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  • Forthcoming
  • Article
  • Journal of Marketing Research (JMR)

A Structural Model of Organizational Buying: Innovation Adoption under Share of Wallet Price Contracts

By: Navid Mojir and K. Sudhir
  • Format:Print
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Abstract

The paper develops the first structural model of organizational buying to study innovation diffusion in a B2B market. Our model is particularly applicable for routinized exchange relationships, whereby centralized buyers periodically evaluate and choose contracts, then downstream users order items on contracted terms. The model captures different utility tradeoffs for users and buyers while accounting for how buyer and user choices interact to impact user adoption/usage and buyer contracting. Further, the paper considers the dynamics induced by share of wallet (SOW) pricing contracts, commonly used in B2B markets to reward customer loyalty with discounts for buying more than a threshold share from a supplier. We assemble novel panel data on surgeon usage, SOW contracts, contract switching, and hospital characteristics. We find two segments of hospitals in terms of the relative power of surgeons and buyers: a buyer-centric and a surgeon-centric segment. Further, innovations diffuse faster in teaching hospitals and when surgeries are concentrated among a few surgeons. Finally, we answer such questions as: Should the marketer focus on push (buyer-focused) or pull (user-focused) strategies? Do SOW contracts hurt the innovations of smaller firms? Surprisingly, we find that the contracts can help speed the diffusion of major innovations from smaller players.

Keywords

Organizational Buying Behavior; Healthcare Marketing; B2B Markets; B2B Innovation; New Product Diffusion; New Product Adoption; Organizations; Acquisition; Behavior; Health Care and Treatment; Marketing; Innovation and Invention

Citation

Mojir, Navid, and K. Sudhir. "A Structural Model of Organizational Buying: Innovation Adoption under Share of Wallet Price Contracts." Journal of Marketing Research (JMR) (forthcoming).

About The Author

Navid Mojir

Marketing
→More Publications

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