“Attraction versus Satisfaction: Customer Attractiveness and Supplier Satisfaction Throughout Different Buyer-Supplier Relationship Stages”

Faculty of Economics and Business

MSc Thesis Supply Chain Management

“Attraction versus Satisfaction: Customer Attractiveness and

Supplier Satisfaction Throughout Different Buyer-Supplier

Relationship Stages”

University of Groningen, Faculty of Economics and Business Co-assessor/ University

Dr. Ir. Thomas Bortolotti

University of Groningen, Faculty of Economics and Business

ABSTRACT

Supplier scarcity is more often recognized in today’s business environment. It is important to maintain a good relationship with suppliers because they can deliver resources that can build competitive advantages. To remain competitive, a buyer should have access to better resources than its competitors. In order to have access to these better resources, a buyer should aim for a preferred customer status at suppliers’ organization. Prior research has shown that customer attractiveness and supplier satisfaction are important indicators in attaining a preferred customer status. This research discusses the importance of the time factor within the concepts of customer attractiveness and supplier satisfaction. Because the dynamic nature of buyer-supplier relationships, it was expected that mechanisms of customer attractiveness and buyer-supplier satisfaction work differently throughout an evolving relationship. For the purpose of this research, a case study was conducted by interviewing sales employees of a Dutch wholesaling company. Acquired data was analyzed by means of coding after which the role of time within customer attractiveness and supplier satisfaction was assessed and discussed. The results of this study confirmed that the time factor has a crucial role in customer attractiveness and supplier satisfaction.

Keywords: buyer-supplier relationships, customer attractiveness, supplier satisfaction,

4.3.4 Decline Stage ... 27

4.4 Attraction and Satisfaction Interaction ... 28

4.4.1 Development Stage ... 28 4.4.2 Commitment Stage ... 29 4.4.3 Integration Stage ... 29 4.4.4 Decline Stage ... 30 5. DISCUSSION ... 32 5.1 General Discussion ... 32 5.2 Theoretical Implications ... 34 5.3 Managerial Implications ... 35

5.4 Limitations and Further Research ... 35

REFERENCES ... 37

APPENDIX A: Interview Protocol ... 42

1. INTRODUCTION

Many industries in today’s business environment are characterized by the presence of a low number of suppliers (Schiele, Calvi, & Gibbert, 2012). Suppliers can deliver resources to buyers that build competitive advantages such as ideas, capabilities, and materials that otherwise not could be achieved (Koufteros, Vickery & Dröge, 2012). Therefore, successful buyer-supplier relationships are recognized as a valuable resource (Dyer & Singh, 1998). However, sharing the same supply base with competitors makes that competing companies may have access to similar resources (Dyer & Hatch, 2006). Hence, it is essential to obtain better resources from suppliers relative to competitors in order to attain a competitive advantage (Hunt & Davis, 2008).

Customer attractiveness and supplier satisfaction have shown their influence on suppliers’ resource allocation as these concepts can lead to a preferred customer status (Pulles, Schiele, Veldman & Hüttinger, 2016). Customer attractiveness involves the concept of the expectations of a supplier towards the relationship with this customer (Schiele et al., 2012). Customer attractiveness is an important characteristic influencing suppliers’ resource allocation to customers (La Rocca, Caruana & Snehota, 2012), and is therefore essential in buyer-supplier relationship development (Aminoff & Tanskanen, 2013). A supplier is satisfied if the value derived from a buyer-supplier relationship are as expected, or exceeds this expectation (Schiele et al., 2012). Supplier satisfaction is essential for organizations since companies cannot be responsive without satisfied suppliers (Benton & Maloni, 2005). Some authors argue that customer attractiveness influences supplier satisfaction, meaning that (positive) expectations of value will lead to satisfaction (i.e. Pulles et al., 2016). Other authors argue that supplier satisfaction influences customer attractiveness, meaning that current value (satisfaction) leads to expectations (i.e. Hald, 2012). According to Mortenson, Freytag, & Arlbjørn (2008), customer attractiveness is a notion that evolves over time. Hence the notion of what is value in order to satisfy suppliers will change over time as well when relational expectations evolve over time. It is thus expected that the importance of antecedents of customer attractiveness (La Rocca et al., 2012) and supplier satisfaction (Vos, Schiele & Hüttinger, 2016) will change over time. It is however not known yet how the concepts of customer attractiveness and supplier satisfaction develop over time.

affect the perceived supplier satisfaction level in functional dyads (Hald, 2012). Pulles et al. (2016) argued that capturing the effect of customer attractiveness and supplier satisfaction on each other across different relationship stages could be a valuable extension of current literature. It is important to take this time perspective into account since this perspective might influence the interaction between supplier satisfaction and customer attractiveness. Currently, the interaction between expectation of a relationship with a customer (i.e., attractiveness) and the realisation of this expectation (i.e., satisfaction) has only been researched at one fixed point in time (i.e. Pulles et al., 2016; La Rocca et al., 2012). Considering the dynamic nature of buyer-supplier relationships, it is expected that mechanisms of customer attractiveness and buyer-supplier satisfaction work differently throughout a relationship. Therefore, capturing the interaction between customer attractiveness and supplier satisfaction and the importance of certain customer attractiveness and supplier satisfaction factors in different stages of a buyer-supplier relationship will be a valuable extension of current literature. Ellram (1991) has defined four relationship stages which are suitable to capture the dynamic nature of buyer-supplier relationships: the development, commitment, integration and decline stage.

This research aims to further extend literature on the concepts of customer attractiveness (i.e. supplier’s expectations) and supplier satisfaction (i.e. expectation fulfilment) and the interaction between these concepts by taking the time perspective into account. This time perspective is taken into account by selecting cases in all four relationship stages as defined by Ellram (1991). In addition, this study provides insight for managers in how to be attractive to a supplier in different relationship stages and how to satisfy a supplier in these stages. When executed successfully, a preferred customer status could be acquired. In order to clarify how above-mentioned concepts are interacting with each other in different relationship stages, the following research question will be central in this research:

“How does (the interaction between) customer attractiveness and supplier satisfaction develop throughout different relationship stages?”

