The role of wholesale brands for buyer loyalty: a transaction cost perspective

Abstract

PurposeMarketing channels are changing dramatically as the world economy becomes networked. Buyers who are likely to only have limited insight into a wholesaler's sourcing decisions may be uncertain about product and/or service quality. This paper aims to show that a credible quality signal provided by the wholesaler, the wholesale brand, can effectively reduce buyer uncertainty.Design/methodology/approachUsing structural equation modelling methodology in the context of 569 buyers across 52 locations of a home improvement wholesaler the authors investigate the key mediating role of transaction costs for the effect of wholesale brand knowledge on buyer loyalty.FindingsThe results suggest that wholesaler brand knowledge effectively reduces ex‐post transaction costs incurred by the buyer. These lower quality control costs and price verification efforts increase buyer loyalty. Interestingly, however, the data show that this bonding effect of the wholesale brand may not affect buyer search costs.Research limitations/implicationsThe research on the role of supplier brands for supply network management is an early effort. Clearly more research is needed to fully explore the role of wholesale brand knowledge for wholesaler selection.Practical implicationsThe findings are important to marketing channel managers because they provide a viable alternative to ever‐increasing relationship marketing costs. They suggest that a close wholesaler‐retailer relationship may not be necessary to realize the benefits of a trusting exchange environment. In fact, they show that high wholesale brand knowledge may act as a substitute and reduce uncertainty effectively.Originality/valueThis paper is the first to introduce a transaction cost perspective on the relationship between wholesale brand knowledge and wholesale loyalty. It demonstrates how wholesale brand knowledge can reduce uncertainty in the wholesaler‐retailer dyad and substitute for more costly relationship building efforts.