A Study of Customer Relationship Management Activities and

Marketing Tactics for Hypermarkets on Membership Behavior

Dr. Wann Yih Wu, Dr. Hsi-An Shih, and Dr. Hui-Chun Chan
National Cheng-Kung University, Tainan, Taiwan

ABSTRACT

In the current retail environment, relationship management activities and marketing tactics play a
predominant role because of the increased importance that consumers attach to the relational properties of their
interactions with retailers. As a result, substantial competitive advantage development is required in order to
establish effective membership relations. Further, as a result of the vigorous development and competition of the
Taiwanese hypermarket, establishment of the extant membership relationship becomes a key method of building
competitive advantage in the hypermarket. Therefore, this study investigates the interaction of membership
relationship management activities and marketing tactics in the hypermarket through: perceived relationship-
investment linking; understood member's psychological factors that promote customer value; allowing industries
and customers to establish a good membership relationship; and finally, the influences of relationship quality and
membership behavior. It attempts to establish and strengthen the complete membership-relationship pattern and
provides reference for industries to build their membership management.

The research is conceptualized and empirically examines relationship-building efforts that are theorized to
enhance perceived relationship investment and relationship quality to membership behaviors. Moreover, a further
discovered initiative in the relationship-strengthening strategy is compared to passive effective; relationship-
management activities are more effective than relationship-marketing tactics. Therefore, the resultant constructs of
relationship quality and membership behavior, which embody consumer reciprocation of the retailer’s investment,
reflect the extent to which consumers want to maintain their relationship with the retailer.

INTRODUCTION

In times of increasing growth or local economic development, GNP increases year over year. Until 2006,
Taiwan’s average GNP is roughly rated at 16,477NTD (Department of Statistics, Ministry of Economic Affairs-
MOEA, 2007). According to the development model analysis about European, American and Japanese business
management activities, whenever GNP reaches 1,000USD, department stores mushroom; whenever GNP reaches
6,000USD, convenience chain stores take prevalence; whenever GNP reaches 10,000USD, the hypermarket is
prevalent; whenever GNP reaches 12,000USD, the large hypermarket centers arise from the business environment.

The sales amount of the hypermarket in Taiwan actually accounts for 30% more within the overall retail
sales amount and takes the lead in all retail trades. According to Taiwan's MOEA, sales of retail trade with general
merchandise grows NT$5,232.34 hundred million in 1999 to NT$7,389.74 hundred million in 2006, while overall-
market scale rises 1.81% during the same period. Convenience stores grow 84.25% and hypermarkets grow 28.68%
during the same period. In comparison with last year, whole sales of retail trade with general merchandise only
increases 3.20% and the hypermarket only slightly increases by 1.59%. Thus, we know that the whole hypermarket
industry has intensive competition from newcomers in recent times.

Furthermore, Grant and Schlesinger (1995) indicate there are three ways that businesses adopt to earn profits.
The first method is a customer mining strategy that is used to attract new customers; namely, it is used to increase the
numbers of customers who opt for products or services. The second way is the market-penetrating strategy that is used to
improve the current income profit rate from customers; namely, it is used to encourage customers to opt for more
purchases of products and services. The third way is used to elongate the relationship duration with customers; namely, it
is aimed toward maintaining long-term relationships with customers. Currently, business owners of hypermarket centers
meet with the current economic recession and the participation of new competitors to cause quite violent competition.
There are countless price-breaking sales promotion activities that occur as a result. These kinds of sales promotion
activities with gross-profit eroding effects will gradually force the hypermarket centers to step into the micro-profit era.
Thus, how a business group effectively adopts efficient relationship management and establishment models to create new
business opportunities is the most critical issue for hypermarket centers in Taiwan, which is exactly the main topic for this
research.

