EXPRESS: Customer-Centric Contract Changes

Customers would frequently benefit from changes to an existing purchase contract with a supplier (e.g., due to a wrong order). Salespeople can voluntarily make such a change, which we label a “customer-centric contract change.” Formally, we define a customer-centric contract change as an act of a salesperson of amending the purchase contract in the customer’s favor without a legal obligation to do so. Since literature has neglected this prevalent and important phenomenon, we draw on social exchange theory to study the impact of such contract changes on relationship performance. Toward this end, we leverage panel data on over 57,000 customers, four experiments, and a survey study. Results suggest customer-centric contract changes increase relationship performance because customers are grateful for a salesperson’s relinquishing of power. Interestingly, this effect is less pronounced in close exchange relationships where a norm of solidarity between customers and salespeople exists. These findings add to emergent work that finds that business partners in close exchange relationships expect each other and are willing to forgo power advantages to alleviate each other’s hardships; we integrate these findings into what we coin “power-solidarity theory.” For practitioners, the findings offer guidance on whether and how to approve contract change requests.