The use of asset specific investments to increase customer dependence: A study of OEM suppliers

Making asset specific investments without sufficient economic safeguards is usually seen as a poor managerial practice according to transaction cost economics. However, in practice, many suppliers still invest in asset specificity to satisfy their major customers' requirements, who do not make sufficient investment commitments. The objective of this study is to explore how suppliers that make asset-specific investments maintain long-term relationships with their customers and even make their customers reliant on them. Empirical analysis of data from a sample of Taiwanese original equipment manufacturer (OEM) suppliers shows a significant positive indirect effect of asset specificity on the dependence of customers on suppliers, mediated through joint learning capacity. In addition, a positive link between a proactive market orientation and the degree of customer dependence on the supplier was found. This investigation finds evidence that joint learning capacity and proactive market orientation play critical roles in linking asset specificity to customer dependence.     

Customer solutions in the capital goods industry: Examining the impact of the buying center

Based on in-depth interviews with customers, this study explores the customers' view of relevant solution criteria in the capital goods industry. Our research examines (1) whether the initial four-process conceptualization of customer solutions also holds for this industry, or whether it has to be extended and (2) which criteria of the customer solution matter the most for each member of the buying center. This study reveals that customers purchasing solutions in the capital goods industry expect the provider to be excellent in terms of six customer/supplier relational processes, namely (1) customer requirements definition, (2) customization and integration of goods and/or services, (3) their deployment, (4) post-deployment support, (5) signaling activities, and (6) inter-process management. Moreover, we found that the relevance of these processes differs across the most important members of the buying center (users, buyers, and deciders) due to their specific organizational function.     

Investigating the decision criteria used in electronic components procurement

Previous research has reported that the decision criteria used to evaluate suppliers differs by product category. Rather than investigating the “key buying criteria” across the entire gamut of products and services, this research takes a novel approach by investigating the evaluation criteria used in the procurement of component parts. The survey results suggest that the content and structure of the decision criteria used by business customers to assess their suppliers does not differ across an array of electronic components. The business implication is that business customers that formally track the performance of their suppliers along the critical evaluation criteria will be in a better position to gain a competitive advantage by effectively managing the inbound supply chain.     

The drivers of customer attractiveness,supplier satisfaction and preferred customer status: A literature review

In this paper, we focus on the preferential treatment of buyers by their suppliers. As there is a lack of detailed information regarding the reasons that suppliers serve some buyers better than others, our research addresses a supplier's evaluation of customers and how this evaluation can be influenced by buyers. To give an overview of the drivers of preferential treatment by suppliers, the provided literature review covers three research fields that are considered crucial to this issue: (i) customer attractiveness, (ii) supplier satisfaction and (iii) preferred customer status. By integrating these research topics, we provide a state-of-the-art analysis and overview of the various drivers of preferential treatment, build a preliminary conceptual model and suggest several directions for future research. The identification of the drivers and the resulting conceptual framework can serve as a stepping stone for additional research in this new field.     

Customer attractiveness,supplier satisfaction and preferred customer status: Introduction,definitions and an overarching framework

Industrial markets are frequently characterized by an oligopolistic market structure. As a result, suppliers may become highly selective with respect to decisions that involve collaborating with certain customers. Buying firms must therefore be more attractive than their rivals to obtain opportunities to collaborate with these selective suppliers. This apparently counterintuitive inversion of the classical marketing approach (that is, relationships that involve buyers competing for suppliers rather than the other way round) constitutes the foundation of the special issue that is introduced in this paper. In this paper, we present key terms and propose a model of preferred customership that uses a social exchange perspective to link customer attractiveness, supplier satisfaction and preferred customer status. The papers that contribute to this special issue are introduced within the context of this framework. Finally, this paper concludes with suggestions for future research directions.     

Supplier market orientation and accommodation of the customer in different relationship phases

As customers' needs have changed rapidly, market orientation has become a more primary focus of marketing literature. This study explores the strategies market-oriented suppliers use to accommodate customer needs. In addition, because buyer-seller relationships proceed through phases characterized by distinct behaviors, this study explores the relationship between market orientation and accommodation strategies over the course of the buyer-seller relationship lifecycle. The results show that market-oriented firms use flexibility and relationship-specific adaptation as accommodation strategies. Also, three market orientation components (customer orientation, competitor orientation, and interfunctional coordination) relate differently to flexibility and relationship-specific adaptation during the relationship lifecycle. Finally, accommodation strategies significantly mediate the effects of the three market orientation components on customer satisfaction. Thus, market-oriented firms can satisfy their customers and avoid an overreliance on current relationships by emphasizing either flexibility or relationship-specific adaptations that correspond to the lifecycle of the relationship.     

