Purchasing Higher-Value,Higher-Price Offerings in Business Markets

Purpose: A conceptual framework is proposed and tested to better understand customers' purchase of higher-value, higher-price offerings in business markets. Ambiguity about superior value and consequences of obtaining superior value are the constructs in this framework. Ambiguity about superior value is meant to capture the concern and doubt that managers at customer firms have about whether their business will actually realize the cost savings or ability to earn incremental revenue and profits that suppliers claim for their offerings. Consequences of obtaining superior value refers to the outcomes that a customer manager anticipates or experiences in making a purchase decision for higher-value, higher-price offerings.

Methodology: Two operationalizations of each construct are studied in a pair of experiments with purchasing managers and plant maintenance managers.

Findings: Value evidence and incentive to change each receive significant support as mechanisms to reduce ambiguity about superior value. Notably, reference customers and pilot programs appear to be equally effective as value evidence in reducing ambiguity about superior value. In addition, the results provide strong empirical support that incentive to change operates as a threshold phenomenon, as predicted from social judgment theory. While no significant differences in purchase preferences are found for area of responsibility (purchasing versus plant maintenance managers), significant support is found for performance review and reward system as a manipulation of consequences of obtaining superior value.

Contribution: The conceptual framework and empirical results significantly contribute to our understanding of how suppliers in business markets can use monetary as well as nonmonetary means to persuade customers to purchase higher-value, yet higher-price offerings.     

An approach to prioritize customer-based,cost-effective service enhancements

Service firms routinely enhance their offerings to satisfy and retain current customers and to attract new customers. We show theoretically that service improvements can be prioritized by simultaneously taking into account the likely incremental revenue (through increased customer value) and the incremental cost of making the improvement. The customer values obtained from a sample of respondents, and cost estimates obtained from managers of the service providing organization are combined to prioritize improvements using a ‘bang for the buck’ (i.e. value/cost) rule. Such a prioritization would be helpful to come up with a ‘short list’ of service improvements. The items on the short list can be evaluated in detail for their ‘Return on Quality’. The approach for prioritization is illustrated in the context of improving passenger train service between a pair of cities in India. An adaptive self-explicated approach is used for obtaining customer values and cost estimates. The customer values so elicited display substantial cross-validity.     

Customer Service as a Strategic Weapon in International Operations

Customer service is an important competitive weapon in international markets becuase of its ability to acquire and retain overseas customers (especially intermediate firms) and, thus, enhance companies' revenues. Customer service is especially critical when foreign vendors are perceived as offering similar products at comparable prices, and purchasers have doubts about suppliers' willingness to carry out various post-purchase responsibilities. This paper reports the results of a study of the customer service programs of 151 U.S. non-service companies with international operations in five or more foreign countries. Sixty-nine firms responded to their customer service efforts in international markets and 81 addressed domestic customer service programs, allowing for comparisons to be made between international and domestic customer service operations. The study's results indicate that copmanies realize the importance of customer service in marketing to international customers, yet customer service for international markets is not considered to be appreciable more important than it is for domestic ones. Much similarity in perceptions about international and domestic customer service programs being in place. Whether this similarity occur from a careful analysis of domestic and international markets or simple expediency is uncertain.     

Between a rock and a hard place: Seizing the opportunity of demanding customers by means of frontline service behaviors

Service businesses are increasingly facing more demanding customers as a result of a shift in power from the service providers' side to the customers' side. Related literature predominantly examines the negative side of this ongoing trend, while overlooking the positive side. The major aim of this paper is to examine how frontline employees — investment account managers — deal with the ongoing increase in customer demandingness. To address this, we draw on adaptability performance theory to test the facilitating effect of frontline employees' post-transaction service behaviors (SBs) — diligence, inducements, information communication, sportsmanship, and empathy — as a means of adaptation to higher levels of customer demand. Findings indicate that frontline employees adapt most of their SBs' intensities to match customers' demands. The results show that some SBs actually increase the effectiveness and efficiency of frontline employees' service performance, leading to an increase in customer value and satisfaction. Customer value is found as a mediator in some of the relationships between SBs and customer satisfaction. Contrary to the conception of the negative outcomes of customer demandingness, service firms need to consider taking advantage of customer demandingness by stressing the role of frontline employees in adapting to customers’ demands.     

Exploring the role of extrovert-introvert customers’ personality prototype as a driver of customer engagement: Does relationship duration matter?

