Retail buying is a particular form of industrial buying, one characterised by buying for the purposes of reselling to the ultimate customer, rather than for use. Retail buyers have a complex role. They are responsible for meeting the requirements of their target customers and they also have to manage relationships with suppliers in order to obtain the best terms and conditions.
Modern retailing is also characterised by a high degree of concentration and centralisation of the buying function. Buyers can operate autonomously or within a buying group. Those selling or marketing to commercial buyers need to understand the needs of the buyer in order to be effective. They need to understand the buyers' businesses and how to develop relationships with them.
A mediator in the development of a customer relationship is customer orientation. A customer orientation is a central factor in being market orientated, but despite the importance of customer and market orientation there has been little research into how well suppliers understand their customers in a commercial context.
In the research reported here retail buyers of textile products were personally interviewed with the aid of decision analysis software to identify the significance of criteria they use in a defined buying situation. The same methodology was repeated with suppliers to identify how well suppliers understood the decision making of buyers in their market. The decision-making process was modelled using a compensatory approach, assuming six decision criteria in a choice of sourcing options. These criteria were partly selected from a pilot conducted with eight retailers in the UK and partly from the literature review and in particular the works of Nilsson and Høst [Nilsson J, Høst V. Reseller assortment decision criteria. Aarhus: Aarhus University Press, 1987] and Weber et al. [Weber CA, Current JR, Benton WC. Vendor selection criteria and methods. Eur J Oper Res 1991;50(1):2–18].
The study found that while buyers were able to understand the relative importance of decision-making criteria adequately, they underestimated the importance of certain criteria. The results demonstrate the potential for judgmental modelling in the appraisal of customer orientation.
Businesses can adopt one of a number of orientations, the most relevant here being that of a market orientation. A market orientation has four components, one of which is a customer focus [1] and [2]. A market orientation has been correlated with profitability or other measures of corporate success [2], [3] and [4].
The quality of that orientation depends upon an organisation's ability to respond to information on markets [1] and [5]. The appointment of senior managers with customer-orientated values and beliefs [6] and appropriate signals from the CEO [7] are factors that can determine the degree of market orientation in a business. The various conceptual models of market orientation have been appraised in the specific context of international marketing and although whole extensions to such models have been proposed, the fundamentals of the concept are retained [8].
A focus on the needs of the customer is also evident from the literature on personal selling. Identifying buyer needs and adaptation to the customer are constructs in such work that mirror the notions in the market orientation literature [9] and [10]. Market-orientated companies need to learn about their customers and to continue to update that learning [11].
It follows from such thinking that gaps might exist between what a supplier believes a customer wants to buy and what is important to the customer in making that purchase. One measure therefore of customer orientation would be the size of such gaps.
The main aim of this research was to explore the value of using judgmental modelling in assessing customer orientation in a context of industrial supply and purchase. Judgmental modelling as employed here involves a number of assumptions, the first that buyer decision making is compensatory in nature. The second is that a finite number of criteria are used to assess a purchase decision (and that the relevant criteria are as specified). No attempt was made here to assess whether the six chosen criteria were a comprehensive list or whether items were mutually exclusive. During the interviews buyers commented that the process reflected their own decision making, or that the same criteria appeared in the assessments they made of their own suppliers. While no structured process can claim to be a true model of reality, the one used here appeared to have face validity with retail buyers. Two areas for improvement emerged from the interviews. First the number of criteria could have been extended or developed into a hierarchy. A hierarchy with subcriteria would have offered a richer format and enabled industrial buyers to qualify their opinions. Secondly, respondents would have preferred to be able to assess at least one more option in addition to the UK and Portugal as sources.
Overall the benefits of applying judgmental modelling to the issue of gaps in perception between suppliers and their customers is that it is possible to create a clear picture of the nature of such gaps. The qualitative data that is gathered during the interactive, interview process can be used to explain why the gaps exist and consequently to provide clues as to how to close such gaps.
Further work implied by this research is into any correlation between the size of perceptual gaps and total market orientation, the size of gaps and the relative market performance of suppliers and the reasons why gaps are larger or smaller in individual cases.
