The role of marketing in supply chain management
Soonhong Min, John T. Mentzer. International Journal of Physical Distribution & Logistics Management. Bradford: 2000. Vol. 30, Iss. 9; pg. 765 Abstract (Summary)
The concept of supply chain management (SCM) started in the logistics
literature, and logistics has continued to have a significant impact on the
concept. This study, however, proposes that the concepts of the marketing
concept, a market orientation, relationship marketing, and SCM are not separate.
Rather they are inextricably intertwined. The main purpose of this study is to
highlight the role of marketing in the implementation of SCM by suggesting
cause-and-effect relationships. Research propositions are presented and future
empirical studies are called for to test the cause-and-effect relationships
suggested in an integrative model. Definitions of marketing and its core
concepts are reviewed. The marketing concept, a market orientation, and their
influences on the management of a firm and a supply chain are described. An
explanation of how relationship marketing affects SCM, as well as the management
of a firm, is provided. An integrated framework of the relationships between the
marketing concept, a market orientation, relationship marketing, and SCM is
Supply chain management (SCM) has been conceptualized with two different components - an integrative business philosophy and implementation actions - to manage the total flow of a distribution channel from the supplier to the ultimate user (see Ellram and Cooper, 1990; Cooper and Ellram, 1993; Cooper et al., 1997a). SCM extends the concept of functional integration beyond a firm to all the firms in the supply chain and, thus, each member of a supply chain helps each other improve the competitiveness of the chain (Ellram and Cooper, 1990). Cooper and Ellram (1993) suggested three major objectives of implementing SCM:
(1) reduce inventory investment in the chain;
(2) increase customer service through increased stock availability and reduced order cycle time; and
(3) help build competitive advantage for the channel to create customer value.
The concept of SCM originated in the logistics literature (Jones and Riley, 1985; Bowersox et al., 1985; Christopher, 1994) and logistics has continued to have a significant impact on the concept (Bechtel and Jayaram, 1997). The strong influence of logistics in the process of conceptualizing SCM seems to be due to the weight given to inventory reduction and stock availability as objectives of SCM implementation. The purpose of this paper, however, is to highlight the role of marketing in the implementation of SCM. The approach taken in this paper is to review several concepts that have received considerable attention (Barksdale and Darden, 1971; Borch, 1957; Churchill and Peter, 1995; Gronroos, 1995; Gundlach and Murphy, 1993; Jaworski and Kohli, 1993; Kohli and Jaworski, 1990; Kotler, 1972; McKitterick, 1957; McNamara, 1972) in the discipline of marketing - the marketing concept, a market orientation, and relationship marketing - to explore the key linkages between marketing management and SCM.
First, definitions of marketing and its core concepts are reviewed. Second, the marketing concept, a market orientation, and their influences on the management of a firm and a supply chain are described. Third, an explanation of how relationship marketing affects SCM, as well as the management of a firm, is provided. Fourth, an integrated framework of the relationships between the marketing concept, a market orientation, relationship marketing, and SCM is proposed. Fifth, the implications of this framework are presented. Research propositions are provided throughout.
Definition of marketing
Kotler (1972) proposed the essence of marketing is the transaction (exchange of values actually made between parties) and, thus, marketing is specifically concerned with how transactions are created, stimulated, facilitated, and valued. According to the American Marketing Association (1985), marketing is "the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals". In other words, the objective of marketing is creating exchanges, and the output of it is customer satisfaction.
Kotler (1997) and Churchill and Peter (1995) defined an exchange as a process in which two or more parties voluntarily provide something of value to each other. According to Kotler (1997), a transaction takes place when an agreement is reached, whereas exchange is the process to produce an agreement. Exchange takes place within a market, defined as a collection of buyers and sellers that interact (Pindyck and Rubinfeld, 1992). In this context, Churchill and Peter (1995) proposed various parties are involved in the marketing effort: firms that produce goods or services, resellers of goods and services (such as stores), and customers or clients.
The marketing concept and a market orientation
The marketing concept is essentially a business philosophy (cf. Barksdale and Darden, 1971; McNamara, 1972), and the philosophical foundation of a market orientation (Jaworski and Kohli, 1993). Kohli and Jaworski (1990) conceptualized a market orientation as the implementation of the marketing concept.
