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Evolution of Marketing

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on 6 May 2015

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Transcript of Evolution of Marketing

Evolution of Marketing
Sales forecasting by correlation techniques
Ferber (1954)
Sales forecasting by sample surveys
Ferber (1955)
The marketing revolution
Keith (1960)
"Is marketing a science" Revisited
Taylor (1965)
On the necessity to present consumer preferences as predictions
Politz and Deming (1953)
Key words: Predicting, Survey, Product, Sales, Responsibility
Take away idea: Marketing is only useful if it can provide managers with ability to make predictions based on relevant causes
Discussion Room
1. Marketing mix and definite answers- "simplistic" to say action A can result R.
2. Fooled by title?
3. Focus on managerial implications. Absence of theoretical implications other than as to "furnish intellectual entertainment".
Key ideas
1. Research design need to be done
"Think of the main relevant causes of sales and drops in sales".
"Design the survey to measure the effects of several possible actions".
2. The task of the "marketing research man"
a. Not be confined to the observable, but to aim for accurate predictions
"The actual decision on what to do is the responsibility of the management, not the research man."
What can be said about the responsibilities of the "marketing research man"? Are they reasonable?
Key words: Science, Art, Postmodern world, General theory (marketing concept vs marketing principles)
Take away idea: The concept of science and marketing should be changed to "embrace the reality of a dynamic world".
Q:"Is Marketing a science?" A: No.
BUT, With the help of Conant (1951)
Q:"Is Marketing a science?" A: Yes.
According to standards (Buzzell, 1963), science needs
A classified and systematized body of knowledge.
Organized around one or more central theories and a number of general principles.
Usually expressed in quantitative terms.
Knowledge which permits the prediction and under some circumstances, the control of future events.

1. Fruitful
2. Predictability (speculative and useful)
3. Science is continuity.
Two examples: Coffin and Oxenfeldt
Discussion Room
Is marketing an Art or a Science?
What can be said about the "new" criteria for science?
Key word: Revolution, customer orientation, "wants" instead of "needs", future
Take away idea: "The customer, not the company, is in the middle" - Switching from company-focus to customer orientation
Key ideas
1. A revolution in science -> revolution in marketing
business oriented
customer oriented

2. Revolutionary stages:
1st era-Production oriented- "
We are professional flour millers

2nd era-Sales oriented - "
We are a flour-milling company...we must have a first rate sales organization...consumer advertising and market intelligence

3rd era-Marketing oriented- "
We make and sell products for consumers
" -> Marketing department, the customer need as criteria for production

4th era-Marketing control
“We are moving from a company which has the marketing concept to a marketing company.”
Discussion room
Today marketing influences:-------> Tomorrow (future) marketing influences:
a. Operation policy short term ------->a. Long range policy
b. "light" cost areas ------------------>b. "heavy" cost areas - tied to top mgmt
c. Technical research ----------------> c. Creative research

It is reasonable to expect that its
implications will grow in the years to
come, and that lingering effects will be
felt a century, or more than one century,
from today
Is the revolution still on-going since the 1960s? Are the visionary ideas of the author reality today?

Key words: forecasting sales, sampling, consumer behavior, new variables for predicting sales
Take away idea: Sample surveys for forecasting sales is promising, in particular consumer panels before interview surveys
Two alternative methods
Key ideas
Single interview surveys
Discussion room
Consumer panels

In search for new predictors for sales

Studying actual customers!

Implying the need for qualitative input

Costs acting as main hindrance- need for efficiency

How do we view/use consumer panels vs interview surveys today?
Sampling as an "unexplored" method of forecasting. Considerations should be taken for:
a. Expenses
b. Speed
c. Forecast items
d. Time period for forecast
e. Area covered when sampling
f. Means of data collection


Moving away from static thinking towards
a softer, dynamic, worldview (subjective vs

Compare to Alderson's ideas about marketing
Key terms: Regression model, Forecasting, "Dos & Don'ts", Sales
Take away idea: Pay more attention to underlying assumptions of sales forecasting models

