Who Owns the Customer? Disentangling Customer Loyalty in Indirect Distribution Channels

Abstract

Increasing levels of vertical competition make the possession of end customers' loyalty an issue of major concern for brand manufacturers and distributors alike. While we can rely on a solid body of knowledge on the drivers and outcomes of customer loyalty, empirical insights into the interplay between different forms of customer loyalty in channels of distribution remain limited, ambiguous and void of theoretical explanations. Based on a nationwide survey of customers in a detail‐intensive industry in the Netherlands and drawing on information integration theory and balance theory, this research identifies a positive and unidirectional spillover effect from customers' brand loyalty to distributor loyalty. Hence, distributors can “free ride” on a brand manufacturer's investments in customer loyalty. From the brand manufacturer's perspective, the loyalty spillover can have positive or negative consequences, depending on the level of vertical competition among channel members. While the spillover increases end customers' loyalty toward the channel, it decreases the brand manufacturer's odds of keeping end customers when it comes to the contest between a brand manufacturer and its distributor.