Exchange Theory

Exchange generally could be defined as the action of receiving or acquiring something from somebody by providing or offering something as return.[1] "The exchange concept is the key factor in understanding the expanding role of marketing." mentioned by .Bagozzi, Richard P.[6] Also, Kotler(2008) mentions that exchange is the core concept in marketing and has to meet the follow five conditions:[1]
1. There are at least two parties
2. Each party has something that might be of value to the other party.
3. Each party is capable of communication and delivery.
4. Each party is free to accept or reject the exchange offer.
5. Each party believes it is appropriate or desirable to deal with the other party.

Exchange is a value-creating process because each party gets something that it is valuable to itself.[1] Also, although exchange is the core concept of marketing, "it has its protagonists and detractors."[3] Negotiation is the most common way when two parties engaged in exchange, which means two parties attempt to work out an agreeable term that satisfies both parties.[2] A transaction takes place when these kinds of agreements are made. "A transaction is a trade of values between two or more parties, involving at least two things of value, agreed-upon conditions, a time of agreement, and a place of agreement."[1] For instance, a dealership sells a vehicle to a customer with a price of $20,000. This trade has involved two parties and two things of value: the dealership and the customer, the vehicle and $20,000. A transfer is different from a transaction. Without receiving anything tangible in return immediately is the major distinction to transaction.[1] For example, a donor donates $100 to a charitable organization is a transfer, because the donor does not expect anything tangible as return.

The Meaning of Exchange

Exchange is more than only a transfer of product or service for financial payments. Most marketing exchange can be characterized by such a transfer. In general, marketing exchange may be appeared one of the three classes of meaning: utilitarian, symbolic and mixed.[9]
  • Utilitarian exchange is an interaction that based on "goods that are given in return for money or other goods and motivation behind the actions lies in the anticipated use or tangible characteristics commonly associated with the objects in the exchange."[9]
  • Symbolic exchange "refers to the mutual transfer of psychological, social, or other intangible entities between two or more parties." [9]
  • Mixed exchange, generally speaking, is the combination of utilitarian and symbolic aspects when it is very hard to distinguish the two.[9]

Exchange Theory in Social Marketing

Exchange theory "originated in economics and became part of the commercial marketing heritage. There has been an ongoing controversy of whether or not social marketing involves exchange."[3] In social marketing, exchange refers to the concept of the interaction between social campaigner providing information to prompt target markets behavior change. Whether social marketing involves exchange has become a controversial gambit for a while.[4] On one hand, some consider that social marketing does nothing relating to exchange. On the other hand, others consider social marketing as the provider of products and services in exchange for behavior changing.[5] In social marketing, exchange is relied on the mutually satisfying relationship between the social marketers as providers and service recipients as customers.[3]
Figure:Social Marketing and Exchange[9]

Exchange Theory Used as a General Theory of Marketing

Marketers such as Kotler and Bagozzi utilize exchange theory to defend a broadened view of the marketing discipline. "Exchange theory incorporates many of the assumptions and concepts of the functional and conflict perspectives, and consequently, bridges the gap between macro and micro structural levels(groups, communities, organizations, and societies)." [9]
Selected premises and principles of economics, functional anthropology, and behavioral psychology are the basis of current exchange theory. "Sociologists view exchange theory as an alternative as to Parsonian functionalism."[9] Turner [10] summarizes that modern exchange theory is based on the following premises and principles:
"This reformulation has involved the recognition that:(a)rarely do men attempt to maximize profits; (b)men are not always rational; (c)their transactions with each other, whether in an economic marketplace or elsewhere, are not free from external regulation and constraint; and (d)men do not have perfect information on all available alternatives. Recognition of these facts has led to a series of alternative utilitarian assumptions: (1)While men do not seek to maximize profits, they always seek to make some profit in their social transactions with others; (2)While men are not perfectly rational, they engage in calculations of cost and benefits in social transactions; (3)While men do not have perfect information on all available alternatives, they are usually aware of at least some alternatives, which form the basis for assessments of cost and benefits.(4)While these are always constraints on human activity, men compete with each other in seeking to make a profit in their transactions. In addition to these alterations of utilitarian assumptions, exchange theory removes human interaction from the limitations of material transactions in an economic marketplace. (5)While economic transactions in a clearly defined marketplace occur in all societies, they are only a special case of more general exchange relations occurring among individuals in virtually all social contexts; (6)While material goals typify exchanges in an economic marketplace, men also exchange other non-material commodities, such as sentiments and services of various kinds. "[9]

