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

Purpose - Marketing 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 study is the first to show that a credible quality signal provided by the wholesaler, the wholesale brand, can effectively reduce buyer uncertainty. Methodology/approach - Using structural equation modelling methodology in the context of 569 buyers across 52 locations of a home improvement wholesaler we investigate the key mediating role of transaction costs for the effect of wholesale brand knowledge on buyer loyalty. Findings - Our results suggests 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, our data shows that this bonding effect of the wholesale brand may not affect buyer search costs. Research implications / limitations - Our 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 implications - Our findings are important to marketing channel managers because we provide a viable alternative to ever-increasing relationship marketing costs. We suggest that a close wholesaler-retailer relationship may not be necessary to realize the benefits of a trusting exchange environment. In fact, we show that high wholesale brand knowledge may act as a substitute and reduce uncertainty effectively. Originality/value - This paper is the first to introduce a transaction cost perspective on the relationship between wholesale brand knowledge and wholesale loyalty. We demonstrate how wholesale brand knowledge can reduce uncertainty in the wholesaler-retailer dyad and substitute for more costly relationship building efforts.