2. THEORETICAL BACKGROUND

The aim of this section is to discuss previous research that has addressed the concepts of buyer-supplier relationships, customer attractiveness and buyer-supplier satisfaction. This section will conclude with the combination of the concepts into a theoretical framework.

2.1 Buyer-Supplier Relationships

Successful relationships between buyers and suppliers are seen as a valuable resource (Fynes, Burca, & Voss, 2005), and can build a competitive advantage (Koufteros et al., 2012). This competitive advantage arises when better resources are obtained from suppliers than competitors (Hunt & Davis, 2008). In addition, relationships can generate supernormal profits that cannot achieved by either firm alone known as ‘relational rents’ (Dyer & Singh, 1998). Holm, Eriksson & Johanson (1996) emphasize that “the dyadic relationship is only developed if both parties consider it profitable or otherwise worth-while to engage in future exchange” (p.1035). Buyer-supplier relationships go beyond the exchange of material goods, it also involves intangible value (Homans, 1958). Therefore, this research will draw on the Social Exchange Theory (SET). This theory is guided by the notion that relational mechanisms can explain firm’s behaviour in relational exchanges (Thibaut & Kelley, 1959). Pulles et al. (2016) stated that this theory is suitable for explaining both the concepts of attractiveness and satisfaction because these concepts explain actor’s motivation in a buyer-supplier relationship to initiate, intensify, or discontinue this relationship to obtain added value from exchange relationships (Thibaut & Kelley, 1959; Blau, 1964). The essence of SET is that “social exchange comprises actions contingent on the rewarding reactions of others, which over time provide for mutually and rewarding transactions and relationships” (Cropanzano & Mitchell, 2005, p.890), the so-called norms of reciprocity (Blau, 1964). SET is applicable for this research because it takes the time perspective in consideration: SET is centred around the notion that “relational interdependence develops over time through the interactions of the resource exchange partners” (Schiele et al., 2012, p.1180). Thus, buyer-supplier relationships evolve over time as the commitment and interdependences are increasing (Ford, 1980).

2.1.1 Relationship Dynamics

2003). Ellegaard et al. (2003) argues that taking the time factor in consideration when managing buyer-supplier relations is very important, because a management approach successful at one moment in time can be useless at another moment in time. Therefore, different stages can be distinguished based on specific behaviours, processes or strategic orientations (Ring & Van de Ven, 1994). Hence, supplier interactions and their outcomes are dependent on the buyer-supplier relationship stage (Dwyer, Schurr & Oh, 1987; Jap & Ganesan, 2000; Medlin, 2004). This stresses the importance of incorporating the time factor when analysing buyer-supplier relationships. Relationships could be analysed based on their duration, however, Eggert, Ulaga & Schultz (2005) stressed that some relationships develop in a different pace than others. Therefore, this research will analyse relationships based on the relationship life-cycle. Wagner (2011) mentioned the relationship life-cycle is a measure that is suitable to capture the dynamic nature of buyer-supplier relationships. Ellram (1991) has defined four stages within this cycle: the development, commitment, integration and decline stage (Table 2.1). Similar stages were identified in a research by Caniels et al. (2010) and Wagner (2011).

Stage Relationship Intention Important Aspects

Development Expand business

Learning each other’s expectations; building trust based on satisfactory interaction; high degree of contact; low mutual dependence.

Commitment Expand business rapidly

Deep understanding of the mutual benefits; trust is being built; more routine contact; increasing dependency.

Integration Low intention to expand business

Mutual expectations are established; high trust, comfort and mutual dependence; highly routine contact; synergies.

Decline Intention to reduce business

Pull back from relationship because of declining product OR unsatisfactory performance.

Table 2.1: Relationship Stages (Ellram, 1991)

2.2 Customer Attractiveness

buyer-supplier relationship (Hald, Cordon, & Vollmann, 2009). Hence, value expectation and creation are important determinants in the determination of customer attractiveness (Ellegaard & Ritter, 2007; Kelley & Thibaut, 1978; La Rocca et al., 2012).

Several authors (i.e. Fiocca, 1982; La Rocca et al., 2012; Tóth et al., 2014) argued that there are certain factors that drive customer attractiveness. For example, La Rocca et al. (2012) defined that customer attractiveness constitute of the following factors: (1) development potential, (2) intimacy, (3) profitability, and (4) relational fit. These factors differ among customers, therefore, not all customers are equally attractive to suppliers (Aminoff & Tanskanen, 2013). By taking this in consideration, customer attractiveness can be used, or is used unknowingly, by suppliers as a priority criterion in order to decide which customers will receive superior resources (La Rocca et al., 2012). It is argued that customer attractiveness is supplier specific: what is attractive to one supplier can be unattractive for another supplier (La Rocca et al., 2012).

2.3 Supplier Satisfaction

Satisfaction relates to the perception of equity in a relationship (Benton & Maloni, 2005). Supplier satisfaction is defined as “the buyer’s ability to live up to the expectations of the supplier […]” (Vos et al., 2016, p.4613). Thus, a supplier will be satisfied if outcomes are as expected, or even exceed this expectation (Schiele et al., 2012). Essig & Amann (2009) argue that satisfaction is an important motivator to continue an exchange relationship in order to retain access to valuable benefits, it enhances commitment through reciprocity, and it determines the business relationship quality. Psychological factors such as commitment, trust, and goodwill are essential in order to sustain a buyer-supplier relationship as described in SET (Palmatier, 2008), and without satisfaction partners are unable to generate such factors (Benton & Maloni, 2005).

management strategy to create supplier satisfaction (Wong, 2000; Forker & Stannack, 2000; Skinner, Gassenheimer, Kelly, 1992). Hence, suppliers find the development of norms and relationship atmosphere more important while buyers are inclined to focus more on performance outcomes (Nyaga, Whipple, & Lynch, 2010). In order to enhance supplier satisfaction, buyers should demonstrate interest in both information sharing and joint effort (Nyaga et al., 2010). With regard to the relational factors, Vos et al. (2016) defined that support, reliability, and involvement affect relational behaviour and that contact accessibility has a positive impact on perceived operative performance. Additionally, Essig & Amann (2009) explicitly argue that low-levels of operative excellence can hinder becoming satisfied in particular.

