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A comparison of relationship marketing and Guanxi: its implications for the hospitality industry
Morgan W. Geddie and Agnes L. DeFranco
Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston, Houston, Texas, USA, and

Mary F. Geddie
C. T. Bauer College of Business, University of Houston, Houston, Texas, USA
Abstract
Purpose This paper describes the variables researchers have found to be signicantly associated with relationship marketing, those related to Guanxi, and the similarities and differences between them. Design/methodology/approach The researchers reviewed 77 articles on the subjects of Guanxi and relationship marketing and identied seven constructs from the literature that apply to both Guanxi and Relationship Marketing. Findings These six constructs were investigated (bonding, customer loyalty, empathy, reciprocity, and satisfaction, and trust). Four constructs were associated with Guanxi (bonding, empathy, reciprocity, and trust) and while two (satisfaction, and customer loyalty) and a category termed other were commonly used with relationship marketing. Practical implications Guanxi concentrates on building the bond or relationship before the transaction in such a way that the company and customer become one cooperative unit. Relationship marketing deals with the transaction rst and builds the relationship later. Relationship marketers could benet from incorporating the principles of Guanxi in their strategies and tactics. Originality/value Many western managers are not familiar with Guanxi. Managers, who have an understanding of the Guanxi, can become more effective at relationship marketing. Keywords Relationship marketing, Hospitality services, Customer satisfaction Paper type General review

International Journal of Contemporary Hospitality Management Vol. 17 No. 7, 2005 pp. 614-632 q Emerald Group Publishing Limited 0959-6119 DOI 10.1108/09596110510620681

A comparison of relationship marketing and Guanxi Relationship marketing can be seen as both an outgrowth of, and reaction to, the technological advances of the computer age. Massive databases of consumer buying histories and preferences, sophisticated printing and communications software and the internet allow for sophisticated tailoring of marketing content to individuals (Bulger, 1999). The investment in technology and data are considered worthwhile to overcome the customer alienation engendered by decades of mass production and industrialization (Stern, 1997). In a world of increasing globalization and ever-larger corporations, relationship marketing is a way to allow customers to feel cared for, to acknowledge their individuality, and to provide personal attention. The hope of relationship marketing is to build a relationship in order to keep existing customers and encourage them to be even better customers, rather than

having to constantly win over new customers, which is a more costly way to make sales (Peppers et al., 1999). The reality is that customers can perceive targeted communication attempts through direct mail, internet, e-mails, etc. as mere sales pitches with no real connection formed (Bulger, 1999; Fournier et al., 1998). Problems with relationship marketing may be attributed to a piece-meal implementation (Krol, 1999) or incomplete understanding of the way commercial relationships are developed and maintained. In contrast to the very modern and technologically-oriented relationship marketing, the Chinese practice of Guanxi has developed over thousands of years. Davies (1995) denes Guanxi as the social interaction within a networked group where repeated favor exchanges ensure a measure of trust among the participants of this network. Guanxi applies to all types of human interaction; it is not limited to business. However, Guanxi can offer insights to relationship marketing practitioners because it enables network participants to interact harmoniously over long periods for their mutual benet. The purpose of this paper is to show that the best practice of relationship marketing as described by academic researchers is closely related to the Chinese practice of Guanxi, by comparing the variables researchers have found to be signicantly associated with relationship marketing, those related to Guanxi, and the similarities and differences between them. Results are persuasive that the ideal implementations of relationship marketing as discussed in academic journals overlap with Guanxi constructs and suggest that familiarity with Guanxi could contribute to a fuller understanding of relationship marketing. The summary information provided on the variables discussed in the literature could be useful to researchers in both CRM and Guanxi research. The constructs of relationship marketing Shani and Chalasani (1992, p. 44) dene relationship marketing as an integrated effort to identify, maintain, and build up a network with individual consumers and to continuously strengthen the network for the mutual benet of both sides, through interactive, individualized, and value-added contacts over a long period of time. This denition emphasizes the data collection and relationship-building aspects of relationship marketing, as well as the expectation that the relationship will be long-lasting. Peppers et al. (1999) use the concept of reducing the customers transaction costs as a way of promoting customer retention. Transactions costs to the customer are reduced when the previous interactions the customer has had with the company are available, so that the customer does not have to re-educate each contact person about his or her history with the company. The amount of information companies have about their customers should increase over time. Transactions costs are also reduced by eliminating some steps required to process transactions, for example, by not requiring that the shipping address or payment method be furnished each time. Finally, the customers time and mental effort can be saved when the companys offerings presented to the customer are limited to those in which they would be interested. Reducing transaction costs to the customer leads to customer retention, because customers must stay with the company most familiar with them in order to continue receiving these cost savings (Peppers et al., 1999).