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 According to the research results of Thomas, Blattberg and Fox (2004), the authors clearly indicate that the
most important part of an investigation of customer relationship management falls on customer hold. Likewise,
Kotler (2001); Lamb, Hair and McDaniel (2000); Reichheld (1996); Reichheld and Sasser (1990), and Heskett,
Sasser and Hart (1989) propose specifically that the cost to attract new customers is five times as high as the cost to
hold existing customers. In addition, the possibility of successfully maintaining existing customers reaches 60%, but
the cost to obtain new customers is less than 30%. In addition, Mckenna (2002) and Lee et al. (2001) propose that
holding currently existing customers is important for hypermarkets, since they lose more than 30% customers
annually. On the other hand, hypermarkets are required to spend more in order to attract new customers. Therefore,
it is necessary to maintain good relationships with customers through marketing activities while maintaining and
enhancing membership loyalty (Berry and Parasuraman, 1991; Berry, 1995). Aside from the concern for
hypermarkets to attract new customers, what counts more is for them to hold their currently existing customers.
Thus, the management of membership behaviors is the first priority of marketing goals for the hypermarket centers.
Accordingly, this seems an imperative issue for individuals to ponder in order to create an overall and in-depth
membership management model within the violently competitive environment that currently exists, which is exactly
the second topic for this research.

There are numerous extant researches about the relevant issues of marketing relationships that focus on the
investigation of relationship marketing, management of customer relationship, and the direct relationship among
customer values. However, few research articles investigate these topics simultaneously with insightful discussion
about the mutual influence between management and relationship marketing, together with the assistance to
membership behavior management as related to membership behavior management. Within the research about
organizational membership identity, Bhattacharya, Rao and Glynn (1995) indicate that whenever their study finds
more involvement to the extent of members and longer duration, the more contributions member will offer and the
more this involvement reduces the possibility for members to leave their own organizations. Further, there are
numerous organizational researches that commonly focus on membership plans, acquisition and relationship
maintenance, but little research exists on membership management. Actually, there is no research that discusses the
mutual influence of management activities for membership relationships that are exerted and relationship marketing
strategies that are exerted on customer values and relationship behaviors. However, this research aspect is quite
important for those hypermarket centers under current, cut-throat competition.

Because the current service target of hypermarket centers focuses on the business of offering customers
convenient service with “all-in-one shopping” and “mass purchases,” “extra-value commodities,” and a “convenient
shopping environment,” the said service targets are actually featured with high substitute availability and a quick
alternation of customer interest. When markets reach the maturity stages with increasing numbers of competitors, to
achieve brand edge from the competition, business owners abandon their past management methods of membership
cards, but instead adopt membership recruiting activities. Through a series of activities about membership
relationship management and relationship marketing activities, they can enhance their market share. Although this
membership recruiting strategy can help business groups to quickly expand market share, the majority cause
currently existing members to rely on the membership values that are created by hypermarket centers. If the
products and service that are provided by hypermarket centers cannot satisfy their members, the customer’s hold rate
will naturally reduce remarkably. Thus, to implement excellent membership management, the customer hold rate
must necessarily be improved with the customers' increased loyalty toward the hypermarket center. Whenever
hypermarket centers aim their efforts toward relationship management to improve member loyalty and relationship
marketing tactics, it is required to previously gather and analyze the factors for the quick alternation of customer
interest so that one can make the correct evaluation (Grant and Schlesinger, 1995; Reichheld, 1996; Blattberg and
Deighton, 1996).

LITERATURE REVIEW

Relationship Marketing Tactics

Relationship marketing is conventionally defined as “developing,” “maintaining,” and “enhancing”
customer relationships (Berry and Parasuraman, 1991). Dwyer, Schurr, and Oh (1987) argue that relationship
marketing encompasses all of the marketing activities that are designed to establish, develop, and maintain a
successful relational transaction. In general, the literature distinguishes between three levels of relationship
marketing (Berry, 1995). The first level relies on pricing incentives to secure customer loyalty and is often referred
to as level on relationship marketing. A second level of relationship marketing focuses on the social aspects of a

