alternative views on value and creative value design · alternative views on value and creative...

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January 5, 2015

Alternative views on value and creative value design

Irma Tikkanen University of Eastern Finland, Faculty of Social Sciences and Business Studies,

Business School

[email protected]

Abstract

Purpose – The purpose of this paper is to explore, what kinds of alternative views on value

emerge in B-to-B and consumer markets based on the research published in academic journals

and books between 1959 and 2013. Creative value design tools and methods are linked with

each view.

Design/methodology/approach – Historic foundation of the term value was presented in brief.

The secondary data included 59 articles and 17 books published between 1959 and 2013. The

articles presented nine disciplines. The definitions of value were classified according to similar

views. A marketing school of thought or a school of thought in strategic management behind

each view was indicated.

Findings – Eight alternative views on value emerged, which were linked with creative design

tools and methods suggested in one article. Subsequently, the alternative views on value were

classified according to goods-dominant logic and service-dominant logic, as well as industrial

view on value and customer view on value. Moreover, eight concluding statements on value

design were suggested based on the results.

Research limitations - The related concepts such as utility, price, quality and satisfaction are

not discussed, because they are different concepts.

Practical implications –The results provide ideas for the business managers and designers on

how to increase the value by design, when the searched type of value is first explored. A deeper

theoretical view on value from the perspectives of manufacturers, service providers, B-to-B

customers, and consumers was achieved.

Originality/value – The eight alternative views on value give an overview on value both from

the suppliers’ and customer’s point of view. The views also indicate how the values differ when

comparing the views of the manufacturer/supplier to the business customer and the consumer.

mailto:[email protected]

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Understanding those views is important in the value system including supplier’s suppliers and

business customer’s customers, and when moving from goods-dominant logic to service

dominant logic in the same value system. The results offer tools for business managers to

analyse, plan, and implement actions to add the value for various actors, and increase the

customer value to the company.

Keywords B-to-B, Consumer, Design, Value

Paper type Literature review

Introduction

During the last decades, the concepts of value-added, value creation and value both in B-to-B

and consumer markets have formed interesting topics in academic research. The number of

published articles has increased especially since 2000 focusing on value, creation, and

dimensions, especially with respect to services.

In 1961, Miles (1961; ref. Lindgreen and Wynstra, 2005) noticed that the value to the producer

means something different from the value to the user. Later, Porter‘s (1980, 1985) books

increased the understanding on how to compete against competitors and conversely how to

create value for customers through both primary and support activities in the value chain. Since

then, value chain, value added, value activities, value system, and value have become familiar

for both researchers and practitioners. Porter’s (1985) value chain was a starting point for the

broader discussion on value and value creation.

According to Ravald and Grönroos (1996), “the concept of value is multifaceted and

complicated and there is an evident risk that the concept is used without any efforts and

commitments to understand really what it means to provide value to customers, how added

value should be related to customer needs and the achievement of profitability for the parties

involved.” Lindgreen et al. (2012) provided an overview of research on the value that business

and industrial marketers analyze, create, and deliver. As the result, the extended value

framework including analysis, creation and the delivery was proposed. However, “there

currently exists no agreed list or typology of customer value” (Bradley and Sparks, 2012),

although a few typologies of value have been proposed earlier.

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This paper presents the alternative views on value by analysing the definitions of value and

utilizing scientific articles and academic books as the secondary data. In addition, creative value

design methods and tools are linked with each view, and concluding statements on value design

are suggested.

The research questions read as follows:

What kinds of alternative views on value emerge in the selected academic journals and

books published between 1959 and 2013?

What kinds of creative value design tools and methods are proposed for each alternative

view on value?

How the alternative views on value can be classified into industrial and consumer

perspectives?

What kinds of concluding statements on value design can be drawn based on the results?

The related concepts such as utility, price, quality and satisfaction are not discussed, because

they are different concepts (cf. Sánzhes-Fernández and Iníesta-Bonillo, 2006). The study

excludes also how to measure value.

Historic foundation of the term value in brief

Sánzhes-Fernández and Iníesta-Bonillo (2006) wrote that the term “value” has its roots in many

disciplines including psychology, social psychology, economics, marketing, and management

(Woodruff and Gardial, 1996). Ramírez (1999) made a comprehensive analysis about the

historical roots of value dating back to the ancient Greeks. Then moral philosophy studied the

terms of moral and economic values, and ethical aspects of value. Moreover, the terms of

“utility value” and “exchange value” date from hundreds of years ago. Also Vargo et al. (2008;

Aristotle, 1959; Fleetwood, 1997) refer to the Aristotle, who distinguished two kinds of value,

namely “use-value” and “exchange-value”. “Use-value” was defined as a collection of

substances or things and the qualities associated with these collections. However, Aristotle did

not define “exchange-value”.

