The role of wholesale brands for buyer loyalty: a transaction cost perspective

Peter Kenning
Zeppelin University, Friedrichshafen, Germany

Stephan Grzeskowiak
Rouen Business School, Mont-Saint-Aignan, France

Christian Brock
Zeppelin University, Friedrichshafen, Germany, and

Martin Ahlert
International Franchising and Cooperation Center, University of Muenster, Muenster, Germany
Abstract Purpose Marketing channels are changing dramatically as the world economy becomes networked. Buyers who are likely to only have limited insight into a wholesalers sourcing decisions may be uncertain about product and/or service quality. This paper aims to show that a credible quality signal provided by the wholesaler, the wholesale brand, can effectively reduce buyer uncertainty. Design/methodology/approach Using structural equation modelling methodology in the context of 569 buyers across 52 locations of a home improvement wholesaler the authors investigate the key mediating role of transaction costs for the effect of wholesale brand knowledge on buyer loyalty. Findings The results suggest that wholesaler brand knowledge effectively reduces ex-post transaction costs incurred by the buyer. These lower quality control costs and price verication efforts increase buyer loyalty. Interestingly, however, the data show that this bonding effect of the wholesale brand may not affect buyer search costs. Research limitations/implications The research on the role of supplier brands for supply network management is an early effort. Clearly more research is needed to fully explore the role of wholesale brand knowledge for wholesaler selection. Practical implications The ndings are important to marketing channel managers because they provide a viable alternative to ever-increasing relationship marketing costs. They suggest that a close wholesaler-retailer relationship may not be necessary to realize the benets of a trusting exchange environment. In fact, they show that high wholesale brand knowledge may act as a substitute and reduce uncertainty effectively. Originality/value This paper is the rst to introduce a transaction cost perspective on the relationship between wholesale brand knowledge and wholesale loyalty. It demonstrates how wholesale brand knowledge can reduce uncertainty in the wholesaler-retailer dyad and substitute for more costly relationship building efforts. Keywords Transaction costs, Brands, Customer loyalty, Channel relationships Paper type Research paper

An executive summary for managers and executive readers can be found at the end of this article.

Introduction
Supply chains are changing dramatically as the world economy becomes networked (Levy and Grewal, 2000). One of the consequences of a networked marketing channel is an increase in complexity of product sourcing. Buyers who are likely to only have limited insight into a sellers sourcing decisions, may be uncertain about the product and/or service quality delivered by the seller (Lynch and De Chernatony,
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2004). This uncertainty stems from inherent product or service variability in a complex procurement process (Ho., 2007); Pathak et al., 2007); that is, the quality levels for different units of the same product or service may differ over time depending on which supplier was used to source the product (Roberts and Urban, 1988). For risk-averse buyers uncertainty is likely to increase transaction costs (Williamson, 1985). Here, transaction costs may, for example, arise from a buyers effort of seeking information about product quality prior to purchase, verifying product quality upon receipt, and managing quality discrepancies and handling disputes. In contrast to traditional buyer-seller relationships, uncertainty in complex supply networks is likely to persist beyond high levels of experience in the buyer-seller dyad. In particular, past transactions with the seller may only provide imperfect
The authors gratefully acknowledge the nancial support for this study from the German Ministry for Education and Research (BMBF FKZ 01 FD 0682).

Journal of Business & Industrial Marketing 26/3 (2011) 162 170 q Emerald Group Publishing Limited [ISSN 0885-8624] [DOI 10.1108/08858621111115886]

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The role of wholesale brands for buyer loyalty Peter Kenning, Stephan Grzeskowiak, Christian Brock and Martin Ahlert

