(with Arun Sharma), Klaus Backhaus and Klaus Backaus (eds.) in Handbook of Industrial Marketing, Gabler Verlag, pp. 147-174.
Industrial marketing has traditionally been an area of extensive research. In 1977, Sheth (p. 17) commented:
“Contrary to popular belief, there is a vast amount of research and knowledge about organizational—industrial buyer behavior […] Actually, there are more journals specializing in industrial buying behavior than in consumer behavior.
The genesis of the research in this area has been industrial buying behavior Where two models were developed around the same time. Sheth (1973) developed a model for industrial buyer behavior and Webster and Wind (1972) developed a general model for organizational buying behavior. These models were robust and form the foundation of industrial buying behavior research (Webster, 1995). These models predominantly discuss the role of the organization, roles of participants, and purchasing situations in the industrial buying process.
A very important area of research emerged next. This area examined the role of the boundary spanners; in other words, industrial marketing salespeople. Specifically, research developed in the area of personal selling and sales management. This area has been a fertile research area, with researchers examining methods to enhance the productivity of salespeople. Research has concentrated on situational and personal factors which influence salespeople and sales managers. The research in this area was predominantly done in the 19805 and is the foundation of the present work in this area. Books by Comer and Dubinsky (1984) and Ford, Churchill, and Walker (1985) are excellent references that detail the models and research in this area.
Based on the fertile research in the areas of industrial buying behaviors and salespeople, an additional area of research emerged towards the late 19805 and early 19905, as research began to highlight the importance of developing relationships for effective marketing, especially in the business-to-business context. Sheth’s creation of a Center Of Relationship Marketing at Emory University brought the issue of relationship management into the mainstream. Scholarly opinion seemed to converge on the fact of a paradigm shift in thinking from a transaction-based marketing perspective to a relationship-based marketing perspective. Such a shift in thinking found an echo in industry as well, with relationship marketing becoming a critical strategic tool for sustaining competitive advantage. General Motors, Xerox, Black and Decker and Neiman Marcus were among the companies that looked to their suppliers to help them achieve a stronger competitive position (Ganesan, 1994). In industrial marketing, this area was addressed by proponents of national or key account management programs.
Several studies strengthened the case for relationship marketing: Morgan and Hunt (1994) Provided a foundation for the relationship marketing theory with the commitment-trust theory of relationship marketing. Research by Dwyer, Schurr and Oh (1987), Bucklin and Sengupta (1993), Ganesan (1994) and Kalwani and Narayandas (1995) delineated the processes involved in formulating relationships and identified major antecedents and consequences of relationship marketing. Recent research has sought to reexamine relationship marketing (Fournier/Dobscha/Mick, 1998; Weiss/ Kurland 1997; Henke, 1995; Michell/Cataquet/I-Iague, 1992). The reason for the reexamination is that the balance between giving and getting in a good relationship seems to have been ignored in favor of getting. Reinartz and Kumar (2000) also report on data that challenges some of the fundamental assumptions of relationship marketing.
The focus of this paper is industrial marketing from a behavioral approach. Therefore, we focus on one of the models that was the genesis of research in this area — the Model of Industrial Buying Behavior (Sheth, 1973). We will provide extant research in the area of industrial marketing — behavioral approach. After discussing the literature in this area, the paper seeks to highlight research areas that are emerging in the area of industrial marketing and need additional research attention.
2 The Sheth Model of Industrial Buying Behavior
The Sheth model was an extension of the Howard-Sheth model of buyer behavior, adapted to the special behavioral processes of the industrial buyer. The Sheth model has a psychological and behavioral emphasis, focusing on the mental states and decision processes of individual participants in the buying process. Among the key concepts in this model, summarized graphically in figure 2-1, are buyers’ expectations, perceptions, role orientations, lifestyles, and perceived risk. Organizational variables are summarized in three constructs: orientation, size and degree of centralization.
