Fairness in Network Marketing Exchange: an Exemplar of Social

ASSOCIATION FOR CONSUMER RESEARCH
Labovitz School of Business & Economics, University of Minnesota Duluth, 11 E. Superior Street, Suite 210, Duluth, MN 55802
Fairness in Network Marketing Exchange: an Exemplar of Social Embeddedness
Dixon H Ho, University of Arizona
ABSTRACTAlthough transactions among friends, relatives, and acquaintances are common, limited consumer research has addressed
this phenomenon. This study examined an exemplar of socially embedded exchange—NM exchanges. It was argued that the
ambivalent nature of NM exchanges heightens consumers’ fairness concern. This paper thus examined the influences of such social
elements as interpersonal trust, social value, and relational exchange norms on consumers’ fairness perceptions when the outcomes of
NM exchanges vary. By examining the effects of social elements on consumers’ post-purchase evaluations, this paper advances our
understanding of the implications of pre-transaction social ties for consumer behavior. Studying NM exchanges in this way provides
insights into the negative side of social embeddedness in marketing exchange.
[to cite]:
Dixon H Ho (2006) ,"Fairness in Network Marketing Exchange: an Exemplar of Social Embeddedness", in NA - Advances in
Consumer Research Volume 33, eds. Connie Pechmann and Linda Price, Duluth, MN : Association for Consumer Research,
Pages: 706-707.
[url]:
http://www.acrwebsite.org/volumes/12464/volumes/v33/NA-33
[copyright notice]:
This work is copyrighted by The Association for Consumer Research. For permission to copy or use this work in whole or in
part, please contact the Copyright Clearance Center at http://www.copyright.com/.
Fairness in Relational Marketing Exchange
Dixon Ho, University of Arizona
EXTENDED ABSTRACT
The relationship marketing literature shows that marketing
exchange is socially embedded in various exchange contexts (Price
and Arnould 1999). Most research in this domain has focused on the
beneficial consequences of building and maintaining long-term
customer relationships for both firms and customers. Much less
research has examined the roles and functions of pre-existing (i.e.,
prior to the occurrence of a transaction) social relations in marketing exchange. The purpose of this research, therefore, is to examine
the implications of pre-existing social ties for consumers’ outcome
evaluations in a unique form of relational exchange—network
marketing. In particular, this research investigates how interpersonal trust, social obligations, and relational norms affect consumers’ post-purchase fairness perceptions when buying goods from
friends.
Drawing on literature on social embeddedness (Frenzen and
Davis 1990; Granovetter 1985; Halpern 1997), social justice (Lind
and Tyler 1988), interpersonal trust (Geyskens, Steenkamp, and
Kumar 1998; Robinson 1996), and relational contracting (Kaufmann
and Stern 1988; Macneil 1980), this research hypothesizes that
customers’ sense of social indebtedness and trust in the seller
mitigates the negative effect of an unfavorable transaction outcome
on their perceived fairness. In addition, it is hypothesized that when
customers firmly believe that their friends should uphold the
implicit relational norms in the transaction, the negative effect of an
unfavorable transaction outcome on perceived fairness is attenuated. However, when the transaction outcome is favorable, all the
relational variables would have no effect on customers’ perceived
fairness.
To test these hypotheses, a scenario experiment was conducted in a laboratory setting. One hundred ninety-five MBA
students participated in the experiment. Subjects were randomly
assigned to one of the eight conditions in a 2 (transaction outcome:
favorable and unfavorable) × 2 (interpersonal trust: low and high)
× 2 (social obligations: low and high) between-subjects factorial
design. Beliefs of relational norms were measured as an individual
characteristic. In the experiment, subjects read a scenario about a
purchase they had just made from a friend, who was a sales agent
of a direct selling firm. The scenario described a situation in which
the subject bought a water filter from his or her friend without
knowing the exact quality of the product. However, subsequent to
the purchase, the subject had a chance to read a water filter rating
in Consumer Report. The product rating indicated the value of the
brand the subject bought relative to other reference brands. In the
favorable (unfavorable) outcome condition, the focal brand had a
higher (lower) value than the reference brands. In the high (low)
trust condition, the sales agent was described as a more (less)
trustworthy person. In the high (low) social obligations condition,
the subject owed a big (small) favor from the sales agent in previous
social interactions. After reading the scenario, the subjects completed a questionnaire that included the dependent measures and
manipulation checks.
