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Journal of Market-Focused Management, 5, 109 126 (2002) 2002 Kluwer Academic Publishers. Manufactured in The Netherlands.

A Stakeholder Perspective for Analyzing Marketing Relationships

DR. MICHAEL JAY POLONSKY1 Melbourne Airport Chair in Marketing School of Hospitality, Tourism and Marketing Victoria University, PO Box 14428, Melbourne City MC 8001 AUSTRALIA DR. DES. STEFAN W. SCHUPPISSER2 th & Partner AG Fluehgasse 17 CH-8008 Zurich (Switzerland) Horva SRIKANTH BELDONA3 Department of Hospitality & Tourism Management, Purdue Univesity West Lafayette, Indiana USA 47906 Received November 16, 2000; Revised July 5, 2001

Abstract This paper proposes a framework that enables the application of stakeholder theory to the analysis of marketing relationships. By distinguishing between different types of stakeholder relationships, stretching from the positive to the negative side of relationships (i.e. the ladder of stakeholder loyalty), and describing the various relational factors (i.e. relationship orientation, trust, communication, learning, power, reciprocity and commitment) that shape a specific relationship, the proposed framework enables marketers to analyze their firms diverse relationships. The paper provides a meaningful starting point for developing strategies to change the type of relationship with a specific stakeholder.
Keywords: stakeholders, relationship marketing

Introduction Marketing is increasingly recognizing that in order to be effective firms need to consider a broader range of stakeholders, other than just consumers (Achrol, 1997; Greenley and Foxall, 1996; Gummensson, 1994; Kimery and Rinehart, 1998; Menon and Menon, 1997; Polonsky, 1996; Polonsky et al., 1999; Reidenbach and McClung, 1999; Slater, 1997). While realizing the importance of other groups is an important first step, the marketing literature has, for the most part, failed even to identify which stakeholders should be considered and/or how their interests should be considered. Thus it could be suggested that stakeholder theory has generally yet to catch on in marketing (Miller and Lewis, 1991, p. 55). However, some recent work seems to suggest that this may be changing and marketers are beginning to apply a stakeholder framework (Kimery and Rinehart, 1998; Menon and Menon, 1997; Murphy et al., 1997; Polonsky et al., 1999; Reidenbach and McClung, 1999).



In considering who are stakeholders, one of the more widely accepted definitions of stakeholders is that they include . . . all of those groups and individuals that can affect, or are affected by, the accomplishment of organizational purpose (Freeman, 1984, p. 46). While Mitchell et al. (1997) have identified that a range of alternative definitions of stakeholders has also been used, within this work we will rely on a Freeman-type definition. Considering the interests of various stakeholders is important, authors such as Agle et al. (1999), Berman et al. (1999) and Henriques and Sadorsky (1999) have identified that firms attempt to broadly consider stakeholders whom they think are important. However, none of the marketing literature and little of the stakeholder literature (e.g. Savage et al., 1991) has suggested or tested ways in which firms can identify stakeholders interests or what strategies can be used to address stakeholders interests, should they be identified (Polonsky, 1996). Although, Frooman (1999) has put forward strategies that stakeholders can use to influence organizational behavior. Within all these works there has been limited examination of how firm-stakeholder relationships evolve and/or how more mutually beneficial relationships can be developed. For the most part, these works have always focused on the positive side of relationships and completely ignored the negative side of relationships. As such, it appears there is a lack of strategic understanding or at least a lack of research into this area. This seems to be somewhat surprising, as firms are continually attempting to develop stronger stakeholder networks (Rowley, 1997), involving a broader range of stakeholders. Understanding firm-stakeholder relationships from positive and negative perspectives can enable marketers/managers, on both sides (i.e. managers of firms and managers of stakeholder organizations) to better understand these relationships and thus better manage this process. The objective of this paper is to assist in better understanding the application of stakeholder theory to the analysis of marketing relationships. It first provides a stakeholder overview of various types of relationships using the ladder of stakeholder loyalty and then discusses the relational factors (i.e. relationship orientation, trust, communication, learning, power, reciprocity and commitment) that shape a specific relationship. The paper then examines how these relational factors can be used to identify the different types of stakeholder relationships suggested by the ladder of stakeholder loyalty and discusses the implications of taking a stakeholder perspective to examining marketing relationships.

