Executive Summary
Suppliers in business-to-business settings are increasingly building multiple types of ties with individual customers. For example, in addition to supplying goods and services, a supplier may have a research-and-development alliance, a marketing alliance, and a joint venture with the same customer. The current study investigates the effect of a supplier having multiple types of ties with a customer (i.e., relationship multiplexity) on the supplier’s performance with the customer. Using panel data on 200 supplier–customer relationships, the authors find that an increase in relationship multiplexity with a customer results in an increase in supplier sales to the customer and a decrease in sales volatility to that customer. However, the impact of relationship multiplexity on sales growth and sales volatility changes as the conditions in the customer’s industry change.
The impact of relationship multiplexity on sales growth becomes weaker and its effect on the change in sales volatility becomes stronger as the competitive intensity in the customer’s industry increases. This suggests that as competition in a customer’s industry increases, a customer expects its multiplexed suppliers to share more of its competitive burden. For example, a customer may ask a multiplex supplier for price concessions but in return purchase greater volumes, thus resulting in average sales growth but more stability in sales. The results also indicate that the effect of a change in relationship multiplexity on the change in sales volatility becomes stronger as the intangibles intensity in a customer’s industry increases. Therefore, if a supplier’s objective is to obtain stable sales from a customer, it would be more helpful to form multiplex relationships with customers in industries with high intangibles intensity. The results of the study have implications for the reporting standards recommended by the Financial Accounting Standard Boards and the International Accounting Standard Boards. Currently, firms are required to identify their large customers because firm performance is likely to be vulnerable to adverse decisions by such customers. This study’s findings suggest that increasing relationship multiplexity reduces vulnerability to such customers because it enhances sales growth and reduces sales volatility. Therefore, relationship multiplexity can be viewed as an “intangible asset” and a “relevant nonfinancial measure” that may be useful to report in financial statements.
Biography
Kapil R. Tuli is Assistant Professor of Marketing in the Lee Kong Chian School of Business at Singapore Management University. He completed his PhD from Emory University (Goizueta Business School) in 2006. In addition, he has a master’s degree in Marketing from Texas A&M University (Lowry Mays School of Business), a postgraduate diploma in Marketing from Narsee Monjee Institute of Management Studies (Mumbai, India), and a bachelor’s degree in Chemistry from Mumbai University (India). His research interests include marketing strategy, customer relationship management, and customer solutions. He has published in Journal of Marketing and Journal of Marketing Research.
Sundar G. Bharadwaj is Associate Professor of Marketing in the Goizueta Business School at Emory University. His research has been published in Journal of Marketing, Journal of Marketing Research, Management Science, and Journal of Academy of Marketing Science, among others. His research is conducted at the marketing–financial performance interface and includes interests in marketing strategy, innovation, brand management, customer management, and customer solutions.
Ajay K. Kohli is Gary T. and Elizabeth R. Jones Chair in Marketing in the College of Management at Georgia Institute of Technology. He has previously taught at Emory University, Harvard Business School, and University of Texas at Austin. Dr. Kohli worked for more than six years in sales and distribution management and as a marketing strategy consulting. He has led numerous executive education seminars in the United States, Europe, Asia, and Latin America. Dr. Kohli’s research focuses on market orientation, customer solutions, market signaling, customer relationships, sales management, brand management, and organizational buying. He is the recipient of the Alpha Kappa Psi award and the inaugural Sheth Foundation/Journal of Marketing award. He is among the 100 most-cited authors in business and economics combined. Two of his articles are among the ten most-cited Journal of Marketing articles in a quarter century. He is also the recipient of the Jack G. Taylor Teaching Excellence Award at UT-Austin. He is currently editor in chief of Journal of Marketing. Dr. Kohli’s undergraduate degree is in Electrical Engineering from IIT-Kharagpur, PGDM (MBA) from IIM-Calcutta, and he earned his PhD from the University of Pittsburgh.
Journal of Marketing Research, Volume 47, Number 1, February 2010
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