Source loyalty in organizational markets: A dyadic perspective

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Source Loyalty in Organizational Markets: A Dyadic Perspective Michael H. Morris Jeanne L. Holman University

of Central Florida

Although a widely prevalent practice among industrial buyers, relatively little is known about source loyalty. This article examines a number of definitional and conceptual issues in this area, and argues that loyalty is an attitudinal and behavioral response to the ongoing dynamics of buyer-seller interaction. As such, theory and practice will benefit from the adoption of a dyadic perspective on loyalty. Four dimensions of the buyer-seller dyad are discussed as they relate to source loyalty. A number of specific propositions are made regarding the nature and dyadic determinants of loyalty. The framework is then used to reexamine Wind’s landmark study on loyalty. Suggestions are made for future research, and managerial implications are drawn. Introduction Source loyalty is an important outcome of the buyer-seller relationship, and has important implications for the design of marketing strategies for industrial products/ markets. Industrial source loyalty is the behavioral predisposition that tends to favor previous suppliers with whom the buyer is familiar. It is somewhat analogous to consumer brand loyalty, the definition that has generated considerable controversy. One of the problems in defining loyalty is that it is not the same as repeat buying behavior. There is an attitudinal component to loyalty that is in place before the act of repurchasing a vendor’s product takes place. This led Jacoby and Chestnut [19, p. SO] to define brand loyalty as “the biased behavioral response expressed over time by some decision-making unit with respect to one or more alternative brands out of a set of such brands, (which) is a function of psychological (i.e., decision-making, evaluative) processes.” In the absence of such an attitudinal bias, repeat buying can be termed spurious loyalty.

Address correspondence to Michael H. Morris, Department University of Central Florida, Orlando, Florida 32816.

Journal of Business Research 16(2), 117-131 (1988) 0 1988 Elsevier Science Publishing Co., Inc. 1988 52 Vanderbilt Ave., New York, NY 10017

of Marketing,

School

of Business,

0148-29634WS3.50

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The behavioral dimension of loyalty also presents definitional problems. Loyalty can be absolute, or undivided, where the buyer repeatedly satisfies all of his or her requirements with one supplier. It can be divided, where the buyer consistently purchases a certain percentage of his or her requirements from one vendor. Loyalty can also be unstable, where the customer favors one supplier’s product through a series of purchases, and then jumps to another supplier’s product for a series of purchases. Scant attention has been paid in the literature to the concept of source loyalty in industrial markets, beyond the groundbreaking work of Wind [37]. The lack of work in this area can be attributed to a variety of issues. As a behavior (versus an attitude), loyalty is so prevalent that it could be thought of as the norm. Given this, and the large number of pressing issues in organizational buying that have not been addressed, loyalty has been relegated to a low-priority status. In addition, loyalty in consumer markets has been a neglected issue in recent years, and this may have influenced research agendas in organizational buying. And yet, the reasons for being loyal, and possibly the amount of loyalty, would appear to be changing as the environments of customer organizations become more turbulent and complex. The difficulties in assessing the impact of these changes only serves to accentuate the inadequacy of our current knowledge base. The purpose of this research is to further develop our understanding of source loyalty as an essential aspect of modern organizational buying behavior. The article will first identify the distinctive aspects of industrial source loyalty. Following this, loyalty will be conceptualized within the dyadic paradigm, a framework that has been emphasized as especially relevant for examining industrial transactions [2,4]. A number of propositions for the industrial marketer attempting to manage sourceloyal relationships will be drawn from the dyadic framework. Finally, suggestions are made for further research. The Nature

of Industrial

Source

Loyalty

Implicit in the limited work on industrial source loyalty is that it is roughly equivalent to store and brand loyalty in consumer markets. However, source loyalty has a number of distinguishing characteristics. Industrial purchases typically carry a larger dollar value and are sold in larger quantities than consumer goods. Often they are custom-made or tailored to the specific application needs of the customer firm. These products are marketed at different stages of completion, with much of what is sold taking the form of raw and semifinished goods. The product-attribute bundle can include technical assistance for installation and equipment operation, service before and after the sale, and an emphasis on prompt, reliable delivery. The buying firm is purchasing for inventories as well as ongoing requirements, and may purchase a given product for a number of different uses. Product performance is critical for the daily functioning and longer-term economic viability of the customer organization. As a result, industrial buyers make more of a commitment, and take more of a risk, in product or vendor selection than is found in the average consumer purchase. The initial decision to buy an industrial product is likely to be more formal, involve more people, and take more time. Subsequent loyalty develops as a result of the ongoing investments made by both seller and buyer [18]. Sellers

