Antecedents and Consequences of Moral Ties in Close Marketing Relationships

ABSTRACT - This paper is dedicated to the study of moral ties that might arise in the relationship between a consumer and a service firm. Fundamentally, we argue that moral ties arise due to the norm of reciprocity governing many aspects of interpersonal interaction, and we suggest that this might very well also adhere to relationships in consumer markets. Despite the acknowledged role of the norm of reciprocity, it has been subject to limited research in previous research on service loyalty. We argue that service relationships entail several facilitators of moral ties. We derive a model that explains how moral ties might mediate effects of service satisfaction and sales rep’s benevolence on customer loyalty. The model is tested in close service relationships between bank clients and their dedicated bank-reps. The results indicate the importance of moral ties in monitoring and developing lasting service relationships. Finally, we discuss implications, limitations, and suggestions for future research.

Citation:

Kare Sandvik, Bendik M. Samuelsen, and Havard Hansen (2002) ,"Antecedents and Consequences of Moral Ties in Close Marketing Relationships", in AP - Asia Pacific Advances in Consumer Research Volume 5, eds. Ramizwick and Tu Ping, Valdosta, GA : Association for Consumer Research, Pages: 186-193.

Asia Pacific Advances in Consumer Research Volume 5, 2002      Pages 186-193

ANTECEDENTS AND CONSEQUENCES OF MORAL TIES IN CLOSE MARKETING RELATIONSHIPS

Kare Sandvik, Buskerud University College, Norway

Bendik M. Samuelsen, Norwegian School of Management BI, Norway

Havard Hansen, Norwegian School of Management BI, Norway

ABSTRACT -

This paper is dedicated to the study of moral ties that might arise in the relationship between a consumer and a service firm. Fundamentally, we argue that moral ties arise due to the norm of reciprocity governing many aspects of interpersonal interaction, and we suggest that this might very well also adhere to relationships in consumer markets. Despite the acknowledged role of the norm of reciprocity, it has been subject to limited research in previous research on service loyalty. We argue that service relationships entail several facilitators of moral ties. We derive a model that explains how moral ties might mediate effects of service satisfaction and sales rep’s benevolence on customer loyalty. The model is tested in close service relationships between bank clients and their dedicated bank-reps. The results indicate the importance of moral ties in monitoring and developing lasting service relationships. Finally, we discuss implications, limitations, and suggestions for future research.

INTRODUCTION

A long proposed strategy for service marketers to gain higher customer loyalty has been to focus on the development of close relationships between customers and front line personnel (Berry and Parasuraman 1991). By tying these two entities close together, the customer develop ties to the firm that should restrain him or her from leaving unless other obvious reasons for leaving is present. The expected mechanisms working within such close relationships are the same as one would find in interpersonal relationships in general. For example, Granovetter (1973) suggest that ties or bonds between individuals grow out of, amongst other things, the number of interactions and emotional intensity. These characteristics also apply to customer-firm relationships, and Price and Arnould (1999) found that both service providers and clients share a general sense of the content of what they label commercial friendships. Affection, intimacy, reciprocity and loyalty constitute the content of these friendships. This study is dedicated to one particular constituent of such relationships: the role of reciprocity, or what we will label "moral ties". Studies have found the social aspects of a relationship to sometimes be even more important than occasional price breaks or special service (Gwinner, Gremler, and Bitner 1998). Such close relationships between a service employee and a consumer would correspond to a service relationship according to the classification schema offered by Gutek (1997). Characterized by consumers being served by the same employee in the firm repeatedly, service relationships possess the kind of customer-employee interactions where the ties suggested by Berry and Parasuraman (1991) are most likely to develop. The strategy of dedicating a particular service rep to one customer, as for example a "personal bank-rep", may serve as an example of a relationship strategy where ties might develop. The purpose of this research is to examine the degree to which moral ties in service relationships influences price tolerance among consumers, and also their propensity to behave as advocates for the service firm in the future. In addition, we examine the importance of employee benevolence and customers’ satisfaction with the service delivery in developing such moral ties The paper continues with a brief elaboration of the concept of moral ties in service relationships. Our conceptual model is then presented along with its specific research hypotheses. The model is empirically tested and the results discussed, before the paper closes with an elaboration on implications and pathways for future research.