Bowman and Ambrosini (2010) defined use values as “properties of products and services that

provide utility. Inputs into the productive process take the form of separable “use values”, e.g.

components such as flour or steel and human inputs”. Bowman and Ambrosini (2010) also

defined “value-in-exchange” as “a monetary amount exchanged between the firm and its

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customers or suppliers when “use values” are traded. “Use values” are converted into “value-in-

exchange” when they are sold in factor markets or product markets”. Later terms related to

value are “value-in-use” and “value-in-offering” (cf. Ngo and O’Cass, 2010), “perceived value”

(cf. Ravald and Grönroos, 1996; Zeithaml, 1988), “value in the experience” (cf. Helkkula et al.,

2012), and “relationship value” (cf. Barry and Terry, 2008).

Methodology

59 academic articles and 17 books discussing the concept of value were utilized as a secondary

data. The articles and books were published as follows: in 1950’s (one book); in 1960’s (one

article, two books); in 1980’s (one article, 3 books); in 1990’s (9 articles, 10 books); in 2000’s

(33 articles, 1 book); and in 2010’s (15 articles). The articles were searched out in the scientific

journal’s data banks (Emerald, ABI/Inform) by using keywords, e.g. value; customer value;

consumer value; perceived value; value dimensions; value chain; value creation; co-creation;

and co-production. Many articles and books were familiar for the author based on previous

studies, teaching, and research. The 59 articles were included in 38 journals as follows (Table

1):

Business European Business Review (4)

Harvard Business Review (1)

Journal of Business Research (1)

Management European Management Journal (1)

International Journal of Value Based Management (1)

Journal of Management History (2)

Management Decisions (1)

Sloan Management Review (1)

Strategic Management Journal (1)

Marketing Academy of Marketing Science Review (1)

European Journal of Marketing (1)

Industrial Marketing Management (3)

International Journal of Bank Marketing (1)

International Marketing Review (1)

Journal of Advertising Research (1)

Journal of Brand Management (1)

Journal of Business & Industrial Marketing (3)

Journal of Consumer Marketing (2)

Journal of Consumer Satisfaction, Dissatisfaction and Complaining Behavior

(1)

Journal of Fashion Marketing and Management (1)

Journal of Marketing (3)

Journal of Marketing Theory and Practice (1)

Journal of Retailing (1)

Journal of the Academy of Marketing Science (2)

Marketing Theory (4)

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Services

Marketing

Journal of Service Management (1)

Journal of Service Research (2)

Managing Service Quality (5)

Tourism International Journal of Hospitality Management (1)

Journal of Leisure Research (1)

Journal of Travel Research (1)

Tourism Management (2)

Production,

Operations,

Supply

Chain

International Journal of Operations & Production Management (1)

Journal of Supply Chain Management (1)

World Class Design to Manufacture (1)

Other Journal of Economic Psychology (1)

Journal of Economics (1)

The Asian Journal of Quality (1)

Table 1. Disciplines and journals of the articles

The definitions of value were listed with authors. After that, they were categorized into eight

alternative views on value based on the author’s subjective decision and theoretical

understanding. Furthermore, based on Lee and Park’s (2006) article, the tools and methods in

creative value design suitable for each view were proposed.

Results

As the answer to the first research question, the eight alternative views on value are presented

next. Both a marketing school of thought and/or a strategic school of thought behind each view

are indicated.

Value, competitive advantage, competitive position – value-in-exchange, value-in-offering

In this view the main contributor is Porter (1985, 3), who concluded that “competitive advantage

grows fundamentally out of value a firm is able to create for its buyers that exceeds the firm’s

cost of creating it”. Value was defined by Porter (1985, 3, 38) as what buyers are willing to pay,

and superior value stems from offering lower prices than competitors for equivalent benefits or

providing unique benefits that more than offset a higher price. Value is measured by total

revenue, a reflection of the price a firm’s product commands and the units it can sell. Value,

instead of cost, must be used when analyzing the competitive position since firms often

deliberately raise their costs in order to set a premium price via differentiation.

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There is both a process and an output view to value creation. Value is added in the value chain

including primary and support value activities. The output from the process is either cost

advantage or differentiation advantage, depending on the competitive scope, and total revenue.