2.4 Theoretical Framework

Customer attractiveness and supplier satisfaction are two different concepts which have different influences on the behaviour of suppliers (Pulles et al., 2016). Supplier satisfaction is resulting from assessment of performance succeeding recent buyer-supplier interactions while customer attractiveness is more expectant and focused on value (La Rocca et al., 2012). However, how these constructs interact with each other is not described straightforward in current literature (La Rocca et al., 2012). Pulles et al. (2016) and Mortenson et al. (2008) argued that customer attractiveness is influencing supplier satisfaction. However, it is also argued by Pulles et al. (2016) and Hald (2012) that a reversed relation is also possible where supplier satisfaction influences customer attractiveness, here, fulfilment of expectations is leading to higher expectations for the future.

become more important (Ellram, 1991) and there a high level of tangible and intangible input in the relation (Blau, 1964). As the relation declines because of unsatisfactory performance or declining products, expectations towards each other are more short-term oriented (Ellram, 1991). Here, informing each other and communicating clearly becomes more important.

As the relationship develops over time, the focus with regard to expectations becomes different and different aspects become more important. Therefore, this research will examine how customer attractiveness and supplier satisfaction interact and what antecedents are important among different relationship stages. The theoretical framework in Figure 2.1 below will be central in this research. The arrow between customer attractiveness and supplier satisfaction is drawn both ways since the relation between these two concepts is not clear in literature yet. The relationship stage is possibly a contingency factor affecting this relationship between customer attractiveness and supplier satisfaction, meaning that the relationship strength and the direction of this arrow might depend on the stage the relationship is in. Furthermore, it will be researched which antecedents of customer attractiveness and supplier satisfaction are more dominant in certain stages of the relationship.

3. METHODOLOGY

This section will address the research design, case selection, data collection, and data analysis in order to carry out a valid and reliable research.

3.1 Research Design

The main purpose of this study is to identify how customer attractiveness and supplier satisfaction develops throughout different relationship stages. In order to answer the research question central in this research, a case study approach has been adopted. A case study is suitable to capture the complex and dynamic nature of buyer-supplier relationships because a case study allowed for a holistic and in-depth understanding (Choi & Krause, 2006; Yin, 2009). Previous studies on customer attractiveness and supplier satisfaction and the interaction between these concepts were mainly of a quantitative nature (i.e. Pulles et al., 2016), the case study approach in this research adds value to existing literature explaining this interaction through qualitative research. By adopting this approach, questions of why, what and how will make it possible to gather insight in the interaction between customer attractiveness and supplier satisfaction (Choi & Krause, 2006; Voss, Johnson, & Godsell, 2008).

To capture the dynamic nature of buyer-supplier relationships, a longitudinal research was preferable. However, due to time constraints, this research adopted a quasi-longitudinal approach as proposed by Anderson (1995). This approach was making it possible to compare groups with certain characteristics and their development over time by defining their relationship stage. By taking this approach, data on business relationships was collected at one point in time through the relationship stage classification (Eggert et al., 2005). In this research, the relationship stages as defined by Ellram (1991) are central. To define the stage the relationship is in, respondents were asked whether they plan to increase business with their partner or not, how often they communicate with their customer, and what the degree of trust, commitment and mutual dependence is. After collecting the answers on these questions, each buyer-supplier relationship was positioned in one of the four stages as discussed in Table 2.1.

3.2 Case Selection

Stage: Unit of Analysis No. Cases

Development Buyer-supplier relationship 3 Commitment Buyer-supplier relationship 4 Integration Buyer-supplier relationship 3 Decline Buyer-supplier relationship 3

Table 3.1: Studied Relationships

This case selection allowed for both literal and theoretical replication. Literal replication implies that cases produce similar results, and theoretical replication implies that contrary results will be produced for predictable reasons (Pandit, 1996). Although we expected different results between stages, it is possible that differences appear within stages (instead of between). In this case, it was assessed how this difference could have occurred in order to find an explanation. In other to capture possible factors, we kept track of relationship characteristics such as relationship duration, company size or sales volume which are discussed later.

3.3 Data Collection

Data was collected by conducting interviews. All of these interviews took place in April and May 2019. Sales managers, sales representatives and account managers were selected as interviewees. These interviewees were selected based on their knowledge on the studied buyer-supplier relationship to make sure these representatives were the best available sources for this study. An overview of the interviews is provided in Table 3.2 below.

Stage Case Position of Interviewee # Interview

Duration

Transcript Length

Development

DV1 Account Manager 1 32 min 10 p.

DV2 Tactical Sales & Education 2 38 min 13 p.

DV3 Junior Product Manager 3 15 min 6 p.

Commitment

CM1 Account Manager 4 30 min 9 p.

CM2 Sales Representative 5 31 min 10 p.

CM3 Account Manager 6 26 min 8 p.

CM4 Key Account Manager 7 56 min 16 p.

Integration

IN1 Product Manager 8 26 min 8 p.

IN2 Sales Manager 9 18 min 7 p.

IN3 Product Manager 10 28 min 10 p.

Decline

DC1 Senior Account Manager 11 27 min 9 p.

