Customer Perceived Value - Literature review Example

Perceived Value: Literature Review  There is a large and obviously growing literature about value and satisfaction and how this is integrated into business practice. This particular topic – customer perceived value – has taken on the status of mainstream research for marketing and business management. A number of the research and studies have specifically linked customer perceived value in the search for new approaches to develop and sustain superior competitive advantage by business organizations who want to survive and take advantage of the highly globalized trade presently. Theoretically, based on multi-attribute attitude theory, as explained by David Loudon and Albert Bitta (1993), customers were thought to associate value with the various attributes of a company’s product or service offering (p. 764). In general, these valued attributes are customer-preferred characteristics of the seller’s products and service offer. (Woodside 2003, p. 519) For instance, in the industrial customers’ world, these attributes might be factors such as a supplier’s product quality, product performance, competitive prices, on-time delivery, technical service quality, after-sales support, prestige, among others. One of the widely quoted references in regard to customer value is Valerie Zeithaml (1988) who has examined the subject in her study of the concepts of perceived price, perceived quality and perceived value. She found that customers generally think about value in four ways: that value is low price; value is whatever he or she wants in the product; value is the quality one gets for the price that he or she paid; and that value is what one gets for what he has given. (p. 14) Overall, Zeithaml reported that quality, price, (monetary and nonmonetary). Reputation and how the product or service makes one feel were dimensions related to perceived value. In addition, the Profit of Impact Marketing Strategies (PIMS) study conceptualized value as the relationship between quality and price, stressing that the ascertained competitive success can be obtained through perceived relative value of the total package of products and services that influence the customer’s behaviour. (Dowling 2006, p. 64) In recent years, the issues about value proposition, value creation, and value appropriation have undoubtedly taken center stage in the discussions in regard to strategy where the rational paradigm is challenged. The main driver for this development is that if business organizations engage in value management, they can gain competitive advantage, the type of advantage that is sustainable, and at the same time is difficult to be imitated and that it is essentially non-substitutable, making it all the more valuable and rare. This is what was pointed out by Hartel, Ashkanasy and Zerbe (2007) who wrote that competitive advantage is anchored in superior value driven from the company’s unique ability to configure and reconfigure its capabilities and assets to best address the customers’ needs. (p. 123) Another way in understanding perceived customer value is called the comparative approach or the trait approach. The objective of this model is to identify and measure the key traits (also termed as driver) that characterize customer value construct and focus on measuring the differences along a set of characteristics which collectively describe the customer value construct. (Parasuraman, Zeithaml & Berry1988, p. 13) Woodside explained that the main advantage of this approach is that it will provide insights into how products, services, and relationships affect customer perceived value; the measures associated with it will show, in detail, customer value drivers for each dimension. (p. 246) Specifically the perceived value here is considered as a dynamic construct consisting of four value types: acquisition value, transaction value, in-use value and redemption value. The definition of these four value types, as cited by Downing, are: acquisition value are the benefits received for the monetary price given; the transaction value as the pleasure the consumer receives for getting a good deal; in-use value is the utility derived from utilization of the product or service; and, redemption value is the residual benefit received at the time of trade-in or end of life for products or termination for services. (p. 64-65) We can see from the body of literature that there are a number of approaches for measuring consumer-perceived value via marketing research and the analysis of consumer bahaviour. These methods may range from simple quality management tools, like user surveys, perception mapping, benchmarking or quality function deployment. (Law, Hvannberg and Cockton 2008, p. 328) A lot of marketing professionals have already used this method as part of the strategy of value-adding in order to target a bigger market share. Robert Woodruff (1997) argued that if organizations are to be better, they need a superior set of tools of customer value. To quote: We’re witnessing a tremendous transformation in organizations. Driven by