Choice of Supplier in Embedded Markets: Relationship and Marketing Program Effects

Abstract

Recent research has documented how exchanges between buyers and sellers are frequently embedded in social relationships. An unresolved question, however, is the extent to which such relationships protect incumbent suppliers from new competitors and their marketing programs. The authors develop a conceptual framework of how relationship and marketing variables influence choice of supplier and test the framework empirically in the context of business-to-business services. The results show that interpersonal relationships between buyers and suppliers serve as a switching barrier but are considerably less important than both firm-level switching costs and marketing variables. Moreover, unlike switching costs, interpersonal relationships do not play the frequently mentioned role of a buffer against price and product competition. Finally, the authors show that buyers and suppliers hold systematically different views of the determinants of switching.