- Elgar original reference
Edited by Gary L. Lilien and Rajdeep Grewal
Chapter 15: Evolution of Buyer–Seller Relationships
Douglas Bowman The importance of understanding how interorganizational buyer–seller relationships are created, persist, sometimes destroyed and occasionally re-established has been raised in multiple contexts. For many reasons, continuity is a focal construct of interest in business marketing contexts (Dwyer et al. 1987). From the seller’s perspective the relative cost of generating a new customer versus retaining a current customer (Fornell and Wernerfelt 1988) suggests that actions that promote continuity can be more profitable. As evidence, consider Kalwani and Narayandas’s (1995) matched-pair analysis of manufacturing firms, which shows that compared with firms viewed as taking a transactional approach, those in long-term relationships achieve high profitability through means such as lower discretionary expenses. Kumar’s (1999) matched-pair study of business services suppliers also reveals that compared with those focused on customer acquisition (i.e. transaction-oriented), firms involved in long-term client relationships typically achieve superior returns on their investment (ROI). Customer retention is a key driver of customer lifetime value (Gupta and Zeithaml 2006), and the profit impact of underspending on retention can greatly exceed the profit impact of a comparable underspend on customer acquisition (Reinartz et al. 2005). In advertising agency–client relationships, the discontinuity in promotional strategy resulting from a change in agencies can weaken the brand image (Buchanan and Michell 1991). Relationships in distribution channels have been viewed as dyadic in nature (e.g. Anderson and Weitz 1989), and their continuity plays an important role in channel effectiveness. With an expectation of continuity, independent sales representatives in an industrial channel, for example,...
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