The Determinants of Seller‐Buyer Interactions during New Product Development in Technology‐Based Industrial Markets

A growing body of literature indicates that the new product development (NPD) process in technology‐based, industrial markets is characterized by collaborative seller‐buyer relationships. Unfortunately, the extant literature is deficient in some significant ways. For example, there is no theoretical framework that explicates the content of these relationships. Also, there is little empirical research on the antecedents or consequences of these relationships. Therefore, managers seeking guidance on how to manage their NPD relationships have lacked appropriate insights. Not surprisingly, ineffective relationship management is a major contributor to new product failure in such settings. Against this background, this study develops and tests a model of seller‐buyer interactions during NPD. The model is based on the relationship marketing literature and is rooted in Transaction Cost Analysis (TCA). It was tested using data from 296 small to mid‐sized firms in a variety of technology‐based, industrial markets. It specifies product co‐development, education, and post‐installation product knowledge generation as three key behavioral dimensions that characterize seller‐buyer interactions during NPD. Our results indicate that the intensity with which these dimensions are undertaken vary with buyer‐related (i.e., perceived buyer knowledge and prior relationship history) and innovation‐related (i.e., product customization and innovation discontinuity) characteristics. For example, perceived buyer knowledge has a positive impact on product co‐development while innovation discontinuity has a positive impact on education. Further, we find that a seller's satisfaction with undertaking these behaviors is moderated by the technological uncertainty in the seller's industry. As a case in point, satisfaction with undertaking product co‐development is reduced when technological uncertainty is high. Collectively, the overall support we find for our model can help NPD managers optimize their relationships with buyers during NPD.     

A Taxonomy of Relationship Approaches During Product Development in Technology-Based, Industrial Markets

Effective relationship management during new product development (NPD) is an important determinant of new product success in technology-based, industrial markets. This article investigates whether different relationship approaches are used by sellers of high-tech innovations during the NPD process. The results of our empirical study reveal that sellers are resorting to two approaches during NPD: bilateral versus unilateral product development relationships. Furthermore, the approach used in a particular dyad is aligned with the seller's marketing strategy for the innovation, particularly aspects related to targeting (buyer knowledge and prior relationship history) and product strategy (the extent of product customization).     

Relationship quality as a resource to build industrial brand equity when products are uncertain and future-based

This article extends our understanding of industrial branding and the influence of buyer–seller relationships by examining key constructs within an industrial context where products are uncertain and future-based. SEM results elicited from 249 buyer surveys empirically validate satisfaction, trust and commitment as dimensions of relationship quality, and show that buyer–seller relationship quality facilitates direct and indirect seller brand equity accruals. Findings reveal that while focusing on sellers' corporate and product brands is good advice for building buyer–seller relationships, seller resource allocations to these areas should vary depending upon the selected target market segment(s). Findings support that sellers should place more focus on developing quality relationships with buyers than they should in focusing on the non-relational attributes of their corporate brands; however, if sellers choose to bypass building high quality customer relationships, they should instead funnel resources into their product brand offerings. Findings demonstrate that buyers credit their own skills and acumen when evaluating products with which they are confident, and ascribe increased value to the involvement of the seller as their attitude and certainty decrease. These findings provide strategic guidance to the sellers of uncertain and future-based industrial products.     

Managing seller-buyer new product development relationships for customized products: a contingency model based on transaction cost analysis and empirical test

Sellers often customize their product offerings in order to increase the value offered to individual buyers and gain a competitive advantage over the seller’s competitors. However, such customization has a downside—it usually requires considerable seller-buyer interactions aimed at matching the seller’s technological capabilities with the buyer’s needs, which can pose exchange risks such as the safeguarding and adaptation problems noted in the transaction cost analysis literature. In the present study, we develop a contingency model to investigate the impact of product customization on sellers’ perceived relationship satisfaction and subsequent expectations of relationship continuity. We draw on the logic of transaction cost analysis to hypothesize that product customization’s effect on satisfaction and continuity may be moderated by three activities that sellers may engage in during the new product development (NPD) process: education, product knowledge generation, and joint new product development.Our substantive hypotheses were tested with data from a national survey of 296 small to medium size firms in several high-tech industries using a series of hierarchical OLS regression models. Overall, we found mixed support for our hypotheses. The results indicated that joint new product development reduced the negative effect of product customization on seller satisfaction and enhanced customization’s positive effect on continuity, as expected. Contrary to our expectations, product knowledge generation activities increased the negative effect of customization on satisfaction; it also had no significant moderating impact on continuity. Buyer education activities were found to reduce the negative impact of customization on satisfaction, but showed no moderating effect on continuity.This study offers important theoretical and managerial implications. It is one of the first to rely on transaction cost analysis as a basis for examining how various relationship activities conducted during the new product development process moderate product customization’s effect on qualitative outcomes. Whereas traditional NPD processes have emphasized unilateral approaches to product development, our study provides evidence of how bilateral approaches to NPD can benefit sellers of innovations. We provide new insights for managers to consider when deciding whether to engage buyers early on and then continue interacting with them throughout the product development process when developing customized products.     