Adoption of digital sales force automation tools in supply chain: Customers' acceptance of sales configurators

Digitalization changes both buying processes and sales processes and, consequently, the dynamics and division of work between buyers and suppliers in the supply chain. This has major implications for industrial marketing and supply chain management. In this study, we analyze the impact of sales configurators, which are used to create valid configurations of market offerings that fulfill customer requirements. The usefulness of sales configurators can be investigated from both the sellers' and buyers' perspectives. In this research, we focus on the latter, and we specifically investigate the antecedents of customers' acceptance of sales configurators in a supply chain. In our analysis, we concentrate on system-level antecedents, which have been neglected by the existing literature. Our research yields better knowledge of how digital sales technologies can be used by customers for improved effectiveness and perceived value. The results demonstrate that ease of use and system adaptability contribute strongly to the perceived effectiveness, and eventually to the perceived usefulness, of sales configurators. Yet, surprisingly, perceived enjoyment is identified as having the most significant effect on perceived usefulness.     

The impact of customer attractiveness and supplier satisfaction on becoming a preferred customer

This paper discusses how a firm can become preferred customer, defined as a particular buying firm to whom the supplier allocates better resources than less preferred buyers. Two concepts play a central role for a firm aiming to become preferred customer: (i) customer attractiveness and (ii) supplier satisfaction. However, the current literature still lacks a clear discussion on the conceptual differences between these constructs and their attributes and is ambiguous with regard to the relationships between the concepts. This study addresses these shortcomings. We examine customer attractiveness and supplier satisfaction as distinct conceptual variables and test how these constructs relate to each other and to preferred customer status. We build upon practitioner input and survey data from 91 suppliers to do so. Our analyses show that the impact of customer attractiveness on preferential resource allocation from suppliers is significantly mediated by supplier satisfaction. These findings expand the current understanding of these concepts. In addition, our findings might help managers better evaluate their relationships with suppliers and align their strategies accordingly to obtain better resources from their suppliers.     

B2B relationships on the fast track: An empirical investigation into the outcomes of solution provision

In academic and business literature, suppliers providing solutions to their business-to-business (B2B) customers are often described as achieving increased customer retention, higher sales volumes, and enhanced cross-selling. Yet there is limited empirical evidence to support the positive impact of solutions on these customer-related outcomes. Moreover, it is unclear whether suppliers obtain similar outcomes from buyers at different relationship life-cycle stages. This paper aims to address these two gaps and tests the contingency role of the relationship life-cycle in driving future customer outcomes. It proposes that there is a positive effect for solutions provided to recent customers (labeled as “accelerator” role) rather than to established ones (labeled as “leverage” role). Results from a longitudinal analysis of the sales database of a North American company providing solutions to its customers empirically support the “accelerator” role of solutions.     

Product type and the relative influence of buyers in commercial construction

Organizational purchasing is usually the product of collective decision making. While the seller's first contact with a prospective customer is with the purchasing agent, the purchasing agent is by no means the sole decision maker. The purpose of this study is to identify the relative influence of purchasing agents and other buyers in the commercial construction industry. Individual buyers and firms can also make use of the framework evolved to examine their own buying practices.     

Identifying the right solution customers: A managerial methodology

The purpose of this paper is to develop and apply a methodology for identifying, assessing and segmenting customers for business solutions. Firstly, criteria for evaluating solution customers are identified from the literature. These criteria are then refined and differentiated through interviews with 23 solution project managers. Secondly, a longitudinal case study with three solution suppliers and five of their customers is conducted to transfer the selection criteria into a managerial methodology which is validated by both solution suppliers and customers. The developed methodology comprises 21 criteria which are structured into two dimensions: the quality of the relationship to date and the customer's potential for future solution partnership. By combining these two dimensions into a portfolio analysis, four customer segments are identified to help suppliers determine customer attractiveness. The study's contribution lies in bridging academic knowledge and managerial practice to develop a new methodology for helping solution providers to make better informed decisions and reduce the risk of solution failure.     