more demanding customers, global competition and slow growth economies and industries, many are on the journey searching for new ways to achieve and retain competitive advantage… there are no shortage of calls for organizations to reorient strategy towards superior customer value delivery… The issue does not seem to be whether an organization should compete on customer value delivery, but rather hot it should do it. (p. 139-140) This brings us to the area concerned with tapping the concept of customer perceived value in a company’s overall drive to gain market share. Obviously, a key task for organizations is to increase the value provided to the customer. Ronan McIvor discussed this extensively in his book entitled, The Outsourcing Process, wherein it was stressed that value can be increased in one of the following ways: Increasing the benefits – through adding something to the product that the customer perceives as important, beneficial and of unique value. Reducing the Sacrifice – This is concerned with examining how a company can add value to the offering by reducing the customer-perceived sacrifice. Reducing the sacrifice the customer has to undertake in order to purchase a product may involve reducing the price of the product or increasing the convenience of purchase. (p. 128) An important revelation on this review on the literature is that there is no consensus on a single term associated with value. The common denominator among the definitions of value is that it implies a trade-off for the customer between the get and the give dimensions. As a result, different and even conflicting approaches are developed and employed. Perhaps this area is an opportunity for further examination and research. Relationship Marketing: Literature Review Previously, marketing largely utilized the methods that seek to generate revenue-producing transactions between the customers and the producers of goods and services. Today, however, more and more firms are paying attention to all relationships that a business has, including those with suppliers, buyers and both lateral and internal relationships. Relationship marketing has numerous interpretations and explanations, all coming from different perspectives. Morgan and Hunt proposed the following formal definition of the relationship marketing: Relationship marketing refers to all marketing activities directed toward establishing, developing, and maintaining successful relational exchanges. (cited in Duncan, Swayne and Ginter 1998, p. 59) For example, according to Ralf Buckley, Catherine Pickering, David Bruce Weaver (2001), a focus on relationships between the managing agency and the public as primary stakeholders is a feasible and appropriate framework to guide data collection about the public and guide other aspects of marketing and policy development. (p. 29) A review of the existing literature in marketing shows that relationship marketing enjoys the support of marketing practitioners and that it is linked to today’s successful service firms. In this perspective, relationship marketing offers a broader focus and a longer-term view than the conventional marketing paradigm. Morgan and Hunt emphasized theoretical and empirical research on commitment and trust as the primary influence on successful relational marketing. This model set store on the significance of trust in marketing relationships because it does, indeed, increase functional conflict and cooperation, and that it increases relationship commitment. In order to prove their point, Morgan and Hunt conducted several investigations using in-depth interviews which informed the quantitative questionnaire used to test whether trust and commitment were simply two independent variables or whether they were central for having a positive relationship. Both trust and commitment, wrote Jacquie LEtang, Magda Pieczka (2006), were found to be mediating variables. (p. 69) a lot of authors agree on this based on the findings that where there is a high degree of trust present, parties are more likely to make a firm commitment to the relationship and invest appropriate resources to maintaining and developing it further. Relationship marketing is also called as one-to-one marketing, or customer-relationship management, which is aimed at increasing the value of a company’s customer base. Thorelli (1986) adopted a more contemporary view as he defined the concept as a part of developing network paradigm, which recognizes that global competition occurs increasingly between networks of firms and of people. Ralph Berndt (2000) distinguished relationship marketing from the traditional straightforward and operational mix approach. According to him there is a paradigm shift from the traditional 4 Ps (product, price, place, promotion) to his so-called 30 Rs (30 relationships), supposedly making relationship marketing the broader-focused model, one that has a longer-term view. (p. 209) While in the past companies tend to concentrate their efforts on the potential advantages of being first to market new and superior products, in relationship marketing, a true customer