A Stakeholder Relationship View It can be argued that a stakeholder perspective lies at the core of relationship marketing, in that stakeholder theory extends the number of stakeholders with which the firm has relationships with and that these relationships are usually interdependent (Gummesson, 1994; Polonsky et al., 1999). Slater (1997 p. 164) explicitly discussed stakeholders and suggested that marketers need to provide superior customer value while considering the interests of other key stakeholders. As such stakeholders, and therefore stakeholder theory, should be integrated into relationship marketing. If this is the case, stakeholders



need to be considered in all marketing activities directed towards establishing, developing and maintaining successful relationship exchanges, which is the definition of relationship marketing put forward by Morgan and Hunt (1994 p. 22).Authors such as Murphy et al. (1997) go further, suggesting that a stakeholder framework can be used to measure overall satisfaction of relationships within an exchange network. Thus, firms need to broaden the way in which they deal with traditional marketing exchanges and move away from the traditional one-off transactional approach to a relationship marketing perspective (Gronroos, 1991; Polonsky et al., 1999). In fact, authors such as Gummesson (1994) and Miller and Lewis (1991) suggest that the marketing exchange process involves a substantial number of stakeholders (30 and 51, respectively) and as such firms need to move away from simply considering how they interact with consumers (Sheth et al., 2000). This means that firms and their stakeholders form long-term relationships, in which they share responsibilities and benefits, trust each other and are engaged in some coordinated planning, as is suggested with any relationship (Dwyer et al., 1987). Adopting a stakeholder perspective to relationship marketing implies the acknowledgement that each partner has a stake in the others activities. In this way both side should think of ways to appropriately involve each other in strategy formulation and implementation processes (Kimery and Rinehart, 1998; Polonsky et al., 1999). The earlier suggestion, that for the most part marketers have not embraced stakeholder theory, does not mean that marketers have totally ignored stakeholder theory either. Kimery and Rinehart, 1998; Polonsky (1996) and Polonsky et al. (1999), Reidenbach and McClung (1999) all explicitly discussed how marketers could broaden their view to consider stakeholders using stakeholder theory. Koiranen (1995) also examined this issue and puts forward an expanded definition of relationship marketing that includes stakeholders. He suggests relationship marketing is a marketing approach to establish, maintain and enhance long-term relationships with customers and other internal and external stakeholders so that the objectives of the parties involved are met (p. 84). As mentioned earlier, Gummesson (1994) suggested that there are 30 potential types of stakeholder relationships and suggested that managers need to prioritize and establish the mix of relationships essential to the companys success. While Gummesson (1994) identified stakeholders in terms of relationships that need to be managed, he did not address the development or management processes for these relationships. Unfortunately, like other authors Koiranen (1995) and Gummesson (1994) failed to identify how firms can or should interact with its stakeholders in either the short-term or long-term and only identified that such interactions should take place. In line with the broader stakeholder-relationship process, Tuominen (1995) also has suggested that organizations need to develop effective long-term stakeholder relationships. The view that stakeholder relations evolve over time is also supported within the more general stakeholder literature. For example, Savage et al. (1991) point out that . . . the specific context and history of the organizations relations with that stakeholder. . . (p. 65) are important to managing the relationship. Hosseini and Brenner (1992) agree and suggest that the history of decision making within these organizations and the effect of their decisions on organizational performance must be addressed (p. 116). In this way it



Figure 1. The ladder of stakeholder loyalty (Tuominen, 1995, p. 167).

is important for marketers to identify and understand how these stakeholder relationships evolve, if they are to influence the relationships development. In examining stakeholder relationships Tuominen (1995) suggested that firms attempt to move stakeholders up a ladder of stakeholder loyalty whereby they strengthen existing stakeholder relationships (See Figure 1). This process might be considered to very loosely describe how stakeholder relationships evolve, although it does not explicit identify if there are any factors that drive the evolution of these relationships. Tuominen refers to the practice of moving stakeholders up the ladder of loyalty as stakeholder-keeping, which he suggests, is different to stakeholder-catching, i.e. developing new relationships. Reidenbach and McClung (1999) emphasize the importance of stakeholder-keeping and go so far to suggest that stakeholder retention (i.e. keeping) is where most organizational value is created. If this is the case, it is even more important that firms better understand and develop stakeholder relationships. The traditional relationship marketing literature also emphasizes the benefits of keeping existing stakeholders satisfied (Gronroos, 1991). In this way, in addition to finding new customers, firms need to keep their existing stakeholders satisfied or at least minimize these stakeholders level of dissatisfaction (Murphy et al., 1997; Polonsky, 1996). While the ladder of stakeholder loyalty identified by Tuominen is a useful starting point for evaluating how stakeholder relationships evolve, it is fairly simplistic in nature and assumes that all stakeholders will ultimately be supportive of organizational activities. This assumption appears to fail to take into consideration that firm-stakeholders interactions are complex (Berman et al., 1999; Mitchell et al., 1997; Polonsky, 1996; Polonsky et al., 1999; Rowley, 1997). Authors such as Frooman (1999) and Polonsky (1996) have both suggested that stakeholders have the ability to directly cooperate and



