An empirical analysis of the role of industrial brands for industrial distributors

Abstract

Purpose

Current research on industrial management strategy is mostly directed at industrial end customers. In doing so, current research overlooks one critical constituency – industrial retailers, i.e. companies selling products manufactured by industrial manufacturers to other companies using these products to create a finished product or service. Since the current literature states that retailers are mostly interested in category profit margins and profitability (regardless of specific brands), it is not clear whether industrial retailers value brands at all. The purpose of this paper is to determine the importance of industrial brands versus other purchase criteria for industrial distributors.

Design/methodology/approach

Three studies are conducted to examine the importance of brands vis‐à‐vis other purchase criteria for industrial retailers and end users. In a longitudinal study employing conjoint analysis the authors find that industrial brands have a larger impact on industrial retailer choice than product price or margin.

Findings

First, these results suggest that industrial brands are a strong purchase driver also for industrial retailers (and not just industrial end users). Second, industrial marketing managers are thus well advised to invest in brand building to positively impact industrial retailer choice, rather than reducing prices or increasing product margins as the prevailing literature suggests. In conclusion, these studies seem to suggest that retailers use brands not only as associative or predictive cues of product performance, but also as predictive indicator of a product's expected future profitability.

Research limitations/implications

From a theoretical point of view, the authors’ studies suggest that industrial brands not only transmit cues to prospective end‐customers, but also send cues to intermediaries – such as industrial retailers – which influences their decision‐making processes. The strong importance B2B retailers place on brands as key purchase factor is an indicator that retailers use brands not only as associative or predictive cues of product performance, but also as predictive indicator of a product's expected future profitability (i.e. profit margins and asset turnover), which positively affects retailers’ own profitability. The results of this study are also an indication that the relationship between industrial manufacturers and industrial retailers are probably driven more by considerations of cooperation than by considerations of conflict.

Practical implications

As a managerial implication, it is suggested that industrial marketing executives should invest in brand building to positively impact industrial retailer choice, rather than reducing prices or increasing product margins, as the prevailing literature suggests.

Originality/value

In this paper, three separate empirical studies are conducted to examine the role of brands in industrial management practice.

Citation

Hinterhuber, A. and Hinterhuber, G. (2012), "An empirical analysis of the role of industrial brands for industrial distributors", Journal of Strategy and Management, Vol. 5 No. 3, pp. 252-265. https://doi.org/10.1108/17554251211247562