Measuring the customer experience in service triads

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The customer perspective:

Measuring the customer experience in service triads

[Year]

Master Thesis – MSc Supply Chain Management

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Acknowledgements

Doing a thesis was one of the most challenging academic efforts I have encountered. A big thank you goes to Dr. Manda Broekhuis, for her eagerness and commitment in providing me with awareness to complete this thesis. She has always encouraged me towards excellence, not only for the completion of my thesis but also through the whole journey of my master’s degree.

I am also thankful to my second supervisor, Dr. Kirstin Scholten and the professor Dr. Cristina Sancha, whose experience, knowledge and constructive feedback has helped me to improve my work.

I am appreciative to Mr. Peter Seemann and Mrs Wendy Hoogenboom for the opportunity to conduct research at (buyer’s name) and their aid and guidance, which gave me the insights to accomplish this thesis. Last but not least, I would like to thank all the interviewers, Marloes Pennings, Alexander Pennings, Tessa van Beijnhem, Sylvia Berkhout, Coen Van Hout, Noortje Gerrits, Arjan Maat, Robbert Slaats, Menno van Gelder and Maarten Van Driest, for their support during my interviews.

Finally, I would like to thank my family and friends, who always encouraged me during the whole journey of completing my research.

Thank you all very much!

Elli Panagi

Groningen, January 2016

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Abstract

The purpose of this research is to investigate what customers experience from the contractual agreements the buyer tries to arrange with the different subcontractors in the retail service triads. A multiple case research was performed in a shop-in-shop context. The data collection involved interviews and documentation analysis for the examination of the contractual agreements and a survey for the examination of the customer experience. The results of the research present the important influence that the contracts-contractual agreements have on the customer experience. These findings help to realize the importance of contractual agreements that the buyer and the subcontractor make in the service triads and show how the deliverables of those agreements can act as determinants for the customer experience. Moreover, the results expand existing literature with the importance of contracts in service triads and provide practical suggestions that form a guideline for establishing successful agreements, which thereafter can enhance the customer experience.

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Success in today’s competitive retail environments requires more than low cost strategies or innovative solutions. In order to compete and survive, retailers should focus to their customers and improve their experiences (Grewal, Levy and Kumar, 2009). The customer experience has become one of the fundamental objectives in today’s business environments. Customer experience is not only the key touch-points or moments of truth of customers when they interface with a company, rather, it is the combined effect of all those key touch-points or moments of truth over time (Rawson, Duncan and Jones, 2013).

Understanding when a customer perceives an experience being good or bad is difficult because every customer has different criteria and standards of evaluating an experience (Rawson, Duncan and Jones, 2013). Understanding customer experience can become more challenging, when outsourcing practices are involved and thus the customer experience depends from both, a buyer and a subcontractor. Specifically, we refer to the concept where a buyer buys the services from specific subcontractors under specific contractual agreements and the subcontractors subsequently offer directly their services to the buyer’s end customers, i.e. a service triad (Wynstra, Spring and Schoenherr, 2014, p. 1). Examples are large retailling shopping malls that close contracts with different clothing and shoe brands each having its own shelves in the specific store. Or the E-commerce retailing companies that outsource their logistics to third party logistics providers who directly deliver the buyer’s goods to the end customers (Lee and Whang, 2001; Bloch, Ridgway and Dawson, 1994). One of the key characteristics of the service triads is that the subcontractor has to deliver a performance on behalf of the buyer (Van der Valk and Van Weele, 2011), however the customer experience will be influenced from both, the buyer and the subcontractor.

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(=subcontractors) who would like to establish their own shop-in-shops within the retailer’s (buyer’s) store (Jerath & Zhang, 2010).

Yet, the customer perspective or experience that derives from the deliverables of those agreements in the service triad has been given less focus compared to the buyer and subcontractor relationship (Wynstra, Spring and Schoenherr, 2014). For example, when a buyer chooses to establish a contract with a subcontractor for the delivery of a service directly to the buyer’s end customers and then the subconctactor underperforms, this is something that influences the customer satisfaction (Holma, 2012, Van der Valk and Van Iwaarden, 2011). In the same line, according to the three stage connections, as clasified by Li and Choi (2009), in the beginning the buyer and the subcontractor make their contactual agreements (bridge and bridge decay stages) and therafter the subcontractor interacts with the customers based on the agreements made with the buyer (bridge transfer). From the above examples, it becomes clear that the contractual agreements that the two parties make influence the customers. Yet, it remains unclear what the customers, in particular, experience from the deliverables of those contractual agreements and which agreements contribute the best and worst customer experience. This is remarkable because even if contractual agreements help the two parties to manage their relationship (Van der Valk and Van Iwaarden, 2011), the outcome of those agreements influence the customers. Therefore, one of the main purpose of these contractual agreements is ultimately to enhance the customer experience.

In addition, being that contracts have barely been studied in a service triad setting (Wynstra, Spring and Schoenherr, 2014) this research examines the following: what customers

experience from the contractual agreements made between the buyer and the subcontractor in a service triad context?

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contract deliverables make an experience great or bad. The focus on the contract for the management of the buyer-subcontractor relationship adds new insights to the limited body of literature about the contracts in the service triad setting. From a managerial perspective, gaining insights in this issue can provide buyers and subcontractors with strong evidence of what they can improve in their agreements in order to enhance the customer experience. Additionally, it can show how customer experience can act as determinant towards the contractual agreements between these two parties.

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2. Theoretical Background

The following sections describe the theory behind customer experience, service triads and contractual agreements in order to demonstrate the main framework in current literature related to these concepts and make the link to this research.

2.1 Customer Experience

This section underlines the framework in literature regarding the customer experience and subsequently dives into which criteria customers use to describe their experience.