directly threaten organizational activities, as well as indirectly influence organizational activities. For example, Shell learned that stakeholder management could be crucial when it decided to dump the Brent Spar oil storage platform at sea. Greenpeace aggressively attacked this action as being the wrong option, even though Shell could provide ample scientific evidence that this was the least environmentally harmful solution. Greenpeace directly impacted on Shells decision through its direct assaults on the firm and indirectly through the generation of publicity that resulted in additional support from other sympathetic stakeholders. Given that these relationships are complex, we posit that the ladder of stakeholder loyalty can be broadened to take into consideration negative stakeholder influences as well. The broadened ladder may serve to locate a firms actual and potential relationships with stakeholders. Thus, firms can develop strategies to minimize the gap between the stakeholders actual and the desired position on the ladder, from the firms perspective (Murphy et al., 1997). However, before discussing this expanded ladder of stakeholder loyalty and the associated strategic implications, it is necessary to examine moderating factors that might influence firm-stakeholder relationships and the process of relationship development.

Relational Factors that Influence Stakeholder Relationships There are a number of moderating variables that can influence how stakeholder relationships evolve (Schuppisser, 1998) and these moderators point to strategy options for organizations seeking to form and/or manage stakeholder relationships. The specific strategy used to influence firm-stakeholder relationships will vary depending on the gap between the actual and desired position of a stakeholder (Murphy et al., 1997) within the expanded ladder of loyalty. As such it is important to understand these moderating factors, which in turn may be used to direct strategy development and strengthen relationships. However, it should be emphasized that this is a broad-based process and it is not suggesting that firms can manage (i.e. control) their stakeholders, as pure stakeholder management implies that the firms interests supersedes their stakeholders which is not the case (Gray, 1989; Polonsky et al., 1999). When evaluating stakeholder relationships it is essential that organizations understand these relational factors as they may moderate the development of the firm-stakeholder relationship (Achrol, 1997). While the factors to be discussed in the following sections are derived from the management and relationship marketing literature, much of the marketing literature has treated many of these factors as either dependent or independent variables. Stakeholder theory might suggest that there is extensive interaction amongst these moderating factors (Mitchell et al., 1997). Further work needs to consider these interrelationships, especially if one is interested in the dynamics of continuing firmstakeholder interactions. In a fluid business environment it might be difficult to determine which factors are the dependent variables and which ones are the independent variables in a continuous stream of actions and decisions. While the following subsections individually discuss the following relational factors relationship orientation, trust, communication, learning, power and reciprocity and



commitment - they are all, in fact, interdependent. In addition they both serve to describe the nature of a relationship at a specific point in time (i.e. are dependent variables to some extent), and on the other hand represent levers/motivators for parties to change the nature of their relationship (i.e. are independent variables to some extent). Linkages between moderating factors are well recognized in the relationship marketing literature with authors such as Morgan and Hunt (1994) who suggest that trust, communication, power and commitment, as well as other variables, all influenced the firm-stakeholder relationship, although they did not refer to these other parties as stakeholders. In addition, stakeholder authors (Berman et al., 1999; Mitchell et al., 1997; Savage et al., 1991) have suggested that a range of variables might moderate the firm-stakeholder relationship. As such relevant moderating factors need to be carefully considered when firm build and manage relationships with stakeholders. Relationship Orientation Relationship orientation guides the parties behavior and responses in the relationship (Deutsch, 1982; Hosseini and Brenner, 1992). At the same time, the kind of behavior the parties experience of the other does shape their relationship orientation (Savage et al., 1991). We use the term relationship orientation to refer to the motivational and evaluative orientations of the parties towards the relationship with each other, rather than the effect and affect orientation discussed by Berman et al. (1999). With regard to the motivational element one can distinguish between cooperative, individualistic and competitive relationship orientations (Deutsch, 1982). With a cooperative orientation, a party takes the welfare of the other party as well as its own welfare into consideration. Having an individualistic orientation means that a party only is interested in doing as good as it can and does not bother how well the other party does. With a competitive orientation a party not only seeks to do as well as it can for itself but also tries to defeat the other party. Throughout the course of the relationship, parties continuously evaluate their interactions. We suggest that their evaluations can be attributed to an operational or strategic evaluation mode. An operative mode is used when parties are concerned with evaluations of short-term cost-benefit or efficiency implications of past interactions and when they emphasize the risks inherent to the relationship instead of opportunities. In contrast, the strategic mode centers on long-term opportunities of the relationship, searches for strategic options facilitated by the relationship, regards the relationship itself as a strategic resource and emphasizes the investment character of the relationship (Barney, 1991; Hall, 1993). Trust The second relational factor is trust between the parties, which has also been discussed as an important moderator in the relationship marketing literature (e.g. Morgan and Hunt, 1994; Moorman et al., 1992). We will define trust as the willingness of one party to be vulnerable to the actions of another party (cf. Mayer et al., 1995). Accordingly, distrust would mean the willingness of a party to avoid any vulnerability to the other party. Many