Created value for a buyer justifies a premium price through two mechanisms: by lowering buyer

costs or by raising the buyer performance. The firm’s product represents a purchased input into a

buyer’s value chain. (Porter, 1985)

Competition between competitors within an industry is a dominating viewpoint and the

emphasis is on the manufacturer’s business strategy. The customer’s view is embedded when

selecting an industry segment and its focus (cf. Porter, 1980). Ngo and O’Cass (2010) call this

“value-in-offering” perspective, where a firm is an operant resources integrator. Moreover, this

view focuses on value, which comprises costs, prices, and revenues compared to the competitors

(“value-in-exchange”). This view can be classified into Positioning School of Thought in

strategic management, and the main discipline is economics (cf. Moussetis, 2011; Mintzberg

and Lampel, 1999; Fredrickson, 1990, 124-137).

Value of product offering – value-in-offering, value-in-use

This view originates from the marketing mix proposed by Borden (1964) and its focus remains

on the product. Levitt (1969; Lindgreen and Wynstra, 2005) defined the consumer value or the

usefulness of a product to the individual or household consumers as depending on the product

attributes and how they translate into a certain value or usefulness.

According to Grönroos (2006), in the notion of “value-in-exchange”, the exchange of ready-

made value embedded in products for money is considered the central phenomenon to the

marketing study. There is no value for the customers until they can make use of a product. Value

is not what goes into goods and services; it is what the customers get out of them; in other

words, the value emerges in the customers’ space rather than in the producer’s space.

Product offering is seen as a value carrier, and the value is perceived by the customers as a

greater net value than the offerings of the competitors (cf. Ravald and Grönroos, 1996). Ravald

and Grönroos (1996; Zeithaml, 1988) defined that “perceived value is the consumer’s overall

assessment of the utility of a product based on a perception of what is received and what is

given”. Customer-perceived value of an offering is related to customer’s own value chain and

remains situation-specific (Ravald and Grönroos, 1996). Woodall (2003, 21) defined that “a

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personal perception of advantage arises out of a customer’s association with an organisation’s

offering”. Ruiz et al. (2008) explored that the value consumers derive from a product or service

includes a range of tangible, social, emotional, and other advantages (Smith and Colgate, 2007;

Sparks et al., 2008; Woodall 2003).

In this approach, there is both the supplier’s (“value-in-offering”) and the customer’s (“value-in-

use”) view towards value which is derived from the product offering and its attributes. This

approach emphasizes costs and financial benefits; the product value consists of the cost of the

product plus a subjective marginal value; and the perceived net value remains higher than the

offering from the competitors.

Firstly, this view is classified into Managerial School of Thought due to product offering as an

element of the marketing mix (4P) and price and cost of the product. Secondly, into Buyer

Behaviour School of Thought (cf. Lagrosen and Svensson, 2006; Sheth et al., 1988), because the

customer derives value from the product offering indicating e.g. economic, psychological and

social dimensions.

Value in customer-supplier relationships (dyad) - relationship value

This view originates from the discussion on buyer-seller relationships (cf. Ford, 2004), where

the total episode value is described as a function including both episode value and relationship

value. The total episode value comprises episode benefits plus relationship benefits divided by

episode sacrifice plus relationship sacrifice (Ravald and Grönroos, 1996). Lindgreen and

Wynstra (2005; Walter et al., 2001) made a distinction between direct functions and indirect

functions of relationships. The direct function of customer relationships comprises the profit

function, volume function, and safeguard function. Indirect functions in customer relationships

include the innovation function, market function, scout function, and access function. The direct

function and indirect function form the bases for supplier-perceived value.

Terpend et al. (2008) developed a histogram of the four types of value from buyer-supplier

relationships. The results revealed that in the late 1980’s research almost entirely focused on

operational performance; integration-based research began in the early 1990’s; capability-based

research emerged during the late 1990’s; and financial performance did not become a major

focus until the early 2000’s. Hammervoll and Toften (2010) distinguished between value-

creation in transaction-based arrangements and value-creation in interaction-based relationships.

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In the former, value-creation initiatives aim to reduce logistical costs or improve logistical

performance; whereas in the latter, value-creation initiatives require a cooperative response from

the exchange partner to create value. Barry and Terry’s (2008) findings confirmed that

“commitment and intentions are influenced by relationship value, which is impacted by benefits

such as performance, efficiency, and reliability as well as comparative costs and switching

costs”.