The Sheth model shows that differences among buyers’ expectations are caused by:
- the background of the individuals
- their information sources
- active search
- perceptual distortion
- satisfaction with past purchases
There has been a considerable amount of significant research conducted in this area since the Sheth model. Recently, Sheth (1996) provided a description of recent/current research, which he divided into categories of decision~making processes, information search, buy class framework, and buyer—seller interaction models. A brief description of the key research in extending the model in the domains of decision-making process, information search, buy class framework, and buyer-seller interaction models follows.
Fig. 2-1: Sheth Model of Industrial Buying
2.1 Decision-Making Process
- Dempsey (1978): This study reports the results of a study dealing with the vendor selection Process. Based on the results of the study, the author identifies five evaluative criteria (vendor stability, basic economic criteria, geographic affinity, attendant services and assurance mechanisms) and four categories (seller-dominated external information, buyer-oriented external information, salespeople and buyer-oriented internal information).
- Vyas and Woodside (1984): The authors develop an inductive model of supplier choice processes. Their descriptive, composite model incorporates subroutines of events, interactions, and decisions learned from studying entire industrial buying processes of 18 products.
- Anderson and Chambers (1985): Describes a new model of organizational buying process based on _the assumption that organizational buying behavior is essentially a form of work behavior. The model emphasizes the role of reward measurement systems in motivating purchasing process participants. A second sub—model is concerned with the process of group interaction and consensus formation.
- Banting et a1. (1991): This paper reports the results of a two-nation study (Hungary and Canada) of the industrial buying process. The authors find similarities as well as differences in purchasing patterns between the two nations.
- Rangan et al. (1992): This paper offers a framework for buyer behavior-oriented micro-segmentation of industrial customers. Four segments of national accounts of a large industrial company are identified: transaction buyers, programmed buyers, relationship buyers, and bargain hunters.
- Dholakia et a1. (1993): The authors report an empirical investigation on the length of time firms take in making major purchase decisions and examine its antecedents. Findings suggest that firm size, buy-class, decision-making unit (DMU) size, information sources, and size of consideration set ail significantly affect decision-making time.
- Burm (1994): The author applies a combination of literature and field-based approaches to develop four constructs that underlie buyer behavior: procedural control, proactive focusing, use of analysis techniques, and search for inf0rmati0n. Measurement scales for these constructs are created and evaluated through a survey of purchasing professionals.
- Schmittlein and Peterson (1994): Their model applies customer base analysis in which past purchase behavior of customers is observed in order to understand the current and likely future purchase patterns. Results indicate that customer base analysis can be both effective in predicting purchase patterns and in generating insights into how key customer groups differ.
- Brown (1995): The author tests a conceptual model of the relationships among buyer’s perspectives of and attitudes toward a vendor company’s marketing mix, and the moderating effects of insupplier/outsupplier status of the seller. Results indicate significant moderating effects of insupplier/outsupplier status, and generally validate predictions made on the basis of attitude theory.
Buying center influence of members of buying center:
- Silk and Kalwani (1982) report findings bearing on the reliability of measures used in industrial market surveys to identify the structure of buying groups. They find a lack of consensus about purchase influence between pairs of informants from the same organization. They also find that ratings appear to differentiate among roles but not among stages in the decision process.
- Thomas (1982) studied the nature of interpersonal influence on the individual‘s decision in organizational buying. Findings suggest that social and organizational bases of influence of personal sources explain changes in a decision-maker‘s product evaluations.
- Jackson et a1. (1984) carried out work to identify the relative influence of participants and how it changes) across purchase of different products, buy classes, and procurement decisions. Findings indicate that the relative influence of the buying center members is constant in different buy classes, but changes across product types and decision types.
- Thomas (1984) studied internal relationships among key participants in the buying center. Findings indicate relative importance of selected bases of power, and their relative importance by organizational position.
- Berkowitz (1986) addresses the identification of the main influencers in new product adoption. Findings indicate that end users and technical staff are interested in product sampling; that price was an important consideration among end users and technical staff; and that the purchasing department exercised the final authority for ordering.
- Lynn (1987) analyzes the structure of the buying center for a professional service and found that CPA buying centers are similar in size and in the number of levels 0f corporate hierarchy and functional areas to other industrial services.
- Kohli and Zaltman (1988) developed a multi—item scale to tap influence, and the process through which influences are manifested in buying centers.