Journal of Business & Industrial Marketing Volume 26 Number 3 2011 162 170

information about future transactions because the seller may only have limited control of its sourcing network (Erdem et al., 2006). The consequences of enduring uncertainty in the marketing channel may be serious (e.g. Akerlof, 1970). One mechanism that may reduce this uncertainty is a credible quality signal provided by the seller. Although much research has investigated the effectiveness of signals on buyer uncertainty, little is known about the impact of supplier brands on buyer uncertainty. In general, a brand can be dened as the name, term, sign symbol or design or a combination of them, is intended to identify goods and services of one seller or a group of sellers and to differentiate them from those of the competitors (Kotler, 1997, p. 443). Brand knowledge refers to brand awareness (whether, and when, consumers know the brand) and brand image (what are the associations that consumers have with the brand) (Keller, 2001). We posit that brand knowledge may act at as signal in complex marketing channel networks that can effectively reduce buyer uncertainty about product and service quality. The purpose of this paper is to contribute to the understanding of marketing channel brands in at least three ways. First, we introduce a new perspective on the role of brands in marketing channel relationships as transaction-cost reducing mechanism. Second, we extend the literature on retail brand image into the context of business-to-business markets. In particular, this study provides a rst insight into the effectiveness of wholesale brands for reducing uncertainty in marketing channels. Finally, we add to knowledge on wholesale patronage by introducing three key mediating variables for the effect of a wholesale brand on buyer loyalty (see Figure 1).

Conceptual framework
Until recently, the phenomenon of wholesale brands has not received much attention in the marketing channel literature. In particular, we are interested in wholesale brand knowledge. Brand knowledge related to a wholesaler refers to a buyers brand awareness (whether, and when, the buyer knows the brand) and brand image (the associations that buyers have with the brand). Research in marketing channels has mostly taken a consumer-oriented focus on brands. Here, retail Figure 1 Research model and hypotheses

brand image is a concept that reects shoppers perception of a retailer in terms of functional and psychological attributes (e.g. Martineau, 1958; Mazursky and Jacoby, 1986). Functional attributes are store characteristics regarded as concrete, tangible, and observable (e.g. type and quality of the stores merchandising, the hours of operation, the quality of the service provided by sales personnel, the location convenience of the store, and relative ease or difculty to nd parking). In contrast, psychological attributes are store characteristics that are abstract, intangible, and not directly observable (e.g. the stores ambience and the type of people shopping at the store). The concept of retail brand image has been empirically documented in an impressive number of studies (e.g. Arons, 1961; Hansen and Deutscher, 1977; Bearden, 1977; Kunkel and Berry, 1968; James et al., 1976; Marks, 1976; Mazursky and Jacoby, 1986; Oxenfeldt, 1974; Schiffman et al., 1977; Darden and Babin, 1994). Recent studies have focused on the impact of retail brand image on product perception (DAstous and Gargouri, 2001), store satisfaction, store commitment, word-of-mouth, purchase intentions, price insensitivity (Bloemer and OderkerkenSchroder, 2002), and store loyalty (DAstous and Levesque, 2003). Although this research informs about the role of brands at the retail level, it does not address the role of wholesale brands for decision making in business-to-business relationships. This gap is especially important because a number of developments in marketing channels are likely to amplify the impact of wholesale brands on channel performance. First, many suppliers today are located in foreign countries (e.g. global sourcing, Trent and Monczka, 2002). Due to the geographical and cultural distances it may be difcult to gauge the reliability of such foreign supply chain partners. Second, due to the increased number of potential suppliers, it becomes increasingly difcult to select the partner that provides the best t. Third, reduced product life cycle durations (esp. automotive and telecommunication industry) lead to less time for selecting the right supply chain partners (Mikkola and Skjoett-Larsen, 2003; Pathak et al., 2007). Accordingly, there is a need to identify the right partners quickly. Fourth, due to increased product complexity, buyers need to rely on the information given by their wholesaler.

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These four trends are likely to contribute to buyer uncertainty about products and services provided by wholesalers who are part of a supply network. Consequently, effective wholesaler signals are needed to counteract this uncertainty and maintain low levels of transaction costs in buyer-seller relationships. In consumer research there is mounting evidence that brands as signals may ease uncertainty (Erdem et al., 2006).

