In this article, the author empirically examines the impact of long-term client relationships on the performance of business service firms. On the basis of the information contained in the Compustat and Compact Disclosure sets of databases, he finds that, over the long run, relationship-oriented business service firms achieve higher returns on their investments than do transaction-oriented firms. Importantly, the findings suggest that, unlike relationship-oriented suppliers of business goods such as component parts, long-term client relationships do not improve the productivity of relationship-oriented service firms. However, such relationships help business service firms to resist price pressures from their customers and add more value to their services over time.
Get full access to this article
View all access options for this article.
References
1.
Anderson, Eugene W.
, Claes Fornell, and Roland T. Rust (1997), “Customer Satisfaction, Productivity, and Profitability: Differences between Goods and Services,”Marketing Science, 16 (2), 129-145.
2.
Balakrishnan, Ramji
, Thomas J. Linsmeier, and Mohan Venkatachalam (1996), “Financial Benefits from JIT Adoption: Effects of Client Concentration and Cost Structure,”The Accounting Review, 71 (April), 183-205.
3.
Bateson, John E. G.
(1995), Managing Services Marketing. New York: Dryden.
4.
Beier, Frederick J.
and James Cross (1993), “Shortline Client Relationships: Can Local Carriers Be More than Small Railroads?”Transportation Journal, 33 (2), 5-14.
5.
Berry, Leonard L.
(1983), “Relationship Marketing,” in Emerging Perspectives on Service Marketing, Leonard L. Berry, G. Lynn Shostack, and Gregory Upah, eds. Chicago: American Marketing Association.
6.
Berry, Leonard L.
(1995), “Relationship Marketing of Services: Growing Interest, Emerging Perspectives,”Journal of the Academy of Marketing Science, 23 (4), 236-245.
7.
Bharadwaj, Sunder G.
, P. Rajan Vardarajan, and John Fahy (1993), “Sustainable Competitive Advantages in Service Industries: A Conceptual Model and Research Propositions,”Journal of Marketing, 57 (October), 83-89.
8.
Bostrom, Gert-Olof
(1995), “Successful Cooperation in Professional Services: What Characteristics Should the Client Have?”Industrial Marketing Management, 24, 151-165.
9.
Corey, Raymond E.
(1991), Industrial Marketing Cases and Concepts. Englewood Cliffs, NJ: Prentice Hall.
10.
Coyne, Kevin P.
(1985), “Sustainable Competitive Advantage: What It Is, What It Isn’t,”Business Horizons, 29 (January-February), 54-61.
11.
Creele, Diane C.
(1995), “Diane C. Creele on Environmental Business,”Environment Today, 6 (1), 21-21.
12.
Crosby, Lawrence A.
and Nancy Stephens (1987), “Effects of Relationship Marketing on Satisfaction, Retention, and Prices in the Life Insurance Industry,”Journal of Marketing Research, 24, 404-411.
13.
Day, Ellen
and Hiram C. Barksdale, Jr. (1994), “Organizational Purchasing of Professional Services: The Process of Selecting Service Providers,”Journal of Business and Industrial Marketing, 9 (3), 44-51.
14.
Day, George S.
and Robin Wensley (1988), “Assessing Advantage: A Framework for Diagnosing Competitive Superiority,”Journal of Marketing, 52 (April), 1-20.
15.
Dion, Paul
, Debbie Easterling, and Shirley Jo Miller (1995), “What Is Really Necessary in Successful Buyer/Supplier Relationships?”Industrial Marketing Management, 24, 1-9.
16.
Ford, D.
(1990), “The Development of Buyer-Seller Relationships in Industrial Markets,”European Journal of Marketing, 14, 339-353.
17.
Frantz, James B.
(1993), “Lazard Freres Services High End with Discretion and Financing Acumen,”National Real Estate Investor, 35 (11), 125-127.
18.
Frey, Sherwood C., Jr.
, and Michel M. Schlosser (1993), “ABB and Ford: Creating Value through Cooperation,”Sloan Management Review, Fall, 65-72.
19.
Grönroos, Christian
(1990), Service Management and Marketing: Managing the Moments of Truth in Service Competition. Lexington, MA: Lexington Books.
20.
Heidi, Jan B.
and George John (1990), “Alliances in Industrial Purchasing: The Determinants of Joint Action in Buyer-Supplier Relationships,”Journal of Marketing Research, 27 (February), 24-36.
21.
Ip, Greg
(1997), “Why the Stock Market Isn’t the Economy,”The Wall Street Journal, September 22, A1-A1.