1. The regression model itself dos & don'ts
a. Fit
b. Deriving the forecast
c. Period of observation
d. Units of measurements
e. Choice of variables included
2. Critically examining the output of
regression models
Discussion room
Before we begin: Some contextual

The articles have strong connection to the US.
The 1950s in the US were the "Happy golden age"...
- Economic growth
- Rise of middle class consumer segment
- Advertising, television, cars, houses….
Final discussion room and conclusions
- how do the articles compare to Kerin's (1996) and Kumar's (2015) understanding of the period 1955-1965?

assessing marketing mix impact
marketing as a quantitative science
focusing on theory development, analytical
studies, and interest in statistical quality control
Key take aways:

1. Tension between wanting to make things (predictions) simple but recognizing they aren't - what to use for predicting? methodological constraints...
2. Sales from macro (national income) vs micro (individual customer) perspective. Unit of analysis?
3. The idea of the customer is becoming interesting - behavioral sciences and psychology
4. Expressing an aura of that things are cooking and brewing in the economy and in science ->
marketing can make a difference
1. Critical examination of forecasting methods used at the time
2. Macro level variables - economics

Key ideas
What can be said about the actual understanding of "correlation techniques"- how advanced were their thinking?
The article refers to marketing as quite "fluffy": an "idea", "function", "department", "concept", "revolution", "era", connected to "brand"

Different from the other articles. Customer as "dead end". How does the customer impact sales? Different from talking about national income as predictor...

Visionary, "fancy", language

a. Attitudes and expectations
b. Purchase intentions
c. Past purchase information
Planning rather than intentions forecast sales!
Key ideas
"The quest is a speculative enterprise, yet fruitful and
Marketing as a Behavioral Science: 1966-1975
Marketing as a Decision Science: 1976-1985
Contextual considerations from 1966 to 1975
Marketing as a Quantitative Science: 1956-1965
A generic concept of marketing
Kotler (1972)
Broadening the marketing concept
Kotler and Levy (1969)
A model of industrial buyer behavior
Sheth (1973)
Future directions in marketing theory
Tucker (1974)
Marketing as exchange
Bagozzi (1975)
Contextual considerations from 1976 to 1985
An applied service marketing theory
Grönroos (1982) European Journal of Marketing
Marketing theory of the firm
Howard (1983)
The impact of the marketing concept on new product marketing
Lawton and Parasuraman (1985)
On making marketing more scientific: the role of orientations, paradigms metaphors and puzzle solving
Arndt (1985)
A role theory perspective on dyadic interactions: the service encounter
Solomon et al. (1985)
General theories and fundamental explanada of marketing
Hunt (1983)
The proposal in the 1969 article of broadening the marketing concept is now taken even further, to include the transaction between an organization and all of its publics.
Moving from the notion that marketing is essentially a business subject (selling-buying products and services) to a concept emphasizing exchange of value between two parties.
In the generic concept of marketing, marketing is viewed as a category of human action. Based on this four axioms of marketing are presented.
W. T. Tucker (1919-1990)
The University of Austin at Texas, "Man of many talents"
Helped to lay the foundations of the field of consumer behavior
Receiver of the 1st H. Maynard Award with the 1974 JM article
S.D. Hunt (born 1939)
Texas Tech University
Editor of JM 84-87
Almost 40K citations in total
Interests: Competition, Strategy, Marketing Theory, Ethics, Macromarketing, and Philosophy of Science
M. R. Solomon
Saint Joseph's University, Philadelphia
Author of Consumer Behavior: Buying, Having, and Being
Interests: Avatars, Consumer Behavior, Psychology of Fashion, Marketing Strategies and Consumer Choice
J. Arndt (1937-1986)
Norwegian School of Economics and Business Administration, Bergen
Enjoyed great international recognition
Recipient of H. Maynard Award with JM 1985
Contribution: further research in the field of consumer psychology and marketing.
Customer is the focus for strategic planning not the the competitive elemets as customer drives the market
The paper is normative to guide management and to provide them with more skills and knowledge in order to understand the customers.
As understanding the customers are the foundation of product innovation.
Understanding the customer. Thus, skills and functions has to be used to develop products.
“The customer is the source o three major constrains (life cycle, competition, and the customer indicates the power of customer and adds support to the hypothesis)
He introduces the model of the customer,
The paper used vocabularies
Addressing the role of services, distinguish between service and product, thus, between service firms and production. Service marketing became a standalone field of study.
The main idea of the paper is to provide understanding to service marketing in order to help service marketers to better plan to develop customers oriented services.
Service are produced and consumed simultaneously, it is intangible mentally and physically. Thus, different marketing strategies should be followed in different to the industrial firms strategies.
Five variables: service concept, accessibility of the service, interactive personnel with customer, auxiliary services and consumer influence
Discussion: How would you define marketing?
Citations: 85
Underlying assumption of marketing: material progress will lead to a “better” life --> not maybe so
Two characteristics of marketing (critical to the understanding of the “broadening the marketing concept” debate)
Focus on outputs (goods and services)
Firm/marketing manager centricity
Questions: What can marketing theory derive from broadening the its application?
- "Kotler-Levy position tends to both enlarge and diminish the scope of marketing" -- what does Tucker mean by this?
Suggests alternative directions for the development of marketing theory
1. Consumer income
(from given income to understanding unused human resources)
2. Consumer insight
(theory about the relationship of the production-consumption system to human well-being)
Citations: 409
Nature of marketing theory vs. nature of general theories
Conceptual domain of marketing:
1. the primary focus of marketing is the exchange relationship,
2. marketing includes both profit sector and nonprofit sector organizations, and
3. all the problems, issues, theories, and research in marketing can be analyzed using the three categorical dichotomies of profit sector/non-profit sector, micro/macro, and positive/normative
General theories explain a large number of phenomena and serve to unify the law-like generalizations of less general theories -> more abstraction and the “empirical testability suffers
Fundamental explananda of marketing
- Fundamental explananda - What do you think about them?
- Hunt argues that the development in technology/methods directed attention away from the important inquiry into the conceptual foundations of marketing.
What do you think?
Citations: 1524
Citations: 376
Science is a social process
Research orientation/worldview influences on the knowledge, problems and instruments used by researchers
Paradigm = taken for granted/unquestioned foundation of theories
Marketing is profoundly dominated by the empiricist worldview and logical empiricist paradigm stressing rationality, objectivity and measurement
Alternative paradigms such as subjective world paradigm, sociopolitical paradigm, liberating paradigm are also needed