Drawing on social exchange theory, the current study examines new drivers and their associated processes of customer engagement. In spirit, the study tests the direct and indirect impacts of the extraversion–introversion personality trait on customer engagement. The study takes into consideration the contingency role of time by testing the moderating role of relationship duration. Results demonstrate that the more extraverted customers are, the more they are likely to engage with service firms. Further, extraversion is positively related to customer–employee interaction, which in turn leads to more utilitarian and hedonic values perceived by customers. Both types of value, then, induce higher customer engagement behaviors in terms of customer referrals, knowledge sharing, and social-influence. Findings demonstrate that relationship duration moderates some of the examined relationships. The current study contributes to the literature by extending the knowledge on customer engagement's predisposition and social causes.     

Measuring service experience: a utility-based heuristic model

This research aims to construct a model to evaluate service experience. We develop a novel model for service experience by incorporating positive and negative dimensions. We demonstrate that greater utility from experience results in greater value of service experience. We also discovered negative dimensions are the key reason; especially waiting time. We separated five groups to help firms explore deeper insights from various dimensions. The value of service experience in group of middle range has the greater contrast between positive and negative dimensions than the other groups. Service providers can obtain customer perception to adjust or revise the service components.     

Trust and direct marketing environments: A consumer perspective

The desire to establish long‐term customer relationships has led companies to consider normative as well as outcome related aspects of relationship development. Much of the research undertaken in this field has focused upon such activity in business‐to‐business markets. The current study sought to examine these issues, from the consumer perspective, in relation to approaches made by firms using direct marketing techniques, specifically direct mail. Empirical assessment was made of a sample of consumers in relation to their receptivity to product and service offerings from firms, and the effects of commitment, trust and privacy concerns upon this receptivity. In conclusion, some implications for marketing practice in developing customer relationships in direct marketing environments are discussed.     

Implementation and Outcomes of Customer Value: A Dyadic Perspective

This study examines the concept of customer value based on the views shared by service firms and their consumers. Using qualitative and quantitative approaches, the study reveals customer satisfaction and retention as outcomes of front-line service employees' value delivery practices. Our results suggest that service employees' efforts to deliver customer value, even when based on a dyadic view, do not necessarily lead to customer retention. Rather, customers become more loyal when the value provided by service employees is matched by consumers' satisfaction. In other words, satisfaction is an important and necessary mediating variable between employees' efforts and customer retention.     

Is there really an Asian connection? Professional service quality perceptions and customer satisfaction

Scenarios involving dental services investigate whether Asian cultures are similar enough to allow standardization of service offerings. The authors control and manipulate levels of service quality and performance to yield a 2 × 2 experimental design, with Japanese, Chinese, and Korean subjects (N = 637) selected to test the invariance of the measures. The findings yield significant cultural differences with the Chinese respondents perceiving significantly higher service quality and expressing greater customer satisfaction when performance is high and expressing less customer satisfaction when performance is low than do the Japanese and Korean respondents. Thus, even though all three countries are considered high-context cultures, having their roots in Confucianism, differences in national culture lead to the conclusion that “one size does not fit all” in terms of service offerings.     

Value co-creation via information and communications technology

The aims of the present work centre on determining whether co-created value constitutes a competitive advantage for firms, and whether it is capable of influencing consumer behaviour. Applying the service-dominant logic perspective, the work examines the firm's capabilities in the context of its business-to-customer (B2C) interactions, focusing on information and communications technology (ICT) as a particular driver of value co-creation. Taking this B2C perspective, ICT is measured, from the firm's point of view, and customer perceptions are analysed, using the variables ‘value co-creation’, ‘perceived value’ and ‘loyalty’. The sample consists of 100 service firms and 572 of their customers. The findings indicate that ICT capabilities have a direct effect on value co-creation, as does value co-creation on perceived value and loyalty.     

New Service Development Process

Abstract

To continue to grow, more and more U.S. service firms have looked overseas in recent years to find markets for their offerings. Thus, innovation in the global context has become a strategic imperative for many service firms. While the issue of how to foster service innovation has been an area of extensive research, the cross-national comparison of innovation practices particularly between developed and emerging countries has been only a nascent field of research. To address this gap in the literature we conducted a comparative study of new service development process and stages of the financial service firms in an emerging country, India, and a developed country, the United States. The results support the central argument of the article that significant cross-national differences do exist with regard to a firm's new service development process. The findings should be of value to managers faced with the tasks of selecting and managing service innovation in emerging markets, as well as those firms experiencing international competition.     