There are diverse understandings and definitions in existing literature regarding the definition of customer experience (Gentile, Spiller and Noci, 2007). Despite the difference in points of views, one common characteristic can be identified that describe the customer experience. These is the moments of truth between the customer and the buyer over time (Addis and Holbrook, 2001; Carù and Cova, 2007; LaSalle and Britton, 2003) which create a comprehensive overlook to the customer for the whole experience (Schmitt, 2003). Specifically Gentile, Spiller and Noci (2007, p. 397) describe it as:

“The customer experience originates from a set of interactions between a customer and a product, a company, or part of its organization, which provoke a reaction. This experience is strictly personal and implies the customer’s involvement at different levels. Its evaluation depends on the comparison between a customer’s expectations and the stimuli coming from the interaction with the company and its offering in correspondence of the different moments of contact or touch-points”.

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There are several criteria that can be considered when discussing customer experience. Table 2 below gives a summary of criteria that customers use the most to define their experience in retail enviroments.

Table 1: Summary of criteria linked to customer experience in retail

From Table 1, criteria that relate for example to the price/value, product assortment, product availability, physical atmosphere/aspects and interaction with or attitude of personnel are

Source Research Title Criteria that influence Customer

experience/perceptions

Grewal, Levy, Kumar (2009) Customer Experience Management in Retailing: An Organizing Framework

- The pricing experience - The promotion experience - The location experience - The supply chain experience - The asortment experience

Verhoef, Lemon, Parasuraman Roggeveend, Tsiros and Schlesingerd (2009)

Customer Experience Creation: Determinants, Dynamics and Management Strategies

- Brand image - Price Value - Assortment - Retail atmospfere - Service person attitude

Leen, Ramayah, Maruf (2004) Validating a retail service quality instrument in apparel specialty stores.

- Responsive to customer needs - Store discounts

- Salespeople attitude - Physical facilities

Arnold, Reynolds, Ponder and Lueg (2005)

Customer delight in a retail context: investigating delightful and terrible shopping experiences

- Pricing

- Employee behaviour - Time commitment - The products range - Store atmosphere

Koul and Mishra ( 2013) Customer perceptions for store attributes: A study of traditional retail stores in India

- Store Image - Product Assortment - Product Availability - Retailers Attitude - Discounts

Dabholkar, Thorpe and Rentz, (1996)

A measure for service quality for retail stores: Scale development and validation

- Problem Solving - Policy

- Personnel Interaction - Reliability

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common through the different studies and important for the customer experience. Following, each of these criteria will be further analyzed.

2.1.1 Product Availability criterion

Product availability is considered as a critical aspect to customer satisfaction (Fisher, Krishnan and Netessine, 2006). It is the possibility that a product will be available on the shelf when the customer asks for it (Chopra and Meindl, 2007, p.77). Instances where there is a lack of or no stock make customers create a negative perception for the store’s image. As a result, this has potential to make customers substitute the brand with different brand or delay a purchase or refuse to purchase the product at all (Koul and Mishra, 2013). Nowadays, customers seek for quick and time saving shopping, and factors such as direct product availability are very critical to customers (Kucuk, 2004).

2.1.2 Value-for-money criterion

Value for money has always been determinant in how customers see a product and how willing they are to pay for it (Grewal, Levy and Kumar, 2009; Koul and Mishra, 2013; Arnold, Reynolds, Ponder and Lueg, 2005). It is defined as “the trade-off between the quality consumers perceive in a product relative to the sacrifice they perceive by paying the price” (Monroe, 1990, p. 46). For example, customers usually relate the low price with low quality or vice versa (Ofir, Raghubir, Brosh, Monroe and Heiman, 2008).

2.1.3 Assortment attractiveness criterion

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13 2.1.4 Physical Attractiveness criterion

Finally, as we live in a visual world, the physical aspects cannot be disregarded from the eyes of the customers and thus, by extension being an important criterion that influences their experience. Physical aspects refer to ‘functional elements such as layout, comfort and aesthetic elements such as the architecture, colour, materials and style of the store, the way the assortment is presented’ (Leen, Ramayah and Maruf, 2004, p.2). Customers choose whether or not they will visit a store by taking into account such aspects (Dabholkar, Thorpe and Rentz, 1996). For this research, physical aspects will be referred as physical attractiveness. It is defined as the total impression that the brand image makes on the minds of the customers (Dichter, 1985, p.75).

Subsequently, the important criteria that customers use in order to define their experience were investigated. While the customer experience criteria are well established in retail, the same criteria (e.g product availability, value for money, assortment attractiveness and physical attractiveness) could be applied to the retail service triads in order to investigate the customer exerience that derives from the contract deliverables that the buyer and the subcontractor establish.

2.2 Contracting in Service Triads

This section makes an introduction and overview to the concept of service triads, and narrows down to the different types of contracts and contractual agreements between the buyer and the subcontractors.

2.2.1 Service Triads

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service offering to the end customer (Li and Choi, 2009a). The subcontractor is responsible to act in accordance to the agreements made with the buyer and deliver the service to the buyer’s customer. Thus, the end customer recieves the final outcome from the contract between the buyer and the subcontractor.

Figure 1: Business service triad (Adopted from Van der Valk & Van Iwaarden, 2011)

2.2.2 Buyer- Subcontractor relationship

Servce triads invlolve three main, different and important relationships between the parties, as illustrated in Figure 1; the relationship between the buyer and the subcontractor, the relationship between the buyer and the customer and finally the relationship between the subcontractor and the customer. The one most discussed in literature is the relationship between the buyer and the subcontractor, where the buyer links the subcontractor’s services to the overall service offering which is delivered to the end customer. In the service triads, the interaction between the buyer and the subcontractor is of an ongoing nature (Wynstra, Axelsson and Van der Valk, 2009). The existence of this ongoing relationship in service triads is important, as it can enhance the trust between the parties and can minimize any monitoring and contracting costs (Holma, 2012; Peng, Lin and Martinez, 2010). However, Van Iwaarden and Van der Valk (2011 & 2013) explain that beyond this trustful relationship, it is important to establish formal contracts in order to control the performance and behavior of the subcontractors in the service triads. They further state that such arrangements minimize any opportunistic behaviours and provide guarantees to order fulfilment in line with what both parties agreed upon. Well-established contractual agreements support the control of the roles and responsibilities for each of the parties (Lui and Ngo, 2004; Williamson, 1985).