Bilateral strategic groups: The market for nontactical navy information systems

Although recent studies of strategic groups have provided much insight into the nature of intra-industry rivalry, most studies have focused on the strategies of seller firms. In this paper we argue that the bilateral exchange between groups of buyers and sellers in adjacent markets should be made explicit. Within this bilateral context, the market for non-tactical Navy infomation systems is empirically examined. Strategic groups are developed for both seller and buyer industries, and the interaction between these groups are explored over time. In particular, two market interventions, the imposition of industrial funding procedures in 1984 and a Life-Cycle requirement order in 1988, were examined with respect to their impact on seller/customer exchanges and vertical integration strategies. Significant changes in strategies were noted, and explained within a transaction cost framework.     

Market structure and business performance: An evaluation of buyer/seller power in the pims database

This paper explores the patterns of buyer and seller structure among business units in the PIMS database and how buyer/seller structure is related to profit outcomes, both long-term through the product life cycle and short-term between periods of boom and recession. Businesses with a favourable structure (few sellers, many buyers buying items of low importance) typically maintain margins through the product life cycle, but if there are many sellers facing few and determined buyers, margins and profitability are likely to deteriorate in recession and to continue to decline through the life cycle.     

The origins of power in buyer–seller relationships

Who, or what, holds power in business-to-business buyer–seller relationships is a debate at the heart of power theory. Power in buyer–seller relationships is variously seen as the property of organizations, individuals or relationships yet to be theoretically valid and useful to management, integration of these schools of thought needs to be operationalized. This paper opens up future research avenues through identifying how buyers and sellers understand the origins of power and the nature of self perceived and countervailing power. The paper presents results from 10 focus groups of both buyers and sellers revealing the underlying origins of experienced power. The results support the proposition that power in buyer–seller relationships is a pluralistic concept and that extant theories focused on organizational, individual or relational elements of power are independently too narrow in their reflections of the power construct; rather, they are all part of the same broad construct.     

The bonding effects of relationship value and switching costs in industrial buyer–seller relationships: An investigation into role differences

Despite the established importance of buyer–seller relationships in B-to-B markets, research to determine the differential effects that keep suppliers and customers in a relationship has been scarce. Referring to transaction cost analysis, this study investigates how switching costs and relationship value as perceived by each side unfold their bonding forces in such a relationship. Based on a large scale survey administered in Germany, Korea, New Zealand, and Argentina among marketing/sales and purchasing managers the study shows that relationship value has a stronger impact on intentions for relationship enhancement, search for alternatives and switch intention than switching costs for both buyers and sellers. Only with regard to relational tolerance and only for buyers do switching costs play a greater role than relationship value. Furthermore, buyers base their future relationship intentions more on the current state of the relationship than suppliers. Our results suggest that role differences must be taken into account when studying institutional arrangements in B-to-B markets.     

Social media and customer relationship management technologies: Influencing buyer-seller information exchanges

Due to the increasing array of sales technology, salespeople must understand how each application assists them. This study examines how business-to-business salespeople use different forms of sales technology to meet their boundary-spanning roles. Our research draws from social exchange theory and task-technology fit theory to test a model that examines how salespeople use CRM and social media technologies differentially to support competitive information collection, product information communication, and buyer information sharing. Dyadic data from industrial buyers and sellers is used to analyze the technology-behavior relationships. Our study's results reveal social media use and CRM technology both positively influence buyer-seller information exchanges; however, each technology takes a distinct route to enable the information exchange between the buyer and the seller. The results also suggest that managers need to champion the use of both technology applications to their salesforce.     