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relationship, which are exemplified by regular communication with consumers or referring to their names during
encounters. Level three relationship marketing requires offering structural solutions to customer problems. Berry
(1995) indicates that, “at level three, the solution to the customer’s problem is designed into the service-delivery
system.” Consequently, we distinguish between five types of relationship marketing tactics that are distributed
between level-one relationship marketing (tangible rewards, promotion activities), level-two relationship marketing
(direct mail, preferential treatment, and interpersonal communication), and level-three relationship management
activities. Few efforts are made in extant research to define what relationship marketing tactics really are and how
valuable consumers perceive them to be (Dorsch, Swanson, and Kelley, 1998). Direct mail includes letters or
catalogs that are mailed directly to customers, which is a proven method of communicating with customers. (Dwyer,
Schurr and Oh, 1987; Anderson and Narus, 1990; Morgan and Hunt, 1994).

We recognize that direct mail should be a strong predictor for building customer relationships. Retailers
offer tangible rewards, such as visible benefits like price discounts, gifts, or coupons (Peterson, 1995) in order to
retain customer loyalty. Leuthesser (1997) indicates that retailers can proactively be concerned with customer needs
through intensive communication with them. Communication can also help to maintain, enforce, and bring the
relationship to a higher level (Weitz and Jap, 1995) and even can develop another, closer relationship. Preferential
treatment can be regarded as discriminate treatment between regular customers and non-regular customers (Wulf,
Odekerken-Schroder and Iacobucci, 2001). Relationship marketing can be effectively implemented through the
application of computer database techniques to access customers (Landry, 1998). The present study’s research goal
is to understand if the application of relationship marketing tactics is helpful for developing a long-term transaction
relationship.

Relationship Management Activities

In the relationship marketing literature, the commitment-trust framework that is developed by Morgan and
Hunt (1994) provides a general model for relationship marketing in business-to-business relationships, but this
channel member framework does not explicitly model the variables that management can directly control when
managing membership relationships. One key objective is to identify a set of relationship management activities that
is appropriate to managing membership relationships. Zeithaml, Berry, and Parasuraman’s (1996) research on
individual customer relationships suggests a positive, direct effect exists between core services performance on
intentions to remain, and Bolton (1998) finds that the duration of the relationship is reliant on customer satisfaction.
Managers of membership relationships must consider the benefits that coproducing customers receive from their
efforts and what can be done extrinsically to enhance the perceived value of these benefits. Because the value
derived from extra-role (coproduction) behaviors is by nature ambiguous, recognition places an unambiguous
valuation on the membership’s coproduction behavior.

Fisk (1997) finds that customer interactions during periods of waiting in line influence their level of
satisfaction. Interdependence among members is becoming increasingly managerially relevant in the rapidly
expanding world of online service because the interactive networks of special interests and bulletin boards are
among the more-frequently used services. Through their interactions with others, customers develop a sense of
belonging. Therefore, these members develop an increased belief that they ought to remain in the organization so as
not to abandon the other members. Kelly, Skinner, and Donnely (1992) point to dissemination of organizational
knowledge as a means of enhancing the socialization of the members. Although comprehension of the organization’s
goal and values helps link the membership to the mission of the organization as a whole, knowledge of the culture of
the organization provides guidelines as to appropriate behaviors that are expected of the membership. Finally,
relationships operate in a larger social context that creates explicit and implicit constraints and pressures on the
relationship.

Perceived Relationship Investment

When a supplier forms a relationship investment of any kind on behalf of a customer, this customer ought
to be favorably impressed (Hart and Johnson, 1999). Generally speaking, investing time, effort, and other
irrecoverable resources in a relationship creates psychological bonds that encourage customers to stay in that
relationship and sets an expectation of reciprocity (Smith and Barclay, 1997). We position relationship marketing
tactics and relationship management activities that are applied by the hypermarket as antecedents of relationship
investment to provide managerial guidelines as to what affects perceptions of relationship investment.

De Wulf et al. (2001) define perceived relationship investment as a consumer's perception of the extent to which
a retailer invests resources, efforts, and attention aimed at maintaining or enhancing relationships with regular customers

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that do not have outside value and cannot be recovered if these relationships are terminated (Smith, 1998). De Wulf et al.
(2001) suppose that relationship marketing tactics will affect relationship quality indirectly through the perceived level of
relationship investment.