Buyer

Subcontractor

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15 2.3 Contracts and Contractual Agreements

This part provides information about the definition and different types of contracts as well as information about the different types of contractual agreements that are involved in the contracts.

Contracts are exclusive formal agreements between the buyer and the subcontractor. These agreements reflect the relationship between two parties to reach their own and/or partly shared objectives (Van der Valk & van Iwaarden, 2011). There are two main types of contracts in retail: the buying contract and the consignment contract. By definition, the consignment contract means that ‘the retailer (= buyer) possesses the physical products but the title still remains with the seller (= subcontractor). The retailer (= buyer) only pays for those sold items and is eligible for full-return privileges for the unsold products at the end of season’ (Hsiao, Purchase and Rahman, 2002, p.13; Rogers and Gamans, 1983). A buying contract refers to the practice where the retailer (= buyer) makes an order to the seller (= subcontractor) in advance. The retailer (= buyer) is fully entitled to own the goods. In contrast to the consignment contract, the goods cannot be returned back in the end of the season (Hsiao, Purchase and Rahman, 2002; Ashford 1997).

The contract involves many different agreements about the different domains that the business relationship is based on (Daskalopoulou and Sergot, 1997). Different types of agreements that the two parties agree upon are described below.

2.3.1 Inventory replenishment contractual agreements

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Kantamneni, 2002). According to Weber and Kantamneni (2002) such systems help to response more quickly to the customer demand and therefore the situations where the customers have to deal with stock out situations are less.

2.3.2 Assortmnet identification contractual agreements

Of course assortment composition agreements are important between a buyer and a subcontractor (Kang, 1999), especially when we are talking about retail enviroments. They are the agreements that refer to the identification of product assortment that is available to the customers (Simonson, 1999) and therefore should derive from further investigation of the customer needs and preferences (Verhoef et al., 2009). More specifically, assortment identification agreements refer to the extend on which a range of products in a store is determined by the customer democraphics and other characteristics (Hwang, Bronnenberg and Thomadsen, 2008). Thus, when a buyer and a subcontractor make contractual agreements regarding the assortment identification, it is important that they take into account customer characteristics and preferences. Consequently, for those agreements, the customer characteristics and preferences act as determinants for the identification and selection of assortment available to them (Dhar and Kumar, 2001; Mantrala, Levy, Kahn, Gaidareve, Dankworthf, Shahg, 2009).

2.3.3 Discounting contractual agreements

Discounts are important contractual agreements that the buyer considers with the subcontractors (Hawkins, Garvier and Berkowitz, 2015). The discounting agreements refer to the agreements regarding the price reductions of the products from their original price1.They are important because, firstly, is one of the criteria that customers consider, before visiting a brand (Lombarta, Louis and Labbé-Pinlona, 2015) and secondly discounts have direct influence on the total turnover that can be achieved from the sales. Discounting agreements involve the frequency and depth of discounts which are based on the price sensitivity of the customers, the prices of the competitors and the actual cost of the assortment (Ding, Kouvellis and Milner, 2006).

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17 2.3.4 Presentation of the assortment contractual agreements

Finally, the presentation of assortment is another important factor that influence the customer experience in a physical setting (Gentile, Spiller and Noci, 2007; Kerfoot, Davies and Ward, 2003). The presentation of assortment agreements refer to the agreements considering ‘’the manner in which the product assortment is presented to the consumers’’ (Simonson, 1999, p. 348). For the presentation of the assortment, Kerfoot, Davies and Ward (2003) explain that it is very important to consider issues related with the assortment at a more detailed and professional level since customers seek for a shopping excitement which can in part be delivered through an attractive physical atmosphere. This implies that the agreements between the buyer and the subcontractor should be very detailed and consider a more proffesional management for the presentation of the assortment (e.g the recruitment of a visual merchandiser which is fully responsible for the development of visual concepts and attractive displays (Kerfoot, Davies and Ward(2003)).

The above contractual agreements can be characterized with a set of different parameters or variables: leading party, contractual content, level of detail, goals and satisfaction. These particular parameters/ variables can be defined as follows:

o Leading party: The extent to which a party has the power to make and enforce decisions (Lusch & Brown, 1996).

o Contractual Content: The content of agreements associated with the different domains of investigation (e.g. the content of the discounting agreements) (Daskalopulu and Sergot, 1997, p.11).

o Level of detail: The extend to which clauses, procedures and rules are specified in detail (Klein Woolthuis et al., 2005)

o Goals: The extent to which “the parties involved have a common goal, to realise the business exchange” for the different domains of agreements (Daskalopulu and Sergot, 1997, p.11)

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18 2.4 Research Question

The focus of this research is looking at the impact of the different parameters of the different contractual agreements (which are made between the buyer and the subcontractors) on end customers’ experience in the retail context. Thus, the following research question emerged from the above:

‘What do customers experience from the contractual agreements between buyers and their subcontractors in a service triad context?’

The main research question can be answered by the support of the following sub-questions: o How do the different characteristics of the inventory replenishment contractual

agreements influence the product availability?

o How do the different parameters of assortment identification contractual agreements

influence assortment attractiveness?

o How do the different parameters of discounting contractual agreements influence

value-for-money?

o How do the different parameters of the presentation of the assortment contractual

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3. Methodology

This section provides all the details of what procedures followed in order to answer the research question discussed in the previous section.

3.1 Method

A multiple case study method was conducted. Following, are the reasons why a case study is more suitable for this research. Firstly, this research is considered to be complex due to the unclear relationship between the set of variables/parameters (e.g. contractual content) regarding the different contractual agreements (e.g. inventory replenishment agreements) and the set of variables considering the customer experience. Therefore, a case study method enables to study complex phenomena due to the richness of data that can be obtained (Eisenhardt, 1989; Ellram, 1996; Yin, 2009). Moreover, the fact that (1) research in service triads is in an exploratory phase (van Iwaarden & Van der Valk, 2013), (2) the customer perspective has been given less focus in the service triads compared to the buyer-subcontractor relationship (Wynstra, Spring and Schoenherr, 2014) and (3) contracts have scarcely been studied in a service triad setting (Wynstra, Spring and Schoenherr, 2014), all together create a new research phenomenon. For this research phenomenon, the case study facilitates its support since the current frame of approach appears to not be appropriate. (Eisenhardt, 1989).