DC2 Product Manager + Account Manager 12 40 min 12 p

DC3 Account Manager 13 28 min 10 p.

Stage Case Turnover within Relationship (2018)

Relationship Length Company

Size* Development

DV1 €40.000 Long, but active for 2 years <

DV2 - <1 year <

DV3 - < 1 year >

Commitment

CM1 €560.000 Long, but more active for 2/3 years

>

CM2 €500.000 Approximate 10 years -

CM3 €1.000.000 Long, but active for 2 years - CM4 €350.000 Long, but active for 4/5 years <

Integration

IN1 €1.500.000 Approximate 10 years <

IN2 €1.000.000 Approximate 10 years <

IN3 €1.750.000 Approximate 20 years -

Decline

DC1 €50.000 Approximate 5 years -

DC2 €140.000 Approximate >20 years <

DC3 €210.000 Long, but active for 4 years <

Table 3.3: Overview of Customer Characteristics

*< = smaller than supplier, > = bigger than supplier, - = similar to supplier

An interview protocol has been developed to lead the interview (Appendix A). This protocol is based on the most important concepts of this research and questions have been developed by using the theoretical background of this research. During the interviews the interviewees were askes in which stage they though their relationship with the customer was. Afterwards this was checked by using the specifications of each stage. Characteristics of the customer discussed in each case were captured and an overview of these characteristics is given in Table 3.3.

3.4 Data Analysis

After collecting the data from semi-structured interviews and transcribing these interviews, data was brought into a database. This database was coded afterwards per relationship stage using ATLAS.ti software. The most important concepts could be identified from interviews with coding (Strauss & Corbin, 1990) because it transforms raw data into a more standardized form (Babbie, 2015). A deductive coding approach is chosen for this research, building on the most important concepts of this research, see Table 3.4. In this table, the second order concepts are operationalized.

Dimension Second Order First Order

Relationship Stage

Customer Attractiveness

(Expected Value: value that the supplier expected in the future relationship)

Development Potential Intimacy

Profitability Relational Fit

Supplier Satisfaction

(Actual Value: perception of the supplier that the buyer lived up to the expectations)

Profitability

Growth Opportunity Relational Behaviour Operative Excellence

Relationship Interaction

(Interaction between customer attractiveness and supplier satisfaction: satisfaction leading to expectations vs. expectations leading to

satisfaction

Current Experiences

Future Expectations

Table 3.4: Initial Coding Scheme

4. FINDINGS

This section will give an overview of the acquired data. Firstly, the most important findings will be discussed. Secondly the findings regarding customer attractiveness, supplier satisfaction, and the interaction between these two concepts will be presented. In order to be able to conclude which concepts are important at which relationship stage, and how the interaction between customer attractiveness and supplier satisfaction differs, results will be subdivided in the relationship stages as defined by Ellram (1991).

4.1 Main Findings

In this subsection the most important findings of this research will be summarized. The subsequent sections will provide a more comprehensive overview of the results.

4.1.1 Customer Attractiveness

As defined by La Rocca et al. (2012), customer attractiveness constitutes out of four factors: (1) development potential, (2) intimacy, (3) profitability, and (4) relational fit. We found that the importance of each of these four factors to suppliers differs per relationship stage, see Table 4.1 below. Per relationship stage, three or four cases are included.

Development Commitment Integration Decline*

1 Development Potential 1 Development Potential 1 Profitability

High Variance

Profitability Profitability Relational Fit

3 Relational Fit 3 Relational Fit Intimacy

Intimacy 4 Intimacy 4 Development Potential

Table 4.1: Customer Attractiveness Throughout a Relation.

The decline stage is marked with a ‘*’ because in this stage there was a high variance in results. Interviewees did not agree unanimously on which factors are important and which are less important. These differences are discussed more in-depth in the subsequent sections.

4.1.2 Supplier Satisfaction

Development Commitment Integration Decline*

1 Relational Behaviour 1 Relational Behaviour 1 Relational Behaviour

High Variance Growth Opportunity 2 Growth Opportunity 2 Profitability

3 Profitability Profitability Operative Excellence

4 Operative Excellence 4 Operative Excellence 4 Growth Opportunity

Table 4.2: Supplier Satisfaction Throughout a Relation

As with the customer attractiveness, the decline stage is marked with a ‘*’ because in this stage there was a high variance in results. These differences are discussed more in-depth in the subsequent sections.

4.1.3 Interaction

The interaction between customer attractiveness and supplier satisfaction differed throughout the relationship. In the initial stages of a relation, attractiveness of a customer leads to suppliers’ satisfaction, where in later stages fulfilment of expectations leads to more expectations in the future.

Interaction Explanation

Development Stage

In this stage suppliers look mostly at the potential of customers. The potential of a customer raises value expectations. These value expectations can satisfy a supplier when high.

There was one case where the relation was the other way around. Here, the customers’ company was bigger than suppliers’ company. High value delivery from the beginning resulted in high expectations for the future.

Commitment Stage

(High) Expectations of value for the future makes suppliers satisfied. However, this focus should not compromise current performance. Lack of current performance could lead to being a less attractive customer.

Integration Stage

Decline Stage

High Variance

High variance between cases. All three cases had different reasons why the relation is in decline, possibly leading to diversity in results.

Table 4.3: Supplier Satisfaction and Customer Attractiveness Interaction

4.2 Customer Attractiveness

This subsection will give an overview of the findings regarding customer attractiveness per relationship stage. These findings will be linked to the factors that drive customer attractiveness as defined by La Rocca et al. (2012). Possible new factors will be discussed as well.