The marketing concept
Based on previous conceptualizations of market orientation offered in Table I, Kohli and Jaworski (1990) argued the marketing concept consists of three pillars:
(1) customer focus;
(2) coordinated marketing; and
The marketing concept has strong influences on the management of a firm, inter-firm relationships, and the supply chain. The marketing concept, as a business philosophy, guides firms to look for customer satisfaction at a profit in a coordinated manner. Webster (1992) proposed that marketing as a culture means a basic set of values and beliefs about the importance of the customer that guide the firm:
P1: The marketing concept provides the philosophical foundation of individuals' activities or behaviors (called a market orientation) within a firm.
Cravens (1995) argued the customer is at the center of the relationship-marketing paradigm. In other words:
P2: The marketing concept, as a business philosophy, guides a firm's behaviors (called relationship marketing) to develop, maintain, and enhance inter-firm relationships to satisfy customers.
The marketing concept is also a necessary component for implementing SCM. Authors (e.g. Cooper et al., 1997a; Lambert et al., 1996) suggested one of the components of SCM implementation is partners with compatible corporate philosophies, at least for key relationships. The marketing concept (i.e. the philosophical foundation of a firm's activities) should be the compatible supply chain partners' philosophy, so all partners in the supply chain strive to satisfy customers at a profit through interfunctional coordination within and among the supply chain partners. Thus:
P3: Under compatible marketing philosophies, supply chain partners become more willing to be efficient (i.e. cost reduction) and effective (i.e. customer service) toward a common goal (i.e., customer satisfaction at a profit).
A market orientation
Based on definitions provided in Table II, Slater and Narver (1994) argued their definition of a market orientation is commensurable with Kohli and Jaworski (1990) and Jaworski and Kohli (1993) because the measures of market orientation consist of three behavioral components, each of which involves market intelligence generation, dissemination, and managerial action. Regardless of Slater and Narver's (1994) commensurability argument, it is proposed that the different conceptualizations of a market orientation as a culture and a set of behaviors are not identical, and the definition of a market orientation as an organizational culture has a critical weakness because it contains circular logic. Deshpande and Webster (1989) defined the marketing concept as referring to a distinct organizational culture, a fundamental shared set of beliefs and values that put the customer at the center of the firm's thinking about strategy and operations. Accepting Deshpande and Webster's (1989) definition of the marketing concept as an organizational culture, Deshpande et al. (1993) and Slater and Narver (1995) interpreted a market orientation also as an organizational culture. As such, if we take the conceptualization of a market orientation as an organizational culture, we would conceptualize the marketing concept as synonymous to market orientation. Thus, we propose to adopt Kohli and Jaworski's (1990) conceptualization of market orientation as the implementation of the marketing concept (culture).
A conceptual model of the impacts of a market orientation on a firm, inter-firm relationships, and a supply chain is presented in Figure 1.
Management of a firm. A market orientation provides a unifying focus for the efforts and projects of individuals and departments within a firm (Kohli and Jaworski, 1990). Slater and Narver (1995) argued a market orientation is valuable because it focuses the firm on:
- continuously collecting information about target-customers' needs and competitors' capabilities; and
- using this information continuously to create superior customer value.
A market orientation encourages interfunctional coordination that is a firm's coordinated efforts, involving more than the marketing department, to create superior value for buyers (cf. Narver and Slater, 1990; Day, 1994). This is so because customer satisfaction, the ultimate goal of a market orientation and the evaluation of the created customer value by a firm, is affected by many factors that lie either inside or outside the scope of the marketing department (Kotler, 1997). For example, delivery reliability, invoice accuracy, invoice clarity, and personnel are major factors that determine customer satisfaction.
A market orientation requires a firm to redefine the responsibilities of each function within a firm, especially those of marketing. Narver and Slater (1990) argued a seller's creation of value for buyers is analogous to a symphony orchestra in which the contribution of each subgroup is tailored and integrated by a conductor. Thus, in addition to traditional marketing activities, marketing should perform a guiding and coordinating role to make sure the rest of the company delivers on customers' expectations (Kotler, 1997). In other words:
P4: A market orientation becomes instrumental in coordinating the activities of all departments, with the marketing function playing a pivotal role in the success of the firm because everyone is involved in marketing activities.
The responsibilities of functions, other than marketing, are also broadly redefined so that everyone within the firm becomes a marketer either on a full-time or part-time basis (Gummensson, 1996) - because any individual in any function in a firm can potentially contribute to value creation for customers (Porter, 1985; Webster, 1988).
