Return on Relationships: Conceptual Understanding and Measurement of Mutual Gains From Relational Business Engagements

Christian Grönroos, Hanken School of Economics Finland
Pekka Helle, Hanken School of Economics Finland

Relationship is based on the idea of creating a win-win situation for parties involved in a business relationship. The purpose of this project is to develop a model of mutual value creation and reciprocal return on relationships assessment which enables calculation of joint and separate gains from a relational business engagement. The empirical part is based on a longitudinal empirical study including several empirical cases.

Following a practice matching process, resulting in mutual innovation and aligning of their processes, resources and competencies, the parties in a business engagement make investments in the relationship. This enables the creation of joint productivity gains. Valuation of joint productivity gains produces an incremental value, which can be shared between the parties through a price mechanism.

Based on this shared value and costs of investments in the relationship, a reciprocal return on the relationship can be assessed and split between the business parties. Thus, the financial outcome of the development of customer relationships as well as an assessment of the return on relationships with customers/suppliers can be established. This forms a basis of further development of marketing metrics and financial contribution of marketing, and of developing financial measures of intangible assets called for by the finance and investor communities.

 

Grönroos, Christian and Helle, Pekka (2012): Return on relationships: conceptual foundation and measurement of mutual value gains from relational business engagements. Journal of Business & Industrial Marketing, Vol. 27, No. 5, pp. 344-359