Types of Exchange Mode

Four types of exchange modes from social marketing perspective were introduced by Janic and Zabkar: power relations, intrusive selling, conventional marketing exchange, and marketing relationships.[7]
  1. power relations
  2. intrusive selling
  3. conventional marketing exchange
  4. marketing relationships

Also, Bagozzi, Richard P. has concluded three types of exchange which are restricted, generalized and complex. 2345.jpg
  • Restricted Exchange refers to two-party reciprocal relationships. The reciprocation is significantly important in this type of exchange. Each party gives to and receives from each other. "Consumers, retailers, salesmen, organizations or collectivities are presenting the social actors of the restricted exchange with reciprocity." For instance, company A trading $100,000 supplies to company B and company B paying the supply with the same amount of value goods to A are considered as a restricted exchange because each company is benefiting each other. Most commonly, the treatment of exchange in marketing literature deals with restricted exchange such as the mode like "customer-salesmen, wholesaler-retailer, or other such dyadic exchanges". Restricted exchange exhibit two characteristics: attempting to keep equality and a quid pro quo mentality. [6]
  • Generalized Exchange refers to more than two social actors involving in the exchange situation. In other words, general exchange could be explain as univocal and reciprocal2.jpg relationships among these actors. "If the reciprocation involve at least three actors and if the actors do not benefit each other directly but only indirectly ."[8]can explain univocal reciprocity. In generalized exchange, each party gives to another but receives from someone other than to whom he gave. For example, a high school (B) asks a computer producer (A) to donate some desktops for establishing a computer courses. When A has donated desktop for B's education, students (C) who benefits from these course recognize this brand of computer. This would potentially drive student to buy this brand of computer in the future. In other words, this sequence of exchange can be expressed as A->B->C->A. This is known as a generalized exchange.[6]
  • Complex Exchange refers to a system of mutual relationships between at least three parties and each party at least involves at one direct exchange.[6] It's more likely the combination of restricted and generalized exchange. The channel of distribution may present the best example of complex exchange. For example, manufacturer(A), retailer(B) and consumer(C) can be illustrated as: A<->B<->C.

See also

External links:


1. Kotler P, Keller K.L & Cunningham P.H (2008). Defining Marketing for the 21st Century. A Framework for Marketing Management. Pearson Education Canada. Toronto, Ontario.
2. Kotler, P., & Lee, N. (2008). Social marketing: Influencing behaviors for good. Los Angeles: Sage Publications
3.Raval, D., Subramanian, B., & Raval, B.. (2007). Application of the Relationship Paradigm to Social Marketing. Competition Forum, 5(1), 1-8. Retrieved November 21, 2010, from ABI/INFORM Global. (Document ID: 1390635351).
4.Peattie, S. and K. Peattie. (2003). Ready to fly solo? Reducing social marketing's dependence on commercial marketing theory..Marketing Theory 3(3): 365-385.
5.Luck, D. J. (1969). Broadening the concept of marketing. Journal of Marketing 33(July): 53-57.
6.Bagozzi, Richard P.. (1975). Marketing as Exchange. Journal of Marketing (pre-1986), 39(000004), 32. Retrieved November 21, 2010, from ABI/INFORM Global. (Document ID: 66025255).
7.Janic, Z. 1. and V. Zabkar. (2002). Impersonal vs. personal exchanges in marketing relationships. Journal of Marketing Management 18(7/8): 657-671.
8.Ekeh, Peter P.. (1974), Social Exchange Theory: The Two Traditions. Cambridge, Mass,: Harvard University Press. Chap 3.
9.O C Ferrell, & Mary Zey-Ferrell. (1977). Is all social exchange marketing? Academy of Marketing Science. Journal (pre-1986), 5(4), 307. Retrieved November 22, 2010, from ABI/INFORM Global. (Document ID: 64983582).
10.Jonathon H. Turner, (1974). The Structure of Sociological Theory. Homewood. Illinois: The Dorsey Press. P 212,213.