- Martin et a1. (1988) compare the expectations of buying center role groups for transportation mode selection and find meaningful differences between role groups. Findings support the suggestion that role members in a buying center have different perceptions of suppliers.
- Kohli (1989) identifies factors that affect an individual’s influence in the buying Center. The study found that expert power has the greatest influence, followed by reinforcement power of the individual.
- McQuiston (1989) focuses on those people who participate in organizational pur— chases and decisions, and the factors which affect the interpersonal influence between participants during the session. This author proposes a structural equation model that suggests the purchase situation attributes of novelty, complexity, and importance are causal determinants of participation and influence in industrial purchase decisions.
- Ronchetto et a1. (1989) introduce the organizational buying system concept as an organizational framework for exploring the patterned, repeated interactions that characterize ongoing purchasing processes. Findings indicate that organizational actors derive influence from the position they occupy within the buying system. Individual influence is derived from properties of the formal and informal structure.
- Choffray and Lilien (1980) present a methodology for segmenting industrial markets on the basis of functional involvement in phases of the purchasing decision process. Implementation of the methodology in a real life situation involving industrial cooling systems led to the identification of four segments of organizations.
- Woodside and Sherrell (1980) report a study on purchase of industrial equipment in the paper manufacturing industry. Five decision stages and five overlapping buying centers were found.
- Johnston and Bonoma (1981) developed a method for the quantifiable dimensions of a buying center. They defined and operationalized five interactive dimensions of the buying center: vertical and lateral involvement, extensiveness, connectedness, and purchasing manager centrality.
- Moriarty and Bateson (1982) tested the methodologies of surveying all members of a DMU. They found that there was a greater response rate to the use of “snowballing by telephone” technique as distinct from single stage and exhaustive snowballing.
Environmental influences on organizational buying behavior:
- Gronhaug (1976) developed a taxonomy for classifying organizations and comparing their behavior in buying situations, based on the organizations that were product dependent and product independent, and found purchasing activities to be “5′ “‘1′ 1 – more structured in product dependent than in product independent organizations. The study also found that search behavior, buying motives, and goals pursued were different in the two types of organizations.
- Spekman and Stern (1979) present a conceptual and methodological framework for examining OBB from a multi-person level of analysis. They view structure as a central variable, for it shapes the nature and degree of interpersonal interaction within the buying group, and is also a primary determinant of the buying group’s information acquisition and processing capabilities.
2.2 Information Search
- Webster (1970) found little support for word-of-mouth communication in industrial markets and suggests a key role for manufacturers’ salespersons.
- Martilla (1971) establishes the importance of word—of—mouth communication within firms and found that the opinion leaders had greater exposure to impersonal information.
- Moriarty and Spekinan (1984) conducted. empirical investigation of the sources of information sought by decision participants and discovered the importance of non-personal information.
- Deshpandé and. Zaitman (1987) studied the use of marketing information in industrial firms.
- Bunn and Clopton (1993) developed the taxonomy of industrial customers’ information source use. They conclude that purchase situations are significantly related to choice of an information source mix.
- Weiss and Heide (1993) studied the nature of the search behavior in high technol— ogy markets. They conclude that search behavior is determined in part by certain inherent characteristics of markets and in part by buyer’s specific situation.
Organizational climate and role perceptions:
- Qualls and Puto (1989) explore the benefits of using organizational climate as one Of the factors affecting decision-framing processes of industrial buyers. Experimental findings indicate that the buyer‘s general orientation towards risk affects the frame and, subsequently, the buyers’ cho1ce. However, there were mlxed $251.11: with regard to the organizational climate factors affecting deC1S1on frame an subsequent choice.
- Robertson and Wind (1982) conducted an empirical study that focused on organizational climate to explain industrial buying behavior.
- Spekman (1981) presents organizational type as a potentially important company Specific characteristic that affects the organizational buying process. Differences in the importance associated with purchasing related factors exist among purchasing managers from commercial, not—for-profit, and governmental organizations.
- Thomas (1982) conducted an empirical study on the role perceptions of the members of a buying center.
