Investment in Relationships
What makes us stay with a partner — or a brand?
As an eager student of relationship engineering, I was given homework to compare two pieces of scientific literature on investment in relationships. Here are my findings.
A comparative study of The Investment Model by Rusbult et al. from 1980 and Investments in consumer relationships by Wulf et al. from 2003.
The Investment Model
The first paper describes the investment model in relationships, which utility and robustness have been demonstrated in numerous studies and meta-studies since it was written in 1980. In all of these studies, satisfaction level, quality of alternatives, and investment size are posited to have additive, main effects on commitment.
The model describes three variables for relationship stability;
- satisfaction level
- perceived quality of alternatives
- quantity of investments
The satisfaction level is the sum of the positive versus negative emotions an individual experiences concerning a relationship.
The comparison level is the standard against which the individual evaluates the relationship experience. When the outcome is better than what is expected, the individual is more likely to feel satisfied.
The comparison level for alternatives is when outcomes in the current relationship are compared to anticipated experiences with the best alternative option.
Identified relationship investments are
- time spent
- self-disclosure
- effort expenditure
- identity bindings
- mutual friends
- material possessions
In summary, the investment model proposes that dependence on a relationship is subjectively experienced as a sense of commitment. That commitment is enhanced when individuals feel satisfied with their relationships when they perceive their alternatives as low quality and invest valuable resources in their relationships.
Commitment is a central motive to summarize the individual dependency on the relationship and engage in relationship maintenance behaviors, even when such actions may be costly, effortful, or otherwise contrary to the individual’s immediate self-interest.
Investments in consumer relationships
The second paper discussing investments in consumer relationships, written more than 20 years later, is a follow-up piece from the same researcher.
This research is investigating retailer-consumer relationships, claiming perceived relationship investment affects relationship quality, ultimately leading to behavioral loyalty.
In both articles by De Wulf, The Investment Model is wholly left out. It is instead referencing a much earlier work dating back to 1964. This study states that time, effort, and other irrecoverable resources are investments in a relationship. As a result of missing this critical piece, self-disclosure, mutual friends, and identity bindings are missing in relationship investments. The perceived quality of alternatives is also left out as a factor in the final equation.
Upside down
Further, direct mail, preferential treatment, interpersonal communication, tangible rewards, product, and service quality, are all investments made by the retailer, not the customer.
Wulf is describing the relationship investment model seen from the retailer’s perspective. In other words, these investments are all stacking up towards the retailer’s dependency on the customer, not vice versa.
From the customers perspective, preferential treatment, interpersonal communication, tangible rewards, as well as product and service quality are positive input to his satisfaction level, but requires no investment on his end, and thus also not his interdependency, commitment, or loyalty.
Direct mail and interpersonal communication are described as methods to communicate unobservable relationship investments made by the retailer or convey interest in the consumer. In the customer’s eyes, this is only further evidence of the dependency and, in the worst instance resulting in a co-dependency relationship.
No interdependency
The only investment made by the customer in this model is the price he pays for the product. Ironically, the authors hypothesize that a lower perceived level of product price leads to a higher perceived relationship investment level, again seeing this from the retailer’s perspective.
Taking the time to read a direct mail could be considered a small time-investment from the customer’s perspective, but that is assuming he reads it. (Expected response rate from direct mail is 4–9%)
Order of operations
Wulf sees relationship investment as directly causal in relationship quality, while the investment model places investment as one of three factors leading to commitment. The relationship quality is seen as an (often positively biased) maintenance behavior resulting from the commitment.
Wulf is furthermore placing behavioral loyalty as a direct response to the relationship quality. In contrast, loyalty, in essence (according to Rusbult) is the willingness to perform maintenance activities.
Simply speaking, commitment and loyalty have swapped positions.
Co-dependency
The result is that the customer is satisfied due to the investments made by the retailer. Still, continuously comparing his current experience to the last one, according to the investment model, he will always need more to be satisfied.
Meanwhile, the retailer grows increasingly dependent on the customer due to the increased investment. (The equivalent of competing on price in a red sea market, ref blue ocean market strategy)
The conclusion
Finally, the authors conclude that price and product quality does not make an impact. Notice that they are stating it does not make a difference as a signal of perceived relationship investment. In other words, communicating the retailer’s commitment.
Expecting customer loyalty in this model assumes an exchange relationship, anticipating guilt the customer would have, should he disrupt the norm of reciprocity.
This completely violates the investment model. Reciprocity assumes he is committed enough to engage in maintenance behavior.
What’s next?
It seems clear that to drive customer loyalty, it is equally essential what the customers invest in the business as what the business invest in satisfying the customer.
The investment model however does not suggest that anyone of the predictors will be particularly influential in driving commitment. Instead, it indicates that all three factors may contribute to the prediction of commitment in an additive fashion.
So, like the ever-curious student I am, my next question then is, what drives the commitment?
Special thanks to Olaf Hermans PhD, an academic authority in the domain of relationship cognition, for his investment in me as his private student.
