S.

MOHAMMED MUSTAFA
LECTURER IN COMMERCE
SV DEGREE & PG COLLEGE
4. RETAIL PRICING

PRICING FOR RETAIL

Price is one of the most important variables influencing the retail decision making. Specifically in the
Indian context where most of the consumers are price conscious. From the customers view point, price
is the most important reason for shopping in a particular store. Customers often seek value for the
money paid. Value is the relationship of what the customer gets (goods/services) to what he has to pay
for it. Some customers may feel that a good value means always getting a low price. Others may be
willing to pay more as long as what they get in terms of product quality or service is assured. From the
retailer’s point of view, pricing decisions has an impact on the profitability, sustainability and most
importantly it has an impact on the image. Price is one of the most tangible means of creating
differentiation and hence, building the image of the store. Price differentiation has given rise to new
store formats, referred to as ‘price formats’. The price formats include discount stores, off-price retailers
and every-day low price (EDLP) retailers.
Factors influencing pricing decisions
The decision regarding pricing is the outcome of interaction of various factors which should be taken
into consideration while fixing the price. The factors affecting the pricing decisions are highlighted
below;
1.Merchandise
The retailers should set the price by carefully analyzing the features and attributes of the merchandise
and the value the consumers attach to the same. To attract different segments of customers the retailer
can offer a range of merchandise selection with different levels of prices to consumers. The retailers can
control the price through either the cost of goods sold or the gross margin that is added to the cost. The
retailer can either buy the merchandise at a lower cost or charge a higher markup to sell at a specified
price. The retailer can also buy merchandise that costs more, but sell at a lower margin to maintain price
line.
2.Customer services
Customer services is an important factor which attracts a customer to the retailer and it is the
distinguishing factor which would enable a retailer to carve a niche in the retail arena. Retailer can offer
a variety of services like delivery of product at the car or door steps, sales assistance, alterations etc. the
retailer may charge higher prices for offering certain services which may result in higher profits. In case
of some services the retailer can provide the option of charging separately for the additional services or
add the charges into the product prices. But many times the retailer do not charge anything extra for the
services, the services are rather provided free of cost to enhance value for the customers.
3. Credit
The requirement for purchasing the product on credit increases the price of the product. Offering credit
may lead to generating greater demand rather than offering discount for cash paying customers. Credit
purchases help the retailer to sell more merchandise and at the same time earn from financing the
transaction.
4.Location
The location of the retail store in terms of nearness to customers and competitors has a significant
impact on the price that can be charged. A store located in proximity to its competitors with comparable
merchandise and customer service has less pricing flexibility. Likewise the distance between the store
and its customers also has an impact on its pricing decisions. If the distance is more, the store may
increase its promotional efforts or reduce its price of merchandise in order to attract customers.

DEPARTMENT OF COMMERCE Page 1 of

13
 S. MOHAMMED MUSTAFA
LECTURER IN COMMERCE
SV DEGREE & PG COLLEGE
5.Promotion
Promotion and pricing decisions are usually interrelated. When a retailer brings a change in its prices
and offers discounts or other modifications, high promotion may be needed in order to create awareness
about the offer to the consumers. A retailer who uses promotion heavily and also prices merchandise
competitively may increase sales more than a retailer who uses high promotion or low price strategies
independently.
6. Store image
The customers unconsciously link the retail prices with its image. The pricing polices and strategies
interact with store image policies and strategies. For eg. If a store dealing with designer dresses starts to
offer discounts regularly, it may lose the image of being an exclusive store.
7.Legal constraints
The legal constraints and the impact of the legal environment, especially the retail laws applicable
should be taken into consideration while the retailer fixes the price. In some countries reducing the
prices is easy like in the case of United states whereas in Japan which has a vertical monopoly of market
distribution the prices are kept high by large manufacturer. In case of India, most packaged products has
a mandatory maximum retail price which has to be followed. The retailer has to keep the MRP in mind
while fixing the prices

