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A customer perspective on product eliminations: how the removal of products affects customers and business relationships

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Abstract

Regardless of the apparent need for product eliminations, many managers hesitate to act as they fear deleterious effects on customer satisfaction and loyalty. Other managers do carry out product eliminations, but often fail to consider the consequences for customers and business relationships. Given the relevance and problems of product eliminations, research on this topic in general and on the consequences for customers and business relationships in particular is surprisingly scarce. Therefore, this empirical study explores how and to what extent the elimination of a product negatively affects customers and business relationships. Results indicate that eliminating a product may result in severe economic and psychological costs to customers, thereby seriously decreasing customer satisfaction and loyalty. This paper also shows that these costs are not exogenous in nature. Instead, depending on the characteristics of the eliminated product these costs are found to be more or less strongly driven by a company’s behavior when implementing the elimination at the customer interface.

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Notes

  1. Although this theory has originally been developed to analyze interpersonal exchange relationships, its scope has subsequently been generalized (and thus extended) to exchange relationships between interacting parties, be it individuals or groups/organizations (e.g., Cropanzano and Mitchell 2005; Moorman et al. 1998). This is also, and especially, true for the marketing literature. For example, researchers have successfully applied the theory to study buyer-seller relationships in business markets (e.g., Dwyer et al. 1987), distributor firm and manufacturer firm working relationships (e.g., Anderson and Narus 1984, 1990), and interfirm adaption in relationships between a supplier firm and a customer firm (e.g., Hallen et al. 1991).

  2. Two case studies should illustrate our study’s understanding of a product elimination. First, a customer producing alternators was confronted with the elimination of a type of electronic device, as this product disproportionately raised the complexity of processes in various functional areas of the eliminating company. So far, the customer had repeatedly purchased this product in large amounts from the eliminating company (located in Mid-Europe) to use it as an essential component of products produced by sites in Mid-Europe. Although the customer had another supplier (located in North-America) for this product, this company had so far only supplied the customer’s sites in North- and Mid-America, as transporting the electronic devices to the sites in Mid-Europe would have been associated with prohibitively high costs. Second, a metal processing firm was no longer supplied with a certain type of steel, as this product became unprofitable for the eliminating company. The product, which had been exclusively purchased from this supplier, had served as the main raw material for manufacturing high-quality rivets and studs sold to customers from the machine building industry.

  3. We assessed non-response bias by two tests. First, when comparing the firms we initially addressed and the responding firms, we found no significant differences in size or industry. Second, following the approach of Mentzer et al. (2001), we contacted a random sample of 50 non-respondents by telephone and asked them to answer the questions that capture the key constructs of our model. A comparison of group means revealed no significant differences between non-respondents and respondents. Moreover, to test for a possible informant bias, we asked respondents whether another manager of their firm had significant knowledge about the product elimination in question. Of the 53 respondents who answered in the affirmative, 46 provided the name and contact information of this manager. We sent a shortened version of our questionnaire to these individuals and compared the responses of the primary and secondary informant of each firm. Results show that the responses of the secondary informant were similar to those of the primary informant, providing further confidence in using the primary responses.

  4. To determine whether the eliminated products in our sample were also important to the eliminating companies, we identified these firms on the basis of information given by customer respondents. Subsequently, we contacted these firms to ask whether the eliminated product represented an important part of their portfolio (on a seven-point scale with “unimportant part of portfolio” and “very important part of portfolio” as anchors). 38 firms provided this information. The resulting mean value of 3.91 indicated that the eliminated products in our sample were mostly of rather medium importance to the eliminating companies.

  5. Moreover, results indicate a number of statistically significant direct effects of product characteristics and other control variables on customer and relationship consequences of an elimination: We find that product importance increases a customer’s psychological and economic costs, whereas product-specific investments seem to have a positive effect on overall customer satisfaction and loyalty after the elimination. Further, product interrelatedness is found to enhance customer loyalty after the elimination. In addition, the availability of alternatives shows a negative effect on a customer’s economic costs as well as overall satisfaction and loyalty after the elimination. Finally, we found overall customer satisfaction before the elimination to positively influence overall customer satisfaction and loyalty after the elimination.

  6. The interesting finding that H9a–c is more strongly supported by the data than are H6a–c–H8a–c can be explained by the fact that the constructs related to H9a–c (implementation outcome and a customer’s economic costs of the elimination) show a closer relationship to product-related issues and thus to the moderator variables (characteristics of the eliminated product) than do the constructs related to H6a–c–H8a–c. Specifically, compared to the implementation process (the manner of the implementation), the implementation outcome is more closely related to product-related issues, as it includes, for example, the offer of alternative products and the stocking of replacement parts for the eliminated product. Similarly, compared to a customer’s psychological costs (doubts about the eliminating company), a customer’s economic costs are more closely related to product-related issues, as they include, for example, costs for searching and evaluating substitute products and opportunity costs owing to lost synergies with other products.

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Authors and Affiliations

  1. Chair of Marketing I, University of Mannheim, L 5,1, 68131, Mannheim, Germany

    Christian Homburg

  2. Chair of Marketing, University of Erlangen-Nürnberg, Lange Gasse 20, Nürnberg, 90403, Germany

    Andreas Fürst

  3. Deutsche Bank, Frankfurt, Germany

    Jana-Kristin Prigge

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  1. Christian Homburg
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  2. Andreas Fürst
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  3. Jana-Kristin Prigge
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Correspondence to Christian Homburg.

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Homburg, C., Fürst, A. & Prigge, JK. A customer perspective on product eliminations: how the removal of products affects customers and business relationships. J. of the Acad. Mark. Sci. 38, 531–549 (2010). https://doi.org/10.1007/s11747-009-0174-9

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