ones. They conducted an experiment exploring the effectiveness of
services advertising, using message appeal as an independent variable. The
findings indicated that rational appeals were more effective than emotional
appeals in generating favorable levels of attitude toward services
advertisements. On the basis of their results,
and Day argued that informational appeals should be used regardless of service
type.
Previous
research on the message appeals of services advertising has not considered the
possibility that different types of services might require different types of
message appeals. Generally accepted distinctions between business-to-business
services and consumer services suggest that different message appeals should be
used in advertising the two types of services. For example, a more rational decision-making
process, greater product complexity, and greater reliance on group decision
making are associated with business-to-business services (Cooper and Jackson
1988). The need for rational justifications therefore seems likely to be
greater in the context of organizational buying, which involves a continual
search for alternatives that yield the best combinations of quality, service,
and price (Dobler and Burt 1996), than in consumer buying.
Internet Address
World Wide Web has given advertisers a new and efficient means of advertising
and marketing their products (Hoffman and Novak 1996). As a result, World Wide
Web Internet addresses have recently emerged in print ads as an advertising
content element. Placing an Internet address in an ad enables a reader to
acquire additional information about the product or sponsor in a timely and
efficient way at his or her own convenience. Moreover, use of the World Wide
Web and Internet addresses in advertisements has reportedly resulted in
marketing and advertising cost savings associated with direct marketing,
increased efficiency, and customer service (Hoffman and Novak 1996).
Because
Internet addresses are a relatively new execution element for advertisers,
little research is available on which to base a hypothesis about the relative
usage of the World Wide Web for business-to-business and consumer service print
ads. For both business-to-business buyers and consumers, the World Wide Web
provides an efficient channel for acquiring information on which to base buying
decisions (Hoffman and Novak 1996). However, Internet addresses seem most
likely to be included in services advertisements targeted to the
business-to-business market because organizational buyers are more likely than
consumers to approach the buying decision-making process as rational decision
makers (Cooper and Jackson 1988).
Quality Claims
quality has been a dominant research stream during the last decade. Theorists
have developed several models to explain how service quality perceptions are
formed, which have sparked wide discussion in the academic community (e.g.,
Gronroos 1983; Parasuraman, Zeithaml, and
external communications with consumers play a central role in the formulation
of customer perceptions of service quality (e.g., Parasuraman, Zeithaml, and
strategic uses of external communications (e.g., advertising) with the consumer
is to communicate special efforts to achieve quality that may not be apparent or
visible because of the intangible nature of services. As a result, quality
claims are often an important and vital message element in services
advertising.
claims are important in both business-to-business and consumer services
advertising; however, Dobler and Burt (1996) suggest that quality is a
particularly strong influence in organizational buying. In a study of
perceptions of business-to-business service quality, Westbrook (1995) concurred
and found the top three quality attributes to be responsiveness, competence,
and reliability.
claims can give potential buyers strong rational criteria for decision making.
Because rational appeals are expected to be more widely used in
business-to-business than in consumer services advertising, business-to-business
services ads seem more likely to include quality claims, as such claims provide
rational criteria on which business-to-business buyers can base their
decisions.
in print ads are closely connected to the message appeal. Some researchers
consider the headline to be of central importance to the effectiveness of an ad
because the headline is sometimes the only part of an ad that is read (Hitchon
1991). In addition, the headline of a print ad may strongly influence the reading
of the ad copy (Hitchon 1991).
Headlines
can be written in many styles. Bovee and Arens (1992) classify headlines into
five basic styles or categories: benefit, provocative, news/information,
question, and command. A benefit headline makes a direct promise to the reader.
A provocative headline attempts to stimulate the reader's curiosity.
News/information headlines provide news, promise information, or include how-
to information that seeks recognition for ad sponsors. Question headlines ask
the reader a question, which generally is answered in the body copy. Finally, a
command headline orders the reader to do something.
Like
advertising message appeals, advertising headline styles seem apt to differ
between business-to-business and consumer services ads. Specifically, news and
information and benefit headlines seem likely to be used more frequently in
business-to-business services ads than in consumer services ads because of the
rational nature of those two types of headlines. Provocative, question, and
command headlines seem likely to be used widely in both business-to-business
and consumer services ads because those types of headlines can be readily
adapted to for both rational and emotional appeals.
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