Paradigm cannot be empirically tested -compare this to Hunt's position that with more abstraction 'empirical testability suffers'. -- What are your thoughts?
“While no paradigm or metaphor is more than a partial and incomplete truth, the notion of paradigms should be viewed as an argument for paradigmatic tolerance and pluralism" -- What does this mean to you?
Emphasis on the ‘personal’ dimension on exchange --> the service encounter
The face-to-face interactions between a buyer and a seller in a service setting
From ‘one party-centric' view on exchange —> to the dyad and the interdependence of the actors
Service encounters are human interactions and socially constructed role performances/ritualized behavior patterns
Role theory, role expectations
Intra-role congruence: the degree to which the service provider's conception of his/her own role is concordant with the organization's conception of that role,
Inter-role congruence: the degree to which provider and client share a common definition of service roles —> sources of role discrepancies
What does it tell about marketing that, one has to argue for service encounters being human interactions?
Solomon et al. argue that service transactions are partially mindless behavior — what does this mean?
P. Kotler (Born 1931)
Kellogg School of Management at Northwestern University
150 published articles and 55 books
1st person to receive the "Leader in Marketing Thought" award (AMA)
S.J. Levy (Born 1921)
University of Arizona
Together with Kotler he challenged the the view of marketing as restricted to commercial activities
1st person to receive the Living Legend of Marketing Award for exceptional contributions to marketing
J.N. Sheth (Born 1938)
Goizueta Business School of Emory University
400 published research papers and 40 books
One of the earliest to espouse the cause of Relationship Marketing
R.P. Bagozzi
Ross School of Business, University of Michigan
Thomson Reuters recognition for ranking among the top 1% most cited researchers in economics and business between 2002 and 2012
Citations: 2227
Citations: 943
Citations: 1460
Citations: 1708
At the time there was an increasing trend where more society work was being performed by organizations other than business firms
The purpose of the article is to show that marketing is not just a business activity - Broadening of the marketing concept to cover non-business organizations as well
A view of marketing as being a concept of sensitively serving and satisfying human needs, made it applicable to organizations
By integrating academic research with industry reports, a model of industrial buying behavior is created