researchers such as Rotter (1967) have treated trust and distrust as two ends of a continuum, although some suggest they are both independent constructs. For example, Sitkin and Roth (1993) say that trust is a belief in a persons competence to perform a specific task under specific circumstances, whereas distrust is a belief that a persons values or motives will lead them to approach all situations in an unacceptable manner. However it can be suggested that trust and distrust are polar opposites, as actor vulnerability is the important issue (Bigley and Pearce, 1998). Lewicki and Bunker (1995) distinguished between three forms of trust (i.e. calculusbased, knowledge-based, identification-based) that build on each other. In calculus-based trust (CBT), trust is an ongoing, market-oriented, economic calculation whose value is derived by comparing the outcomes resulting from creating and sustaining the relationship to the costs of maintaining or severing it (Lewicki and Bunker, 1995, p. 145). If a relationship is based on CBT, parties trust each other because they believe that to some extent they can control the costs and benefits of the others actions, such that the other party is anxious to act consistently. For instance, if the nature of the interactions between the parties is such that each single transaction contains some of the elements of benefit that accrues to the parties, parties do no try to breach the trust as they would forego a substantial amount of future benefits. The second form of trust is knowledge-based trust (KBT) that relies on information and is unlike CBT, which is based on some form of deterrence. KBT can prevail in a relationship if the parties have got to know each other very well, so that the others behavior is predictable because one knows how the other will act in a specific situation. The third form of trust is identification-based trust (IBT). It exists when the parties thoroughly understand, agree with and endorse each others intentions and goals. They share the same needs, choices and preferences. Each can effectively act for the other. Lewicki and Bunker (1995) suggest that CBT is usually the first form of trust in a relationship and is strengthened in a stepwise fashion as the number and significance of interactions increase. However, every breach of trust may set back the relationship evolution by several steps. CBT is very fragile. When the knowledge about each other has increased over time and interactions, it is likely that KBT will emerge. KBT then may represent the ground on which parties develop some collective identity, start creating common products and pursuing common goals such that IBT can evolve. In contrast to CBT the more developed forms of trust (IBT and KBT) are more resilient in regards to breaches of trust. In these other cases additional knowledge about the other party helps explain their actions and it is more likely that communication will be maintained in those relationships despite the other parties inconsistent behavior. Communication Although relationships are impossible without communication, the relationship marketing literature often fails to include the communication process as a critical dimension in relationship building (Duncan and Moriarty, 1998, p. 3). Communication in firm-stakeholder relationships may vary with regard to frequency, direction, modality and content (Mohr and Nevin, 1990). Mohr and Nevin (1990) distinguish between two combinations