- Michaels et a1. (198D: Research perspectives from role theory are examined with a large sample of purchasing professionals. The results suggest that an awareness of the nature and influence of role stress in the buying context could be valuable to marketing professionals.
- Henthorne et al. (1993) examined the role played by informal members of the buying center and their impact on the type and level of risk perceived by the organizational buyer: Results indicated that informal influence has a significant effect on perceived risk experienced by the organizational buyer.
- Ryan and Holbrook (1982) propose a construct, decision-specific conflict, in an attempt to integrate purchasing conflict, exchange transactions, and micro-segue“aticm. Using 17 purchasing decisions faced by automobile fleet administrators, nomological validity was supported by an inverted U-shaped relationship between conflict and responsibility weighted by time.
- Barclay (1991) formulated a model of organizational characteristics that affects buying-related interdepartmental conflict and found that organizational characteristics such as barriers to communication, the reward system, and the ambiguity of departmental responsibilities explain a substantial portion of the variance in the manifestations of buying-related conflict.
- Bellizzi and McVey (1983), based on research conducted in the commercial con- 1 struction industry, test the effects of product type and purchase experience on in- I dustrial buyer behavior (to test the validity of the buy – grid model). The findings indicate that product type is a meaningful variable Which is related to industrial buyer behavior. However, the purchase experience variable or buy-class variable is i not significantly related to buyer behavior.
- Leigh and Rethans (1984) apply cognitive script theory to the analysis of industrial purchase behavior in a computer terminal purchase. Industrial buyers“ scripts for the overall new purchase process, an initial sales call, a follow-up negotiation meeting, and a modified rebuy situation are established and validated.
- Patton et al.’s (1986) research premise is that in certain types of industrial purchase decisions (vendor selection in modified rebuy situations), the presence of certain 1 mediating variables may indicate that the individual purchasing agent rather than a buying group may make the vendor selection decision. Major findings are that individual decisions seem to predominate in modified rebuy decisions, that loyalty to existing suppliers seems to have an effect on the extent of individual decision . making, and that the extent of joint decision making appears to be related to the size of the firm.
- Anderson et a1. (1987) use an empirical approach to examine the buy-class framework. Salesforce managers were asked about the behavior their salespeople encounter on the part of their industrial customers. Much of what salespeople serve is found to correspond closely to the buy-class theory. Also, “problem newness” and “information needs” dimensions are found to be strongly related. However, “seriousness of consideration of alternatives” seems to be a separate dimension that does not operate entirely as predicted by the buy-class framework.
- B Wilson et al. (1991) developed a contingency model for predicting buying center choice using two situations of the RFW framework (modified rebuy and new task decisions) and three levels of perceived risk. Organizational buying centers in firms responded to product evaluation decisions. These data were used as input for seven alternate models of group choice in order to note the predictive accura— cies of each model by situation. Major findings are that in new task situations with high perceived risk, a unanimity model tends to predict choice most accurately. In modified rebuy situations with moderate to high risk, group choice models such as a voting model tend to be used; in these models, group judgments are considered but unanimity is not required.
- Bunn (1993) developed a classification scheme (taxonomy) of buying patterns and situations, consisting of four prototypical “buying decision approaches” identified through empirical procedure: search for information, use of analysis techniques, focus on proactive issues, and reliance on control mechanisms. The use of the particular decision approach depends on four situational characteristics: purchase importance, task uncertainty, extensiveness of choice, and perceived buyer power.
2.4 Buyer-Seller Interaction Models
Dyadic and interactive perspectives:
- Sheth (1976) provides a comprehensive conceptualization of the buyer-seller inter— action process. It has been postulated that the quality of interaction is a function of the compatibility between the buyer and the seller with _respect to both the style and the context of interaction. A number of personal, organizational, and product-specific factors are described as determinants of style and extent of communication buyer-seller interaction processes.
- Bonoma et a1. (1977) emphasized the need for taking a dyadic approach.
- Nicosia and Wind (1977) suggest a model based on inter-organizational and inter-organizational processes during buying decisions. They take a dyadic perspective Of processes in the selling organization as well as of processes in the buying organization. They describe the buying process in terms of individuals and groups, both in selling and purchasing organizations, and in terms of activities performed by them.