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Bulger (1999) also emphasizes the need for a business to collect information on its customers and to treat that information with respect as a pre-condition of creating customer loyalty, the purpose of relationship marketing. In this paper, the ideas of customer retention and a long-lasting relationship are described as the variable customer loyalty. Receiving an increasing proportion of each customers business is another important goal of relationship marketing. Bulger (1999) explains that striving to improve the customers overall experience with the product and the company can achieve this result. Customer satisfaction is the variable used in this paper to indicate a concern with the customers overall experience and impressions of the product, the buying process, and the company itself. There are many other concepts discussed in the relationship marketing literature. One recurring emphasis is on protability. As shown in Table I under the heading Other, several articles emphasize how relationship marketing can increase protability (Bowen and Shoemaker, 1998; Petrof, 1998), or caution that the program must be managed carefully to achieve the desired protability (Gronroos, 1990; Roseneld, 1999). Another recurring concept is employee empowerment (Paley, 1996; Litvan, 1996). Because the focus of this paper is to demonstrate that the constructs of Guanxi overlap with the constructs of relationship marketing, a simple classication scheme using the three variables customer loyalty, customer satisfaction, and other, was sufcient to represent the unique emphases of relationship marketing. The constructs of Guanxi The four dimensions of Guanxi are bonding, empathy, reciprocity and trust (Geddie et al., 2002). Kiong and Kee (1998) describe the six bases from which bonding can arise as locality/dialect, ctive kinship (people sharing same last names), kinship (immediate family), work place, trade associations and social clubs, and friendship. Intermediaries can help establish bonds between two parties, but the bonds must be maintained by continuing interactions between the two parties. Bell (2000) explains that Guanxi networks are more commonly based on families or groups than on individuals. Each person within the group also has to act with principle, or li, relative to each and every other person in order to achieve harmony. Empathy is required by Guanxi, because although returning favor for favor is considered a moral obligation (reciprocity), the form and timing of the return require understanding. A quick repayment may end the relationship (Yau et al., 2000), so it is a good idea to keep the other party in your debt to maintain a relationship for the long term. Trust, Xinyong, develops through repeated, mutually satisfactory and benecial interactions. If trust is violated, the culprit will be ostracized (Kiong and Kee, 1998). The trust developed among members of a Guanxi network means that doing business within the network is lower cost than doing business outside the network. Such lower costs might include, for example, lower risks of default on loans or credit sales, or lower legal costs due to simpler contract requirements. In fact, although todays China has a well-developed legal system, maintaining a rules-based economy is still quite costly there (Ziegler, 2000), which means that the relation-based economy has a competitive advantage.

Author(s) Guanxi articles Empathy Reciprocity Trust Satisfaction Customer loyalty Other

Bonding

Alston (1989) k

Unequal exchanges are easily broken k k k k

k k k k k Bare innermost thoughts k k k k k Understanding of needs, priorities and preferences k k k k k k k k k k k k k k k k k k k

k k

k k

k k

k k

Mutual advantage

k k

Personal relationships

Favor exchanges, Gradual transition commercial and from outsider to social insider

Armstrong and Seng (2000) Bell (2000) Bian and Ang (1997) Bosco (1992) Chen and Chen (2004) Chow and Ng (2004) Ditmer and Xiaobo (1996) Guthrie (1998) Kiong and Kee (1998) Kipnis (1996) Lee et al. (2001) Leung et al. (1996) Pearce and Robinson (2000) Pitts (1994) Tsui and Jiing-Lih (1997)