THEORETICAL MODEL

Moral ties

Consistent with previous research, we conceive of moral ties as a perceived obligation to perform an action because others expect you to do so (Gundlach, Achrol and Mentzer 1995). For example, within social psychology, the norm of reciprocity (Gouldner 1960) suggests that someone who receives a friendly act or favor will feel obliged to the return this in the future. In other words, receiving a favor will result in goodwill towards the giver, or even pledges of reciprocity. Previous research has found such moral ties to also operate within marketing relationships. Kumar, Hibbard and Stern (1994) discuss how moral commitments grow out of reciprocal expectancies of future behavior. Selnes and Hansen (2001) argue that moral obligations are one important dimension of the social bonds developing between exchange partners. Moreover, Gwinner, Gremler and Bitner (1998), reported how customers received extra-services free of charge becaus they were good customers. Such benefits are likely to create a sense of obligation to reciprocate, and this sense of obligation is the core of our definition of a moral tie.

Antecedents to moral ties

Basically, moral ties grow out of repeated interactions between individuals (Granovetter 1973). However, we suggest that both satisfaction with the outcome of the service relationship and perceived service-provider benevolence directly influence the level of moral ties perceived by the customer.

First, we argue that satisfaction with the relationship outcome will increase the level of ties between the partners. When consumers evaluate the performance of service products, attribution theory suggests that the credit and blame will be allocated to the employee and the firm interchangeably (Folkes 1988; Deighton 1992). Even if the service received is intrinsically equal to what can be obtained elsewhere, trivial aspects like a smiling welcome, an empathetic orientation towards the customer as an individual, and honesty in all facets of the service production are likely to increase the level of satisfaction among consumers. Stated differentlyBservice interactions are first and foremost social interactions (McCallum and Harris 1985), and the more satisfying such interactions are, the more will the customer be tied to the partner (Mittal and Lazar 1996). Generally, in interpersonal relationships such as the ones addressed here, these acts on behalf of the service representative suggest that a moral obligation to reciprocate the satisfying experiences will occur. Specifically, if the customer perceives the service representative as an allied friend, this should invoke the norm of reciprocity.

Second, we find reason to believe that benevolence associated with the service employee will strengthen the moral ties as perceived by the customer. Acting in a benevolent manner implies that the partners seek the actions and the behaviors that are supportive for the other (Ganesan 1994). Johnson (1982) argues that moral ties often take the form of an implicit contract between individuals, and that the norm of reciprocity usually implies that such a contract develops when one partner acts benevolent. In close marketing relationships, the seller will often signal his benevolence towards the other part by providing services that goes beyond what the explicit service product includes. Being the customers advocate in the firm and showing flexibility when the customer has wants and needs beyond the normal rules of business are both examples of how benevolence are displayed in everyday service transactions. However, we also find reason to argue that the customer is capable of determining when the employee performs a standard procedure, and when s/he is going further than the standard operating procedure to please the customer. These latter instances will directly influence the customers’ moral ties to the relationship partner.

As a conclusion of the preceding paragraphs, we present our first two hypotheses:

H1: Satisfaction has a positive effect on moral ties.

H2: Benevolence has a positive effect on moral ties.

Consequences of moral ties

When customers feel they are morally tied to a service employee, we expect this to result in behaviors that are positive for the service firm. According to Berry and Parasuraman (1991), such social bonds will increase customer loyalty. We will argue that loyal behavior for the means of showing reciprocation include price tolerance and word-of-mouth (WOM). A strong sign of reciprocity will be a) to accept to pay a price premium (an economic act of reciprocity), andb) willingness to be the service firm’s advocate (a more altruistic, self-disclosing act of reciprocity).