PRICING STRATEGIES

Every Day Low Pricing (EDLP)

In every day low pricing, the retailer tries to sell his goods and services in a consistently low price
throughout the selling season. Low prices are set initially and the retailer reduces the advertising,
product repricing cost and strives to increase the reliability of the customers regarding the prices. Low
prices need necessarily means lowest price. Though the retailer using EDLP strives to keep the price
low, they are not the lowest in the market. However the prices will be same everyday without significant
fluctuations. The strategy emphasizes the continuity of retail prices at a level between the regular
nonsale price and deep-discount sale price of the retailer’s competitors. Since it is difficult to maintain
the lowest price, the retailer may opt for a low price gurarantee policy. In low price guarantee policy the
retailer gurantee that they will have the lowest possible price for a product or a group of merchandise.
The guarantee is given to match or outperform the lower price in the market. It includes a provision to
refund the difference between the seller’s offer price and the lower price.

High/Low Pricing
In high/low pricing strategy retailers prices the products sometimes above their competitors EDLP and
use advertising to promote frequent sales. Retailers more often resort to increasing sales using high/low
strategy. For e.g. the retailers in clothing usually resort to mark down prices at the end of the season.
The retailers often chose this strategy to respond to the competitors and to capture the attention of value-
conscious customers.
Odd pricing
Odd pricing is a form of psychological pricing where the prices are set at levels lower than the even
rupee values such as Rs.9, Rs.99, Rs.149. This pricing make the customer think that the prices represent
discounts or that the amounts are beneath the consumer price ceilings.

DEPARTMENT OF COMMERCE Page 2 of

13
 S. MOHAMMED MUSTAFA
LECTURER IN COMMERCE
SV DEGREE & PG COLLEGE

Multiple unit pricing

In multiple unit pricing the retailers offer discount to customers who buy in quantity or a product bundle. A
retailer attempts to sell more than normal sales at a regular price. The multiple unit pricing may be followed
by a firm for making the customers increase total purchases of an item. The approach enables the retailer to
move the slow moving and end- of- season merchandise. It also enables to increase the sale of related
items. In bundled pricing a retailer combines several elements in one basic price. This approach increases
overall sales and offers people a discount over unbundled service. However the customers may not some
time prefer the items put together. Hence as alternative many retailers use unbundled pricing where separate
prices are charged for each item sold. Unbundled pricing is difficult to manage as consumers may buy fewer
related items

Gross margin:
Gross margin, commonly known as gross profit, is an important performance measure in retailing. It
gives the retailer a measure (estimate) of how much profit it is making on merchandise sales without
considering the expenses associated with running the store. In other words, gross margin is the
difference between Net sales and the Cost of goods sold.
Gross margin (In `) = Net sales – Total cost of goods

Competitive pricing below the market rate:

It means setting the merchandise prices simply to beat the competitor price by charging a price that is
below the prevalent market rate. This policy is advisable only when the retailer follows an optimum
inventory plan, procure merchandise at the right time and at the right price to gain the benefits of cash
payment, trade discount, bulk buying etc.

Competitive pricing above the market rate:

This policy allows a retailer to set the merchandise price above the current market rate. This policy
seems to be straightforward and simple but must be applied carefully. This policy is suggested to those
retailers who have some competitive advantages such as:
(i) Excellent consumer service
(ii) High level of personal selling, delivery and exchanged facilities
(iii) A stock of well-known brands that are not available to its competitors in the nearby location