As inter-functionally coordinated actions prevail within a firm and the responsibilities of each function are redefined, the boundaries between each function become blurred. Since the marketing concept is concerned with company-wide efforts (i.e. a market orientation), marketing is not interpreted as a separate management function but rather the whole business as seen from the customer's point of view (Drucker, 1954; Levitt, 1960; McKitterick, 1957). A form of interfunctional coordination is the organization of cross-functional teams across functional silos with experts from different functional areas working together toward common goals (cf. Kahn and Mentzer, 1998). At the extreme, the marketing function could disappear as a distinct management function and specialty (Day, 1992). Thus, Kotler (1997) proposed a firm should consider managing a set of fundamental business processes, rather than independent functional departments for more efficient and effective response to fulfill customer satisfaction. Given the discussion above:
P5: A market orientation forces a firm to restructure its organizational system.
Jaworski and Kohli (1993) found a firm's financial performance (return on investment (ROI) and return on assets (ROA)) and employee-related performance (organizational commitment and esprit de corps) are positively related to a firm's degree of market orientation. Narver and Slater (1990) and Slater and Narver (1994) also found a positive relationship between a firm's market orientation and its sales growth and new product success. Deshpande et al. (1993) found a positive relationship between a firm's market orientation and its perceived performance in terms of profitability, firm size, market share, and growth rate relative to competitors. As such:
P6: A market orientation positively contributes to a firm's business performance.
Management of inter-firm relationships. The influences of a market orientation do not stop within the boundaries of the firm, but expand to inter-firm relationships with consumers, customers, suppliers, and distributors. Thus, a market orientation provides an environment in which relationship marketing is nurtured.
Nurturing relationship marketing through a market orientation starts with developing commitment, trust, and cooperative norms and reduced conflict between firms. Siguaw et al. (1998) found a supplier's market orientation affects its distributor's commitment to the relationship and the distributor's market orientation has a direct effect on its trust and perception of cooperative norms. Moorman et al. (1993) defined commitment as an enduring desire to maintain a valued relationship. Because a market orientation requires a supplier to devote considerable resources to satisfying distributors' needs, the distributor commits to maintain the relationship with such a devoted supplier (Siguaw et al., 1998).
Trust is a willingness to rely on an exchange partner in whom one has confidence (Moorman et al., 1993). Siguaw et al. (1998) argued a supplier's market orientation contributes to distributor trust through:
- voluntary information and advantage sharing with the distributor;
- favorable motives and intentions passed on to the distributor; and
- open communications and responsiveness to customer needs.
Cooperative norms reflect the belief that both parties in a relationship must combine their efforts and cooperate to be successful (Cannon and Perreault, 1997). Macneil (1978) argued cooperative norms function as a conflict-resolving mechanism.
If a supplier is market oriented and working to satisfy a distributor's needs, the distributor is likely to perceive cooperative norms in the dyadic relationship (both parties are working toward the mutual goal of need satisfaction) (Siguaw et al., 1998).
Conflict is defined as the level of disagreement in the channel relationship that impedes, blocks, or frustrates another firm's goal pursuit (Brown and Day, 1981; Thomas, 1976). Dwyer et al. (1987) and Kumar (1996) proposed firms should select partners who possess similar values (e.g. a market orientation) to reduce conflict potential. According to several authors (e.g. Berry, 1995; Sheth and Parvatiyar, 1995; Gronroos, 1995), relationship variables such as commitment, trust, cooperative norms, and reduced conflict are prerequisites of relationship marketing. Hence:
P7: A market orientation influences the implementation of relationship marketing by helping firms build commitment, trust, cooperative norms, and reduced conflict, all of which are prerequisites of relationship marketing.
A market orientation - by its nature - requires close inter-firm relationships that are the sources of information outside the firm. Kohli and Jaworski (1990) claimed the market, which is the unit of analysis of a market orientation, includes end users and distributors as well as exogenous forces that affect their needs and preferences. Therefore, a firm should have intimate relationships with its customers to closely monitor their current and future needs and to make sure that customers obtain what they want from the firm. In addition, the firm should have close relationships with distributors, suppliers, and any other participants in the market to identify influences of those market participants on customers' needs and preferences.
Day (1991) claimed that organizational learning needs close and extensive relationships with its customers, suppliers, and other key constituencies. Other researchers (e.g. Kanter, 1989; Webster, 1992) also proposed learning from others, includes benchmarking, forming joint ventures, networking, developing strategic alliances, and working with lead customers to recognize strong needs before the rest of the market and to find solutions to those needs. Organizational learning consists of information acquisition, dissemination, and shared interpretation of information across a firm (Sinkula, 1994). According to Slater and Narver (1995), a market orientation and organizational learning are inseparable.
