Benchmarking the Impact of Customer Share in Key-Supplier Relationships

A. Eggert, W. ULAGA, S. Hollmann

Journal of Business and Industrial Marketing

2009, vol. 24, n°3/4, pp.154-160

Departments: Marketing

Keywords: Relationship marketing, Buyer-seller relationships, Benchmarking

Purpose – Business marketers increasingly pursue greater shares of their customers' business. While the merits of such a strategy are straightforward from a supplier perspective, this paper aims to explore its consequences from the customer's point-of-view. Design/methodology/approach – Drawing on resource-dependence theory, value and dependence are established as fundamental characteristics of buyer-seller relationships. Data envelopment analysis is used as a benchmarking tool to integrate these characteristics into a common efficiency score indicating the customer-perceived attractiveness of a sourcing relationship. A post-DEA-regression-analysis explores the link between sourcing attractiveness and relative customer share. Findings – This research suggests a quadratic relationship between sourcing attractiveness and relative customer share. The perceived level of sourcing attractiveness improves until the local maximum is reached and declines beyond a relative customer share of 61.33 per cent. Research limitations/implications – Additional fraction of variability (R2) in sourcing attractiveness explained by customer share displays a modest, yet substantial, level. Studies on customer share in comparable contexts found similarly low levels. Practical implications – Sourcing attractiveness provides an interesting metric for assisting managers in their decision-making. Instead of comparing supplier relationships across the board, the proposed approach allows to compare relationships against their best-in-class benchmark. Findings suggest that the vast majority of supplier relationships still offers avenues for further improving the existing supply bases. Pushing the share of customer beyond its optimum level, however, will have negative consequences for the customer-perceived attractiveness of the sourcing relationship. Originality/value – The paper contributes to a better understanding of the consequences of customer share marketing from the customer's perspective.