Price or relational behaviours?

Abstract

Purpose The aim of this paper is to determine the relative importance of actual price and behavioural factors for the quality of the business relationship between German dairies and their milk suppliers. Design/methodology/approach The paper reports the results of field study involving 209 farmers in Lower Saxony and the northern section of North Rhine‐Westphalia regions in northwest Germany. These regions are the most important milk production centres in Germany. Findings The results indicate that, whereas behavioural factors, specifically relationship management practices and price satisfaction, have a positive influence on the quality of the business relationship between the farmers and the dairies, the actual price levels have no influence. Practical implications Actual prices paid to the farmers is not the most important factor which influences the quality of their relationship with the dairies but rather behavioural norms such as milk price satisfaction and relational norms. Dairies are advised to enhance price perception through price negotiations and transparency in order to facilitate quality relationship instead of through higher price payment alone. Originality/value This study is the first to integrate and compare the actual prices and behavioural variables to determine their relative importance and influence on relationship quality.

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