Dwyer, Schurr and Oh emphasized the importance of the ongoing relationship between buyers and sellers in their article Developing Buyer-Seller Relationships (1987). The preceding research on the relationships focused mainly on the exchanges as discrete events, not as ongoing relationships (Dwyer, Schurr, & Oh, 1987). Central in this research is the exchange relationship between the parties involved (Kotler, 1972). A framework developed by Frazier (1983) introduces four key benefits of the exchange. First, the exchange serves as a principal event between the involved parties. Second, the exchange stipulates a central frame of reference for identifying the social network of individuals and institutions that take part in its foundation and implementation. Third, it allows the examination of the properties that will transfer ownership. Lastly, and most important, as a critical event in the marketplace, it allows the study of precursor conditions and procedures for buyer-seller exchange.
The buyer-seller relationship takes various forms as stated by Arndt (1979). He “noted the tendency of organizational exchange was restricted by long-term associations, contractual relations and joint ownership” (Dwyer, Schurr, & Oh, 1987, s. 11). Arndt labelled this
phenomenon as “domesticated markets” and argued the fact that “transactions are planned and administered instead of being conducted on an ad-hoc basis” (Arndt, 1979, s. 70). He further accentuated the eminence of exchange relationships in business and institutional markets, and Dwyer, Schurr & Oh (1987) further theorized that this may also apply to consumer markets.
The contrast between discrete and relational exchange is emphasized by looking at concepts from modern contract law. Contract law’s conception of discrete exchange is a venerated fiction, where one can propose issues and problem areas where it appears sensible either to oversee or underline relational dimensions (Dwyer, Schurr, & Oh, 1987). A “discrete transaction is the foundation of which concepts of relationship are built” (Dwyer, Schurr, &
Oh, 1987, s. 12). They are characterized by narrow content and limited communications. To ensure a discrete transaction, the identity of the parties in the transaction must be disregarded or relations may occur. The key indicator of a relational exchange is that it transpires over time, and each transaction is then beheld in terms of its past and estimated future (Dwyer, Schurr, & Oh, 1987). Assumptions for future collaborations may be backed by implicit and explicit expectations, trust and planning. Participants in the exchange may also be expected to engage in a social exchange, where complex personal, noneconomic factors are present.
A relational exchange may contribute to product differentiation and create a higher cost of switching supplier for the customer. It may also contribute to a competitive advantage (Dwyer, Schurr, & Oh, 1987). Levitt (1984, s. 111) states that a “sale merely consummates the courtship. Then the marriage begins. How good the marriage is depends on how well the relationship is managed by the seller”. This “marriage” is like a restrictive trade agreement in many cases, where the two parties agree to only trade with each other. At least until the balance of trade becomes disadvantageous in terms of broader market conditions (McCall, 1966).
All the factors mentioned above are the basis for the relationship development process model presented by Dwyer, Schurr & Oh (1987) which progress through five general sections described as: awareness, exploration, expansion, commitment and dissolution. The primary phase, awareness, refers to the initial recognition of one party that another party is a feasible exchange partner. Often, there is a situational proximity that facilitates the parties’ awareness of each other. Phase two, exploration, is the “search and trial phase” (Dwyer, Schurr, & Oh, 1987, s. 16) in the relational exchange. In this phase, the impending partners contemplate requirements, benefits and encumbers, as well as the possibility of exchange. The phase is compartmentalized by five sub-phases: attraction, communication and bargaining,
development and exercise of power, norm development, and lastly, expectation development (Scanzoni, 1979). Phase three in Dwyer, Schurr & Oh’s framework (1987) is expansion. It refers to the constant development of benefits attained by the exchange partners and to their cumulative interdependence. The five sub-phases in phase two also operate in phase three.
However, the crucial difference is the fact that the rudiments of trust and satisfaction that was established in the exploration phase, is now leading to increased risk taking within the dyad (Dwyer, Schurr, & Oh, 1987). Consequently, there is an increased range and depth of mutual dependence. The fourth phase of the model is the commitment phase. At this level of the model, the buyer-seller interdependence has reached a level of satisfaction from the exchange partners that precludes other similar exchange partners who could provide similar benefits.
The fifth and concluding phase of the model is the dissolution phase. Withdrawal or
disengagement as a possibility is implied throughout the framework, as not every relationship reaches the exploration nor the commitment phase. The termination of a relationship is often a cause of psychological and emotional stress for both parties (Dwyer, Schurr, & Oh, 1987).
Heide and Miner (1992) researched the effects of anticipated interaction and frequency on buyer-seller cooperation. They found that when cooperation between buyers and sellers is modeled in an iterated games framework – one can expect to see extendedness or open-ended interaction. One can also expect to see interaction frequency that is associated with high-level of cooperation. The extendedness of a relationship was defined as “a relationship as the degree to which the parties anticipate that it will continue into the future with an
indeterminate end point” (Heide & Miner, 1992, s. 268). If a party intensely expects the continuation of the relationship, they will participate in positive cooperative behavior. Heide
& Miner (1992) also found, to a certain extent, that the expectancy of future interactions gives each party an incentive to cooperate rather than defect in the present. Even though this is applied to the Prisoner’s Dilemma framework – both Miner and Heine (1992) meant that this could be transferred to a real-life buyer seller relationship. Axelrod (1984) believed that once the extendedness was controlled, the interaction frequency would have a positive effect on relationship.