First, moral ties are perceived as a pledge to repay some kind of gratitude towards, or performance received from, the other part in the relationship. This reciprocation may be achieved by granting the relationship partner some slack when confronted with price changes that would otherwise be a motivation to seek other suppliers. Previous research supports this conception. Kumar, Hibbard and Stern (1994) found that suppliers that are normatively or morally tied to the manufacturers have a lower propensity to search for alternatives, and they are more willing to invest in the ongoing relationship. This tendency to give the service provider degrees of freedom, or a zone of tolerance, equates to a consumer’s willingness to pay a price premium. Hence, we hypothesize that

H3: Moral ties have a positive effect on price tolerance.

Second, we have hypothesized that both satisfaction and benevolence are antecedents of moral ties. This implies that moral ties to a large extent are based on the other party’s willingness to support and invest in the relationship with the customer. In other wordsBthe consumer is morally tied to the firm because the employee has been so clever in delivering the service, and so benign as to go beyond what is expected. This implies that the moral ties are not only due to externally imposed norms of behavior, but that they develop from shared expectations within the relationship itself (Wiener 1982). An altruistic, self-disclosing way of reciprocating would be to speak favorably about the service firm to other (potential) customers. In other words, we assume that a typical statement from a customer in these instances might sound like "The guy I know in<the service firm>is just so helpful and clever, and is really twisting his arms to help me. I can’t possibly just walk out of there and find another supplier". Accordingly, we suggest that

H4: Moral ties have a positive effect on word-of-mouth.

Further model development

While the overarching purpose of our research is to explore the effects presented in hypotheses 1-4, we do expect moral ties to only partially mediate the effects of satisfaction and benevolence on price tolerance and word-of-mouth. For example, satisfaction has been described as an important antecedent to customer loyalty (Oliver 1980; Ping 1994). As both price tolerance and WOM are indicators of loyal behavior, we find reason to believe that effects equivalent to those established by previous research should also be found in our model, but that parts of these effects will be mediated through moral ties. The same line of reasoning suggests that benevolence also influence our behavioral intentions. Selnes and Gronhaug (2000) found that benevolence was positively related to customer loyalty. Again we are inclined to include and test these paths within the framework of our model, in order to incorporate the effects of moral ties into the nomological network previously established in the satisfaction literature. Hence, we suggest that the following hypotheses will apply:

H5: Satisfaction has a positive effect on a) price tolerance, and b) Word-of-mouth.

H6: Benevolence has a positive effect on a) price tolerance, and b) Word-of-mouth.

Our conceptual model and its corresponding hypotheses are summarized in Figure 1.

METHODOLOGY

The data used to test te hypotheses were collected in a CATI survey of retail banking clients, all of which had one particular employee in the bank dedicated to take care of their business. This person is known to the customer as his or hers "dedicated bank-rep". This latter factor was important to ensure that the respondents had had the opportunity to develop moral ties to the service employee. In other words, the identification of service relationships as described by Gutek (1997) was of significant importance to secure sufficient variance in the variables of interest. Hence, a random sample of 2.000 customers with dedicated bank reps was drawn from a large bank’s customer database. Although the customers had an employee whose special job was to take care of the customers assigned to him/her, the level of actual usage of this extra service was expected to differ among the customers. Hence, the varying degree of contact between the customer and his/her dedicated employee assures the required variance in the level of interpersonal relationships.

Before sampling took place all persons below the age of 18 were excluded from the client-list, along with all bank accounts belonging to charity organizations, sports teams, and the like. All bank accounts without any transactions the past three months were also excluded to ensure that only active customer relationships were included on the list of customers. Finally, the account numbers were checked against the social security numbers of all the customers, which ensured that customers with multiple accounts were listed only once in the sampling frame. The aforementioned sample of 2000 was drawn from the remaining accounts.

A professional marketing research firm performed the CATI procedure, and the final sample consisted of 335 respondents, which corresponds to a 16.8 percent response rate. The final sample was compared to the population on demographics such as age, sex, and geographic location. No substantial differences were found between the sample and the population, suggesting that non-response bias is unproblematic.