- Bagozzi (1978) provides an exchange theory framework of industrial buying and decision processes. He emphasizes the interactions between buyers and sellers during the exchange. process and reviews leadership and decision-making, group decision-making processes (including research and theory in bargaining and negotiation), coalition and other group effects, and social power approaches.
- Bonoma et al. (1978) post a system paradigm consisting of an “embeddation model! in which dyadic relations are contained in an overall system context. They stress the characteristic of interdependence! in dyadic relations.
- Bonoma and Johnston (1978) offer dyadic or two-party models as reconceptualizations for understanding industrial buying behavior. In the dyadic model, the two most important variables are the relational variables between the two parties (e. go, trust, cooperation. The exchanges that take place between the members of the dyad are the most meaningful of these relational variables. Also included are other variables, such as situational variables. Exchanges and interrelationships are posited as the basis for explaining buying behavior.
Research focused on interaction and social variables:
- Hakannson (1982) presents the industrial marketing and purchasing cIMP) group interaction model. Drawing heavily on the microeconomic notions of the “new institutional economists,” the IMP model reflects the idea that transaction costs may be reduced when a transaction is internalized in one unit. The author prefer to reference the “buyers” and tsellers! as actors linked to one another by short term exchange” episodes and long-term exchange! episodes. Besides the interaction based linkages, the relationship is influenced by its atmospheres! (e. g., power dependence, cooperation, expectations).
- Metcalf et al. (1992) apply the IMP interaction model to study buyer-seller collaborative efforts or factors that engender close relationships between buyers and sellers. Three basic processes are posited as integral to the development of close buyerseller relationships: exchange, cooperation, and adaptation.
- Heide and Miner (1992) examine cooperation between 136 industrial buyers and suppliers by examining the effects of anticipated interaction and frequency of contact on buyer-seller cooperation. Using the iterated games framework, they predict that anticipated open-ended future interaction or extendedness and frequency of contact will increase the chances, and that a pattern of cooperative behavior will occur, but that performance ambiguity will decrease such chances. Results indicated that extendedness and frequency are associated with joint cooperation.
Negotiation process and strategies:
- Clopton (1984) pointed out that industrial buyers and sellers as individuals are boundary spanners, linking communication between the two firms; moreover, when long-term relationships are usually sought and both parties are expected to emerge from negotiation with favorable outcomes.
- Perdue and Summers (1991) report findings from a field study on the relation between negotiation strategies used by the purchasing agent and the characteristics of the purchase content (cost sensitivity of the buyer firm, supplier competition, uniqueness of the buying firm’s specifications, buyer’s cooperative orientation, having information, and formal planning). Results demonstrate the ability of contextual variables to predict the negotiation strategies likely to be used by purchasing agents.
- Perdue (1992) reports the findings from a field study of purchasing agents, use of ten aggressive bargaining tactics when negotiating rebuy purchases of components parts. Results suggest that purchasing agents favor tactics that manipulate the sellers, perceptions about the degree of competition for the purchase contract to persuade (or coerce) the seller to concede.
- Dabholkar et al. (1994) propose a framework of business-to-business interaction that integrates approaches to bargaining from social psychology and economics in order to provide a conceptual paradigm emphasizing long-term relationships. They propose a classification of negotiation behavior along two dimensions and examine the dyadic negotiation process that translates negotiation behavior into long-term relationships.
- Dwyer et al. (1987) describe a framework for developing buyer-seller relationships based on a continuum of contractual, discrete, relational exchanges.
- Hallen et al. (1991), on the basis of social exchange theory and resource-dependence model, formulate a structural model of inter-firm adaptation. The model accounts for mutual adaptation as a consequence of trust-building, as well as for unilateral adaptation due to imbalanced dependence between the parties. Results support the view that inter-firm adaptations are elements, in a social exchange.
- Heide and John (1992) show that norms playa very significant role in structuring economically-efficient relationships between independent firms.