Contribution of the model was
It was suited for organizational buying
The consideration of joint decision making (industrial buying decision is not solely in the hands of purchasing agents)
Because of joint decision making conflict resolution is also considered in the model
Discussions in the article proceeds from the generic concept of marketing formulated by Kotler and Levy.
The exchange paradigm has emerged as a framework for conceptualizing marketing behavior.
Previously marketing had been focusing on direct transfers of tangible entities between two parties. The view here is that marketing exchanges often are indirect, they may involve intangible and symbolic aspects, and more than two parties may participate.
Three types of exchanges is presented (Restricted, Generalized and Complex)
- The Cold War (1947-1991)
- The Vietnam War (1955-1975)
- Economic ‘boom’ in US after the recession in 60-61, high inflation
- Social movements, youth/students as a powerful force, hippies, questioning authority/government, demanding more rights for women and minorities, “make love, not war”
- ‘Man on the moon’ 1969, Arpanet 1969
- The 70's saw perhaps the worst decade of most industrialized countries’ economic performance since the Great Depression
- Oil crisis 1973
- Energy crisis 1979
- Significant rise of women as head of states (Perón 1974, Thatcher 1979)
- First general microprocessor, rudiment personal computers, Sony Walkman 1978, video games, floppy disks and the first car phone

- The 80's was an era of population growth and also an era of great social, economic, and general change especially in newly industrializing economies
- Economic liberalization in the “developed world’
- The rise and fall of arcade games, the rise of home computers, VCRs
- MTV launched 1981, music videos, pop culture/music, Michael Jackson, Madonna etc.
- AIDS/HIV discovered in 1984, attention to global warming for the first time
- What made 'the broadening' discussion so controversial?
- Do you have any thoughts about how the broadening of the marketing concept reflected on companies marketing strategy at the time?
- Kotler presents 4 axioms for marketing - What do you think about them?

- The model of industrial buying behavior purposed in the article is supposed to be a generic model which attempts to explain all types of industrial buying decisions. Do you see any limitations were this model might not be generalizable in this sense?
- "What marketers have considered as exchange is a special case of exchange theory" - What does Bagozzi mean with this?
- What is Bagozzi's take on social marketing?
C. Grönroos (Born 1947)
Hanken School of Economics, Finland
Chosen as the first "Legend in Marketing" outside North America
Research interests: service logic, promise management and marketing, transforming manufacturing into service business
- Why was/is it so important to separate services from products?
- What implications has services marketing to marketing in general?
Citations: 628
Citations: 118
Citations: 196
J. A. Howard (-1999)
Columbia University
Recognized innovator in the application of basic research in marketing, consumer and buyer behavior
The John A. Howard AMA Doctoral Dissertation Endowment
- What are the fundamental assumptions behind the 'marketing theory of the firm'?
- What does this article actually tell about 'the marketing concept'?
Lovelock (1983)
Zeithaml et al. (1985)
Evolution of marketing from 1966 to 1985
- Final discussion and conclusions

- What are your reflections on the journey of marketing evolution we have seen so far?