intimacy is the goal. It requires a deeper understanding of the context in which products and services are used in the course of the customers’ day-to-day lives. Of course, not all of the researchers agree that relationship marketing is a full-proof model. Blois offered a valuable insight: Much that is written about relationship marketing assumes that a relationship is desired by the customer. Yet unless an individual customer’s understanding of the advantages and disadvantages of a relationship are appreciated, the supplier may expend financial resource attempting to establish or maintain a relationship when the customer does not want one… there are likely to be certain aspects of a relationship which concern the customer more than others’ awareness and sensitivity needs to be developed. (p. 163) Stefan Wengler (2006), supported this by pointing out that relationship marketing is a relationship buying and relationship selling. He said: “Even though it has been previously found that companies are increasingly moving towards a relational understanding of transaction, it is unclear if relationship marketing is considered to be a one-sided approach by the supplier or if it implies a relational approach from the seller as well as from the buyer. Most relationship managers are not really aware of this problem.” (p. 17) To illustrate: A manager may often try to implement a relationship marketing model without any knowledge that some customers are thinking in terms of transaction marketing. What we have here is a case wherein the producer/seller is utilizing a relationship selling approach but that the customer does not practice relationship buying. This is unfortunate because, as Wengler stressed, “relationship marketing is only realized if relationship selling as well as relationship buying is performed by the supplier and the customer respectively.” (p. 18) All in all, the numerous accounts and points of view available, it seems like things boil down to one message: There are four fundamental constructs that are central for the development and maintenance of an organization’s relationship with its customers or stakeholder groups: trust, commitment, service quality, and customer satisfaction. It has been repeatedly stressed that that a customer relations program should integrate all of these four constructs in order to be successful. What the body of relationship marketing literature has not yet addressed was the global characteristics of the consumer. Majority of studies on the subject have focused on the domestic activities of the firms and that there were only few investigations of businesses across national boundaries eliminating the cultural variable that could very well affect the dynamics of the provider-buyer relationship. This also underscored the general problem of the literature as studies and research focus on benefits that the firm receives from developing relationships with customers. A comprehensive study employing a comprehensive approach that would examine both the benefits and the negatives of such relationships, particularly from the customer’s perspective has not yet been undertaken. References Dowling, R 2006, Cruise Ship Tourism: Issues, Impacts, Cases, Cabi Publishing. Hartel, C, Ashkanasy, N, Zerbe, W 2007, Functionality, Intentionality and Morality, Emerald Group Publishing. Law, E, Hvannberg, E and Cockton, G 2008, Maturing Usability: Quality in Software, Interaction and Value, Springer. Loudon, D and Bitta, A 1993, Consumer Behavior: Concepts and Applications, McGraw-Hill. McIvor, R 2005, The Outsourcing Process: Strategies for Evaluation and Management. Cambridge University Press. Parasuraman, A, Zeithaml, V, Berry, L 1988, "SERVQUAL: A Multiple-item scale for measuring consumer perceptions of Service Quality." Journal of Retailing 64(1), p. 12-40 Woodside, A 2003, Evaluating Marketing Actions and Outcomes. Emerald Group Publishing. Woodruff, R 1997, "Customer value: The next source for Competitive Advantage," Journal of the Academy of Marketing Science. Vol. 25: 2. p. 139-153 Zeithaml, V, Parasumaran, A and Berry, L 1988, "Communication and Control Processes in the Delivery of Service Quality" Journal of Marketing, 52. --------------------------------------- Berndt, R 2000, Innovatives Management. Springer. Blois KJ 1996, "Relationship Marketing in Organizational Markets - When is it Appropriate?” Journal of Strategic Marketing 4(3). p. 161-175. Buckley, R Pickering, C and Weaver, D 2001, Nature-based Tourism, Environment, and Land Management: Environment and Land Management. Cabi Publishing. Duncan, J Swayne, L and Ginter, P 1998, Handbook of Health Care Management, Blackwell Publishing. LEtang, J and Pieczka, M 2006, Public Relations: Critical Debates and Contemporary Practice. London: Routledge. Thorelli, HB 1986, Networks: Between Markets and Hierarchies. SMJ, 7, p. 37-51. Wengler, S 2006, Key Account Management in Business-to-business Markets an Assessment of Its Economic Value: A Transaction Cost Economics Analysis on the Efficiency of the Marketing Management Organization, SpringerLink/DUV. Read More