of these facets of communication: The collaborative combination, which includes higher frequency and more bi-directional flows, informal modes and indirect content, i.e. parties try to change the others beliefs and attitudes about the desirability of an intended behavior without requesting specific action. The autonomous combination includes lower frequency and more unidirectional communication, formal modes and direct content. Relationships can also be described in relation to the prevalent communication style, which may indicate what parties try to achieve when communicating (Zerfass, 1996). A persuasive communication style is used when a communicating party already knows what it wants to achieve and thus communication merely serves to bring the other to the point where it complies with it. Persuasive communicators do not disclose their intentions and goals, as the parties are not willing to change them as a result of communication with the other. With a persuasive communication style a party thus tries to instrumentalize the other in order to achieve its own goals. In contrast, parties who pursue an argumentative communication style offer the recipients information that allows them to test the truthfulness of an assertion or the legitimacy of a demand. Here, communication serves to enter a process of common sensemaking that will lead to solutions that are jointly created and thus represent a consensus and not a temporary compromise that will be questioned as soon as the distribution of power has changed. Finally, an informative communication style genuinely does not include any specific influence attempt but serves to communicate objective information. Learning Another important relational factor that has not been extensively discussed in the relationship marketing literature is individual/individual learning. Interactions always offer the parties the opportunity to learn something about how actions affect oneself, the other party or the common relationship. An interactive relationship enhances each organization spanning its boundaries to learn to learn more (Cohen and Levinthal, 1990). The organization also increases its capacity to learn from its interaction with other firms and other organizations (e.g. research and regulatory institutions) and with the larger industrial and marketing networks in which it participates (Fynes and Antti, 1998). Representatives of the parties learn, on the basis of their specific organizational context as they enter a learning cycle. This consists of (1) conceiving of valuable goals and (2) appropriate actions, (3) acting, (4) experiencing the outcomes of these actions and (5) evaluating the outcomes in order to conceive of other goals or actions. Depending on what is changed in the continuous movement through this cycle, different forms of learning can be distinguished. When evaluations of outcomes are not satisfactory and a party considers more efficient instrumental actions for achieving the unchanged valued goals, but is not willing or able to challenge the appropriateness of the pursued goals, it engages in single-loop action-learning (Argyris and Schon, 1978). For instance, a marketer learns in single loops when he increases the promotional budget for a green product that does not sell as expected. In contrast, when engaged in double-loop actionlearning a party does not only regard instrumental actions as variable but also is willing and able to change the goals pursued. In double looped learning the marketer would also



be open to the question whether the green product really is an ecologically sound product at its core, which may explain the products poor sales. In triple-loop action-learning (Nielsen and Bartunek, 1996) a party is open to questioning instrumental actions, valued goals and in addition is willing and able to consider potential biases in their organizations context, that makes some actions and some goals more valuable than others. If marketers engage in triple-loop action-learning, as previously described, they would consider if the firms stated overall product development strategy, its accounting and compensation systems and its cultural openness for collaboration with untraditional partners, such as environmental groups, is supportive enough to market a sound and credible ecological product that convinces ecology-sensitive buyers. Power The relational factor power concerns the types of resources parties use to influence another party to behave as it would not otherwise have done (Pfeffer, 1981). Etzioni (1964) distinguishes between three types of power (coercive, utilitarian, normative), which also have been referred to by the stakeholder theorists such as Mitchell et al. (1997) and Agle et al. (1999). Parties can use coercive power, which is based on physical resources of force, violence, or restraint. Alternatively they can employ utilitarian power, which is based on material or financial resources. Last, they may use normative power, which is based on symbolic resources, such as access to mass media or stakeholder communication. Often various types of power are combined. For instance, when a non-governmental organization organizes a protest demonstration in front of a business firms production facilities (coercive power) and thereby attracts media, which will report about the event (normative power). In this way stakeholders may be able to directly, and/or indirectly, use their various types of power to influence organizational outcomes (Polonsky et al., 1999). Reciprocity and Commitment In the relationship marketing literature commitment has been recognized as an essential ingredient for successful long-term relationships (Gundlach et al., 1995; Dwyer et al., 1987). Although as Gundlach et al. (1995) and Meyer and Allen (1991) suggest, one can distinguish several components of the commitment construct, we want to concentrate on the behavioral dimension. From a behavioral point of view, a party commits itself to a relationship if it takes actions that create a self-interest stake in the relationship and that demonstrates to the other party the willingness to undertake consistent future behavior. Commitment thus binds the parties, as past inputs in the relationship are difficult or impossible to redeploy to another relationship in the same form (Gundlach et al., 1995). In other words, there are high switching costs, which have been shown to strengthen marketing relationships. Inputs may involve resources, effort or attention devoted to the relationship (Brock, 1998). Because commitment in relationship marketing literature is always discussed in the context of valuable long-term relationships, only the positive side of commitment is emphasized. However, through their devotion of resources, effort and attention, parties can