Modelling the effect of buyer and seller power on the margins of commodity plastics

In the last decade, large sectors of the chemical and plastics industries in the U.S.A. and West Europe have suffered drastic declines in price and gross margin during periods of low use of industry capacity. This paper shows that the major changes in gross margin observed for some commodity plastics can be modelled successfully in terms of the balance between buyer power and seller power. These industries have visibility of prices and industry occupacity and comparable concentrations of sellers and important buyers. The modelling follows Burgess (1982) in expressing buyer and seller power as simple functions of buyer and seller concentrations, industry occupacity and ‘cohesion’ between sellers. This work provides a first practical test of this new approach. It is shown that the model fits the observed data best if the ‘cohesion’ declines as occupacity declines. It is suggested that the approach would be useful in understanding the behaviour of other ‘near-commodity’, capital-intensive businesses, and in helping to distinguish between those businesses where margins are likely to remain relatively stable and those which might face drastically declining margins if the industry occupacity declines or new entrants change the balance between sellers and buyers.     

When Do Large Buyers Pay Less? Experimental Evidence

The rise of mega‐retailers has precipitated a growing literature on large‐buyer discounts. According to Rotemberg and Saloner [1986] and Snyder [1998], large buyers' ability to obtain price discounts depends on their relative size and the degree of seller competition. I test experimentally implications of this theory concerning the number of sellers and the sizes of buyers in the market. The results track the comparative‐statics predictions to a surprising extent. Subtle changes in the buyer‐size distribution or number of sellers can create or negate large‐buyer discounts. The results highlight the previously unexplored role of the demand structure in determining buyer‐size discounts.     

Building trust in US-Japanese business relationships: Mediating role of cultural sensitivity

While evidence suggests trust plays a fundamental role in maintaining successful buyer-seller relationships in Japan, little is known conceptually as to how foreign sellers can best develop trust in the minds of their Japanese customers. In this research, we develop and test a multi-component model of US seller actions that manifest key trust-building processes (intentionality- and capability-processes) which sellers find effective in building trust with their Japanese buyers. In this unique cultural context, theory suggests trust develops when sellers demonstrate benevolent intentions toward the buyer and exhibit a strong capability to fulfill business promises. An analysis of 181 US sellers in Japan demonstrates that a combination of trust-building efforts is recognized as being critical in seller attempts to develop and sustain trust on the part of their Japanese customers. Importantly, cultural sensitivity mediates the impact of intentionality-based practices on buyer trust, while capability-based activities directly influence trust.     

The effective use of marketing research consultants

Relatively little has been written about effectively managing the buyer-seller relationship for marketing research services. To provide insights into effectively managing this relationship, a survey of both buyers and sellers of marketing research services was conducted. Major findings were that proper problem definition, a familiarity with research methods by the research buyer, and continuous communication between buyer and seller were critical determinants of a successful consultant relationship. For best results the market research buyer-seller relationship should be treated as a mutually beneficial one, not one of conflict or acrimony.     

Ethnicity in housing markets: Buyers,sellers and agents

This paper examines how ethnicity related to cultural differences arising from ethnic background affects housing market transactions in the Atlanta metro area. Using both the US Census and Wikipedia approaches to infer ethnicity from individuals' names, we find that the interplay of buyer, seller, and agent ethnicity composition affects interaction in the housing market. Sellers working with listing agents in the same ethnic group set higher listing prices and enjoy higher selling prices and quicker sales. Agents working with same ethnicity buyers yield higher prices and liquidity. Even though sellers only communicate with buyers through their agents, houses sold by sellers to buyers of same ethnicity have higher prices and sell faster. And while the ethnic mix of agents and their clients matter, the ethnic mix of agents in the transaction does not.     

Reverse Price Discrimination with Bayesian Buyers

This paper studies price discrimination under the situation in which buyers' prior valuations are initially observable by a seller but buyers receive further information about a product or service which remains private thereafter. The buyers interpret new information via Bayes' rule. We show that, in this environment, prices are not monotone in buyers' prior valuations. Interestingly, this results in the possibility that a seller intentionally offers a higher price to a low valuation buyer rather than a high valuation buyer (Reverse Price Discrimination). We derive this result in both monopoly and duopoly markets.     

Seller–Buyer Interactions During the Commercialization of Technological Process Innovations