Relationship Quality
Previous literature argues that relationship quality is divided into three kinds of unique, but related, constructs in
order to capture its complete meaning, and to be applied in practice (Crosby, Evans, and Cowles, 1990; Dwyer, Schurr, and
Oh, 1987; Morgan and Hunt, 1994). Relationship quality is considered an overall assessment of the strength of a
relationship (Garbarino and Johnson, 1999). Relationship quality is a higher-order construct that consists of several
distinct dimensions (Dwyer, Schurr and Oh, 1987). Although discussion still exists as to which dimensions comprise
relationship quality, prior conceptualization mainly emphasizes the critical importance of relationship satisfaction, trust,
and relationship commitment as indicators of relationship quality (Crosby, Evans, and Cowles, 1990; Dorsch, Swanson,
and Klee, 1998).

Membership Behaviors: Retention, Participation, and Coproduction

Three general categories of membership behaviors are said to indicate relationship marketing success in member
markets: retention, participation, and coproduction (Gruen, 1995; Morgan and Hunt, 1994). A long-term relationship is
enforced through a membership system because it helps members to perceive that service firms are more personal and
friendly (Crosby, Evans, and Cowles, 1990; Dwyer, Schurr, and Oh, 1987; Morgan and Hunt, 1994). Morgan and Hunt
(1994) find empirical support for the relationship between a customer’s commitment and acquiescence, propensity to
leave, and cooperation, all of which are regarded as behavioral outcomes of relationships. In membership relationships,
managers are interested in the collective behaviors of members, such as membership retention rates, the degree the
membership participates in and uses membership benefits, and coproduction or volunteering behaviors.

RESEARCH HYPOTHESES AND FRAMEWORK

Conceptual Model
This research aims to investigate situations in which mutual implementation is made by hypermarket centers for
membership management activities and relationship marketing tactics. By linking perceived relationship investment we
can substantially understand the psychological factors of members and the enhancement of customer values so that it is
available for business owners to create intimate member relationship with customers with the further influence on
relationship quality for ultimate guidance as to membership behaviors. Thus, by integrating the research of Wulf et al.
(2001) and Gruen et al. (2000) and the results of numerous other scholars and then referring to the characteristics of
relevant hypermarket centers, we expect to create the conceptual structures for this research, as in Figure 1. Therefore, this
research postulates the following null hypotheses, each of which is examined later.
H1: A greater perceived level of the relationship marketing tactics of: (a) direct mail, (b) preferential treatment, (c) interpersonal
communication, (d) tangible rewards, and (e) promotion activities, leads to a greater perceived level of relationship investment by
customers.
H2: A greater perceived level of the relationship management activities of: (a) core services performance, (b) recognition for
contributions, (c) member interdependence enhancement, (d) dissemination of organizational knowledge, and (e) reliance on
external membership requirement, leads to a greater perceived level of relationship investment by the customers.
H3: Relationship management activities have positive effects on relationship marketing tactics.
H4: A greater perceived level of relationship investment leads to a higher level of relationship quality.
H5: The level of relationship quality has a positive effect on: (a) membership retention, (b) participation, and (c) coproduction.

Relationship
Marketing Tactics

Perceived Relationship Relationship Quality Membership

Investment Behavior

Relationship
Management Activities

Figure 1: The Conceptual Framework

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 RESEARCH METHODOLOGY

Sample
Within this research, our experimental survey subjects include eight hypermarket centers in Taiwan, such
as: RT-Mart, Carrefour, B&Q, Costco and Geant. The survey period is from early July 2007 to late September 2007.
The areas under investigation include shopping mall centers that are located separately on the northern, middle and
southern parts of Taiwan, such as the hypermarkets in Taipei City, Taichung City and Kaohsiung City. Focusing on
hypermarket members, we formulate the randomly sampling questionnaire survey with 200 questionnaires
separately for northern, middle and southern parts of Taiwan, with a total of 600 questionnaires sent to respondents.
After reviewing the questionnaire responses to eliminate incomplete replies and questionnaires with the same
selection scaling, the valid questionnaires total 600 sheets with a valid return rate of 100%.