4.2.1 Development Stage

It was mentioned by all interviewees in the development stage that the development potential makes a customer the most attractive. In particular the growth potential of a certain customer was attractive for all interviewees. “When in conversation with this customer I could notice very quickly that this customer has potential: at this moment this customer brings zero turnover, but within three or five years this could grow to an annual turnover of 300.000-500.000 euros.” – DV1. In some cases, the growth potential of a company was linked to the size of customers’ company. Thus, the size of the customers’ company was something that was found attractive by the interviewees. “Because of its five locations, he has a bigger customer portfolio than a one-man company, making it possible to reach a bigger market. That makes that we see potential in this specific customer.” – DV2. In some cases, the size of the company was interesting because it could give volume guarantees, making the customer attractive. “A couple of weeks ago we saw how big the company was at a fair. If they only need tires for 15% of their deals, they would guarantee a high turnover, so there is a lot of potential.” – DV3.

in our private brands, these private brands brings us higher margins, that makes it interesting for us as well.” – DV1. In addition, these private brands lock customers in, making them dependent on the supplier. Locking in customers is interesting for suppliers since it can give some sort of guarantee. “He can buy premium brands everywhere, so he is not dependent on us with that. But with our private brands he cannot go anywhere else.” – DV1.

Intimacy and relational fit were mentioned less frequently and explicit, implying that these two factors are less important than the development potential and profitability for a relationship in the development stage. When intimacy was mentioned, it was mentioned that the willingness of the customer to initiate business was important. “The willingness to do business with our company, that is at this moment in this development stage with this customer the most important.” – DV2. When relational fit was mentioned interviewees found it important that collaboration with the customer runs smoothly, and that the focus in the relationship not is on the problems, but on solutions. “Important is to search for solutions together, and I am glad that our collaborating together is easy, even though we’re in business for such a short time.” – DV3.

4.2.2 Commitment Stage

The importance of a customers’ development potential in the commitment stage was mentioned many times. Just as in the development stage, interviewees stressed the important of growth potential expectations. The presence of growth potential was an incentive for the majority of the interviewees to spend time on a customer. “The expectation that their own turnover will grow gives us the opportunity to attain substantial numbers, substantial revenue … potential is required when you invest a lot of time in a customer” – CM4. The company size was mentioned several times as an indicator of growth potential. It makes it easier for suppliers to exploit a new area quickly. “They have a wide reach with their number of locations. Then it is easier to grow with a brand than when you start cooperating with an independent organization with only one location.” – CM3. Another advantage of a large company size stressed by interviewees is the guarantee of large volumes. “For our private label it is very attractive to sell via a large chain which stores product centrally, it makes it possible to sell really large volumes.” – CM1.

margins. Customers more attractive to suppliers when they buy products with relatively high margins. “They purchase a lot of our private brands, for which we do a lot of marketing, that makes it attractive since these products deliver us high margins.” – CM2. An advantage for the supplier of selling exclusive, private brands is the binding of customers to the suppliers’ company. “Fully dependent they are never, but buying our private brands has many benefits for us. It generates binding between buyer and supplier.” – CM4.

Relational fit was stressed less explicitly by interviewees, but indirectly the importance of relational fit was mentioned many times. A customer is more interesting for a supplier when there are no problems in managing the relation and the customer can be a stable partner to work with. “It is a stable partner. I cannot go bankrupt suddenly. It is just a stable customer, no payment problems.” – CM2. Thus, a stable, credible, reliable customer is interesting for suppliers. “I find it important that a customer trusts me, and that I can trust this customer.” – CM1. When a customer is reliable, loyal and easy to work with, less effort to manage the relationship is necessary. “It is more interesting to have a few loyal customers, instead of many smaller ones. Loyal clients will contact us when they need something and I appreciate that, less effort is needed, it is easy to work with such customers.” – CM4. This last quote has also some interference with intimacy. (Individual) Attention from the customer is appreciated. However, in general expectations with regard to intimacy were stressed less often, implying that intimacy in a buyer-supplier relationship is less important in the commitment stage.

4.2.3 Integration Stage

For suppliers with customers in the integration stage expectations arise at different levels. First of all, profitability: expectations that a customer can bring high margins makes this customer attractive to a supplier. “For me he is just interesting to make good money, I make good money there, I think that is important.” – IN1. Expectations of value will even increase when a customer is interested in product groups that brings these margins. “What is nice for us is that they buy in segments where we earn a lot of money. They only buy our private brands and that is where we make the highest profits.” – IN3.

that informs a supplier at all times is attractive to a supplier. “A customer that informs you at the moment he thinks that the relationship is under pressure for whatever reason is important.” – IN2. Keeping in touch with each other turned out to be important. Interviewees emphasized also the importance of a pro-active attitude of suppliers. “I expect him to look for us if he needs us, that he inquires us if he has any question. He knows that we can do a lot. Thus, I expect him to have a pro-active attitude. When he is doing so, I know that he is leaning on us.” – IN1. Thus, being thoughtful and considerate is appreciated by suppliers, hence, intimacy turned out to be an important indicator of attractiveness. Some interviewees expected from their customers to have personal contact and to be informative. “The personal contact with this customer is really important, that you do something for each other, that you inform each other and that you keep each other up-to-date.” – IN2.

It turned out that interviewees did not have many expectations with regard to development potential, in contrast with the previous discussed stages. Here it becomes clear that relations in this stage are fully developed and integrated. “It is not a customer from which we expect a growth to a turnover of 3 million, we know that a turnover of 1,5-2 million will be the maximum. We know what they will buy from us and what they will not.” – IN3.

4.2.4 Decline Stage

The reasons why a relationship ended up in the decline stage were different among the cases. It is important to note these differences, since it might explain differences in results among interviewees. The causes of decline of each case are described in Table 4.4.

DC1 Choice of the customer itself. Decision to focus on different brands since there is more competition on the market in certain segments.

DC2 Choice of the customer itself. The customer felt that they did not needed the supplying company anymore. Relationship has ended recently.

DC3 Market conditions. The market is not as prosperous as expected, resulting in disappointing sales.