Organizational learning does not stop within the boundary of a firm, but expands outside the firm. Lei et al. (1997) stated: "All strategic alliances may be thought of as co-alignments between two or more firms in which the partners seek to learn and acquire from each other, products, skills, technologies, and knowledge that are not available to other competitors." As such, organizational learning is practiced within a firm and, then, expanded outside a firm. Thus, organizational learning cannot be separated from close relationships with other firms and, therefore:
P8: A market orientation directs a firm to move toward relationship marketing to deal with the increasing complexity of building and learning new sources of competitive advantage beyond the firm.
Supply chain management. A market orientation plays a pivotal role in implementing SCM. First of all, a firm's market orientation produces and stores valuable market information that is needed in the process of building, maintaining, and enhancing supply chain relationships. For example, since a firm has information about customers, suppliers, competitors, sociopolitical environments, and technological trends, it could answer such questions as which supply chain best serves its customers' needs, with which firms it should work to implement SCM, what should be the objectives to be pursued in SCM, and so on. In addition, Cooper et al. (1997a) suggested one of the components of the implementation of SCM is information sharing through two-way communication between partners within a supply chain. A market orientation should indirectly contribute to information sharing within a supply chain because market information obtained by individual partners could serve as the basis of shared information among the supply chain partners.
Information sharing among the partners in a supply chain may simply be part of practicing organizational learning within the boundary of a supply chain rather than the boundaries of individual firms and dyadic inter-firm relationships. Brown and Hendry (1997) claimed two major ongoing changes in SCM practices are (organizational) learning through the supply chain and working better with suppliers. When combined, these changes help partners within a supply chain achieve better two-way relationships with suppliers. With improved information exchange, partners are better able to utilize supplier creativity and knowledge, improve processes (particularly for cost savings and performance benefits in the supply chain), and encourage individual learning within an established supply chain context.
Finally, a market orientation facilitates relationship marketing that, in turn, could promote the implementation of SCM indirectly vis-a-vis relationship marketing. Cooper et al. (1997a) indicated building and maintaining close long-term relationships among partners beyond the life of a contract that encourage inter-firm coordination are needed for the implementation of SCM. Gundlach and Murphy (1993), Morgan and Hunt (1994) and Gruen (1997) suggested relationship marketing depends on inter-firm cooperation that focuses on the systematic development of ongoing, collaborative business relationships. Therefore, the implementation of relationship marketing promotes inter-firm cooperation, in addition to close long-term relationships among the supply chain members. Thus, the role of market orientation in SCM:
P9: A market orientation positively and indirectly influences firms to implement SCM.
In summary, the marketing concept is conceptualized as a business philosophy, guiding a firm toward customer satisfaction at a profit, and a market orientation is the implementation of that philosophy, forcing the firm to generate, disseminate, and respond to market information. The marketing concept, as a business philosophy, not only provides the philosophical foundation of a market orientation, but also plays an important role in the management of a firm, inter-firm relationships, and the implementation of SCM. A market orientation also impacts the management of a firm, inter-firm relationships, and a supply chain. That is, a market orientation leads a firm to focus on market information generation, dissemination, and responsiveness to satisfy customers, coordinate its marketing efforts, redefine the responsibilities of each function, restructure its organizational system, and achieve superior business performance. At the same time, a market orientation provides an environment which encourages a firm in its efforts to develop, maintain, and enhance close relationships with other firms, obtain organizational learning from other firms, and build commitment, trust, and cooperative norms in relationships with other firms. A market orientation is performed both inside and outside a firm to recognize and respond to customers' needs, and obtain experiences, products, skills, technologies, and knowledge from outside the firm that are not available to other competitors. Finally, a market orientation promotes the implementation of SCM. For example, the input of market information has indirect, positive impacts on the implementation of SCM. In addition, information sharing and organizational learning, both of which are components of SCM, are the broad applications of a market orientation beyond the boundary of an individual firm. A close long-term inter-firm relationship, which is reinforced by a market orientation, is also a component of the implementation of SCM. As such, a market orientation has numerous positive impacts on SCM implementation.
