Business customers' satisfaction: What happens when suppliers downsize?

Abstract

Organizational downsizing has become commonplace in today's competitive environments. Over the past 10 years in the U.S. alone over 10 million positions have been eliminated. Recently, questions related to the holistic benefits of downsizing have emerged. One of these questions suggests that downsized companies may find it more difficult to fully satisfy their customers; especially if there have been significant cuts in key contact personnel. In view of this question, the work presented here examines whether downsized suppliers, as compared to non-downsized suppliers, enjoy higher (or lower) levels of customer satisfaction and loyalty among their business customers. Based on a sample of 560 purchasing professionals, this study indicates that contrary to popular managerial schema ([Lewin, J. E. (2003). An empirical investigation of the effects of downsizing on buyer–seller relationships. Journal of Business Research, 56(4), 283–293]; [McKinley, W., Zhao, J., & Rust, K. (2000). A socio-cognitive interpretation of organizational downsizing. Academy of Management Review, 25(1), 227–243]), downsized suppliers do a significantly worse job in delivering quality and value to their business customers. As a result, their customers are less satisfied and less loyal.