BRANDING
The emergence of major retail brands is a significant new phenomenon in the Indian economic
scenario. Brand is the most important invaluable asset particularly in the context of increased
competition among he retailer to capture the customer base. Some of the well known retail brands
include Pantaloons, Shoppers’ Stop, Crossroads, Culture Shop, Big Bazaar and In Orbit.
Retailing in India is in nascent (initial) stage, however the need for branding as a key tool for
differentiation is gaining momentum. The brands dealt and their price remains the same with all the
retailers. The differentiation has to be made by a retailer to make the consumer choose to shop with
him rather than the competitors. In this context, the retail brand plays an important role in connecting the
customers and making a difference. A strong retail brand can make a customer to choose in favour of a
DEPARTMENT OF COMMERCE Page 3 of
13
 S. MOHAMMED MUSTAFA
LECTURER IN COMMERCE
SV DEGREE & PG COLLEGE
particular retailer.
The objectives that a good brand will achieve include:
 Delivers the message clearly
 Confirms the credibility
 Connects the target prospects emotionally
 Motivates the buyer
 Concretes User Loyalty
The needs and wants of the customers and prospects should be taken into account so as to develop
successful branding strategies. Though the basic principles of branding applies to retail branding, it is
different from the product branding in the sense that retail branding is multisensory and the retail brand
equity to a greater extent depends on the customer experience. The retail brand image and equity also
depends on the manufacturer’s brand they deals along with their brand equity. The manufacturers
brand dealt determines the customers pull, their patronage and loyalty towards the retail store. The
retailers compete with the manufacturers brands by creating their own brands so as to attract the
customers pull. A retailer thus has an option of dealing with manufacturer’s brand or they can develop
their own brands.
Following are the important concepts of brand management:
 Brand Name  Brand Awareness
 Brand Attributes  Brand Loyalty
 Brand Association
 Brand Positioning
 Building a Brand

 Brand Identity  Brand Equity

 Sources of Brand  Brand Equity &

Identity Customer Equity

 Brand Image  Brand Extension

 Brand Identity vs  Co-branding

Brand Image
 Brand Personality

“A brand is a product, but one that adds other dimensions that differentiate it in some way from other
products designed to satisfy the same need”. Retail branding is a strategy based on the brand concept and which
transfers it to a retail company. A retailer’s “products” are his stores that can be marketed in a similar way to a
branded good. A retail brand is then a group of the retailer’s outlets which carry a unique name, symbol, logo or
combination thereof. While all retailers constitute brands to some extent, some retail brands are strong, while
many are not. Recognition and appreciation by consumers are the essential elements of a strong retail brand.
Retail branding can be understood as a comprehensive and integrated marketing management concept, focusing
on building long term customer loyalty and customer preference.
The term retail brand has to be distinguished from the term store brand. While retail brand refers to
stores, the term store brand refers to the product level and is used synonymously with private label. Often, the
retail brand is also used to label the store brands, though this is not a universal characteristic. Retail brands are
characterized by enormous complexity, which results from the service attributes of retailers as well as from
the multiplicity of brand attributes.

Brand architecture refers to the internal structuring of the retailer’s brands and revolves around how
DEPARTMENT OF COMMERCE Page 4 of
13
 S. MOHAMMED MUSTAFA
LECTURER IN COMMERCE
SV DEGREE & PG COLLEGE
many and what kinds of offers are provided under a certain brand. Within the brand hierarchy, a retailer’s
brands can be divided into different levels. Retailers have brand names at the level of the retail company as a
whole (“corporate brand”), the retail stores, the merchandise (e.g. the store brands), and specific retail services
(i.e. banking services or loyalty programmes). Besides the individual branding decision at each level, the
interconnection between the levels has to be considered. As in industrial multiproduct companies, retailers with
more than one store have to decide whether the stores should carry the same or different brands.
Three general branding strategies can be distinguished at the level of the retail brand:
- an umbrella brand strategy, where all the stores of the company carry the same brand, in most cases
differentiated by a sub-brand;
- a family brand strategy, in which groups of stores of the retail company (usually different retail formats)
carry different brands, i.e. the brands are strictly separated;
- a mixed strategy, which applies an umbrella brand for some store formats and separates others by using
different brand names.