22.
Jackson, Ralph W.
and Philip D. Cooper (1988), “Unique Aspects of Marketing Industrial Services,”Industrial Marketing Management, 17, 111-118.
23.
Jackson, Ralph W.
, Lester A. Neidell, and Dale A. Lunsford (1995), “An Empirical Investigation of the Differences between Goods and Services as Perceived by Organizational Buyers,”Industrial Marketing Management, 24, 99-108.
24.
Kalwani, Manohar U.
and Narakesari Narayandas (1995), “Long-term Manufacturer-Supplier Relationships: Do They Pay Off for Supplier Firms?”Journal of Marketing, 59 (January), 1-16.
25.
Levinthal, Daniel A.
and Mark Fichman (1988), “Dynamics of Interorganizational Attachments: Auditor-Client Relationships,”Administrative Science Quarterly, 33, 345-369.
26.
Lovelock, Christopher
and Lauren Wright (1999), Principles of Service Marketing and Management. Englewood Cliffs, NJ: Prentice Hall.
27.
Malone, T. W.
, J. Yates, and R. I. Benjamin (1987), “Electronic Markets and Electronic Hierarchies,”Communications of the ACM, 30 (June), 484-497.
28.
Moorman, Christine
, Rohit Deshpande, and Gerald Zaltman (1993), “Factors Affecting Trust in Market Research Relationships,”Journal of Marketing, 57, 81-101.
29.
Oster, Sharon M.
(1990), Modern Competitive Analysis. New York: Oxford University Press.
30.
Ostrom, Amy
and Dawn Iacobucci (1995), “Consumer Trade-offs and the Evaluation of Services,”Journal of Marketing, 59 (January), 17-28.
31.
Parasuraman, A.
, Valarie A. Zeithaml, and Leonard L. Berry (1985), “A Conceptual Model of Service Quality and Its Implications for Future Research,”Journal of Marketing, 49 (Fall), 41-50.
32.
Payne, Christopher M.
and David Ballantyne (1991), Relationship Marketing: Bringing Quality, Customer Service, and Marketing Together. Oxford, UK: Butterworth-Heinemann.
33.
Perrien, Jean Filiatrault
and Line Ricard (1993), “The Implementation of Relationship Marketing in Commercial Banking,”Industrial Marketing Management, 22, 141-148.
34.
Quinn, James B.
and Frederick G. Hilmer (1994), “Strategic Outsourcing,”Sloan Management Review, Summer, 43-55.
35.
Reichheld, Fredrick F.
and E. Earl Sasser (1990), “Zero Defections: Quality Comes to Services,”Harvard Business Review, 68 (September-October), 301-307.
36.
Rose, Robert R.
(1995), “Hard Driving: A Productivity Push at Wabash National Puts Firm on a Roll—Workers Are Strongly Encouraged to Improve Their Skills; Teams Offer Many Ideas; But Paternalism Irks Some,”The Wall Street Journal, September 7, A1-A1.
37.
Sheth, Jagdish N.
and Arun Sharma (1997), “Supplier Relationships: Emerging Issues and Challenges,”Industrial Marketing Management, 26, 91-100.
38.
Slofstra, Martin
(1993), “A Passion for Service,”Computing Canada, 19 (22), 13-13.
39.
Spekman, Robert E.
, Deborah Strauss, and Ruth Belk Smith (1985), “Antecedents of Collaborative Behavior between Buyers and Sellers: An Exploratory Investigation from the Buyer’s Perspective,”mimeo, University of Maryland.
40.
Stock, James R.
and Paul H. Zinszer (1987), “The Industrial Purchase Decision for Professional Services,”Journal of Business Research, 15, 1-16.
41.
van’t Haaff
, P. Anne (1989), “Top Quality: A Way of Life,” in Distinguished Papers: Service Quality in the 1990s, Eberhard E. Scheuing and Charles H. Little, eds. New York: St. John’s University, Business Research Institute, World Future Society.
Williamson, Oliver E.
(1971), “The Vertical Integration of Production: Market Failure Considerations,”American Economic Review, 61 (May), 112-123.
44.
Williamson, Oliver E.
(1975), Markets and Hierarchies: Analysis and Antitrust Implications. New York: Free Press.
45.
Wilson, Timothy L.
and Frank E. Smith (1996), “Business Services 1982-1992: Growth, Industry Characteristics, Financial Performance,”Industrial Marketing Management, 25, 163-171.