3.2 Research Setting & Unit of analysis

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different contractual agreements, and therefore capture how differently the customers of the same buyer were percieving an experience.

The unit of analysis is the service triad between the buyer, the subcontractors and the end-customers. This is in line with the research question which asks what do customers experience from the contractual agreements between the buyer and the subcontractor. 3.3 Case selection

For this research, four embedded cases were selected, allowing a more grounded base for justification and thus, theory refining (Eisenhardt, 1989). The cases were selected based on the contractual content for each of the following types/domains of agreements: inventory replenishment agreements, assortment identification agreements and presentation of assortment agreements. It is expected that the differences in the contractual content for the different domains of agreements will provide important insights about the expected differences on the customer experience.

1. For the presentation of the assortment agreements for which the contractual content involved the application of expertise knowledge on how the collection should be presented in the shop, it was expected that the customer experience would be relatively more positive. In contrast, for the cases for which the contractual content did not involve the application of such an experise knowledge, it was expected that the customer experience would be relatively less positive. Cases 2 and 3 are the same (literal replication), case 1 scores differently from cases 2 and 3 (theoretical replication) and case 4 scores differently from cases 1, 2 and 3 (theoretical replication). Table 2 illustrates in what way the cases are similar or differ.

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3. For the inventory replenishment agreements for the cases on which the contractual content involved the use of advanced systems (e.g EDI =Electronic Data Interchange), it was expected that the customer experience regarding the product availability would be relatively more positive. In contrast, for the cases for which the contractual content did not involved the establishment of such systems, it was expected that the customer experience would be relatively less positive. Cases 1, 2 and 3 are the same (literal replication) whereas case D scores differently (theoretical replication). Table 2 illustrates in what way the cases are similar or differ.

Presentation of assortment contractual agreements Assortment identification contractual agreements Inventory Replenishment contractual agreements

Case 1 - Moderate use of expertise knowledge

- Decisions are not based on buyer’s end customer characteristics

- Use of advanced systems (e.g EDI)

Case 2 - Use of expertise knowledge - Decisions are based on buyer’s end customer characteristics

Case 3 - Use of expertise knowledge - Decisions are not based on buyer’s end customer characteristics

Case 4 -Use of basic knowledge - Decisions are based on buyer’s end customer characteristics

- No use of advanced systems (e.g EDI)

Table 2: Case Selection

Table 3 below represents the general characteristics of the four different cases.

Type of contract Types of clothes % of sales (of the total sales of the buyer)

Experience in Shop-in-shops

(yes/no)

Years present in the Focal Company

Case 1 Consignment Men and women’s wear 7,1 yes 7

Case 2 Buying Men’s wear 1,7 yes 7

Case 3 Buying Women’s wear 4,1 Yes 5

Case 4 Consignment Women’s wear 1,7 No 7

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22 3.4 Variables

3.4.1 Contractual agreements

Table 4 provides the operationalizations of the sub-variables for each of the main contractual agreements (inventory replenishment, assortment identification, discounting and presentation of assortment).

Sub-Variables & Definitions Source of data

Leading party: The extent to which a party has the power to make and enforce decisions (Lusch & Brown, 1996).

Interviews:

- See Appendix A and Appendix B, Part III

Contractual Content: The content of agreements associated with the different domains of investigation (e.g the content of the discounting agreements) (Daskalopulu and Sergot, 1997, p.11).

Clauses looked at in the contract for:

Inventory replenishment agreements: ‘information exchange’, ‘supply of goods’, ‘sales and stock administration’.

Assortment Identification agreements: ’changes in the concession area’, ‘operation of the shop’ Discounting agreements: ‘margin target’, ‘sales campaign’, information exchange

Presentation of the assortment agreements: ’layout and furnishing of the location’, ‘maintenance of the shop’, ‘staff’, ‘supply of goods’, ‘changes to the concession area’

Documentation:

- Included and explained in the contract? Interviews:

Level of detail2: The extend to which clauses, procedures and rules are specified in detail (Klein Woolthuis et al., 2005)

Documentation:

- Extensive and clear explanations of the procedures and responsibilities?

Interviews:

- See Appendix A and Appendix B, Part III Goals: The extent to which “the parties involved have a common goal, to realise the business

exchange” for the different domains of agreements (Daskalopulu and Sergot, 1997, p.11)

Interviews:

Satisfaction: The extent to which the two parties are satisfied with the agreements as they stand or some revisions are required (Daskalopulu and Sergot, 1997)

Interviews:

Table 4: Operationalization of the main contractual agreements variables

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23 3.4.2 Customer experience

Research-related variables: The variables for the customer experienced and their measured items can be found in summary in Appendix C.

Control Variables: In order to give extra information about the respondents, general questions were included. For this study, four main customer characteristics have been used: gender, visit frequency, fashion style and age.

3.5 Data Collection

The contractual agreements were examined through interviews and documentation analysis and the customer experience was measured through a survey in the form of a questionnaire. 3.5.1 Contractual Agreements

The contractual agreements between the buyer and the subcontractor were investigated as follows. The empirical research started to identify with the buyer the key contractual agreements made with subcontractors that could have possible impact on the customer experience. Thereafter, the selection of the appropriate cases was made. In order to select the cases, it was examined how the contractual content of the different types of contractual agreements were varying between the different brands, thus different cases with different contractual agreements on the three main criteria (see section 3.3) were selected. To guarantee the triangulation of the data and thereafter construct validity, data was gathered in various ways: semi-structured interviews with both, the buyer and the subcontractors and analysis of the contract documents. Appendix A gives an outline from which sources/interviewees the information was gathered.

