Doctoral Program in Marketing and Strategy

Paper analysis

- “Relationship marketing in the not-for-profit sector: an extension and application of the

commitment-trust theory ”

- Keith MacMillan; Kevin Money; Arthur Money and Steve Downing

Journal of Business Research, 2003

César Ferreira

Março de 2010

CONTENTS Introduction .................................................................................................................................................. 3

Paper Analysis .............................................................................................................................................. 4

Conclusions ................................................................................................................................................... 9

INTRODUCTION The paper in analysis is a practical application of the Commitment-thrust theory

proposed by Morgan and Hunt (2004) with the Commitment-trust theory of

relationship marketing.

Morgan and Hunt present this theory using a KMV (Key mediating variables) model.

“Because we hypothesize that relationship commitment and trust are key constructs.

We position them as mediating variables between five important antecedents (i.e.,

relationship termination costs, relationship benefits, shared values. communication,

and opportunistic behavior) and five outcomes (i.e., acquiescence, propensity to leave,

cooperation, functional conflict, and decision-making uncertainty).”1

1 The Commitment-Trust Theory of Relationship Marketing – Morgan Robert M. Morgan & Shelby D. Hunt – Journal of Marketing, July 1994

They build a model that we can present like this. We picked up this picture from the

paper in analysis.

PAPER ANALYSIS In the paper that we are analyzing the authors adapt this model and use it in the NPO

(not-for-profit) sector. This paper researches the relations between funders and NPO´s.

Their goal was to present a NPO-funder relationship model. The major transformation

is explained in the first part.

1. The concept of relationship benefits is replaced by two new constructs: material

and nonmaterial benefits.

2. The trust–commitment link is mediated by nonmaterial benefits.

3. Material benefits are an antecedent of commitment, replacing the relationship

benefits construct of Morgan and Hunt.

4. The communication construct is extended to include items that reflect the two-

way nature of this process—both informing and listening. Only the former is

included in the Morgan and Hunt model.

5. The commitment and relationship termination cost constructs, used by Morgan

and Hunt, require minor adaptation in the wording of the construct items.

6. The opportunistic behavior, shared values and trust constructs are replaced by

more appropriate scales from other published works.2

MacMillan et al. presents this model that we selected from their work

As we can see this is a transformation of the seminal model but with significant

differences that we are going to detail:

2 Relationship marketing in the not-for-profit sector: an extension and application of the commitment–trust theory – Keith MacMillan, Kevin Money, Arthur Money, Steve Downing – Journal of Business Research, August 2003

In this work Macmillan et al. proposes:

Material and nonmaterial benefits to replace Relationship Benefits; they present

this new construct arguing that:

“In the process, the terms were renamed ‘‘material’’ and ‘‘nonmaterial’’ benefits.

These material benefits included, for example, funders learning from the NPO and

receiving positive publicity from their relationship with it (…).Nonmaterial

benefits, on the other hand, included the belief that the NPO was making efficient

use of its donated funds and that it was having a positive impact on the people

for whom these funds were intended

About communication: They argue that communication doesn´t have to do just

with: frequency, relevance and timeliness of communication from the

organization to the customer, thus, they propose that communication had to be

“a two-way process involving, listening to, as well as informing funders. Listening

would include funders’ opinions about the NPO and identifying their needs and

motivations in the relationship.”

Concerning Shared values: “Following Morgan and Hunt (1994), shared values

are described in terms of statements relating to the participants’ perceptions that

an NPO has similar values to themselves. An instrument developed by Swasy

(1979) embraces the conceptualisation as described above in a context-free set of

statements. It was, therefore, adapted for use in this study. The adaptation

involved changing the wording of individual statements in the Swasy (1979)

instrument to capture individuals’ perceptions of the extent to which they share

the same values as the NPO.”