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Loyalty to a technology (e.g., digital versus analog)

Loyalty to a product class (e.g., private branch exchanges PBX’S)

Loyalty to a manufacturer’s brand (e.g., System 75)

Figure 1. A Typography

of Loyalties

Loyalty to vendor (source) (e.g., A.T.& T.)

invest the time and effort of sales and service personnel, may provide applications engineering, and may tailor products or services to the specific needs of the buyer. The buyer not only spends money on the seller’s products or services, but may train employees and design operating procedures to meet the requirements of these products and services. The buyer may modify plant and equipment to be compatible with the vendor’s offerings. Where these investments are not made, and relationships become cozy, sleepy, or paternal, vendor turnover is likely [12]. These investments exceed those generally required of either party in consumer transactions. Correspondingly, industrial source loyalty is most likely a longer-term affair than consumer brand loyalty. Individual purchases are probably less a factor, as both buyer and seller will have situational needs that force them to not always buy from or sell to the other [lo]. The ongoing loyal relationship persists, however, as a function of the mutual investment made by both parties. It appears, then, that it takes more time to establish industrial source loyalty than consumer brand loyalty, but that source-loyal relationships may not be as easily dissolved. In examining source loyalty, it is also important to determine loyalty to what? Jackson [18] explains that buyer commitment can be to a technology, a vendor, a product, or a person. If not to the vendor, then loyalty becomes more tenuous as other firms develop similar products, technologies, or hire company sales people away. This issue is illustrated in Figure 1. Consider the case of the telecommunications industry, which has moved from an analog to a digital technology in manufacturing communications switches for the telephone systems used by organizations. A customer could remain loyal to the old technology, or be an

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advocate for the new. The customer could also be loyal to a particular product category, such as the use of private branch exchanges (PBX’s) in their office buildings, rather than electronic key systems, or central office-based switches at the local phone company. The customer could be a strong proponent of the System 75 brand, which is a PBX made by A.T.& T. Alternatively, their loyalty may be to A.T.& T. itself, because of the company’s reputation or service policies. Or, their attitudes and behavior may have less to do with products and vendors per se, and more to do with a personal liking for a particular salesperson. Loyalty, where it exists, will tend to be divided. This is because of the concern with sole source dependency in industrial markets [8]. For many goods, the buying organization cannot afford the risk of relying on one vendor for all its needs. On the other hand, as firms adopt new purchasing and manufacturing technologies, such as just-in-time inventory (JIT) and materials-requirement planning (MRP), they have a rationale for undivided loyalty. In fact, there has been a trend in recent years towards shrinkage of the supplier base [ll]. Organizational buyers are also more likely than consumers to get involved with vendors in the development of new products. Parkinson [24] has recently demonstrated the significance of such combined efforts. The benefits to the marketer are many, including rich market feedback and a guaranteed market for these new products. It is also probable that source loyalty will follow from such early involvement by the customer in the marketer’s activities. Complexities in the buying process also serve to distinguish industrial source loyalty from brand loyalty. The “buyer” in an organizational setting is often a set of individuals who fill various decision-process roles (i.e., initiator, buyer, user, etc.). Fulfillment of these roles over time culminates in vendor and product choices. The group nature of organizational buying is addressed in Jacoby’s definition of source loyalty, above, which emphasizes the decision-making unit. However, membership in the industrial buying center, or decision-making unit, is subject to change from decision to decision. Loyalty can be undermined, then, by the addition of a key individual to the buying center with vendor biases contrary to those currently held. The marketer, who has spent time harvesting a loyal relationship, may be completely unaware of this individual. The marketer of industrial goods and services should also recognize that incentives often exist for the buyer to loot be loyal. Green and Nordstrom [16] provide a cogent argument in support of the disloyal buyer. By not routinely repurchasing from the same vendor, the organizational buyer may be better able to negotiate such gains as lower prices, discounts on potential purchases, speedy settlement of warranty claims, and extended credit terms. They argue that loyalty has been approached as an unidimensional benefit. Loyalty should be much more a negotiated phenomenon between buyer and seller. It is a behavior pursued by the rational buyer only when the perceived benefits of loyalty exceed the potential benefits of disloyalty. The way in which these benefits are perceived depends upon the positions, characteristics, and behaviors of both buyer and seller. It becomes apparent from this brief discussion of the distinctive aspects of industrial source loyalty that loyalty is a product of the ongoing dynamics of buyerseller interaction. The buyer-seller relationship is probably more a factor than specific characteristics of the buyer, the seller, or the product. For this reason, it may be helpful to position source loyalty within a dyadic framework.