Effects of differential information on the after-market valuation of initial public offerings

This paper examines the after-market for initial public offerings (IPOs), particularly the security valuation effects of structural differences in available information. There is a diversity of information among issuing firms at the time of their offering and particularly under certain market conditions. Because this diversity decreases with time and after-market trading, the IPO market provides an ideal setting for testing errors due to differential information levels in early after-market valuation of IPO firms. We find evidence that during “hot” market conditions and for firms characterized by low levels of available information, the market values of issuing firms are more likely to be overestimated in the immediate after-market. We also find positive overestimation of market values to be more likely for larger IPOs and for those marketed by the less prestigious underwriters.     

A model of product compatibility introduction with consumer recognition

Firms recognizing consumers often use behavior-based pricing (BBP), i.e., condition prices on purchase history. Prior research studies the framework with independent product offerings and shows that BBP leads to poaching and decreases each firm's profits. In this paper, we investigate the efficacy of BBP in a two-period duopoly where firms provide compatible product categories and endogenously determine the levels of cross-compatibility. We first revisit the impact of behavior-based pricing in the traditional framework with independent offerings and verify the competition-increasing effect of BBP. We then examine how the impact of BBP differs when firms introduce product compatibility. Interestingly, we find that firms can benefit from BBP when firms introduce product compatibility. More specifically, when the value consumers obtain from perfect compatibility is moderate, implementing BBP is more profitable than without consumer recognition. The intuition is that when the value of perfect compatibility is medium, consumers do not expect good switching deals in the second period and firms can charge higher prices in the first period. Our findings not only complement the BBP literature but also shed light on the firms' strategic decisions on product compatibility.     

Innovation patterns and their effects on firm performance

This study aims to identify various innovation patterns and understand their effects on firm performance across business service sectors. By collecting empirical data from 198 Korean business services firms, we explore these firms’ major innovation patterns, conceptualized as combinations of different service innovation dimensions: service concept, service delivery, customer interaction, and technology. Then, in accordance with the innovation patterns they display, we group these firms into four clusters: ‘service delivery-based high-technology', ‘service delivery and customer interaction-integrated', ‘customer interaction-based high-technology', and ‘strongly balanced’ innovators. Last, we investigate whether these patterns influence firm performance. Our findings are three-fold: (1) the innovation patterns in business service firms result from the creation of new combinations of major service innovation dimensions, (2) four independent innovation patterns emerge in business service firms, and (3) these patterns lead to different levels of firm performance. Practically, our findings highlight the importance of highly qualified employees, customer interaction, and technology in improving financial performance.     

How professional service firms compete in the market: an exploratory study

Abstract

This study investigates how professional service firms (PSFs) compete in the market. Drawing on strategic marketing literature, a managerial rather than customer perspective is adopted. The study investigates the competitive positions sought by professional service providers and the specific marketing activities actually undertaken to achieve these positions. Thirty-seven depth interviews with senior management from a range of PSFs indicate that firms seek to differentiate themselves by developing long-term relationships, providing better service quality and greater value, and developing brands with strong reputations. Organisations typically seek such interrelated competitive positions simultaneously. A list of marketing activities used by the PSFs to achieve these competitive positions offers practical insights into the specific activities needed to achieve the various competitive positions sought.     

Service value revisited: Specifying a higher-order, formative measure

Recent marketing literature pays particular attention to customer value because of the potential impact on customer behavior and, ultimately, firm performance. Whereas some studies conceptualize customer value in a unidimensional manner, more recent approaches take a multidimensional approach, generally conceptualizing value as composed of various benefits and sacrifices. However, nearly all of these studies consider value components in a reflective manner, which is not only problematic but in many cases conceptually incorrect. In addition, recent customer value research includes service components to define and operationalize the construct. This study suggests that customer value in service contexts, or service value, represents a higher-order, formative construct with benefit and sacrifice components. Specifically, the authors propose a formative model of service value with four components: service quality, service equity, confidence benefits, and perceived sacrifice. A multiple-industry study substantiates the contention that this higher-order, formative approach best models value. The results theoretically and empirically support the conceptualization of service value with formative components, and the measure is robust and works well across multiple service contexts.     

