Customer value determinants

By Jukka Hemilä (jukka.hemila@vtt.fi)

The ongoing “Determinants of value and vulnerability in customer-oriented service network” CUSTOR-project aims to identify customer value determinants and their vulnerabilities in a multi-actor service supply network. We expounded on this topic in our recent conference paper “Value Creation in Product–Service Supply Networks”.

Customer value propositions combine functional, economical, emotional, and symbolic customer value determinants (Rintamäki et al., 2007). Traditionally firms emphasized creating value through offering high quality product or services, and the value proposition was based on the features of product–service offerings, i.e. functional value. Product technical specification, capacity, performance, dimensions or other measurable determinants is this traditional way to argue value for the customers. Today functional value is still valid and cannot be forgotten, but it is in many cases no longer the competitive advantage.

Economic, emotional and symbolic value in B2B context

Economic value has been a hot topic since mass customization and is still so today in times of global economic crisis. Offering low prices is no longer the preferred means to attract new customers. In consumer business, there is always a need for both luxury and low-cost products and services. Also in the B2B context, customers are willing to pay more, if they can acquire a more valuable product or service. In that case, value is something other than economic value. More firms have begun competing against each other by building brand equity, but industrial brand equity is still quite a minor research topic (Leek and Christodoulides, 2012). Brand equity conveys a number of intangible benefits to buyers; it can increase both the buyer’s confidence in, and their satisfaction with, their purchase decision, and can also reduce the level of risk and uncertainty in the purchase decision (ibid). Emotional value is not only about the brand, it is also feelings, experiences, reputation, trust, etc. The B2B purchase process has been more rational than the B2C purchase process, and emotions and feelings have not been so relevant. Today, in high competitive markets, product and service measurable determinants can be quite similar, so buyers include emotional determinants in decision making. In the future, the importance of symbolic value will rise. Consumers prefer recyclable materials, organic food, human rights in production, and other symbolic values. Consumer brands are focusing on symbolic value creation. In a B2B context, symbolic values are becoming more important, and even now industries have focused on CO2 emissions and green technologies. It is clear that tangible elements are crucial in conveying value to buyers, but the role of emotional and symbolic value propositions is becoming more and more important in a B2B context (Rintamäki et al., 2007; Leek and Christodoulides, 2012).

CUSTOR research continues with a detailed case analysis, that is to say measurement and KPIs in value alignment, but also creating a management model for the value creation in product–service networks (picture).

custor focus

This posting is based on a published conference article:

Hemilä, Jukka; Vilko, Jyri; Kallionpää, Erika and Rantala, Jarkko (2014): Value Creation in Product–Service Supply Networks. The proceedings of the 19th International Symposium on Logistics (ISL2014): Designing Responsible and Innovative Global Supply Chains. Ho Chi Minh City, Vietnam, 6-9th July 2014

CUSTOR is financed by Tekes F€€lings –programme. Research partners are VTT, TUT and LUT. Six companies participate in CUSTOR project.

References

Leek S, Christodoulides G (2012), “A framework of brand value in B2B markets: The contributing role of functional and emotional components”, Industrial Marketing Management, Volume 41, Issue 1, January 2012, Pages 106–114.

Rintamäki T, Kuusela H, Mitronen L (2007), “Identifying competitive customer value propositions in retailing”, Managing Service Quality, Vol. 17 No 6, pp. 621–634.

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