- Would you add/change to your initial definition of marketing?
- Arndt argues that in marketing, problem is "spinning off a basic science from a problem solving discipline" - Do you agree or disagree?
The end.
Thank you!
L. Lawton
University of St. Thomas
Research interests: Business Education, Marketing, Statistics and Survey Research
Google scholar: 1590 citations
A. Parasuraman
University of Miami
Research interests: service quality (SERVQUAL), the role of technology in service delivery
Google scholar: 94509 citations
Previously adopting the marketing concept may result in increased reliance on customer- oriented source for new product ideas.
Introducing three hypotheses on marketing concept (customer-orientation)
Quantitative study, questionnaire to 500 US companies. Second hypothesis showed positive relationships between adoption of the marketing concept and the use of marketing research.
the results of this study failed to support any of the three hypothese and they suggest that the extent of adoption of the marketing concept has little impact on new product planning
Contextual Considerations
-The Cloning of Dolly (1996)
-Mad cow disease causes alarm in Europe
-The introduction of the Euro (1/1/1999)
-Expansion of EU
-Terrorist attacks of 9/11
-295 million Internet users in 2000
-Microsoft, world's most valuable company (1997)
-Dot-com bubble (1997-2000)
-Fears over Y2K bug
-Apple releases iPod (2001)

Whence Consumer Loyalty?
Richard L.Oliver
Richard L. Oliver
Professor of Management (Marketing)
Vanderbilt University, Nashville USA
B.S.M.E., Purdue University, 1967
M.B.A., University of Wisconsin, 1969
Ph.D., Marketing, University of Wisconsin, 1973

Research Interests: Consumer psychology (with a special focus on customer satisfaction), customer loyalty, and other post-purchase processes
The article challenges the assumption found in different satisfaction/loyalty literature that satisfaction and loyalty "move" together. And the goal of organizations to always strive for loyal customers

Research questions:
1. What aspect of the consumer satisfaction response has implications for loyalty?
2.What fraction of the loyalty response is due to this satisfaction component?

An intent of this article is to suggest which of these schemes is most appropriate in light of the conceptual logic that is presented
A framework to understand different Loyalty Strategies
Product superiority
- is the weakest form of loyalty
Determined self-isolation
- when the customer wants to have an exclusive relation with the brand
Village envelopment
- the consumer is a passive acceptor of the brand environment
Immersed self-identity
- the consumer intentionally has targeted the social environment because it is consistent with and supports his or her self-concept

Panel 6 comes closest to the perspective taken here, except that satisfaction does not transform into loyalty as much as it is a seed that requires the nurturance of sun,moisture, and soil nutrients

"Although loyal consumers are most typically satisfied, satisfaction does not universally translate into loyalty"

"Many firms and industries should be content to pursue "mere satisfaction" as their goal."

Rediscovering Satisfaction
Susan Fournier and David Glen Mick
Susan Fournier
Questrom Professor in Management/Faculty Director MBA Program/Professor of Marketing
Boston University, USA

Ph D, University of Florida, Marketing, 1994.
MS, The Pennsylvania State University, Marketing, 1983.
BS, University of Massachusetts at Amherst, Marketing, 1980.

Research Interest(s):
Susan maintains a portfolio of research that explores the creation and capture of value through branding and brand relationships. Current projects explore the links between brand strategy and shareholder value, brand co-creation and consumer-generated advertising, the management of person-brands, the power and process of brand parodies, metrics for brand strength and brand community health measurement, attachment style effects on brand relationships, relationship dissolution, and the lived experiences of brand flings

David Glen Mick
Robert Hill Carter Professor of Commerce
McIntyre School of Commerece, University of Virgina, USA
Ph.D., Marketing, Indiana University
M.H.A., Health Care Administration, Indiana University Medical School
M.A., English, University of Texas
B.A., English and Philosophy, Indiana University

Research Interest(s):
Consumer behavior
Wisdom and consumer well-being
Symbolism and advertising
Consumer motivations

• Adding new knowledge to Satisfaction research
• Challenge the Comparison Standards (CS) paradigm

• Qualitative method approach, a longitudinal study


Extensions of existing CS-models are revealed
o The ED-model
o The desires model
o The experience-base norms model
o Modes of satisfaction

Anomalies of the existing CS-models are presented
o Lack or instabilities in comparison standards
o Presence of simultaneous and sequential satisfaction models
o Sequential satisfaction models across time
o Social dimension of satisfaction
o Omitted meanings


• Consumer product satisfaction is an active, dynamic process
• The satisfaction process often has a strong social dimension
• Meaning and emotion are integral components of satisfaction
• The satisfaction process is context-dependent and contingent, encompassing multiple paradigms, models, and modes
• Product satisfaction is invariably intertwined with life satisfaction and the quality of life itself.


