INTERNATIONAL BUSINESS & SUPPLY CHAIN MARKETING – ARTICLES SUMMARY–
Week 1
Article: Customer Value and Value propositions – fundamentals: business-to-business value
propositions based on the value for customers (Thomassen, 2020)
Customer value = the value as perceived by customers.
- Customers choose for a product, service, or supplier because they believe that they
get a better value than they could expect from an alternative.
PART 1: UNDERSTANDING VALUE
Customer value:
(1) A trade-off between benefits and sacrifices
- CV is dominantly conceptualised as the customers’ perceived trade-off and difference
between what they get and what they have to sacrifice for it.
(2) Benefits and sacrifices are multi-facetted
- CV is a multi-dimensional rather than a single, all-encompassing concept.
- Depending on the CV concept used, the attributes of both the benefits and sacrifices
differ.
1) Sometimes the benefits include perceived quality, while sometimes it includes
additional service or product performance/design.
2) Sometimes the sacrifices include monetary costs, another time it might include
time costs.
(3) It is a subjective concept
- CV is something perceived by customers rather than objectively determined by a
supplier.
- CV can be extended into three different concepts:
1) Customer desired value: what customers want to have happened when
interacting with a supplier and/or using the supplier’s product or service.
2) Customer expected value: what customers expect to happen when interacting
with a supplier and/or using the supplier’s product or service.
3) Customer perceived value: judgments or assessments of what a customer
perceives he has received from a supplier in a specific purchase or use situation.
(4) Value perceptions are relative to alternatives/competition
- Customers buy from those companies that they perceive as offering the best value,
so they compare products, services or suppliers to known alternatives.
- When comparing the market offering with the next best alternative, the attributes of
benefits and sacrifices can be divided in points of parity, difference and contention.
,Customer value segments
Three segments can be determined in terms of customer value:
1) Intrinsic value customers = they focus on the cost elements of value.
- They see the product/service as a product that does not differentiate from
competition and is thus substitutable by competitive offerings.
2) Extrinsic value customers = interested in solutions and applications.
- They put a premium on advice and service.
- Focus less on price, and the value of using the product is core.
3) Strategic value customers = want to leverage the suppliers’ core competencies for
their own businesses.
- They are focused on the relationship and are prepared to make radical changes in
their organisations/strategies to get the most value from the relationship with the
supplier as a partner.
→ Main differences:
- Extrinsic value customers: buying beyond product value and (+) increase benefits.
- Intrinsic value customers: buying on price and product value alone and (-) reduce
costs.
- Strategic value customers: leveraging suppliers’ enterprise competencies and (++)
increase benefits.
Transaction- vs relation-oriented purchasing behaviour:
Customer value can be divided into three customer value concepts:
1) Value-in-Exchange = quality of the product or service compared with the price.
- Focus on value at the moment of the purchase (exchange).
, - Value is quality minus price.
- Value is only created by the
supplier; the customer has no role
in it.
- Quality is product and customer
service.
Three-tier value positioning map for value-
in-exchange
1) Economy brands =
products/services with a low price
and a low perceived product
quality (budget products and
services)
2) Mid-market = products/services
with a perceived medium price and
product quality.
3) Premium brands =
products/services with a high price
and perceived product quality.
2) Value-in-Use = functional benefits of use compared with the price and other
sacrifices of using the product.
- Focus on the value of a product/service when using it (so, not when buying it).
To explain the difference between the Value-in-Use and Value-in-Exchange, the Customer
Value Hierarchy Model can be used.
- Value in exchange: bottom of the hierarchy.
- Also, value in exchange focuses on acquisition price while value-in-use uses total cost
of ownership (= sum of purchase price plus all expenses incurred during the
productive lifetime of a product/service minus its salvage/resale price).
, 3) Value-in-Relationship = functional, emotional and social benefits of the relationship
compared with the functional, emotional and social sacrifices of this relationship.
- Focus is extended to psychological value of the relationship.
Two fundamental differences with Value-in-Use
1) Complete business relationship: Value consists of the complete business relationship
in which multiple products and services are purchased and multiple buying episodes
occur.
2) Company and employee level: Value is perceived by both the company and the
individual employees working in the companies’ buying/usage centre (also, individual
emotional and social benefits and sacrifices have an influence on buying behaviour).
3) With some purchases, considerations such as whether a product can enhance the
buyer’s reputation or reduce anxiety play a large role.
Humans do not only use functional, but also emotional and social attributes to evaluate the
value of an offering. The combination of these attributes explains customers’ behaviour.
1) Functional
- Functional value: the utility derived from quality, a perceived reduction in short- and
long-term costs, and the expected performance of service offers and processes for
business client firms.
- Functional benefits: benefits that derive from a given service being able to perform
its functional, utilitarian, or practical purposes
2) Emotional
- Emotional value: the utility derived from the feelings or affective states that the
service offers, and the process generated for the decision makers/buying-centre
participants of the business client firm.
- Emotional benefits: benefits that appeal to the human senses and evoke emotions.
3) Social
- Social value: the utility derived from the acceptance, positive impression and social
approval of the business client firm and its products/ services that the service offer
and process generated. Social approval encompasses the approval of different
stakeholders (e.g. owners, clients, industry partners).
- Social benefits: benefits that resonate with or support a customer’s actual or desired
self-image and their membership in, or desire to belong to, specific groups.
Macdonald et al. (2016) showed that Customer Value consists of a mix of collective
(company) and individual (members of usage centre) attributes.