Connections k

(continued)

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Table I. Review of articles

618

Author(s) Guanxi articles Empathy k Know your partner, do not cause partner to lose face k k Creative convergence k of apparent conicting ideas Substantial relationship-specic investment k Access to resources and opportunities k Expectations, indebtedness Guanxi has own moral code; cannot be bought Ethics Reciprocity Trust Satisfaction Customer loyalty Other

Vanhonacker k (2004a) Vanhonacker Commonality (2004b)

Wank (1996) Warren et al. (2004) Wong and Chan (1999) Wong and Tam (2000)

Yau et al. (2000) Yi and Ellis (2000) Relationship marketing articles Berry (1986) k k 1 1 1 k k k k Learning preferences; storing, retrieving, and using this data Mutual, include service continuity, customization

Berry (1995)

Table I.
Ethics Quality of service distinguishes retailers Clients choose to remain rather than starting over as customers elsewhere Decreased Lower costs to defection rate; retain customers superior value to customers most likely to be loyal (continued)

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Bonding

k Social relations or ties k

Personal connections to build trust network, insider/outsider distinction k

Relationship customization

Social benets of one-on-one relationships fundamentally appealing

Author(s) Guanxi articles Empathy Consumers social support system k k 1 k 1 Increased prots Speak in one voice Mutually benecial Partnership Create interactive On-going programs conversation; respect privacy Reciprocity Trust Satisfaction Customer loyalty Other

Bonding

Bitner (1995) Comfortable relationship Bowen and Commitment to Shoemaker relationship (1998) Brierley Sustained (1994a) relationship; provide opportunities for involvement beyond business transactions Brierley (1994b) Identify customers; make communications relevant; track behavior Respond to customer life cycle changes Monitor satisfaction honestly Opportunity cost for failure to stay loyal

Bulger (1999)

Copulsky and Wolf (1990)

Bond as an output

Database of information; differentiated messages

Offer structured rewards carefully; provide unanticipated rewards Increased response Educated, informed rates; better customer customer retention/extension Increase usage over time Satisfaction with salesperson (continued)

Crosby et al. (1990)

Long-term sales relationship; cooperative versus competitive behavior

Tracking each relationship to monitor cost and value k Mutual disclosure

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Table I.

620

Author(s) Guanxi articles Empathy Satisfaction with contact, core service, and institution Reciprocity Trust Satisfaction Customer loyalty

Crosby and Stephens (1987)

Cross and Smith (1995)

Duncan and Moriarty (1998) Dwyer et al. (1987) k Each parties gratication from others performance creates interdependency Trust evolves

Evans and Building service Laskin (1994) partnerships

Fournier et al. Companies ask (1998) customers for friendship, loyalty, and respect

Table I.
Other Product information Based on dialogue; sharing in customers lifestyle Communication Understanding customer expectations k k Employee empowerment; education to increase perception of quality; increased prots Improve quality of Balance between Trust as basis of consumers lives; giving and truly rewarding comprehensive view getting partnerships of consumer behavior (continued)

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Relationship as quality surrogate; personal contact; direct company communication Customer bonding

Commitment

Recognition of other Aware of changing party as feasible requirements and exchange partner adapt offerings

Author(s) Guanxi articles Empathy Trust drives future Satisfaction intentions of high drives future relational customers intentions of low relational customers Trust and service Important to measure future intentions of consumers Reciprocity Trust Satisfaction Customer loyalty Other

Bonding

Garbarino and Johnson (1999) Focus on retention and repeat sales Mutual benet of k parties involved Cooperative and collaborative

Commitment as desire to maintain relationship

Positive cost/benet ratio Customer loyalty Select customers as the reward for carefully for sharing value with protability consumer

Gilbert (1996) Long-term Individual prole of customer known orientation; we oriented; creating positive relationship Gronroos Relationship (1990) commitment; enduring relationships Gruen (1997) Cooperative and collaborative partnerships; focus on customer retention Gummeson Long-term view Mutual respect (1998)

Heide and John (1990)

Hilliard (1994)

Win-win strategy Acceptance of customer as a partner Alliances; Joint action; partnerships; organizational long-run durability boundaries penetrated Partners share Shared high Long-term, Commitment and resources; standards and values; win-win trust; partners avoid opportunities communication relationships; taking opportunistic and benets partners share advantage unmatched by others proprietary information (continued)

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Table I.