also commit themselves to less constructive courses of action. This is exemplified by Geyskens et al. (1996) who suggest that calculative commitment has positive influences on development of alternatives for a relationship and opportunistic behavior. Calculative commitment is based on inputs such as investment and allocation of resources specifically for the relationship between business partners (Williamson, 1985). Calculative commitment stems from a cognitive evaluation of the instrumental worth of a continued relationship with the organization. Linked to the perceived significance of relationship commitments of the parties is the question of what pattern of committing actions between the parties can be observed, i.e. how the parties reciprocate their actions and/or commitments. Reciprocity is at the core of marketing relationships (Bagozzi, 1995). Reciprocity specifies that one should repay help with help, or at least not repay help with harm (positive reciprocity); and/or that one should repay harm with harm or at least not repay harm with help (negative reciprocity or revenge) (Meeker, 1983, p. 22). Firm-stakeholder relationships may vary in the degree of adherence to the norm of reciprocity or degree of mutuality and the form of reciprocity applied. Over time, action patterns of either positive or negative reciprocity may be identified in a relationship. The longer a certain type of pattern exists the harder it gets for the parties to change behavior. Furthermore, the action of the pattern can be described according to the strength of reciprocity. If the strong form prevails, parties interaction patterns take the form of equivalent and synchronized quid pro quo exchanges, which ensure that parties are even at every point in time. This form is typical for traditional transactional marketing interactions. As the strong form of reciprocity requires equivalent and immediate response to the other partys actions interactions cannot be too complex. Over time when parties have experienced that others will positively reciprocate own actions on a regular basis, parties may start to engage in more complex interactions that inherently prevent an immediate and equivalent response (Dwyer et al., 1987). Parties thus no longer expect a strong form of reciprocity but allow for longer times for reciprocation and do not try to meticulously balance their contribution-benefit accounts at every point in time. Such a weak form of reciprocity is typical of relationship based marketing interactions.

The Extended Ladder of Stakeholder Loyalty Having examined factors that moderate firm-stakeholder relationships, these can be integrated into the extended ladder of stakeholder loyalty, which results in the renaming of the rungs of Tuominens (1995) original ladder (See Figure 2). The names of the expanded version of the ladder might not appear to significantly differ with the original version and in fact these names are similar to those developed by Freeman (1984) and Savage et al. (1991) for stakeholders, based on their ability to directly cooperate and threaten organizational activities. However, the discussion of the underlying moderating dimensions enables all types of stakeholder influences to be considered, not only supportive stakeholder influences, as is done in Tuominens original ladder (see Figure 1). In addition to renaming the rungs, each of the relational factors has been discussed in



Figure 2. Expanded ladder of stakeholder loyalty.

relation to that rung. Each of the new rungs of the expanded ladder is discussed in the following subsections and are summarized in Figure 2. This discussion firstly examines the highest rung on the ladder and then works its way down. Allied Stakeholders These are stakeholders with whom the firm shares a cooperative relationship orientation, such that both parties understand that their own welfare is bound to the welfare of the other. Although they monitor their short-term cost and benefits, they, however, evaluate their relationship strategically, i.e. in terms of future options and opportunities. Their common experiences have led the parties to an identification-based form of trust, such that each party can effectively act for the other as they have come to share joint goals, needs and preferences. This highest form of trust has been achieved over time due to the argumentative and collaborative communication style (Mohr and Nevin, 1990). In addition, both parties have been willing and able to enter even in triple-loop action learning cycles, which have allowed them to change their individual organizational contexts such that they could shape a true win-win relationship, which may be continuously adapted to external and internal requirements. Both parties are highly committed to the relationship through, for instance, idiosyncratic relationship-specific investments. Therefore, a weak and positive form of reciprocity prevails in the relationship and parties can jointly plan and unilaterally invest for the very long term. With regard to power, the nature of the other relational factors makes it very unlikely that one of the parties tries to exert power upon the other. Parties act on consensus, not on power-moderated compromises.



Cooperative Stakeholders Cooperative and allied stakeholders behave the same in regard to relationship orientation and evaluation modes. However, trust is not based on identification, but on the profound knowledge that the parties have about each other. As parties know enough about each other so that they may understand the reasons behind an unexpected and inconsistent behavior by the other, the relationship is resilient. Thus, parties make some commitments to the relationship, but are reluctant to make too specific commitments. They reciprocate the others limited commitments and are also willing to allow for weaker forms of reciprocity as long as their commitments are not too relationship specific. Otherwise, they signal and work for a stronger form of reciprocity. In contrast, to allied stakeholder relationships power is more important but influence attempts are restricted to normative resources. Accordingly, communication is not always argumentative, but in some instances, may be persuasive. Furthermore, communication may be more formal and of direct content than in allied stakeholder relationships as parties try to secure their own limited commitments. Parties are willing to change their valued goals and thus to enter double-loop learning, when they see some opportunity to improve their cooperative relationship. However, the relationship is not regarded as so important and promising, that they would be willing to change their own organizational context to achieve some potential goals. Neutral Stakeholders In relationships with neutral stakeholders, the firm and the stakeholder share individualistic relationship orientations. They interact with each other to achieve their individual goals, although they perceive their goals as independent of the other partys goals. Accordingly, the relationship is evaluated in an operative mode, such that the assessment is focused more on short-term interactions. The parties trust each other and make themselves vulnerable by the other only in so far as they believe that they can control each others costs and benefits of opportunistic behavior. Communication is informative or persuasive and takes place only when parties are negotiating about a specific transaction. It is rather formal and contains mainly requests for specific actions. As the parties individual goals are perceived to be independent, learning is predominantly single-looped, i.e. parties rather would change the relationship partner than change their valued goals. Learning loops serve to find more efficient instrumental actions to achieve individual goals. Thereby, parties often try to use their power based on normative but especially on utilitarian resources to reach their goals. The parties try to avoid actions that commit themselves to this specific relationship and insist on reasonable quid pro quo exchanges, which let them break off their relationships any time without incurring any larger losses. Competitive Stakeholders Competitive stakeholders have a relationship with the firm that is based on an individualistic and sometimes a competitive orientation, such that they not only try to reach their