According to Gundlach and Murphy (1993), exchange - which is at the center of marketing - takes various forms, depending on its location in the exchange continuum. At one end of the continuum, transactional exchange involves single, short-term exchange events encompassing a distinct beginning and ending (Gundlach and Murphy, 1993). Goldberg (1976, p. 49) described this form as a transaction in which "no duties exist between the parties prior to formation (of the exchange), and in which the duties of the parties are determined completely up-front". At the other end of the continuum, relational exchange involves transactions linked together over an extended timeframe (Gundlach and Murphy, 1993). Gundlach and Murphy (1993) explained that relational exchanges trace back to previous interactions and reflect an ongoing process. The close and long-term relationships established between certain suppliers and their industrial customers (e.g. automobile manufacturers and their suppliers), relationship banking, frequent-stay programs at hotels, and priority acceptance for alumni family members at universities, are examples of relational exchanges (Gundlach and Murphy, 1993). Marketing strategies differ along the continuum of exchange from relationship-oriented strategies at one end to transaction-oriented strategies at the other (Gronroos, 1995). Macneil's (1980) relational exchange theory suggests building personal trust relationships and developing social norms are key characteristics of interfirm relationships. In addition, Gundlach and Murphy (1993) proposed that the characteristics of relational strategy include an emphasis on purposeful cooperation, extended planning, and the establishment of complex webs of operational and social interdependence.
Since marketing deals with various forms of exchange - including discrete and relational - and involves more than buyer-seller relationships (see Table III), Morgan and Hunt's (1994) definition of relationship marketing as all marketing activities directed toward establishing, developing, and maintaining successful relational exchanges is adopted for this discussion. Relationship marketing goes beyond repeat purchase behavior and inducement (Sheth and Parvatiyar, 1995). In the same context, Webster (1992) proposed repeated transactions are only a precursor to relationships, and customers expect simply convenience and cost efficiency from repeated transactions. Firms in long-term relationships do not always put relationship marketing into practice. For example, in industrial markets, buyer-seller relationships have typically involved relatively long-term contractual commitments, but even here the relationships have often been arm's-length and adversarial, pitting the customer against the vendor in a battle focused on low price (Webster, 1992).
Relationship marketing goes beyond transactional exchanges, repeated purchases, and even adversarial, long-term relationships. Competitive forces in the global marketplace of the 1980s compelled many firms to move significantly along the continuum from arm's-length relationships with suppliers to much stronger partnerships characterized by much greater interdependence (Webster, 1992). As a result, relationship marketing today pursues buyer-seller partnerships, strategic alliances, joint ventures, and networks, all of which assume mutual, total-dependence relationships.
There are some prerequisites for relationship marketing. First, Berry (1995) proposed relationship marketing is built on the foundation of trust, defined by Moorman et al. (1993) as "a willingness to rely on an exchange partner in whom one has confidence". Berry and Parasuraman (1991) also contend effective services marketing depends on trust because customers typically must buy a service before experiencing it.
Second, mutual benefit to participating parties is essential for strong relationships (Berry, 1995). Both parties must perceive greater benefit from the relationship than could be achieved without it.
Third, financial benefits and/or competitive advantage are earned by a firm only if customers are willing and able to engage in relationship patronage (Sheth and Parvatiyar, 1995). In other words, ongoing and cooperative relationships reflect commitment made by the customer to continue patronizing the particular firm (Gronroos, 1990; Shani and Chalasani, 1992). "Commitment to the relationship is defined as an enduring desire to maintain a valued relationship" (Moorman et al., 1992, p. 316).
Fourth, Bitner (1995) suggested the need of service guarantees and two-way communication are vehicles by which promises can be effectively communicated and customers can be informed as to what they can expect and how it will be delivered. This is important because the foundation for maintaining service relationships is the fulfillment of promises made to customers (Gronroos, 1990). Two-way communication is also important because a firm should monitor customer satisfaction through direct communication channels with its customer bases, since ad hoc communication such as surveys - which are commonly used in transaction-based marketing - provide only a proxy indication of satisfaction (Gronroos, 1995).
Fifth, relationship marketing requires cooperation between marketing and operations (Gronroos, 1995). For example, all functions interacting with a customer have to reinforce the quality perception by the customer, since relationship marketing involves ongoing relationships with customers.
Finally, internal marketing is needed to persuade other functions to be prepared to assume the role of part-time marketers (Gronroos, 1995). This is important because, in order for employees and service systems to deliver on the promises made, they must have the skills, abilities, tools, and motivation to deliver (Bitner, 1995).