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Proposition 1: Because of the greater relative investment made by both buyer and seller, industrial source loyalty will generally last longer than consumer brand loyalty. Proposition 2: It takes more time to establish industrial source loyalty than consumer brand loyalty, but source loyal relationships are not as easily dissolved. Proposition 3: Interaction between buyer and seller in the early stages of product development is likely to result in greater source loyalty over time.

Proposition 4: Source loyalty results more from the ongoing dynamics of buyerseller interaction than from specific buyer, seller, or product characteristics.

The Buyer-Seller

Dyad

A traditional stimulus-response approach to loyalty would focus on the set of variables the marketer can manipulate to cause more loyalty in customers, on the one hand, and the set of factors that correlate with a customer’s tendency to be loyal, on the other. Alternatively, the dyadic framework takes the two-person, two-group, or two-organization interaction prccess as the smallest unit of analysis. It allows for the likelihood that exchange outcomes (e.g., source loyalty) result from the effect buyer and seller have upon one another. Thus, organizational buying is approached as a “negotiated social process whereby people interact, explore their thoughts and feelings, exchange information, and perhaps evolve to new or novel positions and relationships” [4, p. 621. The focus of the dyadic paradigm is on interdependencies, exchanges, power and influence relations, bargaining and negotiation, mutual problem solving, explanation, and understanding. Four sets of variables characterize the workings and outcomes of the buyerseller dyad: 1. Relational Variables: These are concerned with the nature of the connections binding the parties in a dyad, and focus on the nature of the interaction. An example is the power/dependence relationships between buying and selling organizations. Power is determined by a party’s dependence upon another party for some attribute. Both parties in the dyad are dependent upon one another. The question concerns who needs who the most, or where the power balance rests. 2. Social-Structural Variables: These focus upon the relative positions of the representatives of the buyer and seller organizations, and where these positions lie in the respective social hierarchies (e.g., horizontal and vertical differentiation). 3. Social-Actor Variables: These refer to the traits of the individuals themselves-their personalities, likenesses, differences, communication styles, age, background, education, sex, expertise, and so on. 4. Normative Variables: These variables involve the norms, roles, expectations, accepted practices, and the rules of the game involved in the buyer-seller dyad. Both parties of the dyad will have specific expectations concerning how the other party is expected to behave throughout the buying process. Unofficial rules exist that must be understood by each party.

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Dyadic relationships evolve and become more personal over time. They move beyond formal discussions regarding task-related product and vendor performance criteria to informal social interaction and personal friendships. Through this process, long-term buyer-seller arrangements are established, and source loyalty evolves, Source

Loyalty

as a Dyadic

Process

In a dyadic relationship, both parties seek attributes, and seek to gain from the exchange. Source loyalty can be characterized as one of the values exchanged within the dyad. Correspondingly, each of the variables that characterize the buyer-seller dyad can be related to source loyalty. Relational variables include, among others, power and dependency within the dyad. This dependency may be the basis for the existence of source loyalty. The supplier could be the owner of a patent for an essential product or process, creating buyer dependency. The buyer, alternatively, could account for a large proportion of the vendor’s sales volume, creating supplier dependency. Where the buyer and seller share an approximate equality of resource control, the result is likely to be extensive bargaining and negotiation. This is most common in industrial marketing transactions. Johnston and Bonoma [21] explain that “the marketer does not view the buyer as trivial and easily replaced, nor is the industrial buyer just a weak recipient of the seller’s offers and influence moves.” The presence of such a power balance may contribute to long-term source loyalty [33]. This is especially the case given the attitudinal dimension of loyalty [20]. Favorable attitudes would seem an important condition in explaining why the buyer continues to purchase from the same supplier after she or he is aware of a better price or faster delivery from some other source. Where power is more unilateral, loyalty may be merely spurious, and may change as power positions develop further. Of course, power positions change as the dyadic relationship evolves. Such changes may directly affect loyalty as either seller or buyer perceive they have more or less to gain from the other. Proposition 5: The more balanced the power relationship between seller and buyer, the more source loyalty will be exhibited in the dyadic relationship.