3.5.2 Customer Experience

The customer experience was investigated as follows. Data about customer experience was attained through a questionnaire in which the customers were asked to imprint their experience about the product availability, the assortment attractiveness, the value-for-money and the physical attractiveness.

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misunderstanding instructions, detect any mistakes, measure the time needed from the customers to fill in the questionnaire and evaluate the general simplicity of the questionnaire. Two important facts were realized from the pilot test. Firstly, the questions with 9-point Likert scale were more time consuming for the respondents rather than the ones with 7-point Likert scale. Therefore, the 7-point Likert scale was used in the final questionnaire for the actual data collection. Secondly, there was a confusion for the women shopping for men (and vice versa). When they had to answer the questions regarding their fashion style or assortment attractiveness, they were not sure on whether they had to answer on behalf of the person they were shopping for or to answer according to their own criteria. Therefore, in the actual data collection, only the people shopping for themselves were allowed to answer the questionnaire.

The data collection was executed in real time in two branches of the buyer with a face-to-face interaction with the respondents. In this way the interviewer on-site could help the participants by explaining any confusion on questions. Furthermore, this approach stimulates the participants to join the investigation (Gates and Solomon, 1982). In order to minimize sampling and response bias, data collection was conducted in two different locations of the buyer’s stores (one in the North and one in the South of Netherlands).

Respondents

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In total, 200 questionnaires were collected. In the physical stores in real time, all the respondents had the chance to ask questions about the questions and the interviewer had the possibility to check for completeness, thus in the data input no missing data was recorded (except one questionnaire with a missing age value). The number of the respondents per case resulted in 50, which ensures the comparability of the cases. According to the total of 200 respondents, 42% was representing men and 58% women. This is reasonable since cases 3 and 4 target only women, case 2 targets men, while case 1 targets both, men and women. The average age of the sample was 54.05. According to the buyer, this is very valid and reliable since the average target age is 55 years old. Table 5 below demonstrates the results of the customer characteristics per case. Across the different customer characteristics, it was checked whether the customer characteristics (control variables) differed or not. This could provide insights on whether the expected differences in the customer experience could be explained from the differences in the contractual agreements and not necessarily from the customer characteristics. It was resulted that regarding the visit frequency and fashion style, case 1 differed from all the other three cases while for the age variable (see Appendix J), case 2 scored significantly different from cases 1 and 4. These results were considered when analysing the findings. Table 5 shows the results.

Case 1 Case 2 Case 3 Case 4

Gender # of Men/Women 34 Men, 16

Women

50 Men 50 Women 50 women

Visit Frequency (%) 1-3 56.0 54.0 40.0 38.0 4-6 38.0 30.0 32.0 34.0 7-10 6.0 16.0 28.0 28.0 Fashion Styles (%) Smart 50.0 20.0 24.0 26.0 Cool 26.0 48.0 38.0 40.0 Uncomplicated 24.0 32.0 38.0 34.0

Age Means (St. Deviation)

Mean Values 59.4 (14.27) 48.8 (13.09) 52.7 (14.40) 55.3 (10.80)

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26 3.6 Quality of Research

Validity and reliability issues were considered for the execution of this research. The following section explains how these two dimensions were assured for both, the contractual agreements variables and for the customer experience survey.

3.6.1 Contractual Agreements

Table 6 gives an outline of the measures taken in order to ensure the quality of the qualitative part of this study.

Test Method

Construct Validity - Triangulation through multiple sources of evidence: Interviews with the subcontractors, interviews with the buyers, documentation analysis

- Interpreted data was verified with participants to ensure validity (interviews were written down, analyzed and sent to the interviewees for verification)

Internal Validity - Coding of data (data reduction)

- Both within-case analysis and cross-case analysis performed for the findings part (see chapter 4)

External Validity - Theoretical and Replication logic (see section 3.3) (Used in case selection and analysis)

Reliability Use of extensive interview protocols.

Table 6: Validity and reliability of research (Based on Yin, 2009)

3.6.2 Customer experience

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multi-item variables3 (assortment attractiveness, physical attractiveness and brand satisfaction). Table 6 shows the results. Therefore, in order to check the construct validity an exploratory factor analysis was used as it allows all the items (excluding single item constructs) to load independently without any bias or constraints (Cudeck, 2000). After performing the factor analysis, it was resulted a two factor solution, one for the assortment attractiveness and one which compiled the physical attractiveness and brand satisfaction. However, by observing the Rotated Component matrix and especially in the Component plot in Rotated Space in Appendix E, it can be noticed that the items related to the physical attractiveness variable and the items related to the brand satisfaction variable can be separated. Based on this and existing literature, it was concluded to use all the three solid variables (assortment attractiveness, physical attractiveness and satisfaction), plus the two single-item variables (product availability and value for money). The factor loadings can be found in Table 7. Variable/Item Factor Loadings Construct Reliability Assortment attractiveness 0.862

At Brand X, within (buyer’s name), to me, the collection of clothes available is what I look for.

0.859

Brand X, within (buyer’s name), has the right clothing range.

0.934

Physical Attractiveness 0.930

The store layout of Brand X, within (buyer’s name), makes it easy for me to find what I want.

0.884

The store layout of Brand X, within (buyer’s name) is attractive.

0.894

The store layout of Brand X, within (buyer’s name) makes it easy for me to move around in the store.

0.904

Brand Satisfaction 0.869

‘Based on all my experiences with Brand X, within (buyer’s name), I am very satisfied

0.714

Overall, compared to other brands, I am very satisfied with Brand X, within (buyer’s name)’

0.714 Table 7: Validity and reliability of survey

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Finally, the last step was to check whether there were any significant differences between the means of the variables among the four different cases. For this particular test, the one way Anova was applied. From the Anova table and the explanation provided (see Appendix F), it was concluded that the means of the different variables between the different cases were statistically different. Besides the anova test, t-tests were performed (see Appendix I) to check whether one mean was greater or less than another mean (after it was confirmed they were statistically different). These tests allowed the comparability of the cases for the different customer experience variables.