Management of a firm
There are seven outputs of relationship marketing presented in Figure 2 that impact the management of individual firms. First, interfunctional coordination should be reinforced because the decision to either make or break a relationship with other firms is contingent on the role of other processes (e.g. production and delivery) as well as marketing (Gronroos, 1995). Webster (1992) also claimed a common focus on customer value and relationship management might result in much stronger coordination of the procurement, sales, and marketing functions in a manner analogous to the merchandising function in retailing firms (i.e. merchandising searches for merchandise and tests its quality based on direct input from sales and marketing).
Second, relationship marketing drives a firm to redefine the responsibilities of each function. The role of marketing in relationship marketing strategy is expanded from capturing new customers to getting and keeping customers (Gronroos, 1995). Thus, marketing should not be restricted to marketing mix activities that are focused on the manipulation of customers, but should place increased emphasis on relationship marketing skills. At the same time, the fundamental responsibility of marketing is to be an expert on the customer and keep the rest of the network organization informed about the customer (Webster, 1992). Gummensson (1987) used the phrase "part-time marketer" to stress the critical marketing role performed by customer-contact employees other than the marketing department, and argued that part-time marketers are at the heart of relationship marketing.
Third, relationship marketing requires a firm to restructure the organizational system into a boundary-less organization. In other words, the results of reinforced efforts at interfunctional coordination and the role shifts of each function should be consistent with the two major trends of elimination of boundaries between management functions within organizations and a blurring of the boundaries between the firm and its market environment (Webster, 1992). In brief, traditional ways of organizing the marketing function and thinking about the purpose of marketing activity must be reexamined, with the focus on long-term customer relationships, partnerships, and strategic alliances (Webster, 1992).
Fourth, relationship marketing improves a firm's marketing effectiveness because:
- as a firm is dedicated to customers with long-term commitment, it can appropriately direct marketing resources toward those that provide the greatest value for a selective set of customers; and
- relationship marketing promotes early involvement of customers so that customers provide valuable information to the firm (Sheth and Parvatiyar, 1995).
Fifth, relationship marketing brings resources from outside the firm to satisfy customer needs. In the 1990s, customers became more demanding and competition became more intense (Cravens, 1995). "As firms globalize, they realize that no matter how large they are, they lack the total resources and requisites for success. Viewing the complete supply chain for producing value, they recognize the necessity of partnering with other organizations" (Kotler, 1997). As such, relationship marketing that requires a firm to team up with other firms has become a must to satisfy customers in today's market environment.
Sixth, customers were motivated to build and maintain relationships with suppliers to reduce risk (Bauer, 1960; Taylor, 1974). Perceived risk is associated with the uncertainty and magnitude of outcomes (Sheth and Parvatiyar, 1995). In this context, Bitner (1995) argued having a long-term relationship with a service provider can reduce consumer stress as the relationship becomes predictable, initial problems are solved, special needs are accommodated, and the consumer learns what to expect. This is particularly so when customers need continuous and periodic delivery of services that are important, variable in quality, and/or complex (Berry, 1995; Bitner, 1995). In other words, customers become loyal to the service provider for predictability and comfort as well as service quality itself (Bitner, 1995).
The final impact of relationship marketing on a firm is financial benefits such as increased revenue and lower marketing costs (Berry, 1995). For example, Reichheld and Sasser (1990) found that lowering the customer defection rate from 20 per cent to 10 per cent doubled the longevity of the average customer's relationship from five years to ten, and increased the net present value of the cumulative profit streams for a customer from $135 to $300. In addition, a firm can cut costs by reducing some of the wasteful marketing practices associated with competitive mass marketing, and by letting the consumer do such marketer jobs as processing orders, designing products, and managing information directed to the firm (Sheth and Parvatiyar, 1995).
These impacts can be summarized in the following proposition:
P10: Relationship marketing leads to the following impacts on individual firms:
-- (a) increased interfunctional coordination;
-- (b) redefined functional responsibilities;
-- (c) a boundary-less organization;
-- (d) improved marketing effectiveness;
-- (e) increased external resources to satisfy customer needs;
-- (f) increased supplier relationships to reduce risk; and
-- (g) increased revenue and lower marketing costs.