Social-structural variables are concerned with the relative positions of buyer and seller in their respective organizations in terms of status, influence, loyalty, and goals. These variables prescribe the conditions within which the dyadic relation will occur: formalized versus informalized, standardized versus nonstandardized, centralized versus decentralized, and complex versus simple [4]. Social-structural factors influence the exchange of information and assistance between organizations, and set the boundaries of the dyadic interaction. Each member is assigned a position in his or her organizational structure for the purpose of carrying out specific tasks. Each organization provides a setting, together with explicit and implicit cues, that determine the content of the individual’s role [29, 301. In a source-loyal relationship, the sales representative uses his or her status and influence within the selling organization to bargain and negotiate the terms of a deal with the buyer. Along the same lines, the buyer bargains and negotiates within his or her own organization in support of the particular vendor. As a result, the more the similarities between the relative positions of buyer and seller, the more likely it is that source loyalty will be fostered.

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An imbalance between the respective positions creates a more formal, less personal relationship, perhaps impeding attribute exchange. Buyer or seller may question the ability of the other to contribute to his or her own achievement of desired rewards, a key determinant of individual motivation [2]. Such an imbalance can undermine the willingness or ability of either party to go to bat for the other within their respective organizations. Proposition 6: The more similarities exist between the buyer and seller positions within their respective organizations, the more source loyalty will be exhibited.

Social-actor variables include the personalities, demographics, physical resources, past rewards, personal capabilities, and intentions of the representatives of the buying and selling organizations. The literature contains an ample amount of support for the notion that interaction with others who are similar to, or agree with, ourselves is a source of need satisfaction or rewards [9]. More specifically, then, similarity between a salesperson and a prospect in terms of their personal characteristics, beliefs, and attitudes affects the likelihood of a sale being made. For example, Brock [5] demonstrated that similarity was more important than expertise in a field experiment involving paint sales. Akaah [l] has found evidence that the similarity effect increases with the financial value of the purchase. As the exchange process becomes more personal over time, social-actor variables take on greater saliency in determining the extent of source loyalty demonstrated by the buyer. Thus, a logical extension of the previousiy established relationships would be to expect congruency between the social-actor characteristics of the buyer and seller to positively influence source loyalty. This may also help explain how a salesperson is able to change jobs within an industry and take all his or her accounts along. Proposition 7: The stronger the likeness/similarities between representatives of the buyer and seller organizations, relationship,

the more source

loyalty will characterize

the

Normative variables focus on the roles, norms, and mutual expectations of each party within the dyad. Each party has a conception of the other’s expectations regarding his or her own role. Similarly, each imposes expectations upon the other. One’s perceptions of others is influenced by stereotypes of them and their roles, which include inferences about their intentions, attitudes, emotions, abilities, and so forth, and inferences about how others view oneself in terms of these aspects

WI. After the initial sale is accomplished, each party has a conception of how well his or her role expectations were fulfilled. Further, they can modify these expectations as a function of the initial experience [27]. Congruency in buyer and seller expectations regarding the role behaviors of one another over time is likely to contribute to stronger source loyalty. Tosi [32], for example, demonstrated a relationship between how well the buyer’s expectations regarding the salesman are met and the number of suppliers purchased from. The point here, though, is that favorable outcomes such as loyalty are the result of mutual agreement on role definition and mutual satisfaction with role fulfillment. Congruency allows time, which would otherwise be spent on searching for behaviors that fit one’s expectations, to be spent on activities that will foster the mutual exchange of attributes. Proposition 8: The greater the perceived role congruence between buyer and seller representatives regarding one another, the more source loyalty will characterize the relationship.

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Table 1. Variable Class

M. H. Morris and J. L. Holman

The Marketing Dyad and Source Loyalty Location or Source of Variable

Role in Source

Loyalty

Relational variables

Interaction

These variables can signify a power balance or imbalance in dyadic relationships. Dependency of one party on another contributes to source loyalty, but a power imbalance can undermine the attitudinal component of loyalty.

Socialstructural variables

Situation

These variables are concerned with congruency or incongruency in the social-status positions of buyer and seller representatives. Congruency positively affects buyer and seller perceptions of one another’s resource capabilities, which influence the extent of source loyalty.