Interfirm Relationships in the Supply Chain: The Small Supplier’s View

The need for global market presence, the complexity of new product development, and the emphasis on core competence are making alliances among firms more important, and recent evidence suggests that these issues are affecting small suppliers as well as the large firms that are their customers. This paper studied the relationship orientation (i.e., the perceived importance, of interfirm relations) in a fragmented supplier industry whose single largest customer group is automotive OEMs. The primary objective of the research was the identification of factors that discriminate between firms with high and low relationship orientations. The study found four factors describing benefits and barriers associated with interfirm relationships, and found that firms with a high relationship orientation were smaller and more optimistic about the industry’s ability to support a greater number of firms in the future, and perceived faster technology change than firms with a low relationship orientation.     

Pricing issues in industrial marketing

Developing an effective pricing strategy today is becoming a difficult task for industrial marketing managers. The failure of firms to totally understand the implications of their pricing decisions often leads to missed opportunities and eventually lowers profits. Price setting and implementation are multidimensional processes affecting customers, products, cost recovery efforts, produce margin levels, customer retention, market share, and domestic and international sales. This issue of Industrial Marketing Management provides some insights into the complexities of this process for managers by examining pricing on several levels, including the organizational influences on industrial pricing, the factors affecting international pricing, the importance of pricing in controlling supply chain costs, the influence of information on pricing decisions, the degree to which the Internet and reverse auctions are affecting customer relationships with their suppliers, and the importance of developing a strategic pricing plan.     

How does green innovation affect supplier-customer relationships? A study on customer and relationship contingencies

As the demand for eco-friendly products arises, many suppliers have devoted significant effort to green innovation. Prior studies have investigated how green innovation influences product and firm performance; however, its influence on the relationship between suppliers and organizational buyers (customers) is still unknown. Organizational buyers' receptivity to green products is uncertain as they must adjust their current systems to accommodate the new products. As such, understanding how supplier green innovation effort affects the supplier-customer relationship is essential for green innovation success. Using data collected from 196 B2B customers, we find that the relationship between supplier green innovation effort and relational performance depends on several customer- and relationship-level contingencies. Specifically, green innovation benefits a relationship more if customer participation and relational embeddedness are high, or if customer risk aversion and customer-perceived product criticality are low. This research provides valuable guidance for the effective implementation of green innovation.     

Toward Further Understanding the Market‐sensing Capability–Value Creation Relationship

Earlier writings have speculated that the components of customer focus may have differential effects on customer value. This research is responsive to this call as it identifies the behavioral and cultural components that underlie a market‐sensing capability (i.e., customer focus), and undertakes a finer‐grained examination of the impact of the routines through which customer focus is manifested. Specifically, this research investigates the market learning activities (ML) that can affect the depth of the understanding achieved regarding the buyer's requirements and usage context, and the customer‐oriented practices (CO) that can affect the breadth of potential solutions generated to address those requirements. Given the possibility that some buyers may have more sophisticated needs, the role of a customer's performance standards is also considered as a moderating variable. Based on data collected from computer and electronics manufacturers via two separate surveys, the results support that a supplier's ML and CO, respectively, affect perceived customer value. The results also show that a customer's performance standards do not moderate the ML–customer value relationship. Regardless of whether the customer's performance standards (along the lines of product quality, defect rates, and on‐time delivery) are high or low, the seller must be adept at discerning changes in the buying firm's requirements and operational realities. Thus, market learning practices are needed across all customers in order for the supplier to remain synchronized with market changes and deliver superior value to them. Additionally, the results support that the positive association between a seller's CO and perceived customer value is stronger when buyers have more demanding performance standards. The generation of a broader array of potential solutions that is commensurate with a more outward focus is likely to be needed to satisfy customers with more stringent requirements. The disaggregated approach taken in this research contributes to theory by (1) providing greater insight into the domain of the customer focus construct, (2) tracing the mechanisms through which customer focus is reified, and (3) evaluating the possibility that the components of customer focus may have differential effects on customer value. The main practical implication stems from the proposal that market sensing can serve as a core competence and thereby provide the foundation for differential advantage.     

Exploiting and creating knowledge through customer–supplier relationships: lessons from a case study

Through an in-depth analysis of a customer–supplier relationship in the information technology market, we illustrate the complexities of vertical coordination processes. We focus on the strategic and organizational criteria that suppliers and customers must design in order to favour interaction between their heterogeneous competencies. In the examined case, the supplier provides general purpose knowledge to be utilized and enriched through the contact with, and fertilization by, application abilities available at the customer level.     

