Lecture 8: Creating Customer Value

Question 1

why is customer value important? (general statements about business)

Answer 1

• business about creating value
• fundamental basis for all marketing activity”
• the cornerstone of business-to-business marketing

Question 2

why is customer value important? (more specific consequences of cv - 6)

Answer 2

1. Drives (electronic) word-of-mouth
2. Drives repurchase intentions
3. Main source of competitive advantage
4. Superior financial performance
5. Organizational success
6. Determines customer satisfaction & loyalty

Question 3

what is customer value

Answer 3

not much agreement

-exchange value or use value

Question 4

exchange value

Answer 4

• Market demand is
expressed through valuein-exchange (price)
• Function of use value
(utility)
• Arise in production process

• “power of purchasing other goods”
• reflected in market price,
  ie. objective conceptualization

Question 5

use value

Answer 5

• Subjective, individual perception of utility of a particular good or service
• Can vary over time, between individuals
• Arise in consumption process

“utility”
-contribution to someone’s goals
ie subjective conceptualization

Question 6

who initiated the study of value theory

Answer 6

aristotle

Question 7

describe what Adam Smith did with value

Answer 7

• wealth of nations

- also discusses two definitions of value

Question 8

describe Karl Marx’s understanding of value?

Answer 8

Every commodity has a two-fold aspect:

Value-in-exchange
• Realised in the process
of consumption
• Refers to the “actual worth” of a good (utility)

value-in-use
• Basis for value-ine xchange and thereby to all forms of societal wealth
• Realised in the process of production
• Refers to the “value” of a good (reflection)

Question 9

the industrial revolution focused on what type of value-in-exchange

Answer 9

• National wealth has traditionally been measured in terms value in-exchange
• Marketing emerged from the field of neoclassical economics
in early 20th century
• Marketing scholars focused on distribution and exchange or
manufactured goods
• Limited attention to value-in-use

Question 10

there has been renewed attention to value-in-use

Answer 10

• Value-in-use is “defined by and cocreated with the consumer rather than embedded in output”
(Vargo and Lusch 2004, p. 6).
• “Value-in-exchange might represent expected utility but it is not the actual utility; utility (value in-use) can only be realized by and in the context of the life of the customer”

Question 11

describe value-in-exchange: value as benefits/sacrifices

Answer 11

customer value = benefits/sacrifices

benefits:
• Product attributes
• Quality dimensions
• Relationships
• Time-to-market
• Know-how
• Social benefits

sacrifices:
• Monetary (costs, price)
• Non-monetary
(time, effort, etc)

• Customer value perceptions are viewed as resulting from an evaluation of the expected benefits and sacrifices associated with a product or service (e.g., Dodds and Monroe 1985; Graf and
Mass 2008; Zeithaml 1988).
• Cognitive trade-off, intuitive calculation, give-versus-get concept
• Evaluation are relative to the competition (Johnson et al., 2006: 123)
• Viewed as a unidimensional construct—a single overall latent construct measured by a self- reported item or set of items

Question 12

what is the fundamental assumption of value-in-exchange with value as benefits/sacrifices

what is a potential problem with this?

Answer 12

Customers behave
rationally to maximize the utility of their choices and always account for alternative
market offerings

Consumption experiences involve more than one aspect of value simultaneously and extend beyond cognitive evaluations

(Focus on economic and cognitive aspects of
customer value
• Too simplistic, arcane, and narrow)

Question 13

describe the multidimensional conceptualisations of value-in-exchange

Answer 13

• CPV characterized as a multidimensional construct comprising attributes or dimensions that captured consumers’ holistic or multifaceted value perceptions (e.g., Babin, Darden, and Griffin 1994; Sheth, Newman, and Gross 1991)
–>functional, conditional, social, emotional, epistemic value

• Pioneering approach: Theory of consumption values by Sheth, Newman, and Gross (1991)
• Consumer choice is a function of five independent customer value dimensions
• Most widespread approach: Typology of consumer value by Holbrook (1994, 1999)
• CPV “as an interactive relativistic preference experience”
• 8 value dimensions (but disagreement on how much)

Gen:
• Customer value is both the result of cognitive & affective processes
• Comprises rational and emotional/hedonic dimensions
• Multidimensional proposition has gained wider acceptance

Question 14

what are the four compments of value in use according to Vargo and Lusch?

Answer 14

1. Value-in-cultural-context
2. value-in-social-context
3. value in context
4. Value as experience

Question 15

Value-in-use is an __________ outcome, not a property of an output

Answer 15

experiential process

Question 16

describe value-in-use with regards to goals

Answer 16

all customer-perceived consequences arising from
a solution that facilitate or hinder achievement of the customer’s goals“ (Macdonald, et al. 2016)

• strong focus on goals – and not product attributes
• allows for goals to be met at any point in the customer journey (value does not only arise in independent product usage processes)
• Individual-level vs. collective-level goals (individual vs. collective value-in-use)
• goals can be directed towards multiple actors beyond the focal service provider
• goals are multidimensional, hence value that arises is also multidimensional

Question 17

describe how firm value creation focusses on value-in-exchange

Answer 17

• Traditionally, value creation processes were placed within the firm
• The firm creates value by processing resources into end-products
• Consumers passive recipients of value
• Several frameworks address value-in-exchange creation
• Porter’s competitive analysis framework
• Resource-based view
• Resource-advantage theory

Question 18

describe value cocreation and how it focuses on value-in-use

Answer 18

• According to S-D logic, value is cocreated, always involving the beneficiary (i.e., customer)
• While firm creates value-inexchange (potential value-inuse), it is the customer who
determines value-in-use during
the usage of an offering.
• Dual role for the customer as a co-creator:
• active contributor
• interpreter of use experiences

1. firm is primarily value facilitator
2. Value-in-use is always determined by customers either while interacting with firm and/or while using a product independently
3. From a customer’s perspective only value in-use is “real” value

Question 19

how can one capture value-in-exchange

Answer 19

Value as Benefits/Sacrifices
• a single overall latent
construct measured by a selfreported item or set of items

Value as multidimensional outcome

• functional value: quality, well-made, performs consistently
• emotional value: would enjoy, would make me want to use, would feel good, relaxed, etc
• economic value: reasonably priced, offers value for money, is good product for price, would be commercial
• social value: help me to feel acceptable, would improve the way I’m perceived, would make a good impression on other people, would give its owner social approval

Question 20

how could a firm capture value-in-use?

Answer 20

qualitative

• interviews and focus groups
• ethnography
• critical incident technique
• repertory grid technique

quantitative

• scales
• machine learning/AI