The effects of supplier capabilities on industrial customers’ loyalty: the role of dependence

Abstract

This research examines whether suppliers' capabilities impact OEM customers' dependence on the supplier and thereby generate customer loyalty. Using a sample of purchasing managers focusing on a single key component supplier, we examine three supplier capabilities, two dependence dimensions, and three aspects of customer loyalty. Core offering capability increases the customer firm's benefit-based dependence. Operations capability has a more comprehensive effect, enhancing both benefit-based and cost-based dependence. Benefit-based dependence leads to relational loyalty and, through its effect on relational loyalty, to insensitivity to competitive offerings and future purchase expansion. Cost-based dependence motivates insensitivity to competitive offerings, but does not affect relational loyalty or purchase expansion. The supplier's communication capability is associated with relational loyalty, but this effect does not flow through the customer firm's dependence. The divergent pattern of antecedents and effects of benefit-based dependence and cost-based dependence may explain the inconsistent and insignificant research findings in previous research on dependence. Our results suggest that adopting a bidimensional model of dependence more fully captures the theoretical domain of dependence, thereby permitting researchers to better examine its role in supply chain, channel, and marketing relationships.Keywords Business to business relationships . Loyalty . Dependence . Supplier-buyer relationships . Marketing capabilitiesThe May 2007 issue of Inside Supply Management noted that the reviving manufacturing sector brings great opportunities for industrial suppliers, but also has motivated OEM customers to consolidate their supply bases. As manufacturers reduce their suppliers, "highly reliable service, repeated process or product innovations, manufacturing flexibility, responsiveness to market trends, and short product development cycles" become increasingly critical that organizational resources and capabilities constitute an important source of sustainable competitive advantage.We pursue Srivastava et al.'s (1998) suggestion that capabilities' impact on performance outcomes may be mediated by market-based assets, examining customer loyalty and dependence. We do not assert that capabilities' performance effects are fully mediated by customer loyalty, but loyalty is both an indicator of effective deployment and

Relationship Value: Drivers and Outcomes in International Marketing Channels

“…Three, reverse-scored items that reflect the importer's sensitivity and responsiveness to competitive offerings were used to measure insensitivity to competitive offerings. The items came from Scheer et al (2010). A three-item scale was employed to measure future purchase expansion.…”

“…They may take a variety of forms including purchasing dedicated tools and machinery, deploying tailor-made promotional campaigns, and developing operating systems for ordering and inventory control. Bilateral relationship-specific investments occur when both partners make produce such value not only are difficult to replace or duplicate but also have great potential for further development and success (Blocker et al 2011;Scheer et al 2010). Hence, in the presence of superior relationship value an importer is likely to be less attentive to entreaties from possible competing suppliers and more willing to consider expansion of its current purchase activities.…”

“…In addition, we examine the effects of relationship value on two key elements of customer loyalty: insensitivity to competitive offerings and future purchase expansion (Scheer, Miao, and Garrett 2010). Our conceptual model of the drivers and outcomes of relationship value in exporter-importer relationships is presented in Figure 1.…”

“…This affective state strengthens and stabilizes the dyad, and compels partners to focus beyond the short-term (Ganesh, Arnold, and Reynolds 2000;Lam, Shankar, Erramilli, and Murthy 2004). Business relationships that produce such value not only are difficult to replace or duplicate but also have great potential for further development and success (Blocker et al 2011;Scheer et al 2010). Hence, in the presence of superior relationship value an importer is likely to be less attentive to entreaties from possible competing suppliers and more willing to consider expansion of its current purchase activities.…”

Consumer-based strategy: using multiple methods to generate consumer insights that inform strategy

“…Consumer-based strategy can be contrasted with strategy developed based on an understanding of firm-level variables such as organizational capabilities (e.g., Angulo-Ruiz et al 2014;Krush et al 2015) or supply chain relationships (e.g., Kauferle and Reinartz 2015;Scheer and Miao 2010). It can also be contrasted with organizational strategy that responds to market-level variables such as market size and market growth.…”