If you have never thought that your business behaviors create waves, then think twice: they may have a much more far-reaching impact than you’d ever have imagined. Richard McFarland, Prof. of Marketing at ESSEC Business School, shares his research into a novel concept he coins “supply chain contagion”.
Imagine the scene. Two people: one a seller, one a buyer. The scene could take place at a wholesaler’s, a service provider’s meeting room, or even a store. The seller begins to stand closer. The disarming welcoming smile disappears and a small but perceptible shine of “in for the kill” comes to his eyes. No wonder then that the buyer suddenly begins to feel like prey. The seller steps up the rhythm, rolling out sales arguments that give the buyer no time to respond, his voice becoming louder, pushier. Intimidated, it dawns on the buyer that it was all a mistake to call for a meeting. And that, even if he gives in and waves the wallet, he’ll never come back again in the future.
No doubt, we’ve all been in this situation. Whether negotiating with a supplier, acting as a distributer for retailers, or even on a non-professional level when shopping at the weekend. The experience leaves a sour taste in our mouths and a conviction that it’s the last the seller will ever see of us. And we move on.
Two’s company, three is a social network
But what if a third-party entered the relationship? Or even a fourth. Strange, no? For we always tend to think that the relationship in the selling-buying scenario is a one-to-one game. To return once again to the seller, let’s imagine that person, or indeed that company, as part of a chain. In that chain we may have the supplier of raw materials, the maker of the parts, the product manufacturer, the distributer, the wholesaler and the retailer – not to mention the final end-user. As such, this chain represents an eco-system of players which is analogous to a social network, each having social interactions, behaviors and relationships along the line of supply. These interactions matter.
Breaking away from traditional research work that tends to be based on company-to-company relationships between two players, ESSEC’s Richard McFarland decided to go further. Together with James M. Bloodgood and Janice Payan, McFarland conducted twenty-three in-depth field interviews with dealers and wholesalers from fourteen industries in different regions of the United States, as well as collecting survey data from territory managers for a major agricultural equipment producer, over 300 of their dealerships, and hundreds of those dealerships’ customers. The aim was to gather data from both upstream and downstream interactions along the whole supply chain and study to what extent positive business relationships occur as a result of the imitation of good behaviors, and the knock-on effect of propagating these behaviors among the relationships each player then comes into contact with.
On a butterfly’s wings
The results were conclusive: intermediaries (the dealerships) treated end-customers to a great extent by imitating how they were treated themselves by their supplier’s territory managers. If the experience was positive and the relationship fruitful, then the benefits of this relationship were passed on throughout the supply chain. If the experience was negative, then this impact was also relayed, giving rise to a possible breakdown in business.
What McFarland calls “contagion” can therefore have both positive and negative implications. Moreover, studies revealed that it may occur inadvertently or both with or without the knowledge of the involved party. For example, manufacturers and suppliers may unwittingly be influencing the downstream behaviors of organizations that handle and market their products in ways that are detrimental to achieving their goals.
What does this mean for businesses? Perhaps a new golden rule can be offered: “Treat your business partners as you would like them to treat their customers”. As organizations look increasingly for ways to improve the creation, production, distribution, and marketing of products, it points to the importance of understanding what factors trigger positive relationships, and attempting to build accordingly beneficial environments and behaviors to reach them.
Studies reveal several keys to understanding the phenomenon of contagion. Firstly, that supply chain members’ behavior towards another firm in the chain is in part shaped by their own company values and behaviors. If, for example, corporate values include respect and integrity within the organization, then it is likely that these values will manifest themselves when dealing with those outside the company. Similarly, people and companies – much like children – look to others for models of behavior, especially so in times of uncertainty about what to do and how to do it. In terms of the supply chain, Richard McFarland’s research demonstrated that when environmental uncertainty is present, dealers are more likely to imitate a manufacturer’s use of influence strategies with other parties.
A concrete example can be seen in the researchers’ interviews with a liquor manufacturer which used a soft influence strategy when dealing with a downstream distributor. It highlighted the value of its product as having an exclusive image (which would presumably provide the distributor with a positive way to distinguish itself from competitors). The result was that, in turn, the distributor used this same “exclusive image” argument when dealing with its customers, even when some customers did not view this exclusivity as particularly valuable and, in some cases, even when customers considered it undesirable (e.g., consumers who want to fit in rather than be different).
It is also the interpersonal relationship that counts. Similarity between professionals – be it through background, sector, product, or shared values – and the frequency of contact between them over time, help to foster rapport and build trust. Once trust is installed, this leads to a matching and mirroring of behaviors and a form of dependency between the players that may then be relayed to other people and organizations in the chain.
Awareness leads to action
Let’s return to the example of the aggressive seller cited at the beginning of this article. So are pushy sales tactics contagious? The answer is that they could be – if so, with probable disastrous results in terms of both lost business and image. But imagine that the seller becomes aware of the phenomenon of supply chain contagion. Suddenly, he stops pestering the buyer and searches for a new approach that he hopes will reassure the latter and lead to constructive discussion about the sale. His mind turns to his colleagues and how they positively treat prospects. He also remembers the five rules of conduct his firm has developed when interfacing with clients. And more than that – when he opens his mouth again to speak, he discovers that the buyer and he both went to the same college, have a shared belief in the importance of product quality, and that even if a sale isn’t made right now, it would be great to meet again and discuss the issue over coffee. Contagion has taken place. Positively.
Transferred to the supply chain environment, it is awareness of the supply chain phenomenon for those managers and employees who interact with other companies that will make them better armed. Not only to strategically influence their partners, but also to defend themselves against their own unintended imitation of other organizations within their supply chain.
- View Richard McFarland's full research paper
- View a list of R. McFarland's research and publications
- Visit the ESSEC Marketing Department website
- Richard McFarland, winner of the 2016 Stern Award