FIGURE 1

CONCEPTUAL MODEL

Measures

All variables except word-of-mouth were measured with multi-item scales. The satisfaction measures consisted of one item adapted from Spreng, MacKenzie and Olshavsky (1996), two items adapted from Fornell (1992) and one self-constructed item. Benevolence was assessed with four items adapted from Ganesan (1994) and one self-constructed item. The moral ties measure consisted of one item adapted from Allen and Meyer (1990) and four items adapted from Kumar, Hibbard and Stern (1994). The two items measuring price tolerance was adapted from Zeithaml, Berry and Parasuraman (1996), while word-of-mouth was measured with a single item also adapted from Zeithaml, Berry and Parasuraman (1996). All measures were designed with 7-point Likert scales, indicating degree of agreement.

The scales were assessed by bank executives, front line personnel, and customers to secure face validity. Items found difficult to understand, or in other ways perceived as problematic, were altered or withdrawn from the item pool. The revised scales were subjected to further review by several independent marketing scholars.

RESULTS

The final sample was compared to the population on demographics such as age, gender, and geographic location. No substantial differences were found between the sample and the population. For instance, the average age in the sample was 39.7 years compared to 37.2 years in the population list, and the amount of women was 34.3 percent compared to 35.6 percent in the population list. The data was analyzed by use of structural equation modeling (Lisrel 8.30). This approach allows the simultaneous investigation of the measures and the hypothesized model.

Test of the measurement model

The initial measurement model was evaluated using the guidelines provided by Anderson and Gerbing (1988). The paths for single-item scales like our word-of-mouth measure are fixed in structural equation models, and we fixed the error term on this variable to 0.19 to impose measurement error on the scale and thus enforce a stronger test. To meet the requirements of unidimentional measures some items were deleted from the analysis. After the removal of items, the measurement model had a good fit. The final measurement model had a chi square value of 96.58 with 45 degrees of freedom (p=0.00). The other fit indices were a CFI of 0.96, NNFI of 0.94, and RMSEA of 0.057, which meets the requirements for satisfactory model fit (Browne and Cudeck 1993; Hu and Bentler, 1999).

The reliability information is presented in Table 1 using standardized coefficients. The composite reliability is satisfactorily for all constructs except moral ties. Furthermore, average variance extracted is considered fairly good for all constructs, with the exception being satisfaction and moral ties (Bagozzi and Yi 1988). However, lack of high reliability is to a great extent accounted for when using structural equation modeling (J÷reskog and S÷rbom 1982), and all items are thus included in the model to maintain the domain of the constructs.

The resulting correlation matrix for the constructs was inspected according to the procedures suggested by Anderson and Gerbing (1988), and the estimated correlations among the constructs did not indicate any problems regarding multicollinearity or lack of discriminant validity. The correlations are reported in Table 2.

Test of the structure model

The conceptual model had a satisfactory ability to explain the observed variance covariance matrix. The chi-square for 46 degrees of freedom was 99.22 (p=0.00), the RMSEA was 0.057, the NNFI was 0.94 and the CFI was 0.96, indicating acceptable fit for the model (Hu and Bentler, 1999). Satisfaction had a positive and significant effect on moral ties (0.34, p<0.001) and H1 was supported. However, as the estimated path from benevolence to moral ties was non-significant, H2 was not supported by the data. Furthermore, moral ties were found to have a significant effect on price tolerance (0.40, p<0.001) while no effect were found on word-of-mouth. These results support H3 but leaves H4 unsupported. The direct effect from satisfaction on price tolerance (H5a) was not supported while the effect on word-of-mouth (H5b) was supported, with an estimated coefficient of 0.69 (p<0.001). Benevolence was also found to influence price tolerance and word-of mouth directly, and the estimates for H6a was 0.20 (p<0.001) and H6b 0.33 (p<0.001).

TABLE 1

RELIABILITY INFORMATION FOR THE MEASUREMENT MODEL

TABLE 2

CORRELATIONS AMONG THE CONSTRUCTS

The model explained the endogenous variables satisfactorily, with squared multiple correlations of 0.18 for moral ties, 0.27 for price tolerance and 0.46 for word-of-mouth. The conceptual model with parameter estimates and non-significant paths closed are offered in Figure 2.