- Han et aL (1993) examined how industrial buyers and suppliers perceive recent changes in business markets and found that major factors influencing companies toward using fewer suppliers include the need for enhanced performance, cost reduction, and greater technical cooperation. They also found that good relationships are characterized by mutual trust and satisfactory exchange.
- Provan (1993) developed a theory and hypotheses explaining constraints on the emergence of opportunism when buyer-supplier relations are considered in a net. work context. He hypothesizes that opportunistic behavior of individual network suppliers relative to the dominant buyer, or hub firm, will decline at increasing levels of embeddedness in an interdependent supplier-buyer network, despite conditions of high asset specificity and small numbers bargaining.
- Anderson et al. (1994) use a network approach to provide a means for understanding the connectedness of business relationships in a dyadic context. They also conduct a substantive validity assessment to furnish some empirical support for the constructs.
Buyer-seller relationships in channel context:
- Cadotte and Stem (1979) develop a dynamic process model for inter-organizational relations in marketing channels. Five interrelated elements are emphasized: conflict potential, dependence (and its obverse power), conflict perception, resultant force, and conflict after match. The model is based on the political-economy perspective of power and dependence.
- Frazier (1983) develops a framework of inter-organization exchange behavior in marketing channels.
- Frazier and Rody (1991) develop hypotheses on the reciprocal use of non-coercive and coercive influence strategies by the supplier and the distributor in the channel dyad and on the interrelationships of these strategies with the inter-firm power, latent conflict, manifest conflict, and conflict resolution constructs. Hypotheses are generally supported by data from a national survey of industrial distributors.
- Boyle ,et al. (1992) develop new measures of influence strategies in marketing channels (i.e. the means by which a firm’s personnel communicate with its partners to affect their behavior) in order to examine associations with the strength of buyer-seller relationships (relationalism) and alternate governance structures (market, administrative, franchise and corporate).
Special arrangements between buyers and sellers:
- Frazier et al. (1988) explains how Just in Time (JIT) exchanges compare with other forms of exchange; what conditions are most conducive to the initiation of JIT exchanges; and what key factors influence the success or failure of initiated JIT exchanges.
- Heide and John (1990), drawing on a normative theory of transaction costs, identify conditions under which alliances in industrial purchasing are useful. Results support the model wherein they posit that the utility of the relationships is derived from an ability to safeguard relationship-specific investments and to facilitate adaptation to uncertainty.
- Noordewier et al. (1990) demonstrate that performance in terms of acquisitions costs is enhanced when, under conditions of uncertain? firms introduce more relational elements in their purchasing arrangements.
- HandHeld (1993) proposes a model using resource dependence to explain how and why purchasing is moving towards JIT. Results support the idea that purchasing departments in make-to-order firms are likely to reduce the number of critical suppliers in response to uncertainty in demand.
- Swift and Coe (1994) examined single and multiple sourcing of products. A sourcing preference scale is developed to measure purchasing manager’s attitudes towards either single or multiple sourcing. Differences in selected demographic and organizational characteristics between purchasing managers having preference for single and multiple sourcing were found.
- Webster (1993) discusses the importance of buyer involvement and determines the level of involvement or importance that industrial buyers place on the purchase of services.
- Matthyssens and Bulte (1994) address the shift in OBB and industrial marketing. They also discuss the evolution of purchasing toward a more relational and cooperative mode.
- Carter and Narasimhan (1994) integrate the concepts, ideas, and findings that have emerged from ongoing multiphase studies of purchasing role in Total Quality Management (TQM). They develop several ideas about what purchasing organizations should do to attain TQM goals.
- Based on empirical data from 21 firms, Dumond (1994) examines the readiness of the organizational environment, in terms of several critical variables performance measurement system, extent of functional interaction, and access to external information) for successful implementation of value-based purchasing.
- Based on a survey of 122 purchasing managers, the results of Sriram and Banerjee (1994) show that the impact of Electronic Data Interchange (EDI) is moderated by the volume of transactions using EDI Its adoption requires somewhat different skills and training for buyers, and it also changes some aspects of a firm’s relationship with its suppliers.
- Woodside (1994) examines the hypothesis that the marketing-purchasing of new, mdustrial manufacturing technologies involves the development of a new network of relationships within and across enterprises.