Questionnaire design
For measurement of the latent constructs, we use scales that are developed in previous studies. Our final
instrument is pre-tested in a small sample study. This research’s entire questionnaire Cronbach’s α is above 0.65,
and is consistent with Nunnally, (1978) which suggests that Cronbach’s α must be above 0.6 for statistical validity

EMPIRICAL ANALYSIS

The Structure Model

This study follows Anderson and Gerbing’s (1988) suggestion to adopt the two-stage method. We first
calculate the measuring model and then inspect the structural model relationship of the overall model with the
results.

In terms of evaluation of the appropriateness of the goodness-of-fit model, it can be seen that: Chi-square
(x2) reaches 1463.239; DF: 168; P value reaches 0.000; with GFI of 0.985 (greater than 0.9); AGFI of 0.919 (greater
than 0.9); CFI of 0.911 (greater than 0.9); RMR of 0.045 (smaller than 0.5) and RMSEA that reaches 0.115 (smaller
than 0.5). As can be seen from Figure 2, the first two or the last three quality criteria for our overall model are well
below the highest recommended values and above the minimum suggested values. This means that the overall model
in Figure 2 fits the data very well.

Direct mail

Preferential treatment
0.33*
Preferential treatment
0.40*
Interpersonal communication
0.46* Relationship Marketing Relationship satisfaction Trust Relationship commitment

0.55* Tactics
Tangible rewards
0.62* 0.68* 0.74* 0.83*
0.67*
Promotion activities 0.88* 0.94*
Perceived Relationship Relationship Quality
Investment
Core services
0.66* 0.72*
0.91*
Recognition for contributions
0.38* Relationship
0.38* Management Activities Membership Behavior

Member interdependence
0.41* 0.12* 0.65*
enhancement
0.66*
Dissemination of Coproduction Participation Retention
organizational knowledge 0.60*

Reliance on external
membership requirements Figure 2 Completely Standardized Solution of the Empirical Causal Model

Based on these results, we can conclude as follows: H1, H2, H3 is supported, relationship marketing tactics
(direct mail, preferential treatment, interpersonal communication, tangible rewards, and promotion activities) as well
as relationship management activities (core services performance, recognition for contributions, member
interdependence enhancement, dissemination of organizational knowledge, and reliance on external membership
requirement) are significant in hypermarkets. Further, relationship management activities have a positive interaction
with relationship marketing tactics.

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 H4 is supported, as it indicates that when hypermarkets cast in higher sensible quality of services about the
relationship between hypermarkets and members, a greater relationship quality is created. Reliance on external
membership requirements is trusted the most. The second most-trusted is the relationship promise and relationship
satisfaction. From this situation, an increase in the sensible values of members cannot only be helpful to intensify
the overall evaluation and continuous maintenance of membership, but also incurs the perception of reliability and
complete confidence from members of hypermarket.

H5 is supported as it indicates that the relationship quality of the hypermarket strongly affects member
behaviors (0.72). Among these, the behaviors that the membership hold is influenced most. The influence on the
behaviors of participation and common productivity show non-remarkable levels. Namely, the relationship quality of
the hypermarket enhances the behaviors of the membership hold, but it shows no remarkable effect on the intention
to become further involved with the service and products that are provided by the hypermarket. We can clearly see
that if business owners intend to implement other activities of relationship marketing management, it is wise to
focus efforts on those that link to psychological aspects.

CONCLUSIONS AND IMPLICATIONS

Conclusions
When hypermarkets handle the mutual implementation of both membership relationship management and
relationship marketing tactics well, they cause a positive perceived relationship investment among customers and both
come away with a mutually-intensifying effect. Also, according to the results, we find that the effect of relationship
management activities is slightly higher than that of relationship marketing tactics. Namely, whether members of
hypermarkets perceive that greater levels of interaction that are allowed by business owners to provide products that really
meet their value perception levels in an aggressive manner, influences members much more than direct advertising activity
strategies.

