Engaging suppliers in CRM: The role of justice in buyer–supplier relationships
Highlights
► We explore the role that suppliers play in CRM implementation. ► We empirically test a conceptual model of fairness linking CRM to upstream SRM. ► Suppliers use of customer data is influenced by distribution of rewards. ► Suppliers use of customer data is influenced by decision-making processes. ► Perceptions of fairness by suppliers influences engagement with customer CRM strategy.
Introduction
Customer Relationship Management (CRM) suggests that firms must not only develop a knowledge base, but also develop capabilities in knowledge management to allow modified responses to customers on a continual basis (Campbell, 2003, Garrido-Morreno and Padilla-Meléndez, 2011). Customer loyalty data is one such source of customer-specific insight, and if utilized, can result in increased competitiveness, improved customer satisfaction and retention (Leenheer & Bijmolt, 2007). Grocery retailers, in particular, collect and utilize customer loyalty card data to tailor product categories according to customer wants and needs. However, this requires the engagement of suppliers, whose knowledge of design and manufacturing should be utilized in order to facilitate superior value and competitive supply chain advantage (Barrett and Barrett, 2011, Tseng, 2009).
Notwithstanding this, little is known regarding the role suppliers play in the CRM implementation by retailers, and specifically the extent to which buyer–supplier relationships support or inhibit supplier engagement. In particular, there is a lack of empirical research (Chen & Huang, 2007) into the role of social interaction amongst individuals in intra-firm knowledge management, resulting in calls for research to utilize theoretical knowledge from other fields, such as psychology, in order to understand the behavioral aspects of supplier innovativeness within collaborative relationships (Schiele, Veldman, & Huttinger, 2011). The primary purpose of this paper, is therefore to empirically investigate how behavior by buying organizations, at both the individual and the organizational level, impacts upon the use of CRM data by suppliers within close, collaborative relationships. The main contribution of this research is the finding that suppliers are significantly influenced in their use of customer data by how fairly they perceive they have been treated by the retailer.
The paper begins by linking the literature on CRM and Supplier Relationship Management (SRM), and providing a conceptual framework using the theory of organizational justice to explain the relational linkages between buyers and suppliers, and the consequential behavior of suppliers in terms of use of loyalty card and other customer data. The paper then presents empirical evidence of the level of knowledge and engagement exhibited by suppliers of the CRM policies of Supermarket A, and the importance of SRM as a barrier or enabler to supplier engagement in the CRM process. Thereafter, a discussion of the contribution of this study to the field of CRM is presented in the concluding section of the paper.
Section snippets
Linking CRM and SRM
Supplier relationship management involves the management of upstream and downstream relationships to create enhanced value in the marketplace (Christopher, 1998, Rinehart et al., 2004). The importance of external linkages between downstream customers and upstream suppliers by retailers is highlighted by Barrett and Barrett (2011) who found that if business processes are integrated and managed effectively across the supply chain, retailers will accrue benefits such as improved responsiveness,
Theoretical framework
The theoretical framework for measuring the management of supplier relationships draws primarily from the work of Greenberg (1993) and Colquitt (2001) who propose that fairness can be conceptualized according to four distinct components: the fairness of outcome distributions (known as Distributive Justice), the fairness of the processes that led to such outcomes (known as Procedural Justice), the fairness of the interactions between individuals (known as Interpersonal Justice), and the fairness
Sample and data collection
Data was collected during the summer of 2011 via a survey of Supermarket A's suppliers participating in a series of regional supplier workshops conducted in England (York, Cambridge, Manchester), Scotland (Edinburgh), Wales (Cardiff) and Northern Ireland (Belfast). Senior members of staff from 250 suppliers attended (owner managers in the case of smaller suppliers, and marketing or account managers for the larger suppliers), representing artisanal manufacturers of niche speciality products with
Results
Given the relatively small sample size, the hypothesis was tested using multiple regression, as used in similar recent studies (Claro et al., 2003, Corsten and Kumar, 2005, Nevins and Money, 2008, Rokkan and Haugland, 2002). The regression model was estimated using the four components of justice identified in Figure 1. Table 2 illustrates that the model is significant in explaining some of the variance in supplier engagement in data essential to Supermarket A's CRM strategy. Although the
Discussion
It is widely recognized that Supermarket A has a strong, if not unassailable, lead in their knowledge of shopper behavior, through the insights that the loyalty card data provide. However, given that the buying teams do not have direct access to the loyalty card data, their CRM strategy is fundamentally dependent on the willingness and ability of suppliers to access and exploit the consumer insight that the data provides. The results of this study indicate that suppliers are more engaged with
Conclusions
With reference to the main objective of this study, it may be concluded that there is a relationship between how fairly suppliers feel they have been treated, and their willingness to engage with the implementation of their customers’ CRM strategy. While suppliers are recognized as an important source of innovation, they need to be motivated to invest in their customers’ requirement for new product and project developments. Suppliers will be more likely to invest in such activities if buying
Dr. Rachel Duffy is lecturer in Marketing, and a member of the Centre for Value Chain Research, Kent Business School at the University of Kent. Her research interests are on buyer supplier relationships along the supply chain.
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Dr. Rachel Duffy is lecturer in Marketing, and a member of the Centre for Value Chain Research, Kent Business School at the University of Kent. Her research interests are on buyer supplier relationships along the supply chain.
Prof. Andrew Fearne is professor of Food Marketing and Supply Chain Management and Director of the Centre for Value Chain Research, Kent Business School at the University of Kent, focusing on consumer behavior and the co-ordination of value chains, from field to fork. He is the founding editor of the International Journal of Supply Chain Management, author of over 100 articles and is the 14th Adelaide Thinker in Residence.
Dr. Sue Hornibrook is lecturer in Strategy, and Corporate Responsibility, and a member of the Centre for Value Chain Research, Kent Business School at the University of Kent. Her research interests are on buyer supplier relationships along the supply chain.
Dr. Karise Hutchinson* is Head of Business, Retail & Financial Service Department at the Ulster Business School, University of Ulster, Northern Ireland. Recent research has focused on customer relationship marketing, branding, rural retailing and retailer–supplier relationships. Her work has been presented at international conferences and published in the Journal of International Marketing, Journal of Marketing Management, the International Marketing Review, European Business Review, and the Journal of Small Enterprise and Development.
Dr. Andrea Reid is a lecturer in the Ulster Business School, University of Ulster, Northern Ireland. She holds a PhD from Queens University Belfast in Customer Relationship Management (CRM). Most recent research has focused on CRM Implementation in an SME context, Retailer–Supplier Relationships and Information Systems Integration in Local Government. She has extensive practitioner experience working as a CRM Consultant and Assistant Director of Policy in Local Government.