Hypotheses
Dealing with uncertainty in buyer-seller relationships is costly (Williamson, 1985). In addition to traditional governance mechanisms, marketing scholars have proposed forging trusting buyer-seller relationships that may effectively reduce uncertainty in the channel relationship (Heide and John, 1990). However, as the life-span of sourcing relationships decreases and competitive pressures lead to more risky supplier choices, building personal ties (e.g. through sales force management) becomes increasingly difcult and costly. In fact, the cost benets of a supplier network may be sacriced if the cost of increased buyer uncertainty is shifted back to the wholesaler in form of rising relationship marketing costs. One less costly approach to mitigating uncertainty in the buyer- wholesaler dyad may be the extension of traditional business-to-business marketing communication into branding. The fundamental premise of branding in business-to-business relationships is the development of trust irrespective of personal ties. Here, wholesale brands may be used as an efcient instrument to decrease uncertainty and therefore reduce transaction costs in the buyer-seller relationship. In contrast to the use of brands in a consumer context, supplier brands in a marketing channel context should at least full three main functions: 1 Reducing risk and uncertainty; 2 providing information efciently; and 3 increasing loyalty by reducing marketing channel transaction costs. In order to reduce uncertainty in risky purchase situations, rms increase information search activities. However, information about wholesaler products may often not be available or credible (Erdem et al., 2006). Equity theory suggests that as the marginal benet of search activities decreases, rms will cut back on search activities (Adams, 1963; Huppertz et al., 1978). Here, rms may fall back on wholesaler signals to determine adequate product choices. Wholesale brands are an efcient signal of product and service quality. It allows the buyer to identify quickly which products or services are preferable (Kotler and Pfoertsch, 2007). The trust signalled and reputation accrued by the wholesale brand is likely to transpire to wholesaler products and services that are unknown to the buyer or for which only incomplete information is available (Morgan et al., 2007). Therefore, buyers with a high level of wholesale brand knowledge are less likely to follow a costly piecemeal procurement process but rather rely on a more categorical processing of wholesale brand options. Empirically, this effect may be evidenced in price-premiums charged by wholesalers with high brand equity (Fernandez Barcala and Gonzales-Diaz, 2006). For instance, in a recent study Walley et al. (2007) nd that in the UK tractor market branding accounts for 38 percent of variance in purchase 164

decisions dominating price and service evaluations. These price-premiums may reect that the wholesale brand enables buyers to accumulate information. A high wholesale brand knowledge implies strongly beliefs, strong brand equity and more pieces of accumulated information (Morgan et al., 2007). In contrast, if wholesale brand knowledge is lacking, buyers may not be able to efciently transfer their experiences over time, and as a result, may not learn which wholesaler they can trust. Accordingly our rst hypothesis addresses the relation of wholesale brand knowledge and search costs of a particular brand and customer (Dyer and Chu, 2003, Mudambi et al., 1997, Fernandez-Barcala and Gonzales-Diaz, 2006). It is as follows: H1a. The higher the wholesale brand knowledge the lower are the buyers search costs.

Uncertainty in buyer-wholesaler dyad extends beyond product selection. Buyers are likely to perceive the need to verify delivery and product quality. However, high levels of brand knowledge are likely to reduce verication efforts for at least two reasons. First, brand knowledge affects perceptions of product quality and service (Ganesan and Hess, 1997; Ganesan, 1994). Mitra and Golder (2006) for example nd in a 12-year study of 241 products that highly reputed brands are rewarded three years quicker for an increase in quality and punished one year slower for a decrease in quality compared to low-reputation brands. Accordingly, buyers are less likely to verify product and service quality when wholesale brand knowledge is high. Second, brand knowledge may also impact the extent of verication efforts directly. As pointed out, buyers who rely on wholesale brands to make a purchase decision are likely to expect high levels of product and service quality from the wholesaler. Here, cognitive dissonance theory (Festinger, 1957) suggests that customers who expect high quality are likely to reduce activities to verify the quality of products and services they received from this wholesaler. Accordingly we posit that a buyers verication efforts are reduced in transactions where wholesale brand knowledge is high: H1b. The higher the wholesale brand knowledge the lower are the buyers control efforts with respect to product and/or service quality.

