A Stakeholder Perspective for Analyzing Marketing Relationships

A Stakeholder Perspective for Analyzing MarketingRelationships

DR. MICHAEL JAY POLONSKY1 [email protected]

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 [email protected]

Horvath & Partner AG Fluehgasse 17 CH-8008 Zurich (Switzerland)

SRIKANTH BELDONA3 [email protected]

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 commit-

ment) that shape a specific relationship, the proposed framework enables marketers to

analyze their firm’s 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).

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

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, learn-

ing, 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

POLONSKY, SCHUPPISSER AND BELDONA110

need to be considered in ‘‘all marketing activities directed towards establishing, devel-

oping 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 other’s 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 stake-

holders. 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 company’s 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 ‘‘. . . thespecific context and history of the organization’s 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

ANALYZING MARKETING RELATIONSHIPS 111

is important for marketers to identify and understand how these stakeholder relationships

evolve, if they are to influence the relationship’s 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. Reiden-

bach 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

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


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 Shell’s 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 firm’s actual and potential relationships with

stakeholders. Thus, firms can develop strategies to minimize the gap between the stake-

holder’s actual and the desired position on the ladder, from the firm’s 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 relation-

ships 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 firm’s 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 firm-

stakeholder 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 cooper-

ative 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 interac-

tions. 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 person’s competence to perform a

specific task under specific circumstances, whereas distrust is a belief that a person’s

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. calculus-

based, 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 other’s 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 other’s

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-stake-

holder 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 andmore 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 sense-

making 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 action-

learning 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 product’s 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 organization’s

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 firm’s 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 firm’s 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 commit-

ment 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 party’s 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 Tuominen’s (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 Tuominen’s original ladder (see Figure 1).

In addition to renaming the rungs, each of the relational factors has been discussed in


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 argumen-

tative 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.

Figure 2. Expanded ladder of stakeholder loyalty.


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

other’s 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 individu-

alistic relationship orientations. They interact with each other to achieve their individual

goals, although they perceive their goals as independent of the other party’s 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 other’s 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 individu-

alistic 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 one’s 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 other’s 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 organization’s 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 firm’s 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.

Notes

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

management consulting firm Horvath and Partner. Previously he was chief assistant in the Strategic Management

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.


Documents

A Stakeholder Perspective for Analyzing Marketing Relationships