Socialactor variables

Individuals

These variables represent the characteristics of the individuals within the dyad. As the interaction process between buyer and seller moves from functional-task concerns to social-interaction characteristics, individual characteristics increase in importance. This evolution occurs as the buyer is confronted with decisions regarding how source loyal to be.

Normative variables

Interaction situation, and individuals

Roles, norms, and expectations provide guidelines for the behavior of those in the dyad. Fulfillment of roles and norms generates greater incentive for stronger source-loyal relationships.

Proposition 9: The stronger the level of mutual satisfaction between buyer and seller representatives regarding each other’s role fulfillment, the more source loyalty will characterize the dyadic relationship. Each of the elements of the dyadic framework hold insights for better understanding industrial source loyalty (see Table 1). The applicability of this framework can be further demonstrated by applying it to Wind’s [37] model of source loyalty, which represents the major empirical work to date.

Wind’s Model of Source Loyalty: Applying the Dyadic Framework Wind [37] identified major correlates of industrial source loyalty in an advanced electronics firm. He found significant statistical relationships between loyalty and four sets of variables: the offering, buyer’s past experience with suppliers, work simplification rules, and (buyer) organizational variables. Examples of each are illustrated in Figure 2. These loyalty determinants represent factors under control of the supplier (the offering), the buying organization (work simplification rules, organizational variables), or both buyer and seller (past experience with suppliers). Industrial source loyalty results from the interaction of all four sets of determinants, and this is implicit in Wind’s work. That is, the model serves to demonstrate the dyadic nature of source loyalty. Consider, for example, the power/dependency positions within the dyad. An imbalance of power can result from the supplier being the sole source of supply, thereby having more complete control over traditional task variables that are negotiable (e.g., price, delivery). Further, as the buyer accumulates more experience with the supplier, this can affect the ongoing nature of the power/dependency

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4 w

Seller J Traditional

-After-sale service and support. -Supplier’s dedication and commitment to buyer’s needs. -ComoetitivelReasonabble prices. -Only available source of supply. -Supply continuity in times of shortages. -Supplier satisfies buyer’s basic product requirements(e.g., quality, quantity). -Supplier’s ability to meet emergency requirements. -Geographic location of supplier. -Long-term supplier contracts. -Supplier’s ability to deliver when needed (e.g., JR). -Volume discounts. -Reputable company image.

Buy& Past Exwrience -Buyer and seller work together to resolve problems. -Exchange of ideas and suggestions. -Friendship/personal relationships. -Reciprocity relationships. - Continuous and assured source of supply.

Figure 2. Factors Contributing

Buyer

Organizational Variables

Work Simpliii&on Variables -Reduced amount of inbound freight records and claims. Suppliers product is adapted to buyer’s processes and procedures. Routine orders leading to greater purchasing efficiency. -Reduced testing levels on incoming products. -Avoidance of time, effort, and cost spent searching for and switching to a new supplier. -Reduced risk and uncertainty. -Greater buying leverage and control. -Maintenance of older relationships easier than development of new relationships.

-No motive to switch suppliers. -Supplier is recommended by user of product. -Potential for future cost savings and product improvements. -Few complaints from user department. -Small dollar value of purchase order.

to Source Loyalty in Industrial Markets

relationship. To the extent that the buyer is heavily dependent on the supplier, the buying task is simplified as the power relationship serves to preordain buyer behaviors. Alternatively, a more powerful buyer is able to dictate changes in the dyadic relationship to serve the needs of organizational variables (e.g., pressure for cost savings). The social-structural positions of those in the dyad are also affected by a combination of Wind’s variables. The supplier’s status and position within his or her organization will determine his or her ability to negotiate the supplier-controlled variables (i.e., the offering). Past experience has dictated how differences or similarities in the dyad’s respective organizational positions have affected past transactions, and how these differences/similarities will affect future transactions. The perception that the vendor representative is able to simplify the buying task and save the buyer’s time and effort is directly a function of respective social-structural positions. The position of the buyer within the buying organization will determine the extent to which he or she must succumb to pressures for change in certain organizational variables. Social-actor characteristics of both buyer and seller have a major role in determining the way in which a number of Wind’s loyalty determinants are communicated and perceived. For example, the way in which the product-attribute bundle is received by those in the buying center is very much affected by the credibility of