Within each dimension of relationship marketing tactics, there are those that cause positive effects on the
perceived relationship investment of members. Among these, relationship marketing tactics can utilize promotion activities
and tangible rewards to cause the strongest influence on members' perceived relationship investment. The second
influential factor is interpersonal and preferential treatment. Direct mail shows the least effective result. Actual, rewarding
feedback of relationship marketing tactics causes continuous patronage by hypermarket members and some extra rewards
should be allowed to customers who enjoy a special discount. Within promotional activities, hypermarket members show
preference toward price-down promotion methods. We can easily find a series of price-down promotional activities for
hypermarkets during festivals and anniversaries that provide similarly favorable promotion activities. The content of such
activities are almost the same, but merely vary in activity titles. Also, when there is a hypermarket that reaches any
remarkable sales performance from its promotion activities, within a relatively short time, competitors in the same trade
will pattern their activities to match whatever the successful hypermarket has done. When a hypermarket implements
relationship marketing tactics, the way for members to sense the perceived relationship investment that is made members
lies in the touch methods; actual customer touch will cause greater effects than any other method.

The three aspects of relationship marketing tactics, relationship management activities and perceived relationship
investment that are made by hypermarkets form a positive correlation. Thus, whenever a hypermarket implements
activities of relationship marketing or relationship management, these will indirectly enhance membership loyalty toward
the hypermarket. If service quality, traffic convenience, excellent shopping environment, commodity quality and
commodity divergence of hypermarket satisfies members well, the membership reliability of the hypermarket is enhanced
such that membership loyalty is enhanced accordingly. Such situations cause members to continue to hold their
membership and also cause them to recommend that other consumers become members of said hypermarket. Thus, the
hypermarket recruits additional new members as a result. Within the management activities of a hypermarket, core service
performance, distribution of organizational knowledge, and reliance on external member demands are positively correlated
with the quality of a sensible relationship. In the view of a satisfied transaction, the better the core service performs in
terms of quality and quantity, the more intimate the membership emotions are linked to cause members' continuous
membership behaviors. The distribution of organizational knowledge means that hypermarkets need not only actively keep
in touch with members, but also get organizations and members closer in order to enhance the engagement promise of
members so that the activities of common productivity shall be enhanced. As a result, whenever hypermarkets implement
activities of relationship management, it is required that they actively provide services and inform members about their
rights. This organizational knowledge must be actually distributed and the socialized extent of members is deepened to
enhance the company and value identity of hypermarket members. It is also necessary to encourage or invite membership
participation and maintenance of membership through the recommendation of friends and relatives.

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 Whenever hypermarkets cast in higher sensible quality of service in terms of the relationship between the
hypermarket and its members, the greater the customer values that are created. Namely, whenever members perceive that
painstakingly concentrated efforts are made by the hypermarket, the greater the identity of perceived relationship
investment is enhanced; said sensible results further affect members’ psychological factors. The customer values of
members’ feelings about the hypermarket are improved. These greater customer values cause more remarkable influence
on each dimension of quality. Reliance will be trusted the most. The second most trusted value is the relationship promise,
followed by relationship satisfaction. From this situation, it is wise to increase the sensible values of members not only by
intensifying overall evaluation and continuous maintenance of membership, but also by gaining the reliability and
complete confidence of hypermarket members.

The relationship quality of a hypermarket strongly affects member behaviors. Among these, the behaviors that
the membership holds are most influenced. The influence on the behaviors of participation and common productivity show
un-remarkable levels. Namely, the relationship quality of the hypermarket enhances the behaviors the membership holds,
but shows no remarkable effect on interaction to become further involved with the service and products that are provided
by the hypermarket. We can clearly see that if business owners intend to implement other activities of relationship
marketing management, it is wise to focus efforts on the psychological aspects of relationship marketing. Furthermore,
business owners must provide an environment that triggers the impetus of members, opportunities and capabilities of value
creation, such as by providing network communities for member interaction.

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