Member Commitment and Switching Decisions in Dairy Cooperatives – A Factorial Survey

Abstract

The membership base of dairy cooperatives has become increasingly unstable in the past decades. Understanding the factors influencing dairy farmers’ rescinding of such memberships is crucial for preventing supplier losses, which may threaten the cooperatives’ competitiveness. Since the dairy sector is characterised by substantial complexity and uncertainty, the broader context in which such decisions take place must be considered. To this end, a factorial survey experiment is developed. The experiment contains descriptions of realistic scenarios that have to be evaluated by the respondents in terms of the incentives to switch. The factors and processes described in the scenarios result from an extensive literature review and a qualitative pre-study with sector experts. Implemented by means of an online survey, the survey experiment was distributed by Northern German dairy cooperatives among their member suppliers. The obtained results provide evidence for the relevance of the prices paid by the cooperative, the current performance of the cooperative, as well as the importance of the farmer orientation of a dairy and the state of the relationship quality. Moreover, findings provide statistical evidence for the influence of other farmers’ switching decisions and neighbouring farmers delivering to a competitor.