Negotiations over prices are central in marketing channel transactions. Continued haggling over price is indicative of low-trust, arms-length transactions. We suggest, that buyers who can rely on wholesalers to behave honesty and benevolent are less prone to negotiate prices in an ongoing manner. Further, there is less need to verify the appropriateness of pricing and billing. Again, the dissonance-concept (Festinger, 1957) suggests that buyers who feel that they can rely on a wholesaler should lower their activities to check the prices paid at the wholesaler. We suggest that there is a negative relationship between wholesale brand knowledge and a buyers price verication efforts because its brand contributes to a trusting exchange environment: H1c. The higher the wholesale brand knowledge the lower are the buyers price verication efforts.

Consistent with prior research, we hypothesize that there exists a negative relationship between a buyers transaction costs and

The role of wholesale brands for buyer loyalty Peter Kenning, Stephan Grzeskowiak, Christian Brock and Martin Ahlert

Journal of Business & Industrial Marketing Volume 26 Number 3 2011 162 170

loyalty to the wholesaler (Erdem et al., 2006). Low transaction costs in the focal dyad increase the buyers switching barriers and reduce the incentive to seek alternative wholesale relationships (Morgan et al., 2007, Kotler and Pfoertsch, 2007). Empirically, a recent study of Walley et al. (2007) provides evidence that in business-to-business markets there is a positive relation between brand strength (e.g. due to reducing uncertainty) and brand loyalty. Therefore, we posit that: H2. The lower (a) the buyers search efforts, (b) the costs of product and/or service quality control efforts and (c) the costs of price verication efforts the higher is the buyers loyalty to the wholesaler.

relationship between buyer and wholesaler in order to control for changes in the purchase process over time. Translation procedure The above mentioned measures were designed in English. To validate translation equivalence a two-step approach was used (e.g. Homburg et al., 2002). First, a German researcher translated the questionnaire into German and a native speaker and marketing professor back-translated it into English (Douglas and Craig, 1983). Then, the two questionnaires were compared for conceptual equivalence and the two translators reconciled differences. Finally, the resulting German questionnaire was pre-tested and rened on the basis of the results of the above mentioned 180 respondents who were excluded from the nal sample. Common method bias We used an exploratory factor analysis approach to Harmans one-factor test to test at rst for potential common method bias (Korsgaard and Roberson, 1995). As expected we found eight factors explaining 68.9 percent of overall-variance. This suggests that one general factor did not account for the majority of the covariance among the measures in this study (Podsakoff et al., 2003). The measurement model t the data well (x2 195, 59 p , 0.00, Comparative-Fit-Index CFI was 0.96, TuckerLewis-Index TLI 0:94, RMSEA 0:06, pclose 0:01). In order to test construct validity and reliability, we calculated the Cronbachs alpha and average variance extracted [AVE]. Table I shows that both were satisfactory for all reective constructs (Davis, 1964; Fornell and Larcker, 1981). For an overview of the items used, descriptive statistic and correlations among the constructs, see Tables I and II.

Research design
Sampling We tested the research model in the context of a wholesale network in the home improvement sector. Fifty-two wholesale outlets of a national wholesaler in Europe were randomly selected to participate in this study. Twenty customer rms from the database of each wholesaler were randomly selected to participate in computer-aided telephone interviews. Respondents in each rm were managers knowledgeable about the exchange relationship (Phillips, 1981). In the interview we asked them to report on their interactions with the wholesale network with respect to the relevant dimensions of this study. 569 rms participated in the study for an overall response rate of about 50 percent. Firms in the sample reported revenues between e100,000 and e50 million (m e2; 046; 984, s e5; 190; 873). Measurement We conducted the telephone interview in a sequence of three stages. First, we asked respondents to report on transaction costs they incurred with the seller. Here, each type of transaction costs was measured using three-item scales adapted from Erdem and Swait (2003). Second, we asked the respondent to report on wholesaler brand knowledge. The brand equity scale used by Ha (1996) and Aaker (1992) was the empirical precedent for this measure. An extensive pretest with 180 buyers in the same sampling context revealed that some items did not appear meaningful in our sampling context and we were able to develop a parsimonious set of four scale items that tap wholesale brand knowledge. Finally, we reviewed the literature on loyalty and determined that a formative indicator would be best suited to measure buyer loyalty in our sampling context (Jarvis et al., 2003). Based on Oliver (1999), we selected four scale items previously used by Zeithaml et al. (1996) to form our measure of buyer loyalty. See Appendix for a full list of scale items. Control variables Prior research on store loyalty suggests that numerous drivers of loyalty exist that may also apply to this research context. In order to avoid potential model misspecication we included a set of control variables. These measures tapped the buyers satisfaction with the assortment, service, prices and sales personnel. Again, we developed and pretested a set of formative measures to capture the domain of each construct (Jarvis et al., 2003). Finally, we included a measure of the duration of the 165

