Capturing value creation in business relationships: A customer perspective

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Abstract

Collaborative relationships in business markets are of growing importance to customers and suppliers alike. Customers need to decide whether to invest in a new supplier relationship, to maintain and develop a valued relationship, or to divest from a low-value relationship. Suppliers, in turn, face growing commoditization of products and seek to differentiate themselves through relationships. The measurement of value creation in buyer–seller relationships is still in its infancy, and a sound understanding of how firms create and deliver value in business relationships is needed. Emerging studies investigate relationship value based on dimensions derived from theory and lack a managerial perspective. Therefore, the present research explored relationship value from a grounded theory perspective. In-depth interviews with purchasing managers identified eight value drivers in manufacturer–supplier relationships. Implications for the measurement of the concept are discussed, and directions for further research are suggested.

Introduction

There is a growing recognition that collaborative relationships in business markets offer significant opportunities for companies to create competitive advantages and achieve superior results Hewitt et al., 2002, Jap, 1999, Lyons et al., 1990. In many business markets, manufacturers reduce the overall number of companies in their supply base and focus on closer relationships with key suppliers. Consequently, when assessing their supplier portfolio, customers need to decide when to invest in a specific supplier relationship, when to maintain and develop existing relationships, or when to divest from underperforming relationships.

Many suppliers, in turn, face a growing trend towards commoditization of products (Rangan & Bowman, 1992). In search of beating the “commodity magnet,” they increasingly turn toward new ways of differentiating themselves through improved customer interactions (Vandenbosch & Dawar, 2002). As a consequence, suppliers also need to understand how they can create and deliver value in business-to-business relationships.

The measurement of value creation in buyer–seller relationships is still in its infancy, and a sound understanding of the concept is a prerequisite for developing reliable and valid assessment tools Eggert & Ulaga, 2002, Ulaga, 2001. Emerging studies investigate relationship value based on dimensions derived from theory. However, a sound conceptualization grounded in managerial practice is missing. The present research attempts to close this gap by exploring relationship value from a grounded theory perspective. To work towards this goal, the rest of the paper is structured as follows: First, we position our research within the emerging literature on relationship value. Next, we describe our research methodology. We conducted ten in-depth interviews with purchasing managers in nine manufacturing companies located in the Midwest of the United States. Analysis and interpretation of results identified eight value drivers in supplier relationships. Finally, we discuss implications for measuring relationship value and provide directions for further research.

Section snippets

Relationship value

Exchange has been accepted as a core concept of the marketing discipline Bagozzi, 1975, Hunt, 1991. In fact, most current definitions of marketing explicitly include exchange in their formulations (Kotler & Armstrong, 2001). Market exchanges take place because all parties involved expect to gain value in the exchange. Therefore, value has always been “the fundamental basis for all marketing activity” (Holbrook, 1994).

While the marketing literature contains a variety of definitions stressing

Grounded theory

Researchers have recommended the use of qualitative methods (1) to explore phenomena about which little is known or (2) to gain novel understandings about existing phenomena (Stern, 1980). In addition, qualitative approaches can be used to obtain the intricate details about a specific phenomenon under investigation (Strauss & Corbin, 1998). Among the many types of qualitative research methodologies, grounded theory was first presented by Glaser and Strauss (1967) in an attempt to bridge the gap

Results

Eight dimensions of value creation in manufacturer–supplier relationships emerged from our interviews with purchasing managers (Fig. 1). In this section, the relationship value drivers and their dimensions are discussed in detail.

Implications

The present study has a number of implications for managers and researchers alike. From a customer perspective, our findings allow manufacturers to assess how a supplier adds value in a relationship. Drawing on previous approaches of profiling customer value perceptions of physical products (Woodruff & Gardial, 1996), Fig. 2 illustrates how a manager could profile an existing supplier relationship and benchmark it against an alternative supplier.

In this fictive example, Suppliers A and B are

Limitations

As in any empirical research, the results of the present study cannot be interpreted without taking into account its limitations. First, the sample of purchasing professionals selected for the purpose of this study is not representative of the population of manufacturing companies. Only quantitative approaches using large sample sizes could provide generalizations across manufacturing industries.

Second, our research focused on manufacturer–supplier relationships. Dimensions pertaining to

Directions for further research

The present research provides opportunities for further research in understanding value creation in buyer–supplier relationships. First, it would be interesting to develop multidimensional measurement scales based on the relationship value dimensions identified in this study. Empirical research based on a cross-sectional sample of manufacturing industries could provide the possibility to test, validate, and refine the scales.

Second, it would be interesting to integrate relationship value in

Acknowledgements

The author would like to thank Joe Cannon, Andreas Eggert, John Gaski, Tom Reynolds, John Weber, and the two anonymous reviewers for their comments on an earlier draft of the manuscript. In addition, the author would like to thank Joe Guiltinan and the Department of Marketing at the University of Notre Dame for their support in this project.

Finally, the author would like to acknowledge Chris Cronin, MBA Candidate and research assistant, for his valuable contribution to this project.

Wolfgang Ulaga is a Visiting Associate Professor of Marketing at the Mendoza College of Business, University of Notre Dame. He also is Associate Professor of Marketing at ESCP-EAP in Paris, France. His research interests focus on how firms create, deliver, and measure customer value in business markets.

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    Wolfgang Ulaga is a Visiting Associate Professor of Marketing at the Mendoza College of Business, University of Notre Dame. He also is Associate Professor of Marketing at ESCP-EAP in Paris, France. His research interests focus on how firms create, deliver, and measure customer value in business markets.

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