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the salesperson. This, in turn, is affected by that person’s individual characteristics and how they are related to the characteristics of representatives of the buying organization. Similarly, social-actor variables of both buyer and seller combine over time to prejudice the experience buyers have with vendors. These characteristics take on a bigger role as the dyad evolves and loyalty becomes more of an issue. Norms, rules of the game, and expectations also shape the context or manner in which Wind’s determinants influence source loyalty. Such normative variables will affect the approaches and tactics used by both seller and buyer to accomplish their respective objectives. These tactics include decisions on which task variables will be emphasized by the vendor and how. Norms may govern the way in which creative discount structures are used, as well as the exchange of gifts and favors. They also govern any ploys used by the buyer to receive more favorable terms, such as playing an out-supplier against the vendor from whom the buyer is currently purchasing. Fulfillment or violation of norms and role expectations will ultimately color the buyer’s perceptions of the experiences with the supplier. Normative variables determine which members of the buying organization it is appropriate (or inappropriate) for the seller to contact, and vice versa. This is likely to impact upon organizational variables, such as complaints or compliments from user departments [ 161. Wind’s model is limited because it relies on unidirectional relationships between supplier and/or buyer-controlled variables and the buyer’s source loyalty. The dyadic framework suggests the impact of each of these variables on source loyalty is more complex. This impact is the result of buyer-seller interaction on relational, social-structural, social-actor, and normative dimensions. Suggestions

for Future

Research

Studies on the seller-buyer dyad have tended to focus on how characteristics of each party affect whether or not a sale is made (e.g., [l], (361). Extension of this work to source loyalty as a behavioral response would seem, on the surface, a straighforward task. The difficulty comes in 1) identifying the specific variables of relevance within each dimension of the dyadic framework, and 2) operationalizing source loyalty. A two-stage research process is required to solve the first problem. The initial stage should focus on identifying loyalty-relevant variables on each dimension of the dyadic framework, and determining their relative saliencies. For example, on the relational dimension, do we focus on dependency, conflict, reciprocity, or intensity? Under what circumstances will the social structural variables of relevance be more concerned with horizontal differentiation versus vertical differentiation? The number of variables that could be potentially relevant social-actor characteristics is indeed immense, although the sales-management literature will provide some guidance. On the normative dimension, some evidence exists regarding the importance of buyer and seller role clarity, role conflict, role expectations, and role satisfaction. At the same time, the nature and impact of standards of performance and social norms are likely to be situational. The follow-up stage should focus on identifying the structural relationships among the dyadic dimensions and loyalty. The structural model in Figure 3 provides

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\ exchange

dependence.

\ reciprocity

SOCIAL STRUCTURAL VARIABLES influence SOURCE LOYALTY

vertical differentiation

horizontal differentiation

I

organizational loyalty //

‘personal resources

personal capabilities

comparison level for alternatives

’

rules of behavior

laws

Figure 3. A Structural

/

role expectations

Model of Dyadic

Determinants

of Source

Loyalty

a beginning point for this work. Source loyalty is conceptualized as a dependent variable, with the dyadic dimensions as independent variables. A number of potential loyalty-relevant variables are presented for each dimension. The dimensions may also be correlated. For instance, role expectations may be related to conflict, and personal capabilities may be correlated with status. Alternatively, further work with these interdependencies may suggest that relational variables are the key determinant of loyalty, with the social-actor, structural, and normative variables determining these relational characteristics. The measurement problems are also considerable, which brings us to the second problem. The priority in this area is the operationalization of loyalty. Source loyalty is a temporal construct with a number of dimensions, including attitudinal and behavioral. Each of these dimensions has multiple components. For example, behavior can include the tendency to repeat purchase, patterns in repeat purchasing,

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Table 2. Example of Scale for Operationalizing 1. A much superior alternative

2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25.