Results
In order to test the research model, we conducted a structural equation model using supplier brand-strength as the independent variable. The R2 of the basic conceptual model was 57.7%. The goodness-of-t statistics of the model provide suggest a well tting model (x2 132 375, p , 0.00, CFI 0:93, TLI 0:91, and RMSEA 0:06 with pClose 0:04; Hair et al., 1998). Table III depicts the research model results. We nd that the path coefcients between wholesale brand knowledge and the buyers quality control effort and price verication effort are negative and signicant at the 0.01 level, supporting H1b (b2 20:51, t 27:97) and H1c (b3 20:60, t 29:34). Interestingly our data does not support H1a. Contrary to the hypothesized negative association between wholesale brand knowledge and buyer search costs, we nd a positive effect. Therefore, we only nd mixed support for the transaction cost reducing role of wholesale brand knowledge. In particular we nd support related to ex-post transaction costs, but not for ex-ante costs incurred by the buyer. We further nd support that buyer transaction costs have a negative impact on buyer loyalty. Similar to the ndings for H1, we nd support for this theory in relation to ex-post transaction costs, but not for ex-ante costs. In particular, we nd that the lower the buyers cost for quality control (b5 20:17, t 23:11) and price verication (b6 20:30, t 24:54), the more loyal the buyer becomes to the wholesaler. However, we fail to nd support for the

The role of wholesale brands for buyer loyalty Peter Kenning, Stephan Grzeskowiak, Christian Brock and Martin Ahlert

Journal of Business & Industrial Marketing Volume 26 Number 3 2011 162 170

Table I Parameters for measurement model: standarized item loadings, t-value, Cronbachs alpha, composite reliability and variance extracted
Items Brand knowledge X1 X2 X3 X4 X5 X6 X7 X8 X9 X10 X11 X12 X13 Cronbachs alpha Composite reliability Variance extracted Note: *Fixed to 1.00 0.91 * 0.76 (20.55) 0.50 (11.66) 0.90 (31.03) 0.88 * 0.65 (10.27) 0.56 (9.97) 0.73 * 0.79 (16.80) 0.85 (17.23) 0.79 * 0.74 (14.56) 0.73 (15.05) 0.78 0.79 0.57 Search cost Price verication cost Quality control cost

0.85 0.88 0.67

0.72 0.74 0.48

0.83 0.83 0.62

Table II Means, standard devations, and Pearson correlations

Construct 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Brand knowledge Search costs Price verication costs Quality control costs Buyer loyalty Assortment satisfaction Service satisfaction Price satisfaction Satisfaction with personnel Duration of the relationship Mean 2.17 3.71 3.83 3.59 1.70 1.91 1.82 2.24 1.72 5.21 SD 0.89 0.89 0.73 0.79 0.70 0.57 0.58 0.63 0.56 1.16 1 0.20 20.57 20.49 * 0.35 * 0.31 * 0.21 * 0.32 * 0.28 * 20.03 2 3 4 5 6 7 8 9