622

Author(s) Guanxi articles Empathy Investment Customers and suppliers create and share value; set up a feedback loop Individualize customer contact Do not hog control Trust increases likelihood of commitment Commitment and trust; opportunistic behavior decreases trust; trust decreases uncertainty Requires long-term commitment Do not demand monogamy More commitment to relationships involving substantial investments Trust, openness Greater switching costs Reciprocity Trust Satisfaction Customer loyalty

Ledingham and Bruning (1998) Lin and Su (2003)

Litvan (1996) Bonding central to quality-management movement of late 1980s Mitchell Do not assume Do not intrude (1995) customers want a relationship Moorman Enduring et al. (1992) commitment; similarities facilitate the role of trust Greater information and interpersonal investments by users Acquiescence; cooperation

Morgan and Hunt (1994)

Nadherny (1996)

Table I.
Other Sales people make decisions Be prepared for the expense Greater involvement leads to higher perception of quality Communication, shared values; functional conict leading to improved understanding In-depth understanding of customers and industry Maximize value of each customer (continued)

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Bonding

Involvement, commitment

Customer connection Companies identify strategy (customer their position within knowledge) the value chain

Relationship

Author(s) Guanxi articles Empathy Customer requirements and expectations Empathy Having customers best interest at heart; condentiality Trust; credibility, reliability Customers commitment as guarantees Employee empowerment to resolve customer problems Reciprocity Trust Satisfaction Customer loyalty Other

Bonding

Paley (1996)

On-going contact

Palmer (1994)

Measure, compare, and share information Responsiveness and an ability to get answers

Parasuraman Courtesy of service et al. (1985) personnel

Peppers et al. (1999) k

Responsiveness; timeliness of service; ease of access; learning customers specic requirements Identify Differentiate the customers; most valuable adapt to customers customer needs Satisfaction is cornerstone of marketing Intimate understanding of customer needs and wants Interactive k k Satisfaction is key

Reduced attrition; increased cross-selling

Reduced transaction costs

Petrof (1997)

Petrof (1998)

Building relationships with customers is an old idea, and very important No relationship can retain unsatised customers

Make unprotable clients protable

Long-term process

Pruden (1995) Reichheld and Sasser (1990)

Protability

(continued)

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Table I.

624

Author(s) Guanxi articles Empathy Do not assume customers want to work Do not assume customers will be fair; tier ination Do not assume satisfaction is enough Do not confuse necessity with loyalty Reciprocity Trust Satisfaction Customer loyalty Other

Roseneld (1999)

Rosenspan (1997) Schurr and Ozanne (1985) k Bargaining toughness versus concessions; constructive dialogue Flexibility to Brand loyalty, accommodate even when individual customers seemingly contrary to customers self-interest Customer becomes equal partner in the relationship

Shani and Chalasani (1992)

Smith (1998)

Stronger relationships Snyder Relationship (1997) development Solomon et al. Long-term (1985) interpersonal relationships Stacey (1994) Steady, on-going contact Stephen Long-term (1998) customer relationships Mutually satisfying encounters Relevant to customers k

Table I.
Rewards can lead to cannibalization, not incremental sales; avoid changing rules and disenfranchisement Familiarity breeds comfort Protability k (continued)

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Bonding

Customers want solutions, perhaps not through relationships

Exchange relationship

Long-term orientation

Author(s) Guanxi articles Empathy Conict resolution and trust Reciprocity Trust Satisfaction Customer loyalty Other

Bonding

Stern (1997)

Commitment is bonding with consumer

Swan et al. (1985) Walker (1995) k Mutual value from the relationship Mutual benets Tests of commitment lead to escalation of investment Trust; non-retrievable investments k Performance satisfaction Understanding customer needs; sophisticated knowledge of buying rm Adaptation Cooperation; shared technology Cooperation