3.7 Data Analysis

3.7.1 Contractual Agreements

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Codes Score Explanations

Level of detail High: When the contract document and the responses of interviewee about the contractual content were extensive. Low: When the contract document and the responses of interviewee about the contractual content were limited.

Expectations on customer experience

High: When a very positive attitude was expressed by the interviewee about a great customer experience.

High (-): Same as above but the sign (-) indicates that some very small considerations about the customer experience were expressed.

Medium: When the interviewee expressed some considerations about the customer experience

Low: When the interviewee was clearly sure that the agreements were not reflecting the best to the customer experience.

Satisfaction with the agreements

High: When the interviewee was very satisfied with the existing agreements

High (-): Same as above but the sign (-) indicates that some displeased was expressed because there were instances that the agreements didn’t follow as agreed.

Medium: When the interviewee was satisfied but requested some small changes in the existing agreements in the future Low: When the interviewee was not satisfied at all with the agreements and requested high changes in the existing agreements in the future.

Table 8: Scores explanations 3.7.2 Plan of analysis

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4. Findings

This section demonstrates the main findings of the research. Firstly, following the rationale of Miles & Huberman (1994), a within case analysis was explored before the execution of cross-case analysis. This increases the internal validity of the research.

4.1 Within case analysis

4.1.1 How do the different characteristics of inventory replenishment contractual agreements influence the product availability?

Based on the results of product availability, the customer responds vary among the four cases. Case 4 scored significantly the lowest compared to all the other three cases, which means that the customers experienced relatively many stock out situations. Cases 2 and 3 scored significantly higher than case 1. This means, that for cases 2 and 3, the customers could find relatively easier what they wanted compared to case 1. Table 9 below shows the results.

Table 9: Product Availability results Case 2

Inventory replenishment agreements: Concerning the leading party for case 2, the buyer is in the lead. This is because they have established a buying contract and therefore the buyer is entitled for the ownership of the inventory. The supply chain manager from the buyer’s side pointed out “we are the lead but there is an agreed minimum amount of money that we

should buy”. In the contract, the main contractual content about the replenishment

agreements, is the establishment and exchange of EDI-relevant sales and stock data. The level of detail is high since the main contractual content (e.g EDI) is supported by further details on how and in which way the system is about to be used for the business exchange. This includes the replenishment of the inventory based on the EDI data and information, the responsibility of the buyer to send all the weekly sales and inventory reports, and the obligation of the supplier to analyze these reports and replenish the inventory accordingly. The goal of these agreements, as the buyer explained, is to optimize the stock levels in the

Variable: Product Availability Case 1 Case 2 Case 3 Case 4

Mean 5.16 5.92 5.82 4.30

Std. Deviation 0.87 0.92 0.92 1.61

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shop. This means that they want the stock levels for the products available to the customers to reflect the customer demand. Regarding their expectations on customer experience, both parties expected that the customers could find what they wanted easily available. Specifically the subcontractor clamed “at all the times customers will find their size because we replenish

fast movers every week based on the EDI data”. In practice, the agreements are slightly

adjusted due to some problems with the actual updates in the system. Specifically the subcontractor explained “the problem was that we thought that the inventory reports were

successfully updated when we delivered the stock at the distribution center. So, when I say, I deliver on Wednesday to the distribution center, for me it is delivered, but for the buyer it is delivered when it goes to the shop. But when they are very busy in the shop, they will update the system on Friday night or Saturday. And then, when we check the system on Thursday, we see no stock in this shop, but we actually have sent it.” So, the two parties, in order to avoid

such confusions, additionally to the existing agreements, they agreed to manually create excel lists for all the articles based on the EDI information. Concerning the satisfaction with the existing agreements, both parties are very satisfied with the existing agreements but they would both prefer to avoid the manual work in the future. Specifically, the supply chain manager from the buyer’s side explained “I am very happy because at the end we see a good

performance which is rewarding for me. It is a good supplier. The thing is that I have to do extra things, but as long as those extra things are leading to a good performance, then this is fine”

Case 3

Inventory replenishment agreements: With regard to the inventory replenishment agreements, the subcontractor is totally the leading party with no flexibility from the buyer’s side to make any suggestions. Specifically the subcontractor stated “so, that’s something we

fully control”. The main contractual content concerning the inventory replenishment

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agreements is customer-oriented. That is, they want their customers to be able to find in stock what they are looking for. Specifically, the subcontractor stated “so we always think on

the consumer point of view, we always want that the consumer can always find what they need at the right time”. Regarding their expectations on the customer experience, both

parties expected a great customer experience. In particular, the subcontractor stated “when

the customers are getting into our shops, I believe that they see a full in stock shop and not missing items and that’s one of our basic strategies”. In practice, everything is executed as it

was agreed, in perfect detail from both parties with the best use of all the data from the EDI systems. The supply chain manager from the buyer’s side explained “I do not think there is a

better way than that, this brand is a phenomenon, they are doing an excellent job and the customers definitely notice this”. Regarding the satisfaction with the existing agreements, both

parties are very satisfied with the supply chain manager from the buyer’s side stating “I am

very happy. This brand is a phenomenon; they are doing an excellent job”.

Case 1

Inventory replenishment agreements: As for case 2, the subcontractor is totally the leading party. This is because their contract is based on consignment and therefore the title of the goods remains with the subcontractor. In the contract, the main contractual content for these agreements involves the establishment of EDI system. The level of detail is low, since the written agreement only refers in the establishment of EDI system without any further explanation about the way the EDI system should be used for the business exchange. However, the supply chain manager from the buyer’s side explained “we agreed that both

parties should exchange information through the EDI system. We agreed articles are never out of stock and will be replenished twice a week. We agreed that we will send all the EDI information, the sales reports every day and the inventory report once a week”. Those

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supply chain manager from the buyer’s side explained that “What we see from this brand is

an average performance. They have internal problems to get the inventory data, but if you don’t take these data in your system then you don’t have the right inventory information in the system. They also do not analyze the reports the way we [orally] agreed”. Considering the satisfaction with the existing agreements, the supply chain manager from the buyer’s side clarified “What we put in contract is very limited because we thought they know the best. But

they do not know the best. Iam happy with the total amount of quantity they provide but they should fix their system and improve the way they analyze the information. Maybe the contract

should be more specific, we should add more details”.On the other hand, the subcontractor

stated “I am very happy, I wouldn’t like to change something but I think also analyzing data is

the main tool to get better”.