Strategic brand management starts with a clear understanding of what the brand is to represent and
how it should be positioned relative to competitors. Positioning is the deliberate and proactive process of
defining and influencing consumer perceptions of a marketable object, with a strong focus on the competitive
position. A product is thus positioned in the minds of the consumers. Positioning usually applies certain fixed
dimensions along which the retail brand defines its position relative to its competitors. Market segmentation is
often considered necessary for successful brand positioning Market segmentation refers to the process of
dividing a total market by certain attributes into (more homogeneous) partial markets. Segmentation criteria can
be demographic, socioeconomic, lifestyle, geographic location and many others. Segmentation therefore
includes the selection of one or several market segments and targeting the marketing towards the purchasing
behaviour, motives, or expectations of these groups. However, segmentation is often considered difficult for
retailers with given catchment areas and the need for high customer traffic in their stores which require
appealing to broad customer groups.

Retail brand positioning is based on a set of fixed dimensions along which a retailer is perceived to be
located. However, the retail brand is broader than the actual positioning. The total brand knowledge which a
consumer associates with a brand is relevant to the brand strength. The associative network model views
memory as consisting of a network of nodes, representing stored information, and connecting links. Any type of
information connected to the brand is stored in the memory network, including verbal, visual, abstract, and
acoustic information. Retail brand image can be defined as perceptions about a retailer as reflected by the brand
associations stored in consumer memory. The strength of the brand can be evaluated by analyzing the various
relevant associations. Their uniqueness, favourability, strength, and the certainty with which consumers link the
information with the brand, are the dimensions to consider. The retail brand image is complex and it is
connected to an array of other images, both at a higher level as well as in the form of sub-images. The retail
store format image (i.e. category “killer image”), shopping centre image, location image, price image,
merchandise image and other components of the store or its context are all connected to the retail brand image
and are part of the memory network of the consumer.

Principles of Successful Retail Branding

All retail marketing instruments affect the retail brand, as illustrated by the notion of the comprehensive
retail brand image, which is made up of a universe of interconnected associations. To develop a strong and
successful brand, three basic principles are mentioned in literature:
 differentiation from competitors
 long term marketing continuity
 coherence of different marketing components.

Achieving differentiation (in consumers’ minds) is a central characteristic of a brand. Higher levels of
differentiation from the competitor are expected to lead to higher profitability. Only brands that are well

DEPARTMENT OF COMMERCE Page 5 of

13
 S. MOHAMMED MUSTAFA
LECTURER IN COMMERCE
SV DEGREE & PG COLLEGE
distinguished from their competitors can build up long term customer loyalty and avoid store switching by the
consumers.
Establishing a clear brand image is a long term process. Brands are established through consumer
learning processes. Consumers store associations in their memory. Brand associations become stronger over
time and must be reinforced by repeated exposure to the same brand messages, because they might otherwise
fade away. The past investment in the brand building is at least partly lost if the brand marketing is changed.
Thus, continuity is important. Also, risk reduction is one of a brand’s main functions. Consumers trust a brand,
because it entails a standardized and uniform offer under a certain brand name.
Some of the world’s most successful brands demonstrate that retaining the same brand message and
communication (with slight variations) for years and even decades is one of the key prerequisites of successful
branding. The retail marketing mix includes all marketing instruments that a retailer can deploy. The term mix
indicates that the instruments are not used in isolation, but that they jointly influence the consumer. In order to
be successful, all marketing measures must be coordinated to ensure a close fit with one another and that all
measures convey the same brand message. Because inconsistency makes a brand image fragile and consumers
strive for internal harmony or congruity in their knowledge and information (“theory of cognitive dissonance”),
creating coherence between all the different facets of the retail brand is crucial for success. Considering the
complexity of the retail environment, ensuring a fit among the marketing instruments and all brand contact
points is challenging. IKEA, Sephora, The Body Shop, Boots, Zara and others are examples of successful brands
that succeed in projecting a uniform image with their store atmosphere, merchandise, pricing, communication
and service.