Likeable, a friend

Communication, self-disclosure and sympathetic listening; caring; compatibility Convey concerns for customer

Lifetime value of relationship

Weitz and Bradford (1999)

Wilson (1995)

Personal ties; partnering relationships; conict management to strengthen relationship Structural and social bonds

Wilson (2000)

Wray et al. (1994) k

Social bonding, structural bonding, interdependence, mutual goals Relationships, especially with sales personnel; duration of relationship

Notes: k indicates this term used explicitly; 1 descriptions provided when terms are not used explicitly but article constructs are comparable; blank cells indicate term or construct not used

Relationship marketing and Guanxi 625

Table I.

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The four dimensions of Guanxi, trust, bonding, reciprocity, and empathy, are interrelated and complementary. Reciprocity and bonding are linked in that if one party reciprocates to the special efforts of the other, there is a bond. One also needs empathy to reciprocate, since without empathy, reciprocal favors will not be chosen appropriately. Continued reciprocity increases bonding and thus trust (Yau et al., 2000). The Guanxi articles listed in Table I demonstrate that the four constructs of bonding, empathy, reciprocity and trust are widely understood to describe important dimensions of the practice of Guanxi. Relating relationship marketing to the constructs of Guanxi: the comparison It is striking, but not surprising, to notice in Table I that many articles on relationship marketing use terms analogous to the constructs of Guanxi. Guanxi and relationship marketing are both about relationships. When writing on relationship marketing, Barton (1999) stresses that the relationship between customer and company develops in stages. Garbarino and Johnson (1999) also look at relationship marketing as a continuum from transactional to highly relational bonds. They look for the development of satisfaction, trust, and commitment to establish future intentions of the customers. Similarly, trust develops over time within Guanxi. A record of correct behavior strengthens the relationship. Yet, the two practices are not exactly the same. Geddie et al. (2002) use Figure 1 to compare relationship marketing and Guanxi. It shows that while the basis of the relationship in relationship marketing is satisfactory transactions, in Guanxi, the relationship is built prior to the transactions (Yau et al., 2000). In both systems, a satisfactory transaction deepens the relationship in a cyclical way. In relationship marketing, the company often tries to help the customer adapt to the company, especially by educating the customer about how to use the product in order to obtain the maximum benet from it (Bulger, 1999). In Guanxi, the company and customer adapt to each other. It is because Guanxi and relationship marketing are not exactly alike that Guanxi is able to offer insight into ways to implement relationship marketing in order to avoid common pitfalls. For example, if the company using relationship marketing lacks empathy with its customers, it may undervalue the customers time required to share information with the company, and choose an inappropriately small award. The researchers reviewed 77 articles on the subjects of Guanxi and relationship marketing and identied seven constructs from the literature that apply to both. These seven constructs include the four key constructs of Guanxi (bonding, empathy, reciprocity, and trust) and three commonly used with relationship marketing (satisfaction, customer loyalty, and other). Table I provides a list of the articles reviewed and shows what constructs were discussed in each article. The researchers review shows that 70 out of 77 articles mentioned the importance of creating a bond with customers. Forty-eight mentioned concepts related to empathy; 48 described aspects of reciprocity; and 48 included the concept of trust. These four topics are the basic constructs of Guanxi (Yau et al., 2000). Relationship marketing, at least in its ideal form, is similar to Guanxi, as shown by the number of times Guanxi constructs are included in articles on relationship marketing.