Case 44

Inventory replenishment agreements: As for the inventory level agreements, the subcontractor is the leading party since their existing contract is based on concession. However, the buyer explained “we just advise them because it is concession brand but they

know nothing about concession so they mostly follow our advice”. For this case, there are no

agreements in the contract considering the inventory replenishment. However, what they orally agreed, it was supposed to be followed as it was a formal written agreements. Therefore, the ‘contractual’ content involves the inventory replenishment based on the buyer’s analysis about how the articles are selling and therefore, the request of replenishment to the subcontractor. Specifically, the supply chain manager from the buyer’s side stated “It is pull oriented, so we tell them which articles we would like to replenish and if

they have them in their warehouse they will send them”. This agreement shows that the level

of detail is low (procedures and rules are not specified in detail). Regarding their expectations on customer experience, the buyer stated “the stock availability for customers is worse

compared to other EDI connected brands and the replenishment is way slower so yes, this is not very effective”. When both parties were asked whether they were satisfied with the

existing agreements, the buyer mentioned “I am not happy at all because it could be better

4

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and this is a problem. But this is not in our hands anymore because they insist on this way of doing business together. The case of this brand is a bit problematic”. A summary with all the

cases about the inventory replenishment agreements can be found in Appendix H.

4.1.2 How do the different characteristics of assortment identification contractual agreements influence assortment attractiveness?

Based on the results of assortment attractiveness, the customer responds vary among the four cases. Case 2 scored significantly higher than all three other cases. This means, that for case 2, the customers found the collection of clothes available relatively more attractive compared to other cases. Table 10 below shows the results.

Table 10: Assortment attractiveness results

Case 2

Assortment identification agreements: As for the leading party for case 2, both parties agree on the assortment identification agreements. The account manager from the buyer’s side supported “we and the subcontractor discuss together in the buying meeting [i.e in the beginning of each season] which articles should be the best for our customers”. The main contractual content for the assortment identification agreements states that both parties agree in cooperation for the composition of a collection of products that are geared to the buyer’s end customers. On this point, the accounts manager from the buyer’s side explained

“we agree together which articles fit the best for our customers. If we had said, for instance, that the subcontractor would be fully responsible for the collection, it could be that they only send articles which fit their brand and not our customers”. The main goal for both parties is

that their customers can always find the collection that fits their needs and characteristics. Regarding their expectations on customer experience, both parties believe that the customers in the shop can find an attractive range of assortment which fits their needs and characteristics. In practice, everything is carried out in accordance to the agreements.

Variable: Assortment attractiveness Case 1 Case 2 Case 3 Case 4

Mean 5.11 6.09 5.25 5.38

Std. Deviation 0.97 0.82 0.89 1.11

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Concerning the satisfaction with the existing agreements, the two sides are very satisfied because they believe that these agreements contribute the best to their customers; something that results in higher turnovers. Specifically, the accounts manager from the buyer’s side mentioned “I am very pleased with the agreements. I have the ability to say

during the buying meeting what I think about the collection and, when it’s necessary, to change articles. I think it is good that we have this kind of agreements that are based on our customer characteristics, because many customers are coming to our stores just for this brand”.

Case 4

Assortment identification agreements: The leading party for the assortment identification agreements for case 4 is the buyer. Specifically, the accounts manager from the buyer’s side stated “I am the leading party. I decide on the assortment composition. Of course, the people

from the brand can make their suggestions, for example they can say, this jacket is one of our best selling items, but in the end I will make the decision”. In the contract, the contractual

content regarding the assortment identification agreements states that the supplier is responsible to provide an assortment which is based geared to the buyer’s end customers. This means that the collection provided by the subcontractor should be based on the buyer’s customer characteristics. What was revealed during the interviews, was that the two parties strongly believe that the collection fits the customers of the buyer. In particular, the subcontractor explained “it is good that people from the buyer know their clients and then

they adjust the assortment on their client”. The main goal is to provide customers the best

articles, that is, the ones that mostly reflect their needs and preferences. Concerning their expectations on customer experience, both parties agree that the fact that they make the assortment selection based on the characteristics of the buyer’s end customers, directly reflects the satisfaction of the customers. The accounts manager from the buyer’s side stated

“I think that the customers get the best articles because they reflect their needs and characteristics. The fact that we make the selection based on our customer figures, the customers notice this and therefore like the assortment”. With regard to the satisfaction with

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manager from the buyer’s side explained “I am happy with the existing agreements. I have got my own opportunities to make my own collection with cooperation with the brand”.

Case 1

Assortment identification agreements: As for case 1, the leading party for the assortment identification agreements is the subcontractor. The subcontractor explained “we are in the

lead. We are responsible for the merchandise because we have a cooperation with them [ i.e. the buyer] which is based on consignment”. In the contractual content about the assortment

identification, it is stated that the responsibility about the assortment composition lies entirely to the subcontractor. On this point, the subcontractor specifically explained “we are

making the decisions based on the information we have about the Dutch market and our own customers and then we make the order and we inform the buyer”. For both parties, the main

goal regarding the assortment identification agreements, is to generate more sales which will be resulted from the customers who can find the clothing range they want. Regarding their expectations on customer experience, both parties expressed their considerations. Characteristically, the subcontractor stated “I think that customers could have a better

experience if the decisions about the assortment could be done in cooperation with the buyer rather than making our explicit decisions”. Concerning their satisfaction for existing

agreements, the account’s manager from the buyer’s side explained “I do not know at the

beginning of a season what I will get from this brand. What I want to agree is that I will go to the showroom to discuss with the brand the collection for the new season. And then I can also tell them what our customers ask. I think this will be better for our customers”. Similarly, the

subcontractor explained “I think that is very important for both parties to make a decision in a

mutual game play to get best results”.