Table 4.4: Overview Decline Relationships

Expectations in case DC1 were mainly focused on the profitability potential of a customer. “In the end it is all about the profitability. If you are doing business with someone you want to earn some money with it.” – DC1. Here, profitability is linked to growth potential. “For me it is important that I can grow there, and profitability is closely connected to that. Thus, if I grow than I have a change to increase my profitability” – DC1. In case DC2, the relationship recently has ended because the customer decided to do so because of a conflict of interests. However, for the interviewee this customer was, and still is, interesting because he expected growth. “It was a customer with which I had a relation where I thought that it was one to continue. Making bigger steps to let that growth continue.” – DC2. It was mentioned several times that the possibility to exploit a new area is interesting. Thus, the declining relationship is not favorable for the supplier, resulting in less turnover. “The customer has a radius of approximately 50km what their potential customer area is. Now we are missing turnover in that area since we cannot sell directly to the end-user.” – DC2.

The relation of case DC3 declined because of unfavorable market conditions. Here, the customer still wants to be attractive to the supplier. It was mentioned that intimacy, and mainly the clear communication was something that is valued by suppliers. “He is willing to listen, he is interested in how we do business, he takes care. He says himself that he feels sorry for the fact that he only bough for €5000, - so far because of the market conditions.” – DC3. In addition, it is interesting for the interviewee that the customer is easy to work with and solution oriented is. “He always tries to look for solutions, as what I said, it is not a customer which causes a lot of work for me. He is reliable and informative.” – DC3. Despite the disappointing sales, the interviewee has expectations that the sales level will recover before the end of the year. “I hope that I will keep at least at the same sales level as before 2018. Preferably even a little more, but I know that it is a relatively small company and his customer base will not become bigger. I know that we won’t get at the same level as last year.” – DC3.

4.3 Supplier Satisfaction

4.3.1 Development Stage

In the development stage, all four factors defined by Vos et al. (2016) turned out to be important. There was no real consensus between the three interviewees which factor was the most important. However, growth opportunity and relational behavior were factors that were mentioned more often by interviewees than operative excellence and profitability. With regard to growth opportunity, volume growth was something that satisfied suppliers. “In my opinion he is not buying enough, but he is buying tires. He did not buy any of them a couple of years ago, so I am satisfied with that.” – DV1. Concerning relational behavior, interviewees found it important that a customer was willing to improve the collaboration. If suppliers perceive this willingness from their customers, it might improve their satisfaction. “He is very willing to further improve our collaboration. That is something that I am really satisfied about.” – DV1. In addition to this collaboration, it was stressed several times by interviewees that openness in the buyer-supplier relationship was important. Openness to each other can make a supplier feel satisfied with the relation. “Now we get feedback from our customer if we are too expensive, but we get the opportunity to change our prices, we have a choice to act upon it.”. – DV2.

Despite the fact that growth opportunity and relational behavior were mentioned the most often, both explicit and not explicit, profitability was mentioned explicitly by some interviewees as being important in expectation fulfillment. “He helps us to achieve a good profit by buying our private label where we have a good margin. It improves our profitability.” – DV2. With regard to operative excellence, on time payment was something that suppliers appreciated. “Paying bills on time is important to me, I do not like to get called by the finance department every week that my customer did not pay.” – DV1. Also contact accessibility is important to suppliers. When a customer is not able to fulfill suppliers’ expectations regarding this accessibility, suppliers can get dissatisfied. “We have a lot of contact, but that is not how I wish it was. He can reach me every moment of the day, but if I want to contact him it is hard to get in touch. There is room for improvement.” – DV1.

4.3.2 Commitment Stage

are the customer where it comes from both sides, I appreciate when they send requests. I think that we are the best supplier for customers where it comes from both sides.” – CM4. Openness in the relationship was another aspect that was stressed many times as being appreciated by suppliers. “He tells us a lot about their company, or about the market, or what competition is doing currently so that we gain an advantage. Sometimes we cannot do something with it, but where we can we use it in our favor.” – CM1. In addition to the openness that was appreciated by suppliers, market information can give suppliers an advantage in the market which can improve their profitability. Another aspect that satisfies suppliers with regard to profitability are high margins. “This year we reach higher margins on what we sell there than we did last year, so they live up to my expectations more than I expected.” – CM4. There was one exception where satisfaction was not caused by relational behavior. In this case the interviewee mentioned explicitly that this was caused by the nature of their relationship. In this case, the buyer and supplier were competitors in suppliers’ ancillary business. “The relationship will never be very extensive because everyone has its own interests” – CM3. This interviewee stressed the importance of profitability and growth opportunity.

Fulfilling expectations with regard to growth opportunity can satisfy a supplier, but was mentioned less often. Especially volume growth can satisfy a supplier.“It is a big plus if I see what they buy this year compared to last year, that just makes me very satisfied.” – CM2. In addition, a customer which can improve a suppliers’ market position in a certain area are favored. “This customer has a wide reach within The Netherlands, thus with one agreement on headquarters level we can reach the whole country, I think, yes, that I find the most important.” – CM2.

4.3.3 Integration Stage

All interviewees unanimously agreed upon the fact that value delivery with regard to relational behavior is the most important. Showing mutual dependence by communicating openly was valued by interviewees. “Open, mutual dependency, as Covey described in his seven habits of highly effective people. Meaning that if you show mutual dependency is the most ideal form of a business relationship. Our open and honest communication brings us the most.” – IN1. Loyalty turned out to be another import factor for suppliers. “Due to import taxes we had to raise prices from one of our private brands. This customer does not quit business with us, unlike other customers. He is open to talk and to come up with a solution. He gives us time.” – IN2. Being loyal to a supplier can come with some benefits in the long run. Reciprocity also is appreciated by suppliers. “Recently we offered this customer a set of tires and I asked him to pay something extra because the freight was expensive. He understood and said that he would agree if I could arrange his paperwork. Thus, I did some extra work but I got the amount of money I had in mind.” – IN2.