In this view, value is derived from the transactional exchanges emphasizing cost efficiency or

from the dyad relationship-based exchanges emphasizing knowledge, capabilities, and

information sharing. This view on value (“relationship value”) can be classified into

Relationship Marketing School of Thought (cf. Lagrosen and Svensson, 2006).

Value in B-to-B markets (triad, network) – value-in-exchange

This view originates from an industrial network model (activities-actors-resources) by

Håkansson and Johanson (1992). The emphasis is placed on interaction and relationships within

a network with multiple actors.

The value concept is closely linked to the exchange theory of marketing (Eggert and Ulaga,

2002). Miles (1961; Lindgreen and Wynstra, 2005) “distinguished between four kinds of value:

use value; esteem value; cost value; and exchange value”. Anderson and Narus (1998) defined

the value in business markets to be “the worth in monetary terms of technical, economic,

service, and social benefits a customer company receives in exchange for the price it pays for a

market offering”. Value is what a customer receives in exchange for the price it pays. Chandler

and Vargo (2011) defined “a particular context as a set of unique actors with unique reciprocal

links among them. Individual actors pursue value through service-for-service exchanges that are

the basis of a dyad, triads, complex networks, and service ecosystems.

The product value to the buyer and buyer’s value system consists of the cost of the product plus

a subjective marginal value (cf. Neap and Celik, 1999; Lindgreen et al., 2012). The perceived

value consists of the following three elements: perceived benefits of the product minus both the

product price and the costs of owing it (Lindgreen et al., 2012).

This view can be classified into Industrial Marketing School of Thought (cf. Lagrosen and

Svensson, 2006), where the emphasis is on exchange and economic interaction between triad or

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network partners and where the base discipline is economics (cf. Moussetis, 2011; Mintzberg

and Lampel, 1999).

Value proposition to the customer – value-in-offering

In this view, the main contributor is Aaker (1996, 95) and brand identity system. A brand’s

value proposition is a statement of the functional, emotional, and self-expressive benefits

delivered by the brand that provide value to the customer. Aaker (1996, 81) continued that

value is closely related to quality; it enriches the concept by adding the price dimension.

Rintamäki et al. (2007) included also economic benefits in a value proposition. A product-

related attribute can create a value proposition by offering something extra or by offering

something better (Aaker, 1996, 80).

According to Grönroos (2006), “a proposition should be a suggestion and a value proposition a

suggested value”. Kotler and Keller (2006, 25) found that value reflects the perceived tangible

and intangible benefits and costs to the customers. Value can be primarily seen as a combination

of quality, service, and price, thus being called the “customer value triad”. Johnson et al. (2006)

suggested that from the introduction to the growth stage of a life cycle, managers must adapt

from improving value per se to directly measuring and managing relationships and brands.

Ngo and O’Cass (2010) included brand equity (as an asset) into value-in-use perspective, but in

this paper value proposition is included into “value-in-offering” perspective, because a brand

marketer’s viewpoint is prevailing. This view can be classified into Managerial School of

Thought (cf. Lagrosen and Svensson, 2006), where the supplier is the “producer” of the value,

which is promised and delivered to customer in the form of a brand’s value proposition.

Service value – value-in-use, value in the experience

This view originates from the three schools of service marketing, namely American, French, and

Scandinavian (cf. Lagrosen and Svensson, 2006; Grönroos, 1990). Ballantyne and Varey (2006),

who explored value creation through marketing interaction, found that service value is

determined at the time of its use, as “value-in-use”. According to Grönroos and Voima (2012),

“in the customer-grounded view, the “value-in-use” that emerges for the customer appears as a

function of the customer’s experiences and logic”. The notion of “value-in-use” as the extent to

which a customer becomes better off could be analyzed on multiple dimensions.

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Ngo and O’Gass (2010) determined service value as “value-in-use”. Sandström et al. (2008)

linked service experience to “value-in-use” arguing that “value in use is the cognitive evaluation

of the service experience”. Sandström et al. (2008) also introduced a framework for how the

total service experience including functional and emotional dimensions is linked to “value in

use” through individual and situational filter.

