Linking price satisfaction and
business performance in
Malaysia’s dairy industry
Bonaventure Boniface
School of Agriculture, Food and Wine, University of Adelaide,
Glen Osmond, Australia
Amos Gyau
World Agroforestry Centre (ICRAF-CGIAR), Yaounde
´
, Cameroon, and
Randy Stringer
School of Agriculture, Food and Wine, University of Adelaide,
Glen Osmond, Australia
Abstract
Purpose – Price satisfaction is an influential factor in competitive performance and business success.
Strong price satisfaction enhances and sustains high quality business relationships, leading to
improved profits for chain participants. The purpose of this paper is to explore the dimensions of price
satisfaction in the context of the Malaysian dairy industry. The aim is to determine which dimensions
of price satisfaction affect relationship performance between Malaysian dairy producers and the dairy
processers who purchase their milk.
Design/methodology/approach – In total, eight hypotheses are tested using partial least square
methods on survey results from 133 dairy producers in Malaysia.
Findings – The study results suggest that relative price, price-quality ratio and price fairness
influence producers’ loyalty and improved business relationship performance.
Practical implications – To achieve long-term, sustainable business relationships involving consistent
high quality supplies, milk buyers need to understand and capture the price satisfaction dimensions.
Originality/value – The paper provides insights into the important linkages between price
satisfaction and business performance in an agriculture industry.
Keywords Malaysia, Agriculture, Milk, Prices, Business-to-business marketing, Price satisfaction,
Business performance, Dairy industry
Paper type Research paper
Introduction
Much of the relationship marketing research focusing on agricultural industries
emphasize the benefits of long term, sustainable business relationships between
exchange partners (Batt, 2003; Lu et al., 2008; Reynolds et al., 2009). This research reveals
that long term relationships stimulate firm and chain benefits, including improved
partner commitment (Gyau and Spiller, 2008), information sharing (Batt, 2003) and
collaborative innovation (Soosay et al., 2008). Overtime, stronger relationships can
lead to lower transaction costs (Williamson, 1979), reduced market uncertainties (Heidi
and Stump, 1995) and improved business performance (O’Toole and Donaldson, 2000).
Batt (2004) argues that while a long term business relationship may reduce some market
uncertainties, it may not be enough to provide price certainty. As a result, suppliers may
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1355-5855.htm
APJML
24,2
288
Received 10 August 2010
Revised 1 September 2011,
1 November 2011
Accepted 22 November 2011
Asia Pacific Journal of Marketing and
Logistics
Vol. 24 No. 2, 2012
pp. 288-304
q Emerald Group Publishing Limited
1355-5855
DOI 10.1108/13555851211218066