Effective SCM requires partners to build and maintain close long-term relationships (Ellram and Cooper, 1990; Cooper et al., 1997a). Ellram and Cooper (1990) contended a successful supply chain relies on forming strategic partnerships, which expect long-term, inter-firm relationships with trading partners. In this context, SCM puts more emphasis on a partnership approach, or relationship orientation (Morris and Imrie, 1992). In the end, those inter-organizational relationships tie firms to each other and may tie their success to the supply chain as a whole (Cooper et al., 1997b). Ultimately, Webster (1988) expected the emergence of a network of strategic partnerships among designers, technology providers, manufacturers, distributors, and information specialists, which would fit the need of functional integration within a supply chain.
Relationship marketing - through close inter-firm relationships such as partnerships, strategic alliances, and joint ventures - should increase inter-firm cooperation, one of the components of the implementation of SCM, including joint inventory and cost reduction, and joint planning (Cooper et al., 1997a). In relationship marketing strategy, buyer-seller partnerships, strategic alliances, joint ventures, and networks are formed, all of which assume mutual, inter-dependent relationships governed by cooperative norms. The cooperation of partners involved in these various close inter-organizational forms, in turn, help partners achieve a high level of customer satisfaction in a rapidly changing business environment (Cravens, 1995). Cooper et al. (1997a) posited the implementation of SCM involves reducing channel inventory, increasing channel cost efficiencies, maintaining long-term relationships, encouraging inter-firm cooperation, and sharing risks and rewards among the partners:
P11: Relationship marketing helps achieve the objectives of SCM such as efficiency (i.e. cost reduction) and effectiveness (i.e. customer service) through increased cooperation in close long-term inter-firm relationships among supply chain partners.
An integrative framework
Figure 3 shows the integrative conceptual framework of this paper. As detailed earlier, the marketing concept is implemented in the form of a market orientation that, in turn, promotes the emergence of relationship marketing and the implementation of SCM. A market orientation helps the implementation of SCM by providing valuable market information on customers, competitors, potential supply chain partners, and market environments; suggesting a model of information sharing and organizational learning; and augmenting the practice of relationship marketing that contributes to the success of SCM.
Figure 3, and the antecedent justification that precedes it in this paper, lead to the following four ombudsman propositions:
- (1) Ombudsman Proposition I: the marketing concept has direct influences on the management of an individual firm, inter-firm relationships, and a supply chain by:
- providing the philosophical foundation of a market orientation within a firm (P1);
- providing the philosophical foundation of relationship marketing between firms to develop, maintain, and enhance inter-firm relationships (P2); and
- providing a compatible business philosophy for implementing SCM within a supply chain.
- (2) Ombudsman Proposition II: a market orientation has direct influences on the management of a firm, on relationship marketing and, ultimately, on SCM by:
- providing managerial focus (i.e. customer satisfaction) to the partner firms;
- increasing inter-functional coordination;
- redefining the responsibilities of each function;
- restructuring the partner firms' organizational system by redefining the responsibilities of each function and promoting inter-functional coordination (P5);
- contributing to superior business performance of the partner firms (P6);
- increasing trust, commitment, and cooperative norms to the partner firms involved in inter-firm relationships that are prerequisites for relationship marketing (P7);
- requiring relationship marketing to build, maintain, and enhance inter-firm relationships with the partner firms;
- encouraging organizational learning on the basis of well-implemented relationship marketing;
- supplying valuable market information that could be used before and during the implementation of SCM;
- expanding the application of organizational learning activities to SCM so that partner firms share information and experience within the supply chain; and
- advancing relationship marketing that, in turn, helps implement SCM.
- (3) Ombudsman Proposition III: relationship marketing impacts SCM as well as the management of individual firms by:
- enhancing inter-functional coordination to satisfy customers with company-wide efforts (P10a);
- redefining the responsibilities of each function of a firm (P10b);
- restructuring the organizational system;
- improving marketing effectiveness of the partner firms by proper marketing resource allocation to the other partners and involvement of the partners in the marketing process (P10d);
- bringing resources outside the firm to satisfy customers who become more demanding in the competitive market (P10e);
- reducing risks in the market (P10f);
- providing financial benefits such as increased revenue and reduced costs (P10g);
- helping build, maintain, and enhance long-term inter-firm relationships such as partnerships, strategic alliances, joint ventures, and networks that fit into the goal of SCM; and
- allowing inter-firm coordination that is required for the implementation of SCM initiatives such as joint inventory and cost reduction, and joint planning.
- (4) Ombudsman Proposition IV: with the help of the marketing concept, a market orientation, and relationship marketing, SCM achieves differential advantage for supply chain and its partners by reducing investments and improving customer service.
