Faculty Column: Better Networks for Managing Customer Relationships

Courtesy: Thunderbird School of Global Management
Courtesy: Thunderbird School of Global Management

By Professor Gabriel Gonzalez

The task of managing relationships with customers has become much more complex. Relationship managers or RMs operate in an environment where sophisticated solutions have become the norm. This means that they must bring to bear their firm’s resources on the problems that their customers face. They often have to do this in an environment where they have no direct authority over those from whom they need information and cooperation.

Research that my colleague from Brazil, Danny Claro, and I conducted demonstrates that the network of contacts that RMs maintain inside their organization is key to their success. Studying a Brazilian firm, we identified the synergistic effects of both the formal communication network and the informal social network on RM performance. While plenty of attention has been paid to informal networks, our work shows that it is really the combination of resources and cooperation gained from informal and formal networks that counts. These synergistic effects happen in two distinct ways.

First, a set of informal contacts (friends) from which the RM gathers private information and socializes outside of work provides a competitive advantage when those ties represent non-redundant or diverse sources of information. This happens when the friends of friends in a RM’s informal network are not themselves connected. Also, having a closely connected immediate formal work group provides the cooperation needed to effectively serve customers. These folks expend extra effort because they have a social obligation to cooperate since others will find out if they don’t and view them negatively. The real magic happens when the RM brings these two together. For example, when she takes what she privately learns from non-redundant friendship ties about upcoming service changes and relies on her tightly connected formal contacts to convert that knowledge into value for the customer and her firm.

The second set of synergistic effects involves overlapping ties. Overlapping ties are contacts in a RM’s network that represent both formal and informal relationships (e.g. a co-worker who is also a friend). First, overlapping ties are an effective way of converting knowledge into valuable offerings for the customer. Specifically, groups that are already highly interconnected cooperate even more with a RM when they are also made up of more overlapping ties. Second, overlapping ties also contain private information of their own. Because they are stronger ties, they are more willing to share private or behind the scenes information they possess that can help the RM serve her customers.

What does this mean for the Thunderbird RM? Being careful to make sure that you have a set of friends who represent disconnected resource pools is critical for gaining novel and diverse information about your firm’s resources. Also, maintaining a set of overlapping ties is key to both cooperation and information access. The research referenced can be found in an article that is in-press and will appear in the Journal of Marketing in early 2014, a highly respected academic, peer-reviewed journal. The online article citation is http://journals.ama.org/doi/abs/10.1509/jm.11.0431. Also, Professor Danny Claro will be on campus visiting us for the next three months as a Fulbright scholar.

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