Focus on the use of technological devices
• Narrow target group; Caucasians, middle to upper-middle class

The role of Marketing
Christine Moorman and Roland T. Rust
Christine Moorman

T. Austin Finch Professor, Sr. of Business Administration at The Fuqua School of Business, Duke University, USA
Ph.D., University of Pittsburgh.
M.B.A., University of Pittsburgh.
B.S., Northern Kentucky University.
Institute for Social Research, University of Michigan.

Research Interest(s):
How Consumers, Managers, Organizations, and Financial Markets use Marketing Information Marketing Innovation
Marketing Alliances and Relationships
Individual Consumer Use of Health and Nutrition Information and Public Policy Implications

Roland T. Rust
Distinguished University Professor and David Bruce Smith Chair in Marketing, Executive Director, Center for Excellence in Service, Executive Director, Center for Complexity in Business
Robert H. Smith School of Business, University of Maryland, USA

Ph.D. Business Administration, 1979, University of North Carolina, Chapel Hill
MBA Marketing, 1977, University of North Carolina, Chapel Hill
BA Mathematics, 1974, DePauw University

Research Interest(s):
Customer Equity
Service Marketing
Service marketing Research
Advertising Models

"Marketing is everything and everything is marketing"

"Marketing's future is not a function of business, but is the function of business."

"Marketing becomes everybody's job, which potentially diffuses the marketing function's role but increases marketing's influence"

The role of the marketing function in market oriented organizations
• Functional marketing organization vs. marketing process organization

The authors argue for the value of the marketing function beyond an organization-wide market orientation, testing 5 hypotheses

Framework of three customer connections
• Customer – Product
• Customer – Service Delivery
• Customer – Financial accountability

• Quantitative method approach (two stages prompted by the reviewers)

Though market orientation is undeniably important, the marketing function continues to have an important role to play.

Implication for teaching (not managers…)
• Shift from short-term transactional marketing to long term relational marketing
• Greater emphasis on the customer – service delivery connection

On the Profitability of Long life customers in a Noncontractual Setting: An empirical investigation and Implications for Marketing
Werner J. Reinartz
Professor of Marketing, University of Cologne
Director, Center for Research in Retailing

Ph. D. Marketing, University of Houston, U.S.A.
MBA Business Administration, Henley Management College, England
Dipl. Ing. (TU) Agricultural Economics, Munich University of Technology, German

Research Areas: Marketing Strategy, Retailing, Customer Relationship Management,Advertising Effectiveness Distribution Channel Management

Regents Professor; Richard and Susan Lenny Distinguished Chair Professor in Marketing; Executive Director, Center for Excellence in Brand and Customer Management
Georgia State University
Ph.D., Marketing, University of Texas, Austin
Master's in Industrial Management, Indian Institute of Technology
Bachelor's in Engineering, Indian Institute of Technology

Research Areas:
New products management
Marketing models
Database marketing
Customer relationship management
Marketing intelligence
Marketing Strategy

Tbe main objective of this study is a rigorous and differentiated empirical analysis of tbe lifetime-profitability relationship in a noncontractual context
They examine:
•How strong the lifetime duration-profitability relationship is.
•Whether profits increase over lime (lifetime-profitabllity
•Whether the costs of serving long-life customers are less, and
•Whether long-life customers pay higher prices.

Four objectives have been accomplished:
-A strong linear positive association between lifetime and profits does not necessarily exist.
-A static and a dynamic lifetime-profitability analysis can exhibit a differentiated picture: Profitability can occur for the firm from long- and short-life customers. Profits do not increase with increasing customer tenure, which thereby adds new empirical evidence to the domain.
-The cost of serving long-life customers is not lower
- Long-life customers do not pay higher prices.