2 0.11 2 0.10 0.03 0.06 0.01 0.06 0.06 2 0.10

0.28 20.34 * 20.17 20.12 20.18 20.16 0.02

20.33 20.15 20.10 20.15 20.14 0.01

0.38 * 0.42 * 0.40 * 0.40 * 2 0.01

0.50 * 0.65 * 0.57 * 20.02

0.48 * 0.50 * 2 0.07

0.65 * 20.02

20.01

Notes: *p , 0.01 (two tailed); SD standard deviation

Table III Path coefcients: research model

Hypothesis Standardized path coefcient ! ! ! ! ! ! ! ! ! ! ! Search cost Quality control cost Price verication cost Buyer loyalty Buyer loyalty Buyer loyalty Buyer loyalty Buyer loyalty Buyer loyalty Buyer loyalty Search cost

t-value
3.71 2 7.97 2 9.34 2 0.60 2 3.11 2 4.54 2 0.08 0.63 1.89 4.61 2 2.24

H1a Brand knowledge H1b Brand knowledge H1c Brand knowledge H2a Search cost H2b Quality control cost H2c Price verication cost Control variables Assortment satisfaction Service satisfaction Price satisfaction Satisfaction with personnel Relationship duration
Notes: *p , 0.05; * *p , 0.01

b1 b2 b3 b4 b5 b6 b7 b8 b9 b10 b11

0.17 * * 2 0.51 * * 2 0.60 * * 2 0.03 2 0.17 * * 2 0.30 * * 2 0.05 0.05 0.14 0.34 * * 2 0.10 *

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relationship between buyer search costs and buyer loyalty (H2a). To further test the validity of our research model and the mediating role of transaction costs, we conceptualized an alternative model with an additional direct path between wholesale brand knowledge and buyer loyalty (b 0:01, t 0:41). This additional path coefcient was not signicant and the remaining research model results remained stable. In regards to the control variables, we only nd support for the positive impact of satisfaction with the wholesale personnel on buyer loyalty. This indicates the important role of relationship marketing efforts in this sampling context.

Discussion and implications

Overall, this study takes a transaction cost perspective on the role of wholesale brands in marketing channel relationships. Our data provide support for our theoretical model, but some questions remain. In the following section we will discuss these ndings and point out avenues for future research. The rst hypothesis in our research model, H1a, posits that wholesaler brand knowledge will reduce the buyers search efforts. We do not nd support for this hypothesis. In fact, we nd that an increase in the wholesaler brand knowledge increases a buyers search efforts. We suggest that this nding needs to be viewed in the context of the buyers experience with the wholesaler. Consistent with prior research, we nd that increasing experience with the wholesaler reduces the buyers search costs. In light of this effect, the positive effect of wholesaler brand knowledge on the buyers search costs may be a result of increased switching barriers. A buyer who is used to buying from a wholesaler with high brand knowledge may incur higher search costs to nd a suitable alternative. We speculate that this bonding effect of brand knowledge, while consistent with our theory, may have caused the observed positive effect on brand knowledge. Clearly there is a need to further explore the relationship between wholesaler brand knowledge and buyer search costs. We nd support for our second and third hypotheses, H1b and H1c. Wholesaler brand knowledge reduces the buyers cost of verifying prices and quality. Note that these costs in comparison to the search costs in H1a are incurred ex-post. It appears that wholesale brand knowledge casts a shadow on the outcome of the transaction which reduces a buyers uncertainty about exchange outcomes. Given that the wholesaler may save signicant relationship management costs (e.g. sales force expenses) due to an effective wholesale brand, brand knowledge may present a means to re-distribute exchange outcomes across the dyad and in favor of the buyer. A strong wholesale brand may therefore create a win-win scenario that ties wholesaler and buyer into quasi-relational exchanges. Here it is interesting how the transactional character of these exchanges mirrors the incentives of an ongoing exchange. Again, more research is needed to investigate this nding in the light of current relational exchange theory. The research model results for H2 mirror those of H1. Although we nd support for H2b and H2c, the premise that the level of buyer search costs increases loyalty with the wholesaler is not supported. A parallel reasoning to the effect we nd in H1a would suggest that a change in search cost may represent a buyer who is in need of nding a suitable alternative wholesaler. In our sampling context search costs 167