3 Emerging Area of Research
The previous section detailed the extensive research in the areas of the Sheth model. However, there are new and emerging areas of research, which are provided in figure 3-1 and discussed next.
Figure 3-1: Emerging Research on Industrial Marketing
3.1 Industry Structure
Industry structures have not been traditionally analyzed in either purchasing or marketing industrial firms. There is an emerging area of research that suggests that industry structures affect industrial buying behaviors. For example, Sheth and Shah (2003) suggest that the degree of concentration in a purchasers industry leads to enhanced relational processes. The behavioral reason is that industrial firms try to form a relationship with a seller to block access to key supplier resources by new entrants and to lock in supplier capacity. From the industrial firm’s perspective, a dose and enduring relationship with buyers may enable sellers to exercise indirect control over potential competitors by keeping them out of particular markets. This position is in contrast to traditional thinking that suggests that as power increases, industrial customers may
believe they have the upper hand and will tend to be more behaviorally confrontational. Sheth and Shah (2003) suggest that there is a shift when the industrial customer’s industry approaches a near monopoly structure and the monopoly power of the customer is high, the desire for relational exchange by the customer will reduce regardless of the size of the supplier. Pillai and Sharma (2003) also suggest that changes in the economic, competitive and regulatory environments alter an industrial firm’s purchasing processes.
3.2 Organizational Factors
Sheth and Shah (2003) discuss three emerging issues in organizational influences on the industrial buying process: decision-making culture and process, and tolerance of risk. For example, Sheth and Shah (2003) suggest that in organizations where decision making regarding key input resources is made by a cross-functional group or where an entire unit of decision-makers is involved, the preference for a relational orientation increases. Therefore, once a relationship between supplier and customer becomes established in a multi-stakeholder environment, it is difficult for other suppliers to break through. In other words, entry barriers for new suppliers are quite high. Sheth and Shah (2003) also suggest that customers are motivated to enter into long-term relationships with suppliers because they perceive that they can enhance their own legitimacy and competitive position by associating with key “elite” sellers.
3.3 Selling and Purchasing Situations
Emerging research on the effect of buying and selling situations on industrial marketing behaviors has been highlighted by PilIal and Sharma (2003). They suggest that suppliers, relational assets, transaction specific investments .by the buyer, and high quality of alternatives affect processes. Additionally, Sheth and Shah (2003) suggest that outsourcing affects purchasing options. Imai and Sharma (2003) suggest that supplier relational assets can affect buyers, buying processes by creating buyer dependence. Transactional specific investments made by the buyer also help cement long-term relationships. Industrial research suggests that industrial firms are structurally committed to a relationship to the extent that reasonably available alternatives are unattractive. In an attempt to minimize costs, industrial firms outsource activities that are not central to their core business in order to be able to focus on. their core competencies and to realize efficiencies from outsourcing. When specific parts of the business are outsourced, customers may become locked into one supplier or a small set of suppliers due to specific technology linkages or integrated infrastructure between buyers and sellers (Sheth/Shah, 2003. The costs of exiting such relationships are very high, and sometimes prohibitive.
3.4 Marketing and Buying Personnel Roles
There are two areas of research regarding these roles. In the area of purchasing Organization, researchers have suggested greater parsimony is provided in the roles of buyer, payer and user. Sheth, Mittal and Newman (1999) suggest that the increasingly complex world of role specializations could be distilled to three roles: buyer, user, and payer. This classification is relevant to both consumer and industrial markets, but it creates parsimony in the industrial market arena where there are proliferations of role specializations that academics and practitioners followed.
Regarding the sales organization, the majority of previous research has examined the role of a salesperson as a sales agent. Recent research has sought to examine the role of salesperson as a consultant or a facilitate! for customer satisfaction. Sample research by Liu and Leach (2001), Pelham (2002), and [ap (2001) demonstrates that consultancy oriented behaviors of salespeople lead to increased loyalty and sales growth. The research suggests that the role transformation from a salesperson to a consultant increases relationships between buyers and sellers.