The marketing concept, market orientation, relationship marketing, and SCM are not separate. Rather they are inextricably intertwined. At the starting point of the model in Figure 3, the marketing concept promotes individual firms' coordinated activities inside and outside the firms to accomplish customer satisfaction at a profit.
A market orientation, which is the implementation of the marketing concept, requires firms to generate, disseminate, and respond to market information. Organizational learning, a major component of a market orientation, goes beyond the boundaries of a firm since there exist a multitude of learning resources and skills to fulfill customers' demand in an efficient and effective way. Thus, a market orientation not only promotes the emergence of relationship marketing but also provides the reasons for it to exist.
Relationship marketing aims at establishing, maintaining, and enhancing either dyadic relationships or multiple relationships in a supply chain to create better customer value. Thus, the role of marketing through the marketing concept, a market orientation, and relationship marketing is essential for the success of SCM.
The main purpose of this paper was to outline the role of marketing in SCM. Specifically, this paper suggests the cause-and-effect relationships among several important concepts in business research and practice: the marketing concept, a market orientation, relationship marketing, and SCM.
Mentzer and Kahn (1995) suggested an iterative process of theory development, moving forward from idea generation through literature review and observation, to substantive justification, to theory formation, to theory testing using hypotheses and constructs and, finally, to the analysis of the empirical test. According to the Mentzer and Kahn's framework, this paper takes only the first steps in this process and, thus, more work to empirically test the detailed cause-and-effect relationships among the constructs and any potential moderating and/or mediating constructs in the suggested model are in order.
An interesting avenue for future research that emanates from this framework and the work of others is the exploration of the "dark side" of relationships. Grayson and Amber (1999) and Pawson et al. (1998) raised the legitimate issue that although relationship marketing (relationalism) is a new paradigm in inter-firm relationships, it still lacks empirical studies to investigate its nature and the relationships among different relational constructs. Grayson and Amber (1999) found that trust has a decreasing association with continuous advertising agency use and called this relationship the dark side of relationship marketing. However, as Grayson and Amber stated:"... though our study supports the general proposition that there is a dark side to long-term relationships, the exact nature of these relational dynamics remains elusive (p. 139)."
As Grayson and Amber pointed out, their study is limited to one specific industry (long-term use of advertising agencies) that provides their clients high levels of creativity that might deteriorate as an advertising agency stays with a client for a long time. Reddy and Czepiel (1999) found in a business-to-business setting that the likelihood of using bank's services in the future is high if the client firm has a long-term relationship with the focal bank. In addition, Grayson and Amber found positive links between:
- trust and involvement;
- trust and interaction;
- trust, rising expectations, and interactions;
- trust, lower opportunism/loss objectivity, and interaction; and
- trust, rising expectations, and interactions.
Rather than discounting the framework presented in Figure 1, such findings support our argument that trust is a prerequisite of relationship marketing which represents cooperation (e.g. joint marketing programs, cooperative management of logistics, inventory/process, joint R&D, etc.), because cooperation requires greater levels of involvement and interactions between partners.
Pawson et al. (1998) also found a dark side to relationship marketing, suggesting "perceptions of environmental uncertainty reduce the motivations for relational governance (i.e. relationship marketing) instead of strengthening them". Pawson et al. also argued relationalism mitigates perceptions of environmental uncertainty so that "relationalism can, indeed, lull firms into a false sense of security". Finally, Pawson et al. argued very little is known about the consequences of relationalism. Contrary to Pawson et al., however, Naidu et al. (1999) found intensity of competition (a kind of uncertainty) has a positive relationship with relationship marketing programs that, in turn, bring high performance of firms. As such, it seems studies on relationship marketing at the current stage are equivocal at best and, thus, there is a need for further theory development of relationship marketing such as presented in this paper.
Specifically, future research needs to address the propositions put forward in this paper to address these equivocal results. Case studies, surveys, and qualitative supply chain analyses should be able to plumb the casual relationships put forward in this paper. The result will be a more definitive understanding of the role of marketing in SCM.
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Caption: Table I.; Conceptualizations of the marketing concept; Table II.; Conceptualizations of a market orientation; Figure 1.; The impacts of a market orientation; Table III.; Conceptualizations of relationship marketing; Figure 2.; The impacts of relationship marketing; Figure 3.; An integrative model of the marketing concept, a market orientation, relationship marketing, and supply chain management
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