may, for example, occur when buyers are looking to nd wholesalers that are closer to job sites than their dominant supplier. Our empirical ndings show, that supplier brands can signicantly reduce buyer transation costs in supply networks. This holds in particular true for efforts to verify pricing and product/service quality. Based on these results, we posit that wholesale branding might be useful to increase performance and stability in a marketing channel because it reduces transaction costs for both channel partners. Interestingly, we nd that this effect appears to be dominant for ex-post transaction costs. In contrast, consumer research on branding suggests that one key benet of a brand is to reduce search costs. One reason for our nding could be that in marketing channels rms often follow a predened process for sourcing. This sourcing process may not fully take into account the value of wholesale brands. From a managerial perspective, the question arises, why many wholesalers are still lacking sound branding strategies. Perhaps, the relatively low level of complexity in the past did not prompt a need for a comprehensive branding strategy. As mentioned above, this has changed dramatically within the last years. Accordingly we expect that wholesale branding will become a key issue for future marketing channel management. With respect to our ndings, one fruitful avenue for building a strong wholesale brand would be to focus ex-post transaction costs, e.g. by providing excellent product quality of after sale services (Auramo and Ala-Risku, 2005). Other instruments for building strong wholesaler brand knowledge may be the product itself, the assortment, the logistics, the product and service adaptation and customers advice (Beverland et al., 2007). Our research on the role of supplier brands for supply network management is an early effort. Numerous avenues exist for researchers who wish to add to this research. Hence, we encourage others to extend our research and believe that such research will be of value for marketing research and network management practise as well.

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The role of wholesale brands for buyer loyalty Peter Kenning, Stephan Grzeskowiak, Christian Brock and Martin Ahlert

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Quality control cost [Reective Indicator] X11. X12. X13. I dont need to check the products of this wholesaler because they are of high quality. If this wholesaler vouches for the quality of a product I do not have to inspect it. I dont verify the quality of products that I buy from this wholesaler.

Buyer loyalty [Formative Indicator] X14. X15. X16. X17. Do more business with [brand name] in the next time. I will say positive things about [brand name] to other people. I said positive things about [brand name] to other people. I feel attached to the [brand name].

Assortment satisfaction [Formative Indicator] Satisfaction with . . . X18. X19. X20. X21. ... ... ... ... assortment depth in this product category. assortment in other product categories. assortment breadth in this product category. availability of products in this category.

Service satisfaction [Formative Indicator]

Appendix. Measures for study constructs

Supplier brand knowledge [Reective Indicator] X1. X2. X3. X4. When I need to buy products, I will think of [brand name] immediately. [brand name] is the most popular brand in this category. The image of [brand name] represents what I would like to be. When asked about brands in this sector, [brand name] will come to mind immediately.

Satisfaction with . . . X22. X23. X24. . . . the quality of service. . . . the reliability of service. . . . service availability.

Price satisfaction [Formative Indicator] Satisfaction with . . . X25. X26. X27. X28. . . . the price level. . . . the value received in this product category. . . .the value received from services. . . .the exibiliy of pricing.

Search cost [Reective Indicator] Prior to buying products in this product category, X5. X6. X7. . . . I comprehensively investigate product pricing. . . . I extensively search for the right wholesaler. . . . I make sure that I am fully informed about product quality. Satisfaction with store personnel [Formative Indicator] Wholesaler personell . . . X29. X30. X31. X32. X33. X34. X35. X36. ... ... ... ... ... ... ... ... is reliable. is competent. is available. is never to busy to attend to all of my questions. is trustworthy. is always friendly. is exible. resolves my complaints in a satisfactory manner.

Price verication Cost [Reective Indicator] After buying from this supplier, X8. X9. X10. . . . a price comparison with other wholesalers would not disappoint me. . . . I can rely on having paid a fair price. . . . I would consider the prices to be reasonable. 169

Relationship duration X37. How long have you been a customer of [brand name]?