DISCUSSION AND IMPLICATIONS

The study shows that moral ties indeed affect the customers’ relationship with their suppliers or sellers. The strong effect of moral ties on price tolerance indicates that moral ties are connected with important marketing metrics. Price tolerance is both related to margins and serves as a barrier for competitors’ use of price as a marketing means. Importantly, moral ties have a stronger impact on price tolerance than both satisfaction and benevolence, adding credit to the stream of research on commitment and loyalty.

FIGURE 2

PARAMETER ESTIMATES FOR SIGNIFICANT PATHS

TABLE 3

STRUCTURAL MODEL EQUATION RESULTS

Moral ties do not affect word-of-mouth in the study. Contrary to what was hypothesized, it might be reasonable to rationalize post hoc that a person who is morally committed may not necessarily see the need of recommending a brand or a supplier to other customers. Particularly when controlling for satisfaction and benevolence that are more objective reasons for a recommendation. When moral ties may be connected to a customer’s own behavior, satisfaction and benevolence are two important content elements of a recommendation, and thus, more easy to communicate to other customers.

Satisfaction affects moral ties and word-of-mouth, while the effect on price tolerance turned out to be non-significant. Satisfaction is a strong antecedent of moral ties and indicates that the quality of what a brand or supplier deliver is of outmost importance. The effect on word-of-mouth is consistent with other studies on the effects of customer satisfaction. In contrast, price tolerance is, on one hand, connected to the willingness to pay a higher price, and thus, expected to have a positive effect on price tolerance. However, on the other hand, it is irrational to pay more than necessary for a product that is more expensive than similar alternatives. In contrast, moral ties are based on a different kind of rationality, and thus, differ with respect to the willingness to stay with a brand or supplier, even if the customer has to pay a higher price to do so.

Benevolence did not turn out to affect moral ties, which was surprising. However, in retrospect, benevolence is expected to strengthen the emotional ties between the customer and the brand/supplier, but such ties might be more inner-based than the outer-based moral ties. If a customer feels that the supplier treat him/her benevolent, then he/she feels a moral obligation to pay something back (e.g., regarding price tolerance). Accordingly, such benevolence may not be visible or known to the environment, and thus, may not affect the moral ties established by external forces.

Although not related to moral ties, benevolence has a positive and strong impact on both price tolerance and word-of-mouth. These effects indicate the process between the customer and the brand/supplier plays an important role in determining to what extent loyal behaviors occur.

The study has demonstrated that moral ties play an important role regarding price tolerance and as a mediating variable of the effects of customers satisfaction. Future research needs to further explore the mechanisms that drive moral ties to understand why and when such ties are present in different relationships. Also, the effects of moral ties may be broader than just price tolerance, although important enough to many firms. An understanding of the consequences of being morally tied versus not being it is important to explore what kinds of constraints moral ties means to a customer’s behavior. The study of moral ties in marketing represents a new field of research. Consequently, developing and revising measures is important to secure that the construct is adequately measured. Similarly, conducting studies in new settings are important to identify boundaries of the antecedents and effects of moral ties in order to test the external validity and possible moderator variables.

REFERENCES

Allen, Natalie J. and John P. Meyer (1990), "The Measurement and Antecedents of Affective, Continuance and Normative Commitment to the Organization," Journal of Occupational Psychological Society, 63, 1-18.

Anderson, James C. and David W. Gerbing (1988), "Structural Equation Modeling in Practice: A Review and Recommended Two-Step Approach," Psychological Bulletin, 103 (3), 411-423.

Bagozzi, Richard P. and Youjae Yi (1988), "On the Evaluation of Structural Equation Models," Journal of the Academy of Marketing Science, 16 (1), 74-94.

Berry, Leonard L. and A. Parasuraman (1991), Marketing Services: Competing Thrugh Quality. New York: The Free Press.

Browne, M.W. and R. Cudeck (1993), "Alternative Ways of Assessing Model Fit," in Testing Structural Models, eds. Kenneth A. Bollen and J.S Long, London: Sage Publications.

Deighton, John (1992), "The Consumption of Performance," Journal of Consumer Research, 19 (December), 362-372.