The empirical findings show that customers’ fairness perceptions in a relational exchange are determined not only by the
favorability of the transaction outcome but also by their unfulfilled
social obligations and trust in the seller. The ANOVA result
indicates that social obligations and interpersonal trust mitigates
the negative effect of an unfavorable transaction outcome on
customers’ perceived fairness. When the transaction outcome is
favorable, the above relational factors have no effect on customers’
perceived fairness. This implies that social obligations and interpersonal trust act as buffers against the influences of negative outcomes on customers’ evaluations. On the other hand, contradictory
to our predictions, the ANOVA result shows that beliefs of relational norms boost customers’ fairness perception when the transaction outcome is favorable. A plausible explanation is that when
the outcome is favorable, customers confirm their normative expectations of benevolent acts on the part of the sales agent, which in turn
increases their perceived fairness.
In this research, an explicit and unambiguous transaction
outcome (i.e., a product rating in Consumer Report) was used as the
manipulation. The empirical findings, however, provide convincing evidence that relational variables can alleviate the negative
effect of unfavorable outcomes on customers’ perceived fairness.
In daily purchases, quality and value of some products (e.g.,
credence goods like dietary supplements) is more difficult to
evaluate. In such cases, it is anticipated that customers would be
more reluctant to blame the sales agent for any outcome that seems
unfavorable. As a result, sales agents in relational exchange could
act opportunistically and capitalize on customers’ biased judgment
for their own benefits.
In conclusion, this research provides insights into the adverse
consequences of relational exchange for consumer welfare. Previous research in relationship marketing predominately addresses the
positive effects of social embeddedness and considers social relations as the by-product of successful exchanges over time. On the
contrary, this research conceives social relations as an exogenous
variable and tests their effects on consumers’ post-purchase perceptions. This research therefore reveals the potential dark side of
relational exchange in consumer market.
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Advances in Consumer Research
Volume 33, © 2006
Author Index
Abendroth, Lisa J. ......................................................... 516, 523
Adaval, Rashmi ..................................................................... 623
Aggarwal, Pankaj .................................................................. 115
Ahluwalia, Rohini ......................................................... 252, 447
Aikin, Kathryn ....................................................................... 381
Alba, Joseph W. ..................................................................... 452
Alon, Anat Toder ................................................................... 501
Anderson, Laurel ..................................................................... 12
Argo, Jennifer J. ............................................................ 147, 334
Ariely, Dan .................................................................... 254, 681
Arnould, Eric J. ............................................................... 82, 651
Ashworth, Laurence .............................................................. 236
Atalay, A. Selin ..................................................................... 259
Auh, Seigyoung ..................................................................... 139
Banister, Emma N. ........................................................ 343, 390
Barb, Carmen ......................................................................... 445
Bardhi, Fleura ........................................................................ 651
Barrett, Daniel W. .................................................................. 276
Bartmann, Benedikt ............................................................... 163
Bechara, Antoine ................................................................... 636
Becker-Olsen, Karen ............................................................. 578
Behairy, Nivein ..................................................................... 304
Belk, Russell W. .................................................................... 5, 9
Bengtsson, Anders ................................................................. 375
Bergvall, Sven ........................................................................... 7
Bettany, Shona ....................................................................... 227
Bettman, Jim .......................................................................... 692
Beverland, Michael ............................................................ 21, 98
Bhatnagar, Namita ................................................................. 282
Bickart, Barbara ..................................................................... 593
Biswas, Abhijit ...................................................................... 527
Biswas, Dipayan .................................................................... 527
Bode, Matthias ....................................................................... 580
Boller, Gregory ...................................................................... 428
Bond, Samuel D. ................................................................... 245
Bonsu, Samuel K. ...................................................................... 9
Borgerson, Janet L. ................................................................ 591
Botti, Simona ................................................................. 455, 512
Boush, David ......................................................................... 445
Bowman, Gale D. .................................................................. 536
Brasel, S. Adam ..................................................................... 305
Briers, Barbara ....................................................................... 146
Briñol, Pablo .......................................................................... 509
Brown, Brian P. ..................................................................... 337
Brown, Christina L. ....................................................... 331, 519
Brown, Stephen ..................................................................... 155
Brownlie, Douglas ................................................................... 36