Collective attributes
A) Improved operational performance
(1) Avoiding downtime: minimising non-productive time in the firm’s operations
(2) Fast problem solving: rapid resolution of operational difficulties
(3) Low costs: low operational costs from low purchase prices or other operational
savings
Week 1
Article: Customer Value and Value propositions – fundamentals: business-to-business value
propositions based on the value for customers (Thomassen, 2020)
Customer value = the value as perceived by customers.
- Customers choose for a product, service, or supplier because they believe that they
get a better value than they could expect from an alternative.
PART 1: UNDERSTANDING VALUE
Customer value:
(1) A trade-off between benefits and sacrifices
- CV is dominantly conceptualised as the customers’ perceived trade-off and difference
between what they get and what they have to sacrifice for it.
(2) Benefits and sacrifices are multi-facetted
- CV is a multi-dimensional rather than a single, all-encompassing concept.
- Depending on the CV concept used, the attributes of both the benefits and sacrifices
differ.
1) Sometimes the benefits include perceived quality, while sometimes it includes
additional service or product performance/design.
2) Sometimes the sacrifices include monetary costs, another time it might include
time costs.
(3) It is a subjective concept
- CV is something perceived by customers rather than objectively determined by a
supplier.
- CV can be extended into three different concepts:
1) Customer desired value: what customers want to have happened when
interacting with a supplier and/or using the supplier’s product or service.
2) Customer expected value: what customers expect to happen when interacting
with a supplier and/or using the supplier’s product or service.
3) Customer perceived value: judgments or assessments of what a customer
perceives he has received from a supplier in a specific purchase or use situation.
(4) Value perceptions are relative to alternatives/competition
- Customers buy from those companies that they perceive as offering the best value,
so they compare products, services or suppliers to known alternatives.
- When comparing the market offering with the next best alternative, the attributes of
benefits and sacrifices can be divided in points of parity, difference and contention.
,Customer value segments
Three segments can be determined in terms of customer value:
1) Intrinsic value customers = they focus on the cost elements of value.
- They see the product/service as a product that does not differentiate from
competition and is thus substitutable by competitive offerings.
2) Extrinsic value customers = interested in solutions and applications.
- They put a premium on advice and service.
- Focus less on price, and the value of using the product is core.
3) Strategic value customers = want to leverage the suppliers’ core competencies for
their own businesses.
- They are focused on the relationship and are prepared to make radical changes in
their organisations/strategies to get the most value from the relationship with the
supplier as a partner.
→ Main differences:
- Extrinsic value customers: buying beyond product value and (+) increase benefits.
- Intrinsic value customers: buying on price and product value alone and (-) reduce
costs.
- Strategic value customers: leveraging suppliers’ enterprise competencies and (++)
increase benefits.
Transaction- vs relation-oriented purchasing behaviour:
Customer value can be divided into three customer value concepts:
1) Value-in-Exchange = quality of the product or service compared with the price.
- Focus on value at the moment of the purchase (exchange).
, - Value is quality minus price.
- Value is only created by the
supplier; the customer has no role
in it.
- Quality is product and customer
service.
Three-tier value positioning map for value-
in-exchange
1) Economy brands =
products/services with a low price
and a low perceived product
quality (budget products and
services)
2) Mid-market = products/services
with a perceived medium price and
product quality.
3) Premium brands =
products/services with a high price
and perceived product quality.
2) Value-in-Use = functional benefits of use compared with the price and other
sacrifices of using the product.
- Focus on the value of a product/service when using it (so, not when buying it).
To explain the difference between the Value-in-Use and Value-in-Exchange, the Customer
Value Hierarchy Model can be used.
- Value in exchange: bottom of the hierarchy.
- Also, value in exchange focuses on acquisition price while value-in-use uses total cost
of ownership (= sum of purchase price plus all expenses incurred during the
productive lifetime of a product/service minus its salvage/resale price).
, 3) Value-in-Relationship = functional, emotional and social benefits of the relationship
compared with the functional, emotional and social sacrifices of this relationship.
- Focus is extended to psychological value of the relationship.
Two fundamental differences with Value-in-Use
1) Complete business relationship: Value consists of the complete business relationship
in which multiple products and services are purchased and multiple buying episodes
occur.
2) Company and employee level: Value is perceived by both the company and the
individual employees working in the companies’ buying/usage centre (also, individual
emotional and social benefits and sacrifices have an influence on buying behaviour).
3) With some purchases, considerations such as whether a product can enhance the
buyer’s reputation or reduce anxiety play a large role.
Humans do not only use functional, but also emotional and social attributes to evaluate the
value of an offering. The combination of these attributes explains customers’ behaviour.
1) Functional
- Functional value: the utility derived from quality, a perceived reduction in short- and
long-term costs, and the expected performance of service offers and processes for
business client firms.
- Functional benefits: benefits that derive from a given service being able to perform
its functional, utilitarian, or practical purposes
2) Emotional
- Emotional value: the utility derived from the feelings or affective states that the
service offers, and the process generated for the decision makers/buying-centre
participants of the business client firm.
- Emotional benefits: benefits that appeal to the human senses and evoke emotions.
3) Social
- Social value: the utility derived from the acceptance, positive impression and social
approval of the business client firm and its products/ services that the service offer
and process generated. Social approval encompasses the approval of different
stakeholders (e.g. owners, clients, industry partners).
- Social benefits: benefits that resonate with or support a customer’s actual or desired
self-image and their membership in, or desire to belong to, specific groups.
Macdonald et al. (2016) showed that Customer Value consists of a mix of collective
(company) and individual (members of usage centre) attributes.
Collective attributes
A) Improved operational performance
(1) Avoiding downtime: minimising non-productive time in the firm’s operations
(2) Fast problem solving: rapid resolution of operational difficulties
(3) Low costs: low operational costs from low purchase prices or other operational
savings