Doney and Cannon [45] refer to the importance of trust in buyer/supplier relationships and Weitz [10] suggests an alternative approach for effective sales interactions based on customer adaptation and control of the sales interaction rather than searching for simple, universal propositions. The literature emphasises the crucial importance of suppliers' adjusting to customer requirements and needs. Here needs are manifested as a set of criteria that buyers use when evaluating the relative merits of a potential supplier. These criteria reflect those that have been identified in the literature [14] and [23].
The results show the supplier sample holds different views of the relative importance of criteria and the relative weighting of perceived performance from that of their retail customers. In marketing to British retailers, Portuguese suppliers clearly do not understand their customers completely. Whether the differences in the views held are significant in terms of impact on long-term sales is unknown. However, it must be noted that the differences reported here are mainly averages. There will be individual suppliers whose perceptions are markedly different from the buyer norms. Such suppliers must realise that they may lack a customer orientation and that, as part of market orientation, this would damage their businesses.
There are specific practical implications from the study. There is a trend towards liberalisation of world trade, particularly in textiles, which in conjunction with the lower labour cost structures of the less developed countries and emerging economies is constituting a clear threat to the more established, traditional textile industries of countries such as Portugal, who are increasingly finding it difficult to maintain their share of what have been traditionally safe markets. The Portuguese textile/clothing sector finds itself in the undesirable situation of being forced into a middle of the road strategic position, where it is unable to compete on cost (increasing labour cost structures), whilst simultaneously not having the ability and the resources to project an image of product differentiation, flexibility and adaptability to changing conditions in the market. The Portuguese textile/clothing sector has not been able to create an image of high quality and brand awareness, which would in turn allow it to target the higher-priced spectrum of the market, as is the case with some Italian, German, French and Spanish suppliers.
When sourcing for a new textile or clothing product, UK retail buyers consider a number of attributes to be important. These appear to be more or less important, depending on the degree of control buyers have over them. Work quality and supplier reliability are the least controllable attributes, cost and responsiveness to requests are more susceptible to control by negotiation and innovative ability and good design ideas are seen as desirably under control of the retailer itself. Typically noncontrollable attributes had higher scores than controllable criteria.
Cost is subject to negotiation and responsiveness to requests can be facilitated by developing communications systems and enhancing buyer/seller relationships. There is also a trend in retailing towards a reduction in the supplier base and the enhancement of relationships with current suppliers. Reliability of delivery is mainly dependent on the supplier and this is particularly true in a new buy situation. As for work quality, retailers have felt the need to institute quality-control mechanisms at source. Buyers find it difficult to control these attributes and tend to score them higher than others. In terms of good design ideas and innovative ability, buyers tend to rely on their own personal experience, in-house design, and knowledge of the market, to accurately interpret design trends and fabric or process innovation.
Own-brand has increasingly come to dominate the British retail trade, particularly in the case of textiles and clothing, and the structure of the industry is characterised by a high degree of concentration and centralisation of the buying function. In this context suppliers aim to meet the parameters specified by the retail buyer. These can be product- or service-related, and they combine to establish the conditions for the relationship. Plank and Dempsey [9] and Weitz [10] emphasise the need for suppliers to clearly understand buyer requirements as a precondition for success in the relationship. They need to understand the buyers' businesses [46], and consequently develop relationships with them. Williams and Attaway [47] look at customer orientation as a mediator in a buyer–seller relationship. A customer orientation is a central factor in being market orientated. Doney and Cannon [46] point towards the notion of trust as an important factor and Weitz [10] links effectiveness in sales interactions, to the importance of adapting to the customer, establishing a base of influence, and controlling the interaction.
The current research therefore concludes that while the British and Portuguese respondents rated the relative importance of decision criteria similarly, the Portuguese exporters underestimated the relative scores particularly on the more salient criteria of their British customers. Clearly the Portuguese textile and clothing industry needs either to change British retail buyer perceptions of their abilities when compared with domestic suppliers or to change both perception and reality on a number of the more salient criteria.