DEPARTMENT OF COMMERCE Page 6 of

13
 S. MOHAMMED MUSTAFA
LECTURER IN COMMERCE
SV DEGREE & PG COLLEGE

THE RETAIL STORE AS A BRAND

In recent years, more and more retailers have seen the importance of branding and have recognized the need
to adopt distinctive positioning within their marketplaces. However, the drivers of branding for retailers are
often misunderstood, and confused regarding what a retailer needs to do to develop their brand. Store
equity measures the strength of the store brand by examining the extent of consumer loyalty, and their
willingness to pay a premium to shop there. It’s not the same as ‘customer satisfaction’: customer
satisfaction
is about the day-to-day interface with customers, and while shopping experience is obviously vital for
retailers, it is not the only factor in developing a brand. To build long-term commitment, and to drive
conversion opportunities among non-customers, retailers need to develop their store, as well as the
equity. Retailers can create brand equity by establishing awareness and associations to the product
assortment, pricing and credit policy, quality of service and so on. Consumers may choose the
associations on basis of personal experience, word of mouth, advertisement etc. The following aspects
should be considered while building brand equity;
 Create a brand hierarchy
The retailer should create a brand hierarchy by branding the store as a whole, as well as
individual departments, classes of service or any other noteworthy aspects of the retail service or

DEPARTMENT OF COMMERCE Page 7 of

13
 S. MOHAMMED MUSTAFA
LECTURER IN COMMERCE
SV DEGREE & PG COLLEGE
shopping experience. This will enable to create a synergy in brand development. The steps taken by
other retail stores or chains should be considered so as to develop a complete strategy. The various
departments in the retail store can also deal with unique set of associations that would attract the
target market.
 Enhance manufacturer’s brand equity
The retailers should try to gain as much mileage as possible from the manufacturer’s brand they
deal with by communicating and demonstrating their the strength and uniqueness. Retailers can
cooperate with the manufacturer’s in the various push strategy formulated by them to enhance the
value and brand equity of the brands sold. This will enable them to sell more and generate greater
profits.
 Providing value addition
The retailer can enhance the brand equity by offering added value in the selection, purchase,
or delivery of product offerings. Retailer should build strong, favourable and unique associations
that will go beyond the product they deal with. To communicate the associations the retailers can
create strategies that focus on the shopping advantages that can be reaped by a consumer by
choosing to buy from the retail store.
 Create multichannel shopping experience
The customers should be given the choice of variety of channel through which they can shop at
the retail store. It may include physical store, catalogs and online sources. The need for supplementing
the brick and mortar stores with virtual stores is all the more important due to the shortage in
availability of time for the consumers and to satisfy their variety seeking behaviour. Irrespective of
the time of channel chosen, the customers should be provided with rewarding shopping experience in
searching, choosing, paying for and receiving the products.

 Relationship Manageme
Developing relationship with customers is an important ingredient in enhancing the shopping
experience. Instead of choosing mass marketing strategy, the retailer can customize the strategies
according to the requirement of the customer. This requires a database on consumers and an
approach based on profitability and lifetime value of customer. The retailer should carry out instore
data collection, provide frequent shopper reward, carry on interactive communication, make special
offers, drive traffic and value apart from in- store value creation. Retail brand value will get enhance
by having personal relationship with customers rather than only through pricing and product
 External Communication
Retail branding requires the retailer to have communication with customers outside the store too.
It can take the form of broadcasting, email to customers or sending posters or customized sales letter
to customers based on their preference for products

Steps in retail price strategy

Pricing policy of a retail concern should be integrated with the overall retail mix. The process is
complex due to the dynamic and erratic nature of demand, the number of merchandise carried and the
various factors influencing the pricing decision. A retail price strategy involves five steps which will be
discussed in detailed in various sections ;
Pricing Objectives