Profitability and operative excellence were mentioned less often by interviewees as being valuable. Despite the fact that they were mentioned less often, these factors were still seen as relevant by interviewees. “Sometimes it is just nice when you have customers where you do not have to think about all the time, the flow is there and you know that he contacts us when he needs something. The only danger is that you can get lazy as supplier.” – IN2. Dedication of a customer was an aspect that was appreciated as well especially if this helps the supplier to achieve good profits. “If you look at their sales, how they promote our private brand and that they fulfill their promises, that is something that our company should be satisfied with. A customer which sells our private brand as their own brand is something you want.” – IN3.

4.3.4 Decline Stage

Relational behavior was for all interviewees with a relation in the decline stage important. Especially openness of the customer. When a customer is open, the supplier knows what is going on in the relations and feels informed. “What is see as most valuable, even though the business is not going well, is that he keeps in touch with me. He contacts me, he is asking questions. He is open, honest and loyal. That is valuable to me.” – DC3. Informing the supplier is an aspect that is valued, requesting the supplier every single time when the customer needs something. “He does not forget us. He involves me as much as possible in business where he needs me. It would frustrate me when he does not involve me.” – DC1. Not being open can result in a dissatisfied supplier. “What I found negative about the situation was that we noted it and had to investigate it. I am wondering how long it would have taken before they contacted us about the situation if we did not contact them ourselves.” – DC2. Reciprocity was mentioned as a valued aspect in the case of DC3, where the relation is declining because of market conditions. “I like that our relation has a two-way mindset, and not a one-way. Not that he only thinks about himself, not grabbing only, but also giving away something when I need it.” – DC3.

4.4 Attraction and Satisfaction Interaction

This subsection will give an overview of the findings regarding the interaction between customer attractiveness and supplier satisfaction. These findings will be discussed per relationship stage after which a summary of results will be provided.

4.4.1 Development Stage

The majority of the interviewees mentioned that expectations for the future the main focus is in the current buyer-supplier relationship. “I am looking more at future expectations; it is the potential of the customer you are looking at.” – DV2. Expectations for the future can make a supplier satisfied with the relation at this moment. “I am satisfied with where we stand after two years, but I will be dissatisfied if we are on exactly the same point in five years. I know there is more potential so I have expectations for the future.” – DV1. Despite the fact that the main focus is on future potential, interviewees mentioned that the focus on the future should not be at expense of current profitability. “We should develop conditions for the customer to ensure durability of the relation, but it should not be the case that after we have created these conditions the customer says: Nice that you created this, but I am choosing for another supplier.” – DV2.

4.4.2 Commitment Stage

There was consensus among all interviewees that both current performance and value expectations for the future are important. Future expectations of value were most important to interviewees, but when current performance is insufficient value expectations will drop.

It was mentioned many times by interviewees that future expectations about the customer have the main focus. These (positive) expectations can lead to suppliers’ satisfaction. “They can do a lot more, I am sure. They are doing different brands now that we do not deliver now. So, we can get more out of it in the future, and then I can be more satisfied with this customer. I am satisfied now, but I can be more satisfied in the future.” – CM2. The interviewees were sure that they could reach better performance in the future than they do now. “No, not satisfied yet about what they have reached, so that is not where the satisfaction comes from. But I know that we can and will reach satisfaction in the future. – CM4. Despite the future focus, it was mentioned several times that the future focus should not compromise too much on current performance. “I think that you should prioritize future expectations before current performance. But you cannot concede too much on the current performance. If a customer does not grow with the expectations you will lose support from the management.” – CM4. Thus, suppliers in the commitment stage are satisfied when the expectations of value for the future are high. However, when customers do not fulfill (some) of the expectations on short term, suppliers can get dissatisfied and a customer can become less attractive to this supplier. “For me it is important that currently everything is going as we want it to be. But it also important that they will do the numbers in the future that we have in mind. At this moment everything is going well, so then the future is more important.” – CM3. When value is delivered currently, expectations of value for the future will grow. “I am pretty satisfied with the current situation of the customer. But I think that there is more potential. But what we have reached last year is already a prestation.” – CM2.

4.4.3 Integration Stage

that you can achieve with a customer.” – IN2. And: “I do not expect more for the future, because I know it is not possible at the moment. But I expect that they will stick to the same sales numbers.” – IN3. Thus, their current satisfaction is leading to expectations for the future. However, these expectations do not relate to growth, but relate more to the stability of revenue and the relational aspect. “I see not growth potential. But I am satisfied with the fact that we are on a level, and that we do not put aside each other for the smallest inconvenience. That is a prestation, but not volume or turnover related. More the substantive relationship, that is what I am satisfied about.” – IN2. Interviewees are satisfied about the relations and expect that the relation will carry on at a stable level. “I do not think that our relation changes if our way of working does not change. As long as the dollar does not change, we keep working like this. Just close contact, a very open relation and generating as much as possible business for both of us.” – IN1.

4.4.4 Decline Stage

There was no consistency between the cases in the decline stage. Therefore, each case will be discussed separately. In the first case where the customer made the decision for another brand, but where the relation is still in a good place, the supplier still has some expectations for the future. “I want more, it is already an existing customer, everything is in place. My priority is to earn more turnover, that is my expectation.” – DC1. The supplier knows that there is more possible, making him more future-oriented and is leading to mixed feelings. Knowing that there is potential is leading to a certain level of satisfaction, but at the other hand, knowing that the customer is currently not performing at its maximum is leading to some sort of dissatisfaction. “I am more future-oriented. There is still a lot that I do not have yet. So, I would love to do more business with them.” – DC1.

was more the moment of the day, saving the relationship from deteriorating. “At the end, our focus was on how to ‘glue’ the current relation. Looking for a way how we could keep doing business with this customer.” – DC2. Here, not clear interaction between customer attractiveness and supplier satisfaction was found.