3.5 Individual Factors
The cognitive factors that affect individual level decision-making are schema, cognition, and persuasion knowledge. The ability of the individual managers to process all available information is limited. Hence, the interpretation of information and assessments of problems, risks, and solutions are affected by the cognitive structures, called schemas, that are used as templates to explain and interpret events. As managers acquire greater experience, more complex schemas develop. The Persuasion Knowledge Model (PKM) postulates that individuals develop knowledge about persuasion and
use this knowledge to cope with persuasion episodes (Friestad/Wright, 1994). Persuaion knowledge includes agent knowledge, topic knowledge, and persuasion tactic knowledge. Agent knowledge includes beliefs about marketers, motives, strategies, and tactics. Topic knowledge includes beliefs about the context of persuasion, product knowledge. Finally, persuasion tactic knowledge includes the effectiveness and appropriateness of persuasion tactics and ways of coping with persuasion attempts. Persuasion knowledge is developmentally and historically contingent (Friestad/Wright, 1994). Managers consciously process their experience in order to understand persuasion and communication episodes at both a macro level (general knowledge) and at a micro level (agent specific knowledge. Therefore, the development of persuasion coping expertise is strongly influenced by the experience possessed by managers (c. f., Friestad/Wright, 1994). Thus, managers with greater experience are likely to have
better developed persuasion knowledge structures agent knowledge, topic knowledge and persuasion knowledge compared to those who are relatively inexperienced. The better-developed persuasion knowledge structures enable managers to see through the persuasion tactics of salespeople (Sharma, 1997). Purchasing and alliance managers deal with the persuasion strategies and tactics of salespersons; hence, the model is particularly relevant to managers in the buying firm.
4 Areas of Future Research
One of the goals of the authors of this paper was to identify areas of future research. These include key account management practices, internal marketing, social capital, cross-selling and up-selling, dissolution of relationship, and EDI and electronic markets.
Key Account Management Practices. Although key account practices have received considerable research interest, the behavioral aspects have received limited research attention. Specifically, cross-functional and cross-organizational processes need to be examined. We observe these cross-functional arid cross-organizational teams in brand manager advertising account executive interactions, as well as in IT consultant and IT manager interactions. However, the antecedents and consequences of these forms have not been fully articulated and need to be further examined.
Internal Marketing. The behavioral processes underlying internal marketing by salespeople is an under-examined area of research. Interestingly, the buyer in industrial organizations has typically completed the internal marketing process before contacting the salesperson. In contrast, salespeople need to market their orders internally before they can propose prices, adaptations or delivery times. Consulting firms have made the behavioral process easier by allowing salespeople manage their own organizations. The efficacy of this process needs to be examined.
Social Capital. The buyer and seller in industrial firms create social capital. However, a change in one part of the dyad reduces the level of relationship. There is a need to examine the behavioral processes that will allow industrial marketing firms to capture the social capital.
Cross-Selling and Up-Selling. Most industrial marketing firms suggest up-selling and cross. selling to their salespeople. However, the behavioral impact of up-selling and cross-selling on existing relationships is not well understood. From the perspective of marketing firms, the process explores new opportunities. However, from the perspective of the buying. firm, it can be regarded as a major nuisance, reducing the commitment to relationships.
Dissolution of Relationships. There is research on developing relationships, but limited research on dissolution of relationships, Dissolutions of relationships leave stranded assets that must be maintained by firms and that are of value to both firms. There is a need for examining dissolution of relationships so that the equity and goodwill of the relationship can be maintained.
EDI and Electronic Markets. EDI and electronic markets have grown very rapidly in the last decade, but academic research has only begun to examine this phenomenon. An excellent start has been research by Grewal, Comer, and Mehta (2001) that examines the antecedents of industrial marketers participating in electronic markets. They propose that ability (learning, age, and effort), IT capabilities, efficiency motive, legitimacy motive, and environmental dynamism affect participation. There is a need for additional research on the behavioral implications of CRM, ERP and knowledge management.
Industrial Marketing research, specifically from a behavioral perspective, continues to be an area of interesting and complex research. We hope that this paper has been able to provide a summary of the past and the future of this area.
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