Development and implementation of customer solutions: A study of process dynamics and market shaping

A broad, dynamic network perspective on solution processes remains scarce. This article presents the process of developing and implementing customer solutions and its effects on the wider business environment by investigating customers and suppliers in the global mining industry (Australia, Chile, and Sweden), analyzing the deployment of a new customer solution, and assessing the changes to the competitive environment and focal firms' relationships with other customers and suppliers. It shows that the forces that drive customer and supplier interests and motivation to co-develop customer solutions may change over time, thus redefining the aim and scope of solutions and creating failure risks. Customers present problems; suppliers respond, on the basis of not only the feasibility of the customer-specific solution but also of their evaluation of future solutions in a broader market; then suppliers aim to standardize successful solutions across markets. Customers want close supplier relationships and unique solutions but also like standardized and repeatable solutions, so they can share development costs with competitors and expose the supplier to competition to avoid lock-in effects. From a network perspective, a novel solution can have a market-shaping effect and evoke reactions from other actors who want to enhance their market position. However, these changes are not necessarily deliberate, and the dynamics that market introductions of solutions trigger may be difficult to predict.     

The effect of buyer behaviors on preferred customer status and access to supplier technological innovation: An empirical study of supplier perceptions

Buying firms are increasingly looking to suppliers for technological innovations that enhance the competitive position of their new products. However, extant research provides limited guidance on how buying firms may gain access to suppliers' innovative technologies. To address this gap in the literature, we draw from social exchange theory to posit sequential relationships among buyer behaviors, preferred customer status, and supplier's willingness to share technological innovations. We test our assertions by applying structural equation modeling statistical analyses to survey response data from 233 sales personnel of production good suppliers in the U.S. automotive industry. Whereas our results show that two buyer behaviors – early supplier involvement and relational reliability – positively affect preferred customer status, a third behavior – share of sales – has no effect. In turn, we find that preferred customer status is positively associated with supplier's willingness to share new technology with the buyer. Further, our findings indicate that preferred customer status fully mediates the benefits exchanged within a buyer–supplier relationship. Hence, our study highlights why buyers seeking innovations should take care that their behavior is appropriate for managing suppliers' perceptions. Accordingly, our results provide specific guidance to buyers as to how they may increase their access to suppliers' new technologies.     

Market Orientation and Innovativeness in Supply Chains: Supplier's Impact on Customer Satisfaction

As today's firms increasingly outsource their noncore activities, they not only have to manage their own resources and capabilities, but they are ever more dependent on the resources and capabilities of supplying firms to respond to customer needs. This paper explicitly examines whether and how firms and suppliers, who are both oriented to the same customer market, enable innovativeness in their supply chains and deliver value to their joint customer. We will call this customer of the focal firm the “end user.” The authors take a resource‐dependence perspective to hypothesize how suppliers' end‐user orientation and innovativeness influence downstream activities at the focal firm and end‐user satisfaction. The resource dependence theory looks typically beyond the boundaries of an individual firm for explaining firm success: firms need to satisfy customer demands to survive and depend on other parties such as their suppliers to achieve customer satisfaction. Accordingly, the research design focuses on three parties along a supply chain: the focal firm, a supplier, and a customer of the focal firm (end user). The results drawn from a survey of 88 matched chains suggest the following. First, customer satisfaction is driven by focal firms' innovativeness. A focal firm's innovativeness depends, on the one hand, on a focal firm's market orientation and, on the other hand, on its suppliers’ innovativeness. Second, no relationship could be established between a focal firm's market orientation and a supplier's end‐user orientation. Market orientation typically has within‐firm effects, while innovativeness has impact beyond the boundaries of the firm. These results suggest that firms create value for their customer through internal market orientation efforts and external suppliers' innovativeness.     

Market microstructure in a global B2B network

On‐line marketplaces raise several interesting issues, among them the relevance of location when content is digitized, and the assessment of a supplier's capabilities when buyers worldwide only have electronic contact with sellers. In global B2B on‐line marketplaces, market microstructures, i.e. which firms compete for the same customers, are thus likely to be influenced by how customers value location and firm capabilities in their decisions to do business with different suppliers on‐line. We suggest that both these sets of attributes will continue to matter on‐line—firms possessing similar capabilities, as well as firms that are similar in location by country, time zones or clusters, will compete for business from the same customers. We model the similarity in competitive positions between pairs of firms based on the overlap in their customer networks, using data on actual interactions between supplier and customer banks on an electronic trading system. Using QAP network regression techniques on the 100 largest banks in this industry, we find that similarity in capabilities influences who competes with whom, and that location still matters in a global B2B exchange. Interestingly, location influences who a firm's competitors are, but not where its customers are from. Copyright © 2001 John Wiley & Sons, Ltd.