The researchers included as bonding references to partnerships, cooperative relationships, and so forth. Several of the articles referred to the importance of a single contact point and noted that the relationship is formed with that person, more than the rm. The researchers included as empathy references to understanding and adapting to customer needs. The researchers considered reciprocity to include the need for a response from the customer, particularly by providing information. The researchers considered trust to include the organizations long-term commitment to the relationship, as well as keeping condential information secure. Of the 24 Guanxi articles reviewed, 18 referred to all four constructs. Each of the 24 articles described bonding, 19 referred to empathy, 20 mentioned reciprocity and 19 dealt with trust. This indicates that when discussing Guanxi, it is necessary or natural to include all the constructs because they are seen as closely integrated in a system. It may also represent the authors desire to introduce the fundamentals of a subject that may be unfamiliar to non-Chinese readers. Of the 53 relationship marketing articles reviewed, only 11 touched on all four constructs of Guanxi. Another 16 articles mentioned three of the Guanxi constructs. Perhaps not surprisingly, given that references to relationships were considered references to bonding, 46 relationship marketing articles were coded as including the construct of bonding. However, only slightly more than half of the articles referred to the other Guanxi constructs. Empathy, reciprocity and trust were mentioned in 29, 28 and 28 of the relationship marketing articles, respectively. Satisfaction was mentioned in the relationship marketing articles 16 times and customer loyalty 15 times. The implications Clearly, there are important similarities between the constructs of Guanxi and relationship marketing, but writers describing relationship marketing tend to discuss the various aspects of relationship marketing individually rather that as an integrated system. Two major implications can be gained from this comparison. First, as shown in Figure 1, a distinction between the two concepts is that Guanxi concentrates on building the bond or relationship before the transaction in such a way that once the transaction is completed, the company and customer become one cooperative unit. On the other hand, relationship marketing deals with the transaction rst and builds the relationship later. With the relationship not as strong, the customer is seen as more of a subset than a merged partner. If this is true, perhaps relationship marketers could benet from a close look at their strategies and tactics. Consider the following example. A hotel guest is asked to ll in a form at registration about their preferences so that the hotel can have the information on le and thus will be able to cater to the guests. The guest now has a certain expectation built in. If the service is delivered at the heightened level of expectation, everything will be ne. If not, the guest has just been let down. Some hotels may ask their guests to complete a survey upon their departure or check-out so the guests can incorporate his or her experience in the information. Again, these are all very transaction-based. Such is the base of relationship marketing. However, higher level and more sophisticated relationship marketing is more like Guanxi. The guests do not tell you what they want. Your job as the hotelier is to nd out their preferences in order to establish a bond with the guest. You train your staff to notice those preferences by talking to the guests when they check in, by noticing what they order for breakfast in the restaurant,

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Figure 1. Comparison of CRM and Guanxi approaches

and the like. You build that trust in the way that you make notes on your guests so that upon their return, you know their needs and preferences. This illustrates the importance of empathy in forming a bond. You do not want to settle for a mere relationship with your guests. You want them to be bonded to you. The second implication of this comparison, and a benet of understanding Guanxi, is how the western culture can work with Asian culture more effectively. Guanxi is a Chinese concept and is practiced in most Asian countries. The globalization of the hospitality industry opens the door of the West to Asian travelers and vice versa. As Confucius once said, if a warrior knows himself and also his enemies, he will ght a hundred battles and win all one hundred of them. Of course, commerce is not ghting battles but the same applies. In business, if you understand the mentality and expectations of your business partners and, through empathy and reciprocity, gain their trust, the business relationship will be sealed as a bond. In 2000, Chinese outbound travelers totaled 10.5 million, 13.43 percent more than a year before. Among them, business travelers were 4.9 million, accounting for 46.23 percent. Travelers for private purposes were 5.6 million accounting for 53.77 percent (www.cnta.com/lyen/ 2fact/outbound%20tourism.htm, accessed 27 May 2005). As the number of international visitors and global tourism opportunities increase, the focus of marketing methods has extended from a domestic-only focus to leveraging resources for the greatest global impact (Guan, 2002). To better understand the Asian market is thus a good business practice.

The researchers review, while extensive, was not exhaustive. There are many articles dealing with relationship marketing and Guanxi that were not included here. However, the purpose of this review was to relate the popular and scholarly understandings of relationship marketing and Guanxi, and the results show that the concepts are, indeed, closely related. The researchers results indicate that an understanding of Guanxi would be helpful when designing a relationship marketing program. Including the constructs of bonding, empathy, reciprocity and trust will help ensure that customers who participate in a relationship marketing program will feel valued, strengthen their bond to the seller, and spread positive reports about the quality of the buying experience.
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