5. DISCUSSION

Firstly, a discussion of resultswill be held. Then, the theoretical and managerial implications will be discussed. This section will be finished by discussing limitations of this research and by providing suggestions for future research.

5.1 General Discussion

Customer attractiveness and supplier satisfaction are important determinants in gathering a preferred customer status (Pulles et al., 2016). This study gives insight into how customer attractiveness and supplier satisfaction develop throughout a buyer-supplier relationship, and how customer attractiveness and supplier satisfaction interact over time. Up till now these concepts have been researched only at one point in time, without making a distinction in relationship stages, and by conducting qualitative research (e.g. Vos et al., 2016; Pulles et al., 2016). The results of this research give insight in which antecedents of customer attractiveness and supplier satisfaction are important at what stage of the relationship and why. These antecedents are summarised in Appendix B. Results of the decline stage are not summarised in this appendix because there was high variety in results within this decline stage. In addition, this research provides insight into how customer attractiveness and supplier satisfaction interact over time.

potential. In a relationship where market conditions are cause of decline, different factors are making a customer attractive. Here, expectations relate more to intimacy, and especially the clear communication about the (market)situation was valued. This is in accordance with what was suggested by Ellram (1991): informing each other and communicating clearly is important when a relation is in decline.

Secondly, this study found that the importance of supplier satisfaction indicators is different among relationship stages except for one indicator: relational behaviour turned out to be the most valued indicator throughout all relationship stages. This is in line with the results in the study of Vos et al. (2016), here, relational factors explained a greater variance than economic factors in supplier satisfaction. Suppliers appreciate it when customers are open, easy to work with, loyal, and when reciprocity is present. In the initial stages of a relationship growth opportunity is besides relational behaviour an important indicator in supplier satisfaction. Especially growth in volume was valued by suppliers. As the relation develops, growth opportunity becomes less important and profitability and operative excellence was valued more. As with the customer attractiveness, there was some variance in results in the decline stage due to the different reasons why the relationship was in decline. However, there was some consistency with regard to relational behaviour: this was seen as valuable in supplier satisfaction regardless of the decline reason.

before in literature. In the integration stage, it was clear that the current value delivery is the most important. High delivery of value is leading to expectations in the future. However, these expectations do not relate to growth or potential, but they relate to stability of profitability and the relational aspect. This is in line with what Ellram (1991) proposed: in a mature relation both buyer and supplier know each other’s expectations, and the focus is more on stabilizing and incorporating the relationship. In the decline stage, there was no clear pattern detectable between cases. Ellram (1991) suggested that expectations in a declining relation are more short-term oriented. This orientation was not evident in all cases suggesting that future oriented expectations are still possible in a declining relationship. In cases where the supplier was aware of possible potential, future value expectations are the overriding concern.

5.2 Theoretical Implications

It was argued by Ellegaard et al. (2003) that buyer-supplier relationships are dynamic in nature and that taking the time factor in consideration when managing these relations is important. This study confirms this statement. Time has a crucial impact in managing buyer-supplier relationships. What attractive is to a supplier and what satisfies a supplier evolves over time, therefore, both customer attractiveness and supplier satisfaction are dynamic concepts. Future research into customer attractiveness and supplier satisfaction should incorporate the time factor because it can affect these concepts.

since it proofed to have a considerable impact. This study adds value to current literature by giving clarity and explanation about how the interaction between customer attractiveness and supplier satisfaction works in different stages.

5.3 Managerial Implications

The results of this study have shown the importance of taking the time factor in consideration when managing buyer-supplier relationships. Because the relational stage turned out to be a contingency factor in buyer-supplier relationships, organizations should consider a supplier relationship management approach where suppliers are split into groups based on the stage the relationship is in. These groups then need different approaches, what is effective for one group might be ineffective for the other. In addition, this research provides insight, especially for purchasing managers, on how to attract and satisfy suppliers in each of the four relational stages. Relationships in a development stage require a different approach than relationships in for example the integration stage in order to be attractive to a supplier and to satisfy this supplier.

To attract a supplier in the initial stages of a relationship, showing development potential and profitability is the most effective. As the relationship develops, development potential becomes less important and the importance of relational factors grows. To satisfy a supplier in the initial stage of a relationship, excelling in relational behavior and growth opportunity is most valued by suppliers. As the relationship develops, growth opportunity becomes less important and delivering value with regard to profitability and operative excellence becomes more important. In all four relationship stages, it is most effective to deliver value in relational behavior to suppliers.

5.4 Limitations and Further Research

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APPENDIX A: Interview Protocol

The introduction and relationship questions are mainly to support the data collection chapter

Introduction:

1. What is your position within this company?

2. What is your role in this buyer-supplier relationship?

3. For how many years is the buyer-supplier relationship we are focussing on established? 4. What is the size of the customer’s company?

5. What is the average annual sales volume in this relation?

Relationship Characteristics

1. How would you describe the relationship with this customer? 2. How has this relationship developed over the years?

à Try to figure out if current value (satisfaction) leads to expectations (attractiveness) or if (positive) expectations of value will lead to satisfaction.

Customer Attractiveness:

1. What are your expectations of value regarding this customer? Focus on the type of expectations and relate this to the antecedents of customer attractiveness: development potential, intimacy, profitability, relational fit. Might be possible that there are new/other antecedents.

2. What makes that you have these specific expectations regarding this customer? Distinguish answers that focus on future expectations and answers that focus on experiences/perceptions from the past

3. What were the reasons to establish a relationship with this customer?

Supplier Satisfaction:

1. What do you consider to be the most valuable in the current relationship?

2. Is this customer able to live up to the expectations you had (or even exceeded those expectations)?