Brunel, Frédéric F. ......................................................... 276, 501
Bruyneel, Sabrina .................................................................... 46
Buchanan-Oliver, Margo ....................................................... 350
Burns, Alvin C. ...................................................................... 606
Burson, Katherine .......................................................... 113, 569
Burton, Helen Woodruffe ...................................................... 227
Büttner, Oliver B. .................................................................. 197
Caldwell, Marylouise ................................................................ 6
Carlson, Kurt A. .................................................................... 245
Catterall, Miriam ........................................................... 222, 672
Cayla, Julien .......................................................................... 458
Chalmers, Tandy D. ................................................................. 15
Chandran, Sucharita ...................................................... 250, 516
Chang, Chingching ................................................................ 503
Chang, Chun-Tuan ................................................................ 104
Chapa, Sindy ........................................................................... 10
Chatterjee, Subimal ......................................................... 75, 562
Chatzidakis, Andreas ............................................................. 693
Chelminski, Piotr ................................................................... 466
Chen, Yu ................................................................................... 5
Chen, Cathy Y. ...................................................................... 526
Chen, Qimei ........................................................................... 301
Chin, Wynne W. ...................................................................... 96
Chiou, Jyh-Shen .................................................................... 161
Chng, Raymond ..................................................................... 464
Cho, Cecile ............................................................................ 475
Cho, Hyejeung ........................................................ 319, 331 637
Choi, Beomjoon ..................................................................... 252
Chowdhury, Tilottama G. ...................................................... 453
Chronis, Athinodoros ............................................................ 367
Chuang, Shin-Chieh .............................................................. 237
Chung, Emily ........................................................................... 98
Cialdini, Robert B. ................................................................. 276
Cismaru, Magdalena .............................................................. 271
Close, Angeline ..................................................................... 356
Cole, S. Jason ............................................................................ 8
Corneille, Olivier ................................................................... 284
Cornelissen, Gert ................................................................... 284
Cornwell, T. Bettina .............................................. 312, 428, 543
Coskuner, Gokcen ................................................................... 63
Coulter, Robin ............................................................... 453, 466
Craig-Lees, Margaret ............................................................. 274
Cronley, Maria L. .................................................................. 247
Czellar, Sandor ...................................................................... 274
Dahl, Darren W. .................................................................... 323
Dalli, Daniele ........................................................................... 87
Darke, Peter R. .............................................................. 147, 236
Davis, Lenita ......................................................................... 419
Davis, Teresa ......................................................................... 335
Dawar, Niraj .......................................................................... 324
Decker, Seamus ..................................................................... 296
DeHouwer, Jan ...................................................................... 699
Dekimpe, Marnik G. ................................................................ 46
Dellaert, Benedict G.C. ......................................................... 195
DeMarree, Kenneth G. .......................................................... 509
DePelsmacker, Patrick ........................................................... 699
Desai, Kalpesh ....................................................................... 321
Dewitte, Siegfried ............................ 46, 284, 314, 399, 448, 565
Dhar, Ravi ............................................................................... 57
Dimofte, Claudiu V. ...................................................... 276, 312
Dobscha, Susan ..................................................................... 520
Domke, Anja ......................................................................... 163
Dong, Weiming ..................................................................... 276
Dowdles, Melissa .................................................................. 599
Downey, Hilary ..................................................................... 672
Droms, Courtney ................................................................... 282
Du, Shuili ............................................................................... 516
Dubé, Laurette ....................................... 263, 296, 302, 409, 636
Duclos, Rod ........................................................................... 681
Duhachek, Adam ................................................................... 261
Dutta, Sujay ........................................................................... 527
Duxbury, Linda ..................................................................... 599
Einwiller, Sabine ........................................................... 270, 335
Eisenstein, Eric M. ................................................................ 403
Ekici, Ahmet .......................................................... 280, 429, 613
707