individual goals, but also strive for outperforming the other. They perceive each other as engaged in a zero-sum game. Accordingly, they evaluate interactions in the relationship in an operative mode, such that they work for minimizing own costs and maximizing own benefits. Consequences for the other party have minimal impact. Regular communication between the two is rare, but when it occurs it is distinctly persuasive in the sense that it serves to impress the other and signal to the other what one does regard as ones own turf that will be defended when the other tries to interfere with it. The parties instrumentalize each other to achieve their individual goals. Accordingly, communication is often unidirectional, formal and/or directed. To a large extent the parties try to influence and outperform the other by means of their utilitarian and normative power. Strong forms of reciprocity mainly apply to harming or negative influencing attempts by the other. Furthermore, parties try to avoid any commitments to the relationship. Trust only develops in so far as the parties can be sure that they tightly control the calculus of the others costs and benefits with regard to a breach of trust. Threatening Stakeholders Organizations regard their relationship as a struggle in which only one of them can prevail. As their relationship is characterized by distrust both try to avoid vulnerability to the other. Communication in general is rare, although there may be some intense intermittent bursts, for instance when parties try to strike the decisive blow. Especially in these intense phases communication is persuasive in character and sometimes even becomes manipulative, i.e. parties not only try to achieve their own goals through communication but also deliberately send messages that mislead the other in their effort to understand what they themselves are up to. Whereas, in general communication is unidirectional and formal, in these intermittent phases it may become more bi-directional and informal in the sense of spontaneous and personalized. The content is always very direct, i.e. the parties demand specific actions from each other. Due to the prevailing relationship orientation and the character of communication learning is single-looped and mainly focused on finding more efficient ways to outperform the other. Attempts to exert influence on the other are very common. Here parties use every base of power they possess, even coercive power. Parties may become very committed to the relationship through their actions. However, the purpose of this commitment is not achieving a common goal, but winning over the other. As a matter of fact, parties may find themselves engaged in a genuine exchange of blows if they are devoted to a negative and strong form of reciprocity.

Implications Broadening the ladder of stakeholder loyalty will enable firms to identify the more supportive and the more antagonistic stakeholders, as well as identify broad-based approaches that can hopefully be used to move stakeholders along the ladder or stabilize their position. In the case of the supportive stakeholders the firm would want to maintain or increase their support, whereas the strategies aimed at the antagonistic stakeholders