The effect of customer service on retailers’ shareholder wealth: The role of availability and reputation cues

Retailer customer service has been shown to lead to increases in consumer attraction and retention, but what is less apparent is whether shareholders are fully rewarded for retailers’ customer service efforts. Results from an event study on 48 retailer announcements of customer service strategies indicate that customer service increases retailer market values by 1.09 percent on average. The magnitude of this abnormal return suggests that customer service is one of the more effective ways for firms to create shareholder wealth. Further, analysis of the abnormal returns suggests that the shareholder value created by the retailer's customer service is affected by the heuristics and cues used to judge the likelihood of service delivery. Consistent with the availability heuristic, we find that services that are difficult to bring to mind and non-vivid services create significantly less shareholder value. Results further show that the retailer's reputation can also significantly inhibit the customer service's shareholder wealth creation.     

The complex firm financial effects of customer satisfaction improvements

It has been widely assumed that increases in customer satisfaction have continuous financial benefits for firms. However, recent meta-analysis results and anecdotal evidence suggest substantial variability in satisfaction-performance effects. We propose and investigate three explanations for this variability: (1) changing trade-offs of financial benefits vis-à-vis costs along the satisfaction continuum, (2) varying stickiness of benefits and costs over time, and (3) contextual effects related to a firm’s marketing strategic situation. For our empirical investigation, we used customer satisfaction scores and financial data for around 100 U.S. firms over a 15-year period. The results show that revenues and savings in marketing and acquisition costs can accelerate at high satisfaction levels. However, for many firms, operating costs and capital investments also accelerate, and shareholder returns for satisfaction improvements can become negative. Tests over different assessment horizons show that operating cost increases are sticky while top line benefits fade. Finally, firm strategy, offering customization, potential of customer word of mouth, and competitive innovation pressure determine the satisfaction payoffs. Our study will help managers to predict more accurately than before the financial effects of their customer-directed investment decisions.     

Ethical Customer Value Creation: Drivers and Barriers

There is a long-standing discussion on the positive interactions between enterprise value creation and business competitiveness. The corporate value can be seen as being created from three major sources within the cycle – from employees, from processes, and from customers or investors through reinvestment. To achieve competitive advantages, a firm must create more value than its competitors in the industry. Emphasizing that, firms should explore the positive drivers of customer value creation, allowing for a true value creation that will lead to increments in competitiveness. In reality, however, there are also barriers that hinder customer value creation. Targeting the above issues that have not yet been explored or analyzed, we have collected related literature at the first stage. Based on these presumable assumptions, this paper then conducts an empirical study by surveying and analyzing the relevance given by the investigated leading machinery measuring equipment firms in Taiwan, regarding the concerns as drivers and barriers in relation to customer value creation. This paper especially aims to answer several key questions: What drivers revolving around employees and processes can facilitate the organization to create more value for its customers? Conversely, what barriers block the organization from creating value for customers in examining the same dimensions? Does value creation direct an organization’s profitability and competitiveness? Our questionnaire survey results show that the most recognized and agreed drivers of customer value creation in consideration of employees are “distinctive skills”, “personal experience”, “learning and training”, and “team work”; and, in regard to the firm’s processes, the key drivers are “innovation and evolution”, “R&;D capability”, and “capability for differentiation”. Conversely, the most recognized and agreed barriers to customer value creation in relation to employees are a “distrustful environment” and “inadequate knowledge”; and, in terms of processes, they are “short of core technology”, “poor resource support”, and “bad services and attitudes”. Furthermore, our in-depth interview outcomes reveal that “capital sufficiency” and “mergers and acquisitions” are in practice considered to be other important customer value creation drivers; in contrast, “cultural and structural barriers” and “short of mechanisms to measure customer value creation effectively” are viewed as additional critical barriers to customer value creation.     

Research needs for assessing online value creation in complex consumer purchase process behavior

Consumers face considerable frustration when purchasing structurally and/or semantically complex high-involvement products online. Reliance on computer-mediated communications for their information needs may result in functional and emotional frustration from information overload and lack of personal trust. This paper proposes a responsive real-time information system as a proxy for a perceptive sales representative who assesses customer needs based on information exchanges and then offers appropriate responses. By tracking and analyzing a consumer's online activity, vendors can offer information relevant to the consumer's real-time needs, facilitating their purchase process. In essence, this is a real-time value co-creation process based on the consumer offering cues to vendors through their key strokes and mouse click activity. This allows for differentiated information offerings for inexperienced and more experienced consumers, creating value by dynamic information serving. Where appropriate value is created, consumers will experience less frustration and continue online, rather than possibly moving offline or to alternative vendors. In examining the bases of consumer information needs in complex purchases, this paper identifies the data required to enable a responsive dialog between vendors and consumers.