Folkes, Valarie S. (1988), "Recent Attribution Research in Consumer Behavior: A Review and New Directions," Journal of Consumer Research, 14 (March), 548-565.

Fornell, Claes (1992), "A National Customer Satisfaction Barometer: The Swedish Experience," Journal of Marketing, 56 (January), 6-21.

Ganesan, Shankar (1994), "Determinants of Long-Term Orientation in Buyer-Seller Relationships," Journal of Marketing, 58 (April), 1-19.

Gouldner, Alwin W. (1960), "The Norm of Reciprocity: A Preliminary Statement," American Sociological Review, 25 (April), 161-78.

Granovetter, Mark (1973), "The Strength of Weak Ties," American Journal of Sociology, 78 (May), 1360-80.

Gundlach, Gregory T., Ravi S. Achrol and John T. Mentzer (1995), "The Structure of Commitment in Exchange", Journal of Marketing, 59 (January), 78-92,

Gutek, Barbara A. (1997), "Dyadic Interaction in Organizations," in Creating Tomorrow’s Organization, eds. Cary L. Cooper et al., New York: John Wiley & Sons Ltd.

Gwinner, Kevin P., Dwayne D. Gremler and Mary Jo Bitner (1998), "Relational Benefits in Services Industries: The Customer’s Perspective," Journal of the Academy of Marketing Science, 26 (2), 101-114.

Hu, Li-Tze and Peter M. Bentler (1999), "Cutoff Criteria for Fit Indexes in Covariance Structure Analysis: Conventional Criteria Versus New Alternatives," Structural Equation Modeling, 6 (1), 1-55.

Johnson, Michael P. (1982), "Social and Cognitive Features of the Dissolution of Commitment to Relationships," in Personal Relationships: Dissolving Personal Relationships, ed. S. Duck, London: Academic Press.

J÷reskog, Karl G. and Dag S÷rbom (1982), "Recent Developments in Structural Equation Modeling," Journal of Marketing Research, 19 (November), 404-416.

Kumar, Nirmalya, Jonathan D. Hibbard and Louis W. Stern (1994), "The Nature and Consequences of Marketing Channel Intermediary Commitment," Working Paper No. 94-115, Marketing Science Institute, Cambridge, MA.

McCallum, Richard J. and Wayne Harrison (1985), "Interdependence in the Service Encounter," in The Service Encounter: Managing Employee/Customer Interaction in Services Industries, eds. John A. Czepiel et al., Lexington, MA: Lexington Books.

Mittal, Banwari and Walfried M. Lazar (1996), "The Role of Personalization in Service Encounters," Journal of Retailing, 72 (1), 95-109.

Oliver, Richard L. (1980), "A Cognitive Model of the Antecedents and Consequences of Satisfaction Decisions," Journal of Marketing Research, 17 (November), 460-469.

Ping, Robert A. (1994), "Does Satisfaction Moderate the Association Between Alternative Attractiveness and Exit Intention in a Marketing Channel?," Journal of the Academy of Marketing Science, 22 (4), 364-371.

Price, Linda L. and Eric J. Arnould (1999), "Commercial Friendships: Service-Provider-Client Relationships in Context," Journal of Marketing, 63 (October), 38-56.

Selnes, Fred and Kjell Gronhaug (2000), "Effects of Supplier Reliability and Benevolence in Business Marketing," Journal of Business Research, 49, 259-271.

Selnes, Fred and Hsvard Hansen (2001), "The Potential Hazard of Self-Service in Developing Customer Loyalty", Journal of Service Research, 4 (2), 79-90.

Wiener, Yoash (1982), "Commitment in Organizations: A Normative View," Academy of Management Review, 7 (3), 418-428.

Spreng, Richard A., Scott B. MacKenzie and Richard W. Olshavsky (1996), "A Reexamination of the Determinants of Consumer Satisfaction," Journal of Marketing, 60 (July), 15-32.

Zeithaml, Valarie A., Leonard L. Berry and A. Parasuraman (1996), "The Behavioral Consequences of Service Quality," Journal of Marketing, 60, (April), 31-46.

----------------------------------------