Case 3

Assortment identification agreements: The leading party for case 2 is clearly the subcontractor. Specifically, the subcontractor explained “we are really clear of what we want

and how we want it”. The account’s manager from the buyer’s side added “they have so much knowledge, they know so much about their own brand, and thus we agreed that the subcontractor will be totally in the lead”. In the contract, the contractual content regarding

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composition of collection. This means that the types of clothes are based mainly on the brand’s customers and not specifically to the buyer’s end customers. The goal for both parties is that the customers can find the best collection available to them. Specifically, the account’s manager from the buyer’s side explained “the main target is to have the right

articles for our customers, the best possible collection”. With regard to their expectations on

customer experience both parties explained that they expect that the customers experience an attractive assortment. In particular, the subcontractor stated “what they should

experience is that we offer a really good collection and good quality compared to other brands”. Both parties are satisfied with their existing agreements, however, the accounts

manager from the buyer’s side expressed her considerations “I am happy with this brand.

However, they have a very strict policy [the subcontractor demands that everything should be

arranged the way brand wants it], but sometimes it is so strict that we would prefer to have a

room for maybe more flexibility when deciding the assortment, which will be based on our customers”. In other words, it would be better for the buyer to be able to make decisions on

the assortment composition, as in that way the assortment could fit better the customers of the buyer. On the other had the subcontractor stated “on the agreements themselves I am happy [because they are in the lead and they can make whichever decisions regarding the assortment], and I believe the buyer too”. A summary with all the cases about the assortment identification agreements can be found in Appendix H.

4.1.3 How do the different characteristics of discounting contractual agreements influence value-for-money?

Value for money: Based on the results for the value for money, the customer responds vary among the four cases. Case 2 and 3 scored significantly higher than cases 1 and 4. This means that for cases 2 and 3, customers found that the prices of the clothes were relatively of a good value for money. In contrast, for the cases 1 and 4, customers scored significant lower on their perception of their value for money. Table 11 below shows the results.

Table 11: Value for money results

Variable: Value for money Case 1 Case 2 Case 3 Case 4

Mean 5.28 5.88 5.78 5.10

Std. Deviation 0.64 0.75 0.93 1.21

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Case 2

Discounting Agreements: The leading party for case 2 is the buyer. This is because it is a buying contract and therefore, the buyer is fully entitled to own the goods. The supply chain manager from the buyer’s side explained “I am in the lead, but in order to establish a long

term relationship, we make negotiations”. In the contract, the contractual content regarding

the discounting agreements states that the mark downs (discounts) are determined in cooperation. In fact, this means that the buyer decides the discounts that they will give to the products, however, as buyer mentioned, in order to establish a long term relationship, they agree the level of discounts in consultation with the subcontractor. The goal for both parties is to achieve at least 45% gross margin. Concerning their expectations on the customer experience, the supply chain from the buyer’s side explained “I think that discounts are a bit

higher than normal because I want to get rid of the stock, but because there are negotiations, there are not extraordinary prices”. Therefore, the buyer expects that the customer can

experience more discounts from this brand. Regarding their satisfaction with the existing agreements, both parties are pleased. However the subcontractor explained “What I would

like to change, is that they have lots of moments with special offers, and I think is too much.I want to get my margins and I do not want my brand to be undervalued”.

Case 3

Discounting Agreements: For case 3, even if the buyer has to purchase all the goods (and they are thereafter fully responsible for the leftovers), the subcontractor is totally the leading party on the discounting agreements. The subcontractor explained “I don’t know if it is in the

contract or if it is a spoken agreement, but more or less they have to follow our discounting procedure”. In the contract, the contractual content regarding the discounting agreements

states that the subcontractor regularly performs promotional activities (discounts) designed to promote the sale of the products. In fact, this means that the subcontractor discounts regularly the products. On this point, the subcontractor added “the buyer has to follow our

pricing strategy that every month, there should be discounted items. We really believe in just in time deliveries and if you deliver every month, then you should have discounts every month as well, not everything but certain styles”. The goal for both parties is to ensure good

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best to the customers. Specifically the supply chain manager from the buyer’s side explained “the customer can see attractive prices. Not all the brands give discounts during the season,

so it is attractive for customers to buy discounted articles during the season”. Concerning

their satisfaction with the existing agreements, both parties are very satisfied with those agreements, especially the buyer who stated “their pricing strategy is phenomenon, it is very

good”. It can be said that even if the subcontractor has the lead, the subcontractor’s strategy

favors the buyer who wants to get rid of the stock.

Case 1

Discounting Agreements: For case 1, since the contact is based on concession and the subcontractor is fully responsible for the inventory, the subcontractor is therefore entirely the leading party on deciding the discounts. Specifically the subcontractor explained “We are

in the lead.If the buyer thinks we have to put more discounts then they get in contact with us and we discuss it but until now and in the future we will decide on the mark downs”. In the

contract, the contractual content regarding the discounting agreements states that the business exchange is based on a concession partnership. In fact, this means that the subcontractor tries to prevent deep and frequent discounts in order to avoid undervaluing the brand. What the subcontractor explained on this point was “I do not think that only price

decides when an item is to be sold. So we try to be really careful with the price reductions”.

The goal for both parties is to achieve a high gross margin out of all articles throughout each season. Concerning their expectations on the customer experience, both parties believe that the customers will experience higher prices compare to other brands. Characteristically, the supply chain manager from the buyer’s side explained “the customers will experience less

deep discounts, because it is a European brand, they want to keep their brand value, so they do not want to give much mark downs. They prefer to send these articles to other outlet stores”. Regarding their satisfaction with the existing agreements both parties are pleased so

far. In particular, the subcontractor explained “I am happy so far, I wouldn’t like to change anything in the future”.

Case 4

Measuring the customer experience in service triads

The customer perspective: