This delivered value to customers thus can be measured as a difference, although customers do not always choose the offer with the highest delivered value (Kotler, 2003). For example, a business customer might have to buy at the lowest price; another might aim to maximize only personal benefits; or customers could enjoy a loyal relationship with a company and buy from it, almost regardless of the delivered value.
Neap and Celik (1999) argue that product value reflects the buyer's desire to obtain the product, which in turn depends on the affiliation of product details or performance with the buyer's value system. The value then is the cost of the product (i.e., total price paid), plus a subjective marginal value—a subjective measure that depends on the person's value system and can change. This definition clearly differs from others, in that the cost is not subtracted from benefits but rather offers a sort of objective indicator of those benefits.
To Anderson and Narus (1998), value is the monetary worth of the various benefits (e.g., technical, economic, service, social) a customer receives, compared with the price paid, taking into consideration competing suppliers' offerings. Value and price are independent; at least in business markets, the value provided nearly always exceeds the price, and the difference is the customer's incentive to purchase, such that price and value are two elemental product characteristics (Anderson, Thomson, & Wynstra, 2000). Value excludes price in this definition; the benefits underlying value are net benefits, and costs incurred to obtain the benefits (except for purchase price) are included. The value of the same product varies for different customers, depending of its value in use in their usage situation.
These definitions of value usually rely on monetary terms; other authors include other measures. Wilson and Jantrania (1994) measure value along economic, strategic, and behavioral dimensions. Woodruff's (1997) customer-value hierarchy links customer-desired value and customer satisfaction with received value. Customer-perceived value entails perceived preferences for and evaluations of product attributes, their performance, and the consequences of their use, which determine customers' ability to achieve their goals and purposes in usage situations. Customers want to maximize the perceived benefits and minimize the perceived sacrifices (money, time, effort). Ulaga and Chacour (2001) also adopt a supplier perspective to understand customers' perceptions of value.
2.1.2. Value of relationships
Companies do business not only to obtain the value of the good or service (Håkansson, 1982 and Reichheld, 1996) but also to enjoy attractive features of the offering, such as the reputation, location, or innovativeness of the supplier. Even future capabilities are valuable; the buyer can initiate a relation with this capable supplier and thus not need to change suppliers in the future, regardless of market shifts. This sort of relationship value extends beyond the actual product or service being exchanged.
The Contemporary Marketing Practice (CMP) group notes managers place greater emphasis on managing long-term relationships, networks, and interactions by focusing on their employees, customers (and their customers), suppliers (and their suppliers), and other markets (Coviello, Brodie, Danaher, & Johnston, 2002). Because marketing features a continuum of exchanges (Dwyer, Schurr, & Oh, 1987), more value accrues through relational exchanges than transactional exchanges. Companies must examine all value-creation interactions in any customer relationship, as well as devote efforts to maintaining customer relationships.
Value creation does not take place in isolation, so the role of companies has changed, from providing customers with goods or services to designing systems of activities to help customers create value (Wikstrom, 1996). Sellers and buyers co-produce value; value innovation thus requires a company to combine its resources with others' capabilities and relationship quality thus becomes an important determinant of profitability (Grant, 2004 and Webster, 2000).
A relationship also has value when (1) exchanges become predictable and reassuring as the partners learn to organize their business operations and (2) learning and adaptation in the relationship result in new solutions. For Walter, Ritter, and Gemünden (2001), this value entails the perceived trade-off among multiple benefits and sacrifices in a customer relationship, which may derive from the focal relationship or from connected networks on which the relationship has an impact. Suppliers must simultaneously offer value to and gain benefits from customers.
The activities performed and resources gained from customer relationships imply a functionalist paradigm (Anderson, Håkansson, & Johanson, 1994), in which direct functions affect the partner company immediately, but indirect functions have a more ambiguous effect. The paradigm also indicates
• Direct functions include activities and resources that create value for the supplier, without depending on other relationships.
• All functions are direct; the effect is derived from a given relationship.
• Resources in a customer relationship have implications for a supplier's other exchanges.
• A customer relationship can fulfill more than one direct or indirect function.
• In a given relationship, indirect functions can be as important as the direct ones.
2.1.3. Perspectives on role of industrial and business marketing
Research has focused on the value of either the object or the process of exchange reflects two fundamentally different perspectives on the role of business and industrial marketing (Axelsson & Wynstra, 2002).
The first views the market system as fully functional and marked by perfect competition. Business and industrial marketing activities target relevant markets, and the number of alternative buyers and sellers represents the room for action, which depends on the standardization of the offering (a more unique offering creates lock-in effects). High termination costs mean the parties constantly analyze whether they can solve existing problems. Key commercial competencies include market knowledge and the ability to play the market. The market pushes for the use of existing competition and exploiting opportunities. This market structure thus supports a transactional approach to business and industrial marketing.
The second perspective regards markets as well-organized, connected networks (Axelsson & Wynstra, 2002), so business and industrial marketing activities pertain to the relations across activities, ties among resources, and bonds between actors. Relationship functions are critical, including the customer's resource supply system and its significance for the company's position in various networks. The company focuses on specific customers, not vast market segments, with an emphasis on the contents and functions of a specific relationship in the larger network. This situation fosters practices in line with the relational approach.
Table 1 illustrates the main differences between transactional (competition) and relational (collaboration) exchange behavior (Axelsson & Wynstra, 2002). Both perspectives represent distinct theoretical foci and ideas about the role of business and industrial marketing.
Table 1.
Transactional versus relational marketing and purchasing behavior (adapted from Axelsson and Wynstra (2002)).
Perspective Transactional Relational
Competition Many alternatives One or few alternatives
Tactical focus Every deal is a new business; no one benefits from past performances; market exchanges are independent and discrete A deal is part of a relationship, and the relationship is part of a network; dependent, ongoing market exchanges
Relationship attitude Exploit the potential of competition; anonymous and efficient market Exploit the potential of cooperation; numerous market networks
Temporal horizon Short-term, arm's-length, avoid coming too close Long-term, tough demands, joint development
Organizational structure Hierarchical, functional organization Cross-functional, process-based organization
Renewal Effective renewal through partner changes, choose the most efficient supplier at any time Effective renewal through collaboration and teamwork; combine resources and knowledge
Innovation imperative Buying standardized products Buying capabilities; customized products
Services Services augment the core product Services are basis for differentiation
Orientation Price orientation, to achieve favorable prices in well-specified products; marketing through the 4Ps Cost and value orientation, to achieve low total costs of supply; develop new value; marketing through relationships, networks, interactions
Table options
In addition to the above, Lindgreen and Wynstra (2005) identified three major value themes in business and industrial marketing: value analysis (i.e., how do customers analyze value?), value creation (how can firms use value appraisals or tools like value engineering in market-oriented product development?), and value delivery (which actors create value, and which delivery process provides the best value for which customers?) When the two perspectives are crossed with the three themes, six potential areas for research emerged.
2.2. Post-2005
As the debate on value continued past 2005, Industrial Marketing Management has acted in a central role in following and shaping the landscape. Much of the cutting edge analysis of our understanding of value has been played out in the journal, as can be noted from its predominance as source amongst the papers identified in this section. As seen above, Lindgreen and Wynstra (2005) categorized the different approach to understanding value derived from goods and services and value from buyer–seller relationships, and this has been a precursor for more recent knowledge development concerning
This delivered value to customers thus can be measured as a difference, although customers do not always choose the offer with the highest delivered value (Kotler, 2003). For example, a business customer might have to buy at the lowest price; another might aim to maximize only personal benefits; or customers could enjoy a loyal relationship with a company and buy from it, almost regardless of the delivered value.
Neap and Celik (1999) argue that product value reflects the buyer's desire to obtain the product, which in turn depends on the affiliation of product details or performance with the buyer's value system. The value then is the cost of the product (i.e., total price paid), plus a subjective marginal value—a subjective measure that depends on the person's value system and can change. This definition clearly differs from others, in that the cost is not subtracted from benefits but rather offers a sort of objective indicator of those benefits.
To Anderson and Narus (1998), value is the monetary worth of the various benefits (e.g., technical, economic, service, social) a customer receives, compared with the price paid, taking into consideration competing suppliers' offerings. Value and price are independent; at least in business markets, the value provided nearly always exceeds the price, and the difference is the customer's incentive to purchase, such that price and value are two elemental product characteristics (Anderson, Thomson, & Wynstra, 2000). Value excludes price in this definition; the benefits underlying value are net benefits, and costs incurred to obtain the benefits (except for purchase price) are included. The value of the same product varies for different customers, depending of its value in use in their usage situation.
These definitions of value usually rely on monetary terms; other authors include other measures. Wilson and Jantrania (1994) measure value along economic, strategic, and behavioral dimensions. Woodruff's (1997) customer-value hierarchy links customer-desired value and customer satisfaction with received value. Customer-perceived value entails perceived preferences for and evaluations of product attributes, their performance, and the consequences of their use, which determine customers' ability to achieve their goals and purposes in usage situations. Customers want to maximize the perceived benefits and minimize the perceived sacrifices (money, time, effort). Ulaga and Chacour (2001) also adopt a supplier perspective to understand customers' perceptions of value.
2.1.2. Value of relationships
Companies do business not only to obtain the value of the good or service (Håkansson, 1982 and Reichheld, 1996) but also to enjoy attractive features of the offering, such as the reputation, location, or innovativeness of the supplier. Even future capabilities are valuable; the buyer can initiate a relation with this capable supplier and thus not need to change suppliers in the future, regardless of market shifts. This sort of relationship value extends beyond the actual product or service being exchanged.
The Contemporary Marketing Practice (CMP) group notes managers place greater emphasis on managing long-term relationships, networks, and interactions by focusing on their employees, customers (and their customers), suppliers (and their suppliers), and other markets (Coviello, Brodie, Danaher, & Johnston, 2002). Because marketing features a continuum of exchanges (Dwyer, Schurr, & Oh, 1987), more value accrues through relational exchanges than transactional exchanges. Companies must examine all value-creation interactions in any customer relationship, as well as devote efforts to maintaining customer relationships.
Value creation does not take place in isolation, so the role of companies has changed, from providing customers with goods or services to designing systems of activities to help customers create value (Wikstrom, 1996). Sellers and buyers co-produce value; value innovation thus requires a company to combine its resources with others' capabilities and relationship quality thus becomes an important determinant of profitability (Grant, 2004 and Webster, 2000).
A relationship also has value when (1) exchanges become predictable and reassuring as the partners learn to organize their business operations and (2) learning and adaptation in the relationship result in new solutions. For Walter, Ritter, and Gemünden (2001), this value entails the perceived trade-off among multiple benefits and sacrifices in a customer relationship, which may derive from the focal relationship or from connected networks on which the relationship has an impact. Suppliers must simultaneously offer value to and gain benefits from customers.
The activities performed and resources gained from customer relationships imply a functionalist paradigm (Anderson, Håkansson, & Johanson, 1994), in which direct functions affect the partner company immediately, but indirect functions have a more ambiguous effect. The paradigm also indicates
• Direct functions include activities and resources that create value for the supplier, without depending on other relationships.
• All functions are direct; the effect is derived from a given relationship.
• Resources in a customer relationship have implications for a supplier's other exchanges.
• A customer relationship can fulfill more than one direct or indirect function.
• In a given relationship, indirect functions can be as important as the direct ones.
2.1.3. Perspectives on role of industrial and business marketing
Research has focused on the value of either the object or the process of exchange reflects two fundamentally different perspectives on the role of business and industrial marketing (Axelsson & Wynstra, 2002).
The first views the market system as fully functional and marked by perfect competition. Business and industrial marketing activities target relevant markets, and the number of alternative buyers and sellers represents the room for action, which depends on the standardization of the offering (a more unique offering creates lock-in effects). High termination costs mean the parties constantly analyze whether they can solve existing problems. Key commercial competencies include market knowledge and the ability to play the market. The market pushes for the use of existing competition and exploiting opportunities. This market structure thus supports a transactional approach to business and industrial marketing.
The second perspective regards markets as well-organized, connected networks (Axelsson & Wynstra, 2002), so business and industrial marketing activities pertain to the relations across activities, ties among resources, and bonds between actors. Relationship functions are critical, including the customer's resource supply system and its significance for the company's position in various networks. The company focuses on specific customers, not vast market segments, with an emphasis on the contents and functions of a specific relationship in the larger network. This situation fosters practices in line with the relational approach.
Table 1 illustrates the main differences between transactional (competition) and relational (collaboration) exchange behavior (Axelsson & Wynstra, 2002). Both perspectives represent distinct theoretical foci and ideas about the role of business and industrial marketing.
Table 1.
Transactional versus relational marketing and purchasing behavior (adapted from Axelsson and Wynstra (2002)).
Perspective Transactional Relational
Competition Many alternatives One or few alternatives
Tactical focus Every deal is a new business; no one benefits from past performances; market exchanges are independent and discrete A deal is part of a relationship, and the relationship is part of a network; dependent, ongoing market exchanges
Relationship attitude Exploit the potential of competition; anonymous and efficient market Exploit the potential of cooperation; numerous market networks
Temporal horizon Short-term, arm's-length, avoid coming too close Long-term, tough demands, joint development
Organizational structure Hierarchical, functional organization Cross-functional, process-based organization
Renewal Effective renewal through partner changes, choose the most efficient supplier at any time Effective renewal through collaboration and teamwork; combine resources and knowledge
Innovation imperative Buying standardized products Buying capabilities; customized products
Services Services augment the core product Services are basis for differentiation
Orientation Price orientation, to achieve favorable prices in well-specified products; marketing through the 4Ps Cost and value orientation, to achieve low total costs of supply; develop new value; marketing through relationships, networks, interactions
Table options
In addition to the above, Lindgreen and Wynstra (2005) identified three major value themes in business and industrial marketing: value analysis (i.e., how do customers analyze value?), value creation (how can firms use value appraisals or tools like value engineering in market-oriented product development?), and value delivery (which actors create value, and which delivery process provides the best value for which customers?) When the two perspectives are crossed with the three themes, six potential areas for research emerged.
2.2. Post-2005
As the debate on value continued past 2005, Industrial Marketing Management has acted in a central role in following and shaping the landscape. Much of the cutting edge analysis of our understanding of value has been played out in the journal, as can be noted from its predominance as source amongst the papers identified in this section. As seen above, Lindgreen and Wynstra (2005) categorized the different approach to understanding value derived from goods and services and value from buyer–seller relationships, and this has been a precursor for more recent knowledge development concerning
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