Determinants of Customer Dependence and its Effects on Customer Trust in

Interpersonal based Buyer-Seller Relationships

Kareem Abdul Waheed

Assistant Professor of Marketing
Institute of Management Technology, Dubai
UAE
E-Mail: waheed@imtdubai.org

Sanjay S. Gaur
Associate Professor of Sales & Marketing
AUT Business School
Auckland University of Technology
New Zealand
E-Mail: sgaur@aut.ac.nz

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 Determinants of Customer Dependence and its Effects on Customer Trust in
Interpersonal based Buyer-Seller Relationships

Abstract

Traditionally, customer dependence is viewed as a structural constraint in relationship

outcomes. The effect of customer dependence on power, control and opportunistic behavior in
buyer-seller relationship context is well researched. This paper views customer dependence as a
positive relationship construct, identifies the determinants of customer dependence and explains
the effects of customer dependence on customer satisfaction and customer trust. The paper is
based on an empirical study carried out in farmer-chemical fertilizer retailer relationship - a
commonly found interpersonal based buyer-seller relationship in India.

Conceptualization

Many customers in developing country like India build and maintain personal
relationships directly with the small-scale retailers. Customer dependence, satisfaction, trust and
loyalty on retailer play an important role for building and maintaining such relationships
(Anderson and Narus, 1990; Morgan and Hunt, 1994; Andaleeb, 1995). There is considerable
research in retailing that focuses on customer’s satisfaction, trust and loyalty (e.g. Westbrook,
1981; Macintosh and Lockshin, 1997; Reynolds and Beaty, 1999). Customer dependence has
been studied in marketing channels and industrial buying literature (e.g. Andaleeb, 1995; 1996;
Lusch and Brown, 1996; Gassenheimer, et al., 1996; Gassenheimer, et al., 1998; Joshi and
Arnold, 1998) and not well in retailing. Retailing involves interpersonal based buyer-seller
relationships. To the best of our knowledge in the field, no study has researched customer
dependence in the interpersonal based buyer-seller relationships. In this paper, we have proposed
a model on determinants of customer dependence and its effects on customer trust in
interpersonal based buyer-seller relationships context.

We identified product familiarity and market uncertainty as two determinants of customer

dependence. First, if the customers’ knowledge is limited in understanding their own
requirements and how well the supplier’s product could be used, they have to depend on their
supplier to supply the products in accordance with their requirements. Second, if there is
perceived uncertainty about availability of alternative supplies and suppliers, it would act as an
exit barrier for the relationship with one supplier and would lead to a dependence based
relationship.

Further, we examined the effects of customer dependence on trust. We proposed two

types of positive effects on trust - one direct effect and the other indirect effect via satisfaction. A
widely prevailing argument suggests a hypothesis - increased levels of perceived customer
dependence on the supplier has a negative impact on customer trust, which was however not
empirically supported (Monczka et al., 2002; Handfield and Bechtel 2002). An interpersonal
trust development perspective of Lewicki and Bunker (1996) is adopted in this paper to support
the hypothesis – customer dependence on supplier leads to customer trust. Lewicki and Bunker
(1996) posit three stages of trust development in interpersonal relationships in professional
context: calculus-based trust, knowledge-based trust and identification-based trust. We equate

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customer dependence to calculus-based trust and hence it further leads to enhancement of trust.
We contend, even when the buyers are in dependent position, the extent and quality of
experience gained during the interactions could lead to positive effects on trust. Similarly,
majority of the studies that focus on TCA (transactional cost analysis) approach suggest direct or
indirect negative causal relationship between dependence and satisfaction (Gassenheimer, et al.,
1998; Andaleeb, 1996). By applying Lewicki and Bunker model, we contend, customer
dependence also leads to satisfaction. Many studies empirically proved the positive relationship
between satisfaction and trust (Batt and Rexha 1999; Kennedy et al. 2001).

Last, we proposed a negative moderating role of satisfaction on the relationship between

customer dependence and trust to reemphasize that satisfaction acts as a major contributor in
developing trust rather than dependence.

Method

A survey was carried out to empirically validate the model in farmer-chemical fertilizer
retailer relationship, which is an example of a typical interpersonal based buyer-seller
relationship in Indian context. Madurai, Pudukottai and Trichy districts of Tamil Nadu state were
selected for the study. One taluk having higher fertilizer consumption from each of the above
districts was selected. A taluk is the major revenue, administrative and planning unit in the
district. The total sample size for this study was 300 farmers. The questionnaire was first
translated to Tamil and then was translated back to English with the help of English and Tamil
language translators independently (Brislin, 1980; McGorry, 2000). The earlier version of the
English questionnaire was compared to the back-translated questionnaire and inconsistencies
were removed after consultation with the translators (Brislin, 1980; McGorry, 2000). All the
variables included in the study were measured using the scales available in the literature [product
familiarity - Oliver and Bearden (1985); market uncertainty - Batt (2000); customer dependence
- Batt (2000); customer satisfaction - Kennedy et al. (2001); customer trust - Holden (1990)].

All the measures were subjected to convergent validity and discriminant validity test
using AMOS. Hypotheses testing were carried out specifically for determinants of customer
dependence and its direct effect on trust by Confirmatory Factor Analysis using AMOS. The
indirect effect of customer dependence on trust via satisfaction and the moderation effect of
satisfaction hypotheses were tested by multiple regression analysis using SPSS.

Major Findings

There are well-documented researches suggesting the importance of customer

dependence for long-term buyer-seller relationships. But limited researches in marketing domain
have looked at the phenomenon of customer dependence in the market place. Our study
conceptualized and empirically tested the determinants of customer dependence and its effects on
customer trust. The customer perception of market uncertainty was empirically proven as an
important determinant for the customer dependence. Perceived product familiarity was also
found to reduce customer dependence on the seller.

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 Our main contention of the study that analyzes the effect of customer dependence on
customer trust was well supported. Basically, this result emphasized the applicability of
interpersonal trust development perspective in interpersonal based buyer-seller relationships. We
view the development of calculus-based trust as a process that leads to the customer dependence.
The possible subsequent interactions between the buyer and seller add to the knowledge of each
other and positive experiences, which could possibly lead to information symmetry between
them. Information symmetric situation between the buyer and seller evolves when the customer
has identification-based trust on the seller. Identification-based trust between the buyer and seller
leads to joint goals, cooperative behavior, collective decision-making and collective efforts.
Hence, this result negates the exaggerated negative consequences of customer dependence in
buyer-seller relationships.

Our other contention of the study, the customer dependence has positive impact on
customer satisfaction, did not get empirical support. We suggest this research question for further
probe. Finally, our last hypothesis is related to the negative moderating effect of customer
satisfaction on the positive relationship between customer dependence and customer trust was
also supported. This result again emphasizes the importance of customer satisfaction in creating
customer trust when compared to other variables.

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