Data: From the database of an established US catalog retailer.The items sold by the firm cover a broad spectrum of general merchandise. The firm's products are offered and can be purchsed all year round.
The data covers a three year period and is recorded on a daily basis
The impact of customer relationship characteristics on profitable lifetime duration
Werner J Reinartz and V Kumar
The key research objectives are to:
-Empirically measure lifetime duration for noncontractual customer-firm relationships, incorporating projected profits;
-Demonstrate the superiority of our proposed framework by comparing it with the widely used recency, frequency, and monetary value (RFM) framework using the criterion of generated
-Understand the structure of profitable relationships and test the factors that affect a customer's profitable lifetime duration;
-Develop managerial implications for building and managing profitable relationship exchanges.
Customer Portfolio Management: Toward a Dynamic Theory of Exchange Relationships
Michael D Johnson
Dean of the Cornell University School of Hotel Administration
E.M. Statler Professor of Hotel Administration.


Bachelor of Science from the University of Wisconsin–Madison
Ph.D. and Master of Business Administration from University of Chicago

Research Focus

Development of customer information systems and how they can be utilized to craft strategy and manage customer relationships

Fred Selnes
Norwegian School of Management
Department of Marketing

Educational background:

Siviløkonom, Bedriftsøkonomisk Institutt 1980

Master of Science in Marketing, Northwestern University, USA, 1984

Dr.oecon, Norges Handelshøyskole, 1986. Area: Marketing

Research Interests
Economic psychology
Customer satisfaction
How organizations could become more market and customer oriented.
How companies should develop its portfolio of customer relationships

The purpose of this article is to move relationship management research toward a dynamic theory of how to
build value for a firm across an entire portfolio of customer relationships

Develop a typology of exchange relationship mechanisms that captures fundamentally different forms of value creation. The different forms are a function of customers’ capabilities and problem-solving behavior as well as suppliers’ capabilities and resource-allocation decisions.
Because the different types of relationships imply different profit mechanisms, sellers’ marketing strategies should encompass an entire portfolio of customers at different relationship levels. This process is called “customer portfolio management.”
Introduce a model of customer portfolio lifetime value (CPLV) that links value creation within individual customer relationships with overall value creation for a firm.


As the competitive capability of converting customers to closer relationships increases relative to competition, (a) CPLV increases, and (b) closer relationships make a greater contribution to CPLV over a longer period of time.

(b) As the capability of creating distant relationships increases relative to the capability of converting customers to closer relationships, (a) CPLV increases, and (b) distant relationships make a greater relative contribution to CPLV over a longer period of time.

(c) As the competitive capability of gaining and keeping customers increases, (a) CPLV increases, and (b) distant relationships make a greater contribution to CPLV than do closer relationships over time.

(d) When a market is subject to sudden increases in unit costs (reduced revenue premiums), (a) closer (distant) relationships make a greater contribution to CPLV than do distant (closer) relationships, and (b) closer relationships have less (more) variance or risk associated with their contributions than do distant relationships.

Interfirm Relational Drivers of Customer Value
Robert W Palmatier

Professor of Marketing Foster School of Business University of Washington
John C. Narver Endowed Professor in Business Administration
Research Director of the Center for Sales and Marketing Strategy

PhD University of Missouri (2004)
MBA Georgia State University (1989)
MSEE Georgia Institute of Technology (1984)
BSEE Georgia Institute of Technology (1983)

Area of Expertise
Business To Business Marketing
Business To Consumer Marketing
International Marketing
Marketing Management
Marketing Strategy
Strategic Planning

This article integrates social network and exchange theory to develop a model of customer value based on three relational drivers: relationship quality (the caliber of relational ties), contact density (the number of relational ties),
and contact authority (the decision-making capability of relational contacts).
The results suggest that the value generated from interfirm relationships derives not only from the quality of customer ties (e.g., trust, commitment,
norms), as is typically modeled, but also from the number and decision-making capability of interfirm contacts and the interactions among relational drivers

This article evaluates the effect of relational drivers on
CV across 446 business-to-business relationships. It contributes
to existing literature by providing insight into three
research questions:
(1) What are the key relational drivers of CV?
(2)What are the synergies among relational drivers?
(3What customer factors leverage the impact of relational drivers on CV?
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