The role of wholesale brands for buyer loyalty Peter Kenning, Stephan Grzeskowiak, Christian Brock and Martin Ahlert

Journal of Business & Industrial Marketing Volume 26 Number 3 2011 162 170

Corresponding author
Martin Ahlert can be contacted at: ahlert.martin@t-online.de

Executive summary and implications for managers and executives

This summary has been provided to allow managers and executives a rapid appreciation of the content of the article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benet of the material present. Consistency is often taken for granted in business, as in other walks of life. We expect the expected, not the unexpected, and we like to be able to rely on our knowledge and experience of what has gone before. Good reputations are built on consistency in other words delivering as good a product or service as was delivered before. But can a business buyer count on certainty and consistency from a wholesaler, especially when marketing channels are changing dramatically and the world economy becomes networked? One of the consequences of a networked marketing channel is an increase in complexity of product sourcing. Buyers who are likely to only have limited insight into a sellers sourcing decisions may be uncertain about the product and/or service quality delivered by the seller. This uncertainty stems from inherent product or service variability in a complex procurement process. That is the quality levels for different units of the same product or service may differ over time depending on which supplier was used to source the product. For risk-averse buyers uncertainty is likely to increase transaction costs which may, for example, arise from a buyers efforts to seek information about product quality prior to purchase, verifying product quality upon receipt, and managing quality discrepancies and handling disputes. In contrast to traditional buyer-seller relationships, uncertainty in complex supply networks is likely to persist beyond high levels of experience in the buyer-seller dyad. In particular, past transactions with the seller may only provide imperfect information about future transactions because the seller may only have limited control of its sourcing network. The consequences of enduring uncertainty in the marketing channel may be serious. In The role of wholesale brands for buyer loyalty: a transaction cost perspective Peter Kenning et al. say one mechanism that may reduce this uncertainty is a credible quality signal provided by the seller. There are developments in marketing channels which are likely to amplify the impact of wholesale brands on channel performance. First, due to geographical and cultural distances it may be difcult to gauge the reliability of foreign supply chain partners. Second, due to the increased number of potential suppliers, it becomes increasingly difcult to select the partner that provides the

best t. Third, reduced product life-cycle durations (e.g. automotive and telecommunication industry) lead to less time for selecting the right supply chain partners. Accordingly, there is a need to identify the right partners quickly. Fourth, due to increased product complexity, buyers need to rely on the information given by their wholesaler. This is why effective wholesaler signals are needed to counteract this uncertainty and maintain low levels of transaction costs in buyer-seller relationships. There is mounting evidence that brands as signals may ease uncertainty. The question arises why many wholesalers are still lacking sound branding strategies. Perhaps the relatively low level of complexity in the past did not prompt a need for a comprehensive branding strategy but this has changed dramatically within recent years. One fruitful avenue for building a strong wholesale brand would be to focus ex-post transaction costs, e.g. by providing excellent product quality of after sale services. Other instruments for building strong wholesaler brand knowledge may be the product itself, the assortment, the logistics, the product and service adaptation and customers advice Contrary to anticipated support for the view that the higher the wholesale brand knowledge the lower are the buyers search costs, this study found that an increase in the wholesaler brand knowledge increases a buyers search efforts. This needs to be viewed in the context of the buyers experience with the wholesaler. Consistent with prior research, it was found that increasing experience with the wholesaler reduces the buyers search costs. Consequently, the positive effect of wholesaler brand knowledge on the buyers search costs may be a result of increased switching barriers. A buyer who is used to buying from a wholesaler with high brand knowledge may incur higher search costs to nd a suitable alternative. It was also found that wholesaler brand knowledge reduces the buyers cost of verifying prices and quality. These costs are incurred ex-post. It appears that wholesale brand knowledge reduces a buyers uncertainty about exchange outcomes. Given that the wholesaler may save signicant relationship management costs (e.g. salesforce expenses) due to an effective wholesale brand, brand knowledge may present a means to redistribute exchange outcomes across the dyad and in favor of the buyer. A strong wholesale brand may therefore create a win-win scenario that ties wholesaler and buyer into quasi-relational exchanges. Here it is interesting how the transactional character of these exchanges mirrors the incentives of an ongoing exchange. Supplier brands can signicantly reduce buyer transaction costs in supply networks. This holds in particular true for efforts to verify pricing and product/service quality. (A precis of the article The role of wholesale brands for buyer loyalty: a transaction cost perspective. Supplied by Marketing Consultants for Emerald.)

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