Managing Relational Exchanges Gila E. Fruchter Bar-Ilan University Simon Pierre Sigué Athabasca University The authors propose an analytic model that deals with both behavioral considerations between exchange part- ners and the determination of relational marketing efforts over time. On the basis of the behavioral marketing litera- ture, they consider three main factors that drive the levels of relational commitments between two exchange part- ners: the trust/distrust component, the opportunism com- ponent, and the relational marketing effort of the seller. Incorporating these factors in a well-known model used in applied mathematics for “love dynamics,” the authors claim that the issue of managing relational exchanges is an opti- mal control problem. Their analysis shows that the seller’s optimal policy for determining relational marketing effort over time is either time-invariant or time-variant, depend- ing on whether or not the exchange partners are conserva- tive and the structural and contextual environment of the relationship remains unchanged over time. Keywords: relational exchange; commitment; trust; op- portunism; optimal control; relational mar- keting effort During the past decade, the study of relationship mar- keting and customer relationship management has at- tracted the attention of several marketing scholars (e.g., Berry 1995; Garbarino and Johnson 1999; Morgan and Hunt 1994; Sheth and Parvatiyar 1995a; Verhoef 2003). Increasingly, it is believed that successful and lasting rela- tional exchanges are those in which partners go beyond short-term transactional benefits and incorporate behav- ioral factors such as trust and commitment (e.g., Dwyer, Schurr, and Oh 1987; Gundlach, Achrol, and Mentzer 1995; Sirdeshmukh, Singh, and Sabol 2002). This belief has pervaded marketing thought such that many scholars, especially in Europe, are calling for a paradigm shift in marketing (e.g., Grönroos 1994; Gummesson 1997). From the seller’s perspective, the challenge presented by the emerging paradigm of relationship marketing is to determine a sequence of marketing decisions and behavior capable of establishing, developing, and maintaining suc- cessful relationships with buyers (e.g., Morgan and Hunt 1994). For many scholars, it is no longer possible to focus on marketing mix as the only set of strategic marketing variables (e.g., Grönroos 1994). Given improved technol- ogies, resources, and skills, competitors are increasingly able to meet the quality of any offer in the market. One of the critical consequences of this trend has been an ampli- fied focus on pricing and sales promotion to attract cus- tomers in the short term, which, unfortunately, increases customers’ sensibility to prices and decreases their loyalty to brands. The fundamental idea of relationship marketing is to go beyond short-term transactional marketing actions and to build loyalty to brands and sellers. To accomplish this, The authors thank the participants of the INFORMS 2003 Marketing Science Conference for the feedback on an earlier draft of the ar- ticle. The comments provided by Roland Rust as well as two anonymous Journal of Service Research reviewers are greatly appreciated. Finally, the second author thanks the School of Business, Athabasca University for support of the research and Janice Thiessen for her useful comments. Correspondence concerning this article should be addressed to Gila E. Fruchter, Graduate School of Business Admin- istration, Bar-Ilan University, Ramat-Gan 52900, Israel; fax: +972 (3) 535-3182; e-mail: fruchtg@mail.biu.ac.il. Journal of Service Research, Volume 7, No. 2, November 2004142-154 DOI: 10.1177/1094670504268421 © 2004 Sage Publications