Suppliers' willingness to end unprofitable customer relationships

Abstract

Purpose – The purpose of this article is to investigate the supplier's view on supplier‐initiated relationship dissolution due to lack of customer profitability. Design/methodology/approach – The research is focused on inter‐organisational buyer‐seller relationships. An exploratory study in the German mechanical engineering industry was conducted to provide insights into the usage of customer valuation techniques and the preponderance of unprofitable customer relationships, and to identify various ways of managing unprofitable customer relationships by means of cluster analysis. Findings – The study shows that many companies in the industry lack knowledge and use of customer valuation techniques. Three clusters of supplying firms are identified that differ in their willingness to end unprofitable customer relationships. Research limitations/implications – Provides an exploratory study into a neglected aspect of relationship marketing characterised by a low response rate. The sample contained companies from one major German industry, limiting the applicability of its findings. The main implications are that unprofitable customer relationships are a common feature of industrial markets, which merits further investigation. Respondents were shown to have a range of different views and approaches to such relationships. Research on customer valuation needs to focus on the implementation barriers of valuation methods. Practical implications – Study results stress the importance of developing and implementing customer valuation methods, the relevance of unprofitable relationships, and suppliers' decision making concerning such precarious relationships. It is a useful source of information and impartial advice for managers involved with customer management. Originality/value – The paper leads to a more thorough understanding of relationship marketing and provides empirical data on a neglected field of marketing research, as prior work did not consider the supplier's view on dissolution management in detail.