DEPARTMENT OF COMMERCE Page 8 of

13
 S. MOHAMMED MUSTAFA
LECTURER IN COMMERCE
SV DEGREE & PG COLLEGE
Identification of the pricing objectives in a systematic manner is a must for developing the pricing
strategy. The pricing objectives are the starting point for achieving effective price points i.e. the
different level of prices set for products are services. The pricing objectives reflect the overall goals of
the organization. The objectives should be consistent with the overall image and positioning, sales, profit
and return on investment goals. The primary pricing objectives are described below:

1.Product quality objectives

It is a type of pricing objective which focuses on recovering the costs associated with the retail
research and development. This objective is used in association with integrated marketing
communication to create the perception of high product quality and thus a high retail store quality in the
consumers mind. This objective is often reflected upon by the high-end retailers.
2. Skimming objectives
Skimming objectives refers to the retailer setting a high initial price. This strategy is often used to recover
the cost incurred in selling a new product. The retailer targets at the customers who are relatively
unconcerned about the price. Later after capturing these customers the prices may be lowered to attract
additional customers who are more price conscious.
3.Market penetration objectives
Market penetration objectives are effective when the customers are price sensitive. It is opposite of
the skimming objectives. The retailer may set initially low price to attract large number of customers.
The key to effective market penetration strategy is to increase the sales volume to offset the low product
price. It enables to discourage the competitors from entering the trading area because of the lower prices
the retailer has already established for the market. In addition, market penetration may help to establish the
popularity of the new product.
4.Market share objectives
Market share refers to the proportion of sales of a particular product or brand to that of the total sales
of a particular product or brand in a given area. Market share objectives is a type of pricing objectives in
which the retailer has to adjust price levels based on the competitors change in the price, with the goal to
gain additional market share. The retailer can set the market share for each division, each department,
product line , product and brand.
5.Survival objectives
This is a type of pricing objectives in which the retailer increase price level to meet sales expenses.
This objective is generally used to match sales volumes to overall store expenses.
6.Return on investment (ROI) objectives
This objective enables the retailer to meet or exceed the stated return on investment. The retailer
fixes a target return figure which will satisfy the stakeholders. The price is fixed to attain the return of
investment targeted.
7.Profit objectives
Profit objectives are similar to the ROI objectives except that the target is set on the bais of profit
levels rather than as the return on investment. If the management uses profit maximization approach of
retailing then, it may resort to this method of pricing.
8.Status quo objectives
In this type of objective the retailer attempts to maintain the current situation. Aretailer who may want to
stabilize sales will prefer to set the objective based on the status quo. For example a retailer may fix the
price at a rate which is the same as the previous year so as to assure the sales and profit target as set in the
past.
9.Cash flow objectives
DEPARTMENT OF COMMERCE Page 9 of
13
 S. MOHAMMED MUSTAFA
LECTURER IN COMMERCE
SV DEGREE & PG COLLEGE
Cash flow objectives are generally short term objectives. This objective allows the retailer to generate
money quickly. It is designed to encourage additional sales volumes. For example a retailer may set a lower
price during a particular time period to enhance the sales volumes and increase the cash flow

MANAGEMENT EVALUATION
Providing qualified service is considered an essential strategy for success and survival in today’s competitive
environment. As most retail markets have reached maturity and have difficulties differentiating themselves
based on merchandise selection only, retailers are increasingly obliged to seek out products, processes and
technologies to increase consumer value. In general, however, retailers have little knowledge on the types of
consumer value drivers on which they should focus. In particular, research pertaining to relationship marketing
in consumer markets has advanced little.

In general, marketing literature has focused on product and service efforts as drivers of total consumer value, to
the neglect of relationship efforts.Therefore, three types of relationship efforts which validates retailers impact are
(i) Consumers’ trust, (ii) Relationship commitment and (iii) Behavioural loyalty.