For buyers and sellers alike, high-tech process innovations can be a double-edged sword. On the one hand, technological process innovations (e.g., computer hardware and software, factory automation equipment) offer buyers the potential for reduced production costs and enhanced product quality. However, early adoption of such innovations is often a risky proposition. For the seller, successful commercialization requires stimulating not only adoption, but also successful implementation of the innovation. In other words, effective management of seller—buyer relations during the development and commercialization process go a long way toward determining the success of a high-tech process innovation. Gerard A. Athaide, Patricia W. Meyers, and David L. Wilemon examine the relationship marketing activities employed by successful sellers of high-tech process innovations. They identify eight strategic marketing objectives that underlie these relationship marketing activities: product customization, information gathering on product performance, product education and training, ongoing product support, proactive political involvement (to encourage support for the innovation from the various affected parties in the buyer's organization), product demonstration and trial, real-time problem-solving assistance, and clarification of the product's relative advantage. Their findings suggest that successful sellers engage in relationship marketing activities throughout all phases of the commercialization process. Rather than simply trying to close a deal, these firms seek active involvement from potential customers, ranging from codesigning of products to seeking feedback on product-related problems or desired modifications. This broader scope of customer involvement necessitates cooperation among various groups in the seller's organization. Product development and engineering work closely with the customer during product customization. Those groups must communicate effectively with the salespeople who demonstrate the product and with the customer support people who obtain feedback and provide real-time problem-solving support. In other words, these relationship marketing activities cut across functional barriers. Consequently, a clear understanding of the buyer's needs and environment is essential throughout the seller's organization, not just in the sales and marketing departments.     

Assessing the Market Value of Real Estate Property with a Geographically Weighted Stochastic Frontier Model

In this study we consider the problem of sellers, buyers and real estate appraisers in determining the price for a house, taking into account the characteristics of the house and its location as well as the goals of these three different parties. The appraiser's job is to determine the fair market value of the house, while the buyer and seller want to find, respectively, the lowest and highest feasible price for it. We combine recent developments in geography and econometrics to develop an approach that determines local estimates of property values from the perspectives of the buyer, seller and appraiser, taking into account the characteristics of the house as well as its location. We illustrate our approach analyzing closing prices in one residential real estate market.     

Online content match-making in B2B markets: Application of neural content modeling

Business-to-business (B2B) sellers need to enhance content marketing and analytics in an online environment. The challenge is that sellers have data but do not know how to utilize it. In this study, we develop a neural content model to match the content that B2B sellers are providing with the type of content that buyers are seeking. The model was tested with two experiments using a dataset that combines cookie-based browsing data from 74 B2B seller companies over a period of fourteen months. In total, the data comprises 180 million browsing sessions tracked via 11.44 million cookies from 34,170 buyer companies. In the first experiment, we study the content in the sellers' own channels, and in the second experiment we study paid channels. With these experiments, we illustrate that browsing data can be combined with marketing content data to evaluate and improve the content-marketing efforts of B2B seller firms. Since the development of digital information technologies (DITs) has made the B2B buying process more buyer driven, our neural content modeling approach can be used to create B2B analytics that re-empower the sellers.     

Mechanism choice and the buy-it-now auction: A structural model of competing buyers and sellers

A striking feature of many online sales platforms is the coexistence of multiple sales mechanisms. Items on eBay, for instance, are frequently offered through auctions, posted prices, and buy-it-now auctions. In this article, I study how this mechanism multiplicity influences the welfare of buyers and sellers. I specify and estimate a structural model of mechanism choice in online markets, in which I consider both sides of the market: On the demand side, buyers' choices among available listings are equilibrium outcomes of an entry game. On the supply side, sellers make equilibrium decisions when choosing sales mechanisms and prices. I estimate this model using data from sales of baseball tickets on eBay and calculate consumer and seller rents in three markets: the actual market with all three sales mechanisms and two counterfactual markets with auctions and fixed prices or only fixed-price listings, respectively. I find that the addition of auctions to fixed-price markets hurts sellers and risk-averse buyers but benefits risk-neutral buyers. Additionally, the consumer surplus increases when buy-it-now auctions are offered but the seller surplus is reduced further. I discuss the intuition for the cause of this result.     

Price Strategies for Idiosyncratic Goods—The Case of Housing

We determine the mechanism that a rational, profit-maximizing seller would use to revise his reservation price for a heterogeneous or infrequently exchanged good. For instance, while one dimension of a home's quality may be easily determined in competitive markets (e.g., the valuation of floor size, location, etc.), other dimensions of quality may be idiosyncratic (unit specific) and unobservable by the seller (e.g., aesthetics of the home). Here, a seller of a new or infrequently exchanged housing unit may use sales success information to revise his expectation of the unit's market-determined value and hence revise his reservation price. The rational seller will, upon arrival of the first buyer inspecting the unit, determine a sequence of reservation prices for this and expected subsequent buyers. This price sequence falls for subsequent buyers and starts from a lower initial price if the first buyer arrives later than expected. Through this mechanism, we offer an explanation for price dispersion and vacancy durations in housing markets. While we explicitly model the real estate market here, this price revision mechanism is also applicable to rental markets, labor markets, used car markets, and other markets characterized by heterogeneity and infrequent sales.