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The Role of Marketing in Supply Chain Management: Soonhong Min and John T. Mentzer
The Role of Marketing in Supply Chain Management: Soonhong Min and John T. Mentzer
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Introduction
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; GroÈnroos, International Journal of Physical
Distribution & Logistics
1995; Gundlach and Murphy, 1993; Jaworski and Kohli, 1993; Kohli and Management, Vol. 30 No. 9, 2000,
pp. 765-787. # MCB University
Jaworski, 1990; Kotler, 1972; McKitterick, 1957; McNamara, 1972) in the Press, 0960-0035
IJPDLM discipline of marketing ± the marketing concept, a market orientation, and
30,9 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
766 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.
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
IJPDLM Kohli and Jaworski The implementation of the marketing concept and that it is
30,9 (1990) composed of three sets of organization-wide activities: generation of
market intelligence pertaining to current and future customer needs;
dissemination of the intelligence across departments; and
responsiveness to market intelligence
Jaworski and Kohli Focuses on specific behaviors and, therefore, facilitates
768 (1993) operationalizing the market orientation construct
Narver and Slater An organizational culture in which all employees are committed to
(1990) the continuous creation of superior value for customers through
three behavioral components: customer orientation, competitor
orientation, and interfunctional coordination, and where culture is
defined as the pattern of shared values and beliefs that help
individuals understand organizational functioning and, thus,
provide them with norms for behavior in the organization
(Deshpande and Webster, 1989)
Table II.
Conceptualizations of a Deshpande et al. A set of attitudes or beliefs that should be pervasive throughout
market orientation (1993) the company
(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.
The role of
marketing in
SCM
769
Figure 1.
The impacts of a market
orientation
Relationship marketing
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 (GroÈnroos, 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
Berry (1980) and Attracting, maintaining, and ± in multi-service organizations ± The role of
Berry and enhancing customer relationships marketing in
Parasuraman (1991)
SCM
Morgan and Hunt All marketing activities directed toward establishing, developing,
(1994, p. 23) and maintaining successful relational exchanges. The rationale for
this definition is that in many instances of relationship marketing
``customers'' do not exist, but only ``partners'' exchanging resources 775
Cravens (1995) Involves more than buyer-seller collaboration, and include suppliers,
distribution channel members, internal functions, and even
competitors
GroÈnroos (1990, Marketing is to establish, maintain, and enhance relationships with
p. 138) customers and other parties, at a profit, so that the objectives of the
parties involved are met. This is achieved by a mutual exchange
and fulfillment of promises. This perspective departs from the
traditional view of marketing that emphasizes only ``exchange'' and
moves toward the notion of ``exchange in relationship'' and, thus, Table III.
called the emergence of relationship marketing a paradigm shift in Conceptualizations of
the marketing discipline relationship marketing
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 (GroÈnroos, 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
(GroÈnroos, 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
The role of
marketing in
SCM
777
Figure 2.
The impacts of
relationship marketing
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
IJPDLM blurring of the boundaries between the firm and its market environment
30,9 (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
778 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 The role of
firms: marketing in
(a) increased interfunctional coordination; SCM
(b) redefined functional responsibilities;
(c) a boundary-less organization;
779
(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.
SCM
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.
IJPDLM An integrative framework
30,9 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,
780 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);
Figure 3.
An integrative model of
the marketing concept, a
market orientation,
relationship marketing,
and supply chain
management
. providing the philosophical foundation of relationship marketing The role of
between firms to develop, maintain, and enhance inter-firm marketing in
relationships (P2); and SCM
. providing a compatible business philosophy for implementing SCM
within a supply chain.
(2) Ombudsman Proposition II: a market orientation has direct influences on 781
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;
IJPDLM . improving marketing effectiveness of the partner firms by proper
30,9 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);
782 . 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.
Conclusions
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 The role of
testing using hypotheses and constructs and, finally, to the analysis of the marketing in
empirical test. According to the Mentzer and Kahn's framework, this paper takes SCM
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 783
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
IJPDLM al. (1999) found intensity of competition (a kind of uncertainty) has a positive
30,9 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
784 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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