Relationship efforts increasingly become important as a source of consumer value. First, consumers’ quality
expectations related to consuming products and services have risen.
Secondly, retailers are increasingly competing with one another on the basis of the same or highly comparable
marketing tactics and strategies.
Thirdly, retailers are faced with new challenges of the marketing environment, such as blurring boundaries
between markets or industries, an increasing fragmentation of markets and shorter product lifecycles.
The sequences of relationship efforts on consumer behavioural intentions can be viewed as signals of
retention or defection and are desirable for monitoring. With that in mind, the objectives are fourfold:

1 To summarise existing evidence about the behavioural sequences of relationship efforts and relationship
outcomes at the individual consumer level.
2 To offer a conceptual model of the impact of relationship efforts on relationship marketing and particular
behaviours that signal whether consumers remain with or defect from the company.
3 To report the results of an empirical study examining the correlation between relationship efforts and
consumers’ behavioural intentions (ie trust, commitment and loyalty).
4 To suggest a research agenda whereby information about individual-level behavioural sequences of
relationship efforts can be monitored and linked to relationship outcomes to provide ongoing evidence of
the impact of relationship bonding tactics on behavioural loyalty.

RELATIONSHIP BONDING TACTICS

Bonds are the psychological, emotional, economic or physical attachments in a relationship that are fostered by
association and interaction, and serve to bind parties together under relational exchange. While previous researchers
conceptualised two types of bonds: structural and social, Smith proposed that functional bonds also serve to bind
parties to a relationship.

Financial
bonding tactics

Social
bonding tactics Trust Commitment Loyalty

DEPARTMENT OF COMMERCE Page 10 of

13
Structural bonding tactics
 S. MOHAMMED MUSTAFA
LECTURER IN COMMERCE
SV DEGREE & PG COLLEGE

Financial bonding tactics

Financial bonding tactics are a kind of bond stimulating consumers ’consumption motivation and
acquiring consumers’ loyalty by using price decision, such as price discounts, higher interest rate, etc.
This kind of integration emphasises the pricing function of marketing components. As it is easy
to be emulated by competitors, it is not an easily sustained competitive advantage.

Social bonding tactics

Social bonding tactics are personal ties or linkages forged during interaction at work. Researchers include the
degree of personal friendship and liking shared by a buyer and seller, as well as linking of personal selves or
identities through self disclosure; closeness; providing support or advice; being empathetic and responsive;
feelings of affiliation, attachment or connectedness; and shared experiences.
Although the effects of ‘social bonding tactics’ cannot yet replace ‘price attraction’, it provides
customised service, developing independent relationships, making consumers trust and be satisfied
with retailers’ service, and understanding and learning consumers’ needs and wants. Companies
expressing friendship or gratitude with gifts to consumers really have social meaning. Personnel
can use these kinds of socialising tactics to build stable relationships and promote relationship
quality further.
Structural bonding tactics
Structural bonding tactics are knots relating to the structure, administration and institutionalisation of norms in a
relationship. The rules, policies, procedures, infrastructure or agreements that provide formal structure to a
relationship; the norms or routines that informally govern interaction; and the organisational systems and
technologies that enable or facilitate interaction can provide psychological, legal and physical ties that bind parties
to a relationship and make it difficult to consider other exchange partners. Here, this kind of bonding tactic means
providing structural solving programmes for consumers; thus, marketing programmes with value-added advantages
are provided by retailers.

By providing this level of relationship bonding tactics, companies can consolidate their relationship
with consumers. The kinds of value-added services provided from structural integration are often
technique related; they cannot only improve consumers’ efficiency and productivity, but also are not
easily emulated by competitors for heightened transforming costs. If further integrated with the
previous two kinds of bonding tactics detailed above, it is not straightforward for competitors to
penetrate into the company’s existing markets.