As for nonopportunistic behavior: “Morgan and Hunt (1994) use a construct

labelled opportunistic behaviour. We use a construct labelled nonopportunistic

behaviour. This is done to simplify the model for the reader, because with this

labelling all the links in the model can be hypothesised to be positive. The items

used to measure nonopportunistic behaviour are therefore represented by

statements relating to the participants’ perceptions that an NPO has not taken

advantage of them in the past.

Regarding termination costs: “The conceptualization of termination costs is an

extension of that used by Morgan and Hunt (1994) to incorporate their

suggestions for further research and is described in terms of statements relating

to the: financial costs of ending a relationship (i.e., switching and opportunity

costs, dissolution expenses) and the nonfinancial costs of ending a relationship

(e.g., loss of reputation, aggravation). Questions were added to obtain a measure

incorporating both dimensions.”

At this point I can´t understand why, Macmillan et al., don´t continue with the model

formulation, joining the outcomes that Morgan and Hunt propose or others for this

specific research. If the model is designed as Key Mediating Variables, how can we

study just a part of the model? In this model there aren’t key mediating variables but

end variables, because trust and commitment, in this model, are not in the middle of

nowhere.

When we study the hypotheses of the Macmillan model we find this:

The study tests the following hypotheses: H1: Increases in termination costs associate with increases in commitment.

H2: Increases in material benefits received associate with increases in commitment.

H3: Increases in shared values with the NPO associate with increases in commitment.

H4: Increases in nonmaterial benefits received associate with increases in commitment.

H5: Increases in shared values associate with increases in funder trust in the NPO.

H6: Increases in NPO communication associate with increases in nonmaterial benefits.

H7: Increases in NPO associate with increases in funder trust in the NPO. (must be a typing error)

H8: Increases in NPO nonopportunistic behaviour associate with increases in funder trust.

H9: Increases in funder trust in the NPO associate with increases in the perceived nonmaterial benefits received from the NPO.

In Morgan and Hunt model: H1 : There is a positive relationship between relationship termination cost and relationship commitment.

H2: There is a positive relationship between relationship benefits and relationship commitment.

H3 There is a positive relationship between shared values and relationship commitment.

H4: There is a positive relationship between shared values and trust.

H6: There is a negative relationship between opportunistic behavior and trust. H5: There is a positive relationship between communication and trust. H7: There is a positive relationship between relationship commitment and acquiescence. H8: There Hi a negative relationship between relationship commitment and propensity to leave. H9: There is a positive relationship between relationship commitment and cooperation. H 10: There is a positive relationship between trust and relationship commitment. H 11: There is a positive relationship between trust and cooperation. H12: There is a positive relationship between trust and functional confilct. H13: There is a negative relationship between trust and uncertainty.

As we can see the model presented by MacMillan et al. is designed in just one

direction, we cannot understand H7 and there is a misinterpretation of the

commitment-trust theory, because in the MacMillan model conclusions there are no

key mediated variables.

About the research method and empirical analysis we must say that this paper has a

profound and complex degree, with statistical tools that are combined too aim a

robust result.

We just had a methodological question that, in our opinion, had to do with the lack of

empirical observation of the correlation with material benefits and commitment. The

sample of funders of NPO´s that responds to questionnaires was the following:

“Of the 41 respondents, 21 (51%) were commercial organisations, 6 (15%) were

government departments, 8 (20%) were either trusts, foundations or

development organizations and 6 (15%) organisations did not indicate what

sector they were from. “

As we can see, almost 50% of the respondents were organizations which their main

goal wasn’t profits. So we think that it would be very difficult, with this sample, to

present one result different from the one they add. Another sample could easily

provide a statistical significance to the correlation between material benefits and

commitment.

CONCLUSIONS We conclude from this work the following statements:

This paper addresses a very important issue in an area that needs to be researched

and this paper contributes to the development of knowledge.

This model must be expanded to include outcome variables consequent to

commitment and trust.

Although appropriate statistical methods were applied, the quantitative study is based

on a sample of 41 respondents, so the generalisability of the findings would be

strengthened if it were to be replicated with a larger sample.