Building Customer Commitment

by hieu_nadal (student)

University Degree Business and Administrative studies

LITERATURE REVIEW

Introduction

Commitment is as an essential ingredient for successful long-term relationships. Developing a customer’s commitment in business relationship does pay off in increased profits, customer retention, willingness to refer and recommend. In relationship marketing literature, commitment has widely been acknowledged to be an integral part of any long-term business relationship (Anderson and Weitz 1992). In most case it is described as a kind of lasting intention to build and maintain a long-term relationship (Dwyer, Schurr, and Oh 1987).

Customer commitment definition

Commitment has been defined as “an implicit or explicit pledge of relational continuity between exchange partners” (Dwyer, Schurr and Oh 1987). It is believed to imply a willingness to make short-term sacrifices to realize long-term benefits (Dwyer, Schurr, and Oh 1987). According to Anderson and Weitz (1992), committed partners are willing to invest in valuable assets specific to an exchange, demonstrating that they can be relied upon to perform essential functions in the future.

Dwyer, Schurr, and Oh (1987) propose that “the buyer’s anticipation of high switching costs gives rise to the buyer’s interest in maintaining a quality relationship. Commitment may be generated by the buyer’s anticipation of high switching costs. Morgan and Hunt (1994) also posit that firms that receive superior benefits from their partnership, relative to other options, on such dimensions as product profitability, customer satisfaction, and product performance, will be committed to the relationship.

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Despite the fact that commitment is a central construct in the area of relationship marketing, there is little agreement on the nature of the construct. Frequently, commitment is defined as a desire to maintain a relationship (Morgan and Hunt 1994). Sometimes it is conceptualized as a “pledge of continuity” from one party to another (Dwyer, Schurr, and Oh 1987). Others have put forward that the root of commitment lies in sacrifice or the potential for sacrifice that a party faces in the event that the relationship ends (Anderson and Weitz 1992) or the forsaking of alternative options (Gundlach, Achrol, and Mentzer 1995). More recently, commitment has been defined as a resistance to change (Pritchard, Havitz, and Howard 1999) and a type of attitude strength (Ahluwalia 2000). These various conceptualizations make it difficult to develop a definitive view on what commitment means to customers and organizations.

Type of customer commitment

Meyer and Allen (1984) initially proposed that a distinction be made between affective and continuance commitment, with affective commitment denoting an emotional attachment to, identification with, and involvement in the organization and continuance commitment denoting the perceived costs associated with leaving the organization. Allen and Meyer (1990) later suggested a third distinguishable component of commitment, normative commitment, which reflects a perceived obligation to remain in the organization.

Along with Gundlach, Achrol, and Mentzer (1995), there are three different dimensions: Affective commitment describes a positive attitude towards the future existence of the relationship. Instrumental commitment is shown whenever some form of investment (time, other resources) in the relationship is made. Finally, the temporal dimension of commitment indicates that the relationship exists over time.

In a more simple approach according to Dig Deeper (2006), there are three different forms of commitment have been identified: instrumental, relational, and values-based. Instrumental commitment occurs when customers are convinced that no other offer or company could do a better job of meeting their needs. They are not just very satisfied, but unbeatably satisfied. All expressed and latent needs have been met. Relational commitment is that customers can become highly attached to a company's people. An emotional tie may be formed with an individual person, a work group or the generalized company as a whole. Values-based commitment is that customers become committed when their values are aligned with those of the company. Values are core beliefs that transcend context and serve to organize and direct attitudes and behaviors.

Measure of customer commitment

Customer commitment is the intention of a customer to maintain a long-term relationship with a supplier. It is a measure of the future of the

relationship. A customer’s aim to stick with a supplier in future is essentially based on positive experience and positive evaluation with the past relationship. A business relationship is that a customer considers as important enough to “warrant maximum efforts at maintaining it” (Morgan and Hunt, 1994) leads to commitment. Social exchange theory argues that the intention to stay with an exchange partner depends on how the partners perceive reward and cost (Homans 1958). Therefore customer relationship value is as an essential antecedent of customer commitment. The higher a customer values a business relationship with a supplier, the stronger the customer's commitment towards the relationship with this supplier will be.

Besides that, the more the customer trusts a supplier, the higher the customer's commitment to the relationship with this supplier will be. Trust has a direct positive impact on commitment. Trust diminishes the perceived risk and vulnerability in a relationship and thus leads to a higher commitment to the relationship (Ganesan 1994). Moreover trust reduces transaction costs, as there is less necessity to establish expensive control mechanisms. Lower costs in turn increase the probability to continue the relationship in future and therefore increase the commitment to the relationship.

Trust can even be called an essential antecedent of commitment. If a supplier is not perceived to be benevolent, honest or competent enough to show useful behavior regarding the relationship in question, the customer cannot rely on this supplier and thus will show no commitment towards the relationship (Morgan and Hunt 1994).

Referencing

Anderson, E., Weitz, B., (1992), "The Use of Pledges to Build and Sustain Commitment in Distribution Channels,” Journal of Marketing Research, 29 (February), 18-34.
Ahluwalia, R., (2000), “Examination of Psychological Approaches Underlying Resistance to Persuasion,” Journal of Consumer Research, 27 (September), 217-32.
Dwyer, F. Robert, Paul H. Schurr and Sejo Oh (1987), “Developing Buyer Seller Relationships,” Journal of Marketing, 51 (April), 11-27.
Deeper, D. (2006). Customer Relationship Management [pdf]. Available at :< http://searchcrm.techtarget.com/feature/Understanding-customer-commitment>[Accessed 13 May 2012].
Gundlach, Gregory, Achrol, R and Mentzer, J (1995), “The Structure of Commitment in Exchange,” Journal of Marketing, 59 (1), 78-92.
Ganesan, Shankar (1994), “Determinants of Long-Term Orientation in Buyer Seller Relationships,” Journal of Marketing, 58 (April), 1-19.
Homans, George C. (1958), “Social Behavior as Exchange,” The American Journal of Sociology, 63 (May), 597-608.
Morgan, Robert M., Hunt, Shelby D. (1994), “The commitment-trust theory of relationship marketing,” Journal of Marketing Vol.58 (3)20-38.
Meyer, J. P., Allen, N. J., & Gellatly, I. R. (1990), “Affective and continuance commitment to the organization: Evaluation of measures and analysis of concurrent and time-lagged relations,” Journal of Applied Psychology, 75, 710–720.
Meyer, J. P., & Allen, N. J. (1984), “Testing the “side-bet theory” of organizational commitment: Some methodological considerations,” Journal of Applied Psychology, 69, 372–378.
Pritchard, Mark, Havitz, M and Howard, D. (1999), “Analyzing the Commitment-Loyalty Link in Service Relationships,” Journal of the Academy of Marketing Science, 27 (3), 333-48.