would be designed to either reduce their influence on the firm or their negative attitudes towards the firm and its activities. However, it may not be possible, desirable or efficient to position every positively oriented stakeholder on the top of the ladder, i.e. to have a true allied relationship with every stakeholder. Such an approach would require extensive resources to maintain these stakeholder groups and while some of these groups might be cooperators or allies of the firm their abilities to influence the firms performance might be minimal. Such attempts to improve relationships may not be an effective utilization of resources. When comparing the desired positions with the actual positions of the stakeholders, marketers must start thinking about formulating strategies that either move stakeholders on the ladder or keep stakeholders where they are. Therefore, they should take into account how the relationship has developed so far. For instance, a competitive stakeholder might want to look on how long it has been involved in this kind of relationship. Are they just about to establish it, or have they had a long history of competitive episodes? In the first case one can assume that, for instance, competitive relationship orientations are not so well corroborated by actual experience than in the latter case. Thus, the change in the nature of the relationship might be easier in the first case than in the second. Of course, the categories in the expanded ladder of stakeholder loyalty are ideal. In business it is not always easy to place every relationship in exactly one category. However, the suggested set of relational factors complements analytical concepts in the stakeholder literature and the relationship marketing literature with a rationale to describe and analyze the history of the relationship. It is one thing to analyze what has happened in a relationship so far, and it is a different thing to formulate strategies for making things happen in the relationship in the future. The relationship analysis does place specific stakeholders on various rungs of the ladder of stakeholder loyalty. Marketing strategists within firms must develop tactics that facilitate the movement of stakeholders to the most desirable positions. It is important to note that moving a relationship on the ladder will most often require both parties to act, i.e. the firm and its stakeholder must both commit energy and effort to the relationship development and over time both parties may modify their actions and or expectations (Polonsky, 1996). However, one party can initiate change within the relationship, although the modifications required will most likely not be equal. The set of relational factors does suggest some reasonable starting points for strategies/ tactics. For instance, a firm could ask if a change in its relationship orientation is necessary and what measures in the organizations context might facilitate these changes. Many things that are observable for and can be experienced by the other party depend on the relationship orientation of the firm. The relationship orientation significantly shapes what can be noticed in the environment, how these events and stimuli are motivationally and evaluatively interpreted, and finally how the firm acts or reacts on these interpreted cues. Thus, it is very likely that a change in the relational dimension of a firm-stakeholder relationship can be induced by an autonomous change in the firms relationship orientation. As suggested above, it is challenging to move a relationship that has been stabilized for a long period of time on the competitive rung of the ladder to the cooperative rung. The relational factors at least indicate some starting points to signal the other party



that the firm intends to improve the firm-stakeholder relationship. For instance, a firm can change its communication, providing other and/or more information that shows the stakeholder that the firm is trying to be regarded as truthful and trustworthy. What is said can be corroborated by actions that commit the firm to its new intended way of relating to the stakeholder. Actions of the stakeholder can be reciprocated in a way to support the achievement of the desirable rung. Understanding how stakeholder thinking can be used to foster more supportive, or less disruptive, relationships from both an academic and managerial perspective is only a first step. There may be numerous approaches to implementing strategies designed at developing better relationships and these will most certainly vary based on the interaction of the relational factors. Better understanding of relationships using the proposed stakeholder framework may assist in developing more effective implementation programs, which should in turn bring about more effective outcomes. Of course, these outcomes need to be considered in the light of the stakeholder networks that facilitate them, which means that organizations need to move beyond simple firm based measures of organizational success. However, measuring the overall success of a stakeholder network is something that will require complex mechanisms that aggregate a diverse range of entities, as each member in the network may have differing or even competing goals (Wood and Jones, 1995). Future work should consider this multiplexity of mechanisms for measuring the success of a set of relationships to broaden the theoretical underpinnings of this study.

1. Phone: (61-3) 9688-4625 Fax: (61-3) 9688-4931. 2. Phone: 411 421 23 00 Fax: 411 421 23 99. 3. Phone: 765 494 7754 Fax: 765 496 4984.

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Professor Michael Jay Polonsky is the Melbourne Airport Chair in Marketing at Victoria University in Australia. He has previously taught at a range of institutions in Australia, New Zealand, South Africa and the US. His areas of research include environmental marketing/management, stakeholder theory, ethical and social issue in marketing, cross- cultural studies and marketing education. He has published extensively across these areas including works in Journal of Market Focused Management, Journal of Marketing Communications, European Journal of Marketing, Business Horizons, Journal of Marketing Theory and Practice, Journal of Business Ethics, Journal of Macromarketing, Journal of Marketing Management, International Journal of Nonprofit and Voluntary Sector Marketing, Business Strategy and the Environment, International Journal of Retailing and Distribution



Management, Journal of Organizational Change Management, Journal of Business and Industrial Marketing, International Marketing Review, International Journal of Advertising, and Journal of Advertising Research. Dr. des. Stefan Schuppisser works as a consultant in the Zurich (Switzerland) office of the international th and Partner. Previously he was chief assistant in the Strategic Management management consulting firm Horva Department of the Institute for Research in Business Administration at the University of Zurich, Switzerland. His teaching and research interests include the interfaces between strategic management, stakeholder management and business and society. Srikanth Beldona is a Ph.D. candidate at the Department of Hospitality and Tourism Management, Purdue University, USA. Prior to this, he graduated with an MBA from the Graduate School of Business, University of Newcastle, Australia. His research interests are in Inter-Organizational Relationships, Impact of Technology on Service Organizations and Knowledge Management.