M. H. Morris and J. L. Holman

Source Loyalty

must be available before we would consider replacing this supplier. We would go out of our way to recommend this supplier to our colleagues in other companies. We would not be concerned about carrying reduced levels of safety-stock when dealing with this supplier. If another supplier offered a lower price, we would switch suppliers. We like to regularly buy from suppliers like this because they make the purchasing job a lot easier. We will search for alternative sources if this supplier develops goals that conflict with our own. We would continue to buy from this supplier even if the user department desired another supplier. We would feel reluctant to drop this supplier as a source of supply. We are satisfied with our relationship with this supplier. My company will be searching for and evaluating new sources of supply for the products/services provided by this supplier. We would want to establish a long-term relationship with this supplier even if they did not offer the lowest price among available suppliers. If this company sent us an unacceptable number of defective products, we would work with them to solve their quality control problems. We will search for alternative suppliers if this supplier is not able to perform to our level of expectation. We would feel more comfortable establishing a sole-source relationship with this supplier than other available suppliers. My company would tend to be very aggressive in pushing for better terms from this supplier. We are prepared to make considerable investment (time, personnel, money) in order to establish a long-term relationship with this supplier. We will maintain our relationship with this supplier only if they could help us achieve a price advantage over our competition. A long-term relationship with this supplier is highly unlikely. My company would continue purchasing from this supplier even if their prices tend to fluctuate. We would continue to buy from this supplier only at the insistence of the user department. We would welcome extensive technical contacts with this supplier’s personnel in order to establish a close working relationship. Our relationship with this supplier will be terminated if an atmosphere of conflict rather than cooperation develops. We would buy in larger quantitites than normal to help this supplier out if they were experiencing some financial problems. We will search for alternative suppliers if communication problems with this supplier are not handled promptly. We would like to decrease business with other suppliers we currently use and increase this supplier’s volume of business.

Source

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the tendency to increase or reduce the number of vendors used, the proportion of total purchases from a given vendor, and the number of source changes. As an example of one potential approach to operationalization, consider Table 2. Here, using Jacoby’s [19] definition of loyalty, three components of the loyalty construct are measured: predispositions to respond in certain ways to given stimuli, strength of preference over time, and future purchase intentions. The 25 statements are meant to be used with a strongly agree to strongly disagree scale after the respondent (e.g., a purchasing agent) has been asked to identify a particular vendor. This is only an example, and is included here to illustrate the need to look beyond the behavioral dimension, especially given the prevalence of repeat purchasing in industrial markets [6, 201. Attempts at measuring source loyalty must also reflect the five different types of loyalty presented in Figure 1. Otherwise, the managerial usefulness of the operationalization becomes questionable. The scale in Table 2 addresses this problem in part by explicitly focusing on the vendor in each of the items. Measures of the other types of loyalties are needed, as well. With such measures, marketers can begin to examine the interrelationships among the loyalty types. Finally, Watson [34] has developed a buyer-supplier stability matrix that can be useful in assessing the dependency positions of buyer and seller over time. The matrix is concerned with the margins suppliers are able to charge buyers as a function of the power advantage or disadvantage. Developing similar matrices concerning the amount of loyalty buyers reward suppliers as a function of 1) power positions, 2) social structural differences, 3) social-actor similarities, and 4) normative agreement would be helpful. Strategic

Implications

of Source-Loyalty

Research

Strategy formulation in industrial marketing is not a well-developed area. Limited progress has been made in identifying the sets of strategies that are most appropriate under various market conditions. One such condition is source loyalty. The establishment of a source-loyal relationship is equivalent to converting the buying situation into a straight rebuy, where the marketer is the in-supplier. Research on source loyalty as a dyadic phenomenon has strategy implications for marketers both as in-suppliers and as out-suppliers. In a turbulent environment, where technologies, competitors, economic conditions, sources of supply, and regulation are subject to disruptive change, longterm loyalties become more difficult to maintain. The in-supplier must recognize that balance on the dyadic dimensions can easily become imbalance, especially where the marketer becomes complacent, or is overly opportunistic in taking advantage of his or her company’s position in the source-loyal relationship. Even the marketer who conscientiously manages customer relationships can lose part or all of an account if the wrong variables are emphasized. Research can help identify the more salient dimensions (e.g., normative versus social actor) and variables (e.g., comparison level for alternatives versus personality variables) within the dyad, which the marketer can then build strategies around. As an out-supplier, the ultimate objective is to overcome source loyalty as a behavior. However, the real problem concerns the attitudinal component of loyalty. Providing the buyer with reasons not to be loyal is insufficient. Marketers can work

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to create an imbalance

in existing dyadic relationships by performing better on the key dyadic dimensions. Efforts should focus on the dimensions and variables that are most responsible for loyalty. Out-suppliers may, for example, be emphasizing conflict, when personal rewards are more important in modifying an existing source-

loyal relationship.

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Source Loyalty, Journal of Marketing Research 7 (November