TRUST
The development of trust is thought to be an important result of investing in buyer–seller
relationships. As relationship efforts are defined as efforts that are actively provided by a retailer, the extent to
which a retailer makes relationship efforts can provide evidence to the consumer that the retailer can be

DEPARTMENT OF COMMERCE Page 11 of

13
 S. MOHAMMED MUSTAFA
LECTURER IN COMMERCE
SV DEGREE & PG COLLEGE
believed, cares for the relationship and is willing to make sacrifices. In the literature, several types of
relationship efforts have been related to the concept of trust. Several authors indicate that more intense levels
of buyer–seller communication enhance feelings of trust. Hence, it is possible to infer that trust was the
main element required to develop high-level relationships, especially during the initial period of relationship
development.
A positive relationship between tangible rewards and trust can be hypothesised.
Consequently, the following three hypotheses are formulated

H1a: A higher perceived level of financial bonding tactics leads to a higher level of trust.
H1b: A higher perceived level of social bonding tactics leads to a higher level of trust.
H1c: A higher perceived level of structural bonding tactics leads to a higher level of trust.

COMMITMENT
Commitment is generally regarded to be an important result of good relational interactions. Morgan and Hunt’s
Commitment–Trust theory suggested that commitment and trust were the main variables that make relationship
marketing successful.
Thus, commitment was not only an important characteristic to maintain a good and long-term relationship,
but also an expression of willingness that consumers want to stay with retailers. When the proportion of
commitment becomes more remarkable, it is not difficult to infer that the relationship on both sides becomes
more stable.
one of the few studies investigating the relationship between trust and relationship commitment in an
information education services industry context. Therefore, the following hypothesis is investigated:

H2: A higher level of trust leads to a higher level of relationship commitment.

BEHAVIOURAL LOYALTY
Having defined relationship commitment as ‘a consumer’s enduring desire to continue a relationship with
a retailer accompanied by his willingness to make efforts at maintaining it’, it is assumed that there exists a
positive relationship between relationship commitment and behavioural loyalty as a desire and willingness to
imply higher chances of actual behaviour.
The stronger relationship commitment, the more likely the buyer is to overcome potential obstacles in
the buyer–seller relationship, resulting in repeat patronage. Based on these insights, the following hypothesis is
formulated:

H3: A higher level of relationship commitment leads to a higher level of behavioural loyalty

A concern of relationship efforts to relationship outcomes

In terms of endogenous constructs, the results clearly reveal a significant relationship between the construct
of trust and the construct of relationship commitment, indicating that trust is important in the consumer
situation.
This implies that the greater the consumer’s trust, the higher their relationship commitment will be; that is,
consumers will only be committed to a relationship with a retailer when they have trust in this retailer.
Therefore, consumer relationship management is indeed a critical dimension for consumers’ trust and relationship
commitment in the information education services industry. In other words, one could infer that once
consumers feel trust with a retailer’s relationship efforts, their commitment to that retailer becomes stronger.
Regarding the correlation between relationship commitment and behavioural loyalty, the results show that
consumers’ relationship commitment to retailers has positive effects on consumers’ behavioural loyalty. Therefore,

DEPARTMENT OF COMMERCE Page 12 of

13
 S. MOHAMMED MUSTAFA
LECTURER IN COMMERCE
SV DEGREE & PG COLLEGE
one could reason that the greater the consumers’ relationship commitment is to the retailer, the more consumers
will demonstrate their loyalty. Consequently, researchers should be aware of the fact that, while relationship
commitment is often regarded as the ultimate relationship outcome, it is only an antecedent of behavioural
loyalty.
From the survey results discussed above, one could infer that it is not only an institution’s service
depth and scope itself, but also the provision of structural resolutions or value-added services that
comprise the most effective relationship marketing programmes. Furthermore, once consumers
perceive higher relationship efforts or feel trust in a company’s relationship efforts, they will make
a greater commitment to that retailer. Finally, consumers will feel obligated to demonstrate their
loyalty by remaining with the retailer

DEPARTMENT OF COMMERCE Page 13 of

13