There is both a process and an output view to value. Heskett et al. (1997) proposed a service-

profit chain, where the service concept creates service value to the customers resulting from

customer’s satisfaction and loyalty, and for the producer revenue growth and profitability. The

article of Helkkula et al. (2012) adopted a phenomenological perspective and conceptualized

“value in the experience” as “an intrasubjective, socially intersubjective, context- and situation-

specific phenomenon that is both lived and imaginary, constructed based on previous, current,

and imaginary future experiences and is temporal”. Then “value resides not in the object of

consumption, but in the experience of consumption” (cf. Frow and Payne, 2007, 91). Also

Grönroos and Voima (2012) adopted the process view to value. The customer creates value

through past, current, and/or imagined future experiences in a temporally fluctuating

individually and socially accumulated process. The firm produces resources and processes that

represent potential or expected “value-in-use”. The provider sphere generates potential value,

which customers later turn into real value (-in-use). (Grönroos and Voima, 2012)

The view can be classified both into Services Marketing School of Thought and Relationship

Marketing School of Thought (cf. Lagrosen and Svensson, 2006), because value might be co-

created in the joint sphere (cf. Grönroos and Voima, 2012).

Consumer value - multidimensional perceived value

This view originates from the consumer’s buying behaviour. Zeithaml (1988) produced four

different definitions for value: “1. value is low price; 2. value is whatever I want in a product; 3.

value is the quality I get for the price I pay; and 4. value is what I get for what I give. Bradley

and Sparks (2012) defined that “value is a benefit or advantage, something consumers prize over

other things. It is a subjective, contextually based, comparative judgment that varies widely

between individuals, between groups, and over time.” Gallarza and Gil Saura (2006) concluded

that the consumer value concept has evolved from the development of two pivotal dimensions of

the consumer behaviour: the economic and the psychological. The term perceived value should

be understood as synonymous with the consumer value.

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Ravald and Grönroos (1996; Monroe, 1991) defined the customer perceived value as the ratio

of perceived benefits relative to perceived sacrifice. Sánzhes et al. (2006) configured perceived

value construct in two parts, “one referring to the benefits received (economic, social and

relationships) and the other indicating the sacrifices made (price, time, effort, risk and

convenience) by the customer”.

Perceived value is multidimensional. Sheth et al. (1991; Sweeney and Soutar, 2001) explored

consumer perceived value and introduced PERVAL scale including four dimensions: emotional,

social and two types of functional value (price/value for money and performance/quality).

Holbrook (1999, 5, 12) developed a typology of consumer value including two- and three

dimensional conceptual framework of consumer value as follows: self-oriented (active/reactive)

and other oriented (active/reactive) vs. extrinsic and intrinsic. The typology included the

following eight types of consumer value: efficiency, excellence, status, esteem, play, aesthetics,

ethics, and spirituality.

Bradley and Sparks (2012) introduced value dimensions proposed to pertain to a single product

to vary between one and over a dozen. The nature of these value dimensions also varies: the

types commonly proposed include monetary, functional, emotional, prestige/reputational, and

symbolic/self-expressive features (see e.g. Gallarza and Gil Saura, 2006; Holbrook, 1999;

Lemmink et al., 1998; Petrick, 2002; Sanzhes et al., 2006; Ruiz et al., 2008; Sweeney and

Soutar, 2001; Woodall, 2003).

There is also a process view to perceived value. Sánzhes et al. (2006; Ravald and Grönroos,

1996) defined that perceived value is a subjective construct in several senses: it varies between

customers, cultures, and different times. This last appreciation conceives the perceived value as

a dynamic variable, experienced before the purchase, at the moment of purchase, at the time of

use, and after use. Lindgreen et al. (2012) developed the extended value framework matrix (7 x

3) including analysis, creation, and delivery. Heinonen (2004) found that time and location

should be included in service design decisions, and no longer focus on process and outcome

aspects of service delivery.

Bradley and Sparks (2012), who refer to Grönroos (2008); Payne et al. (2008); Smith and

Colgate (2007); Vargo and Lusch (2004); Woodall (2003); and Zeithaml (1988), view consumer

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value as a property inherent in the product; as resourced, facilitated, and/or created by firms and

their marketers; as derived by consumers through product purchase, use, and/or experience; and

as co-created through interaction and dialog between producers and consumers.

This view can be classified both into Buyer Behaviour School of Thought (cf. Lagrosen and

Svensson, 2006; Sheth et al., 1988), and Social Exchange School of Thought (cf. Sheth et al.,

1988), because these schools of thought approach the consumer not only as the “economic

man”, but theories are applied from the fields of psychology, sociology, and anthropology.

Value of a customer to the firm – relationship value

Reichheld (1996; ref. Lindgreen et al., 2012) concluded that the existing customers are valuable

assets to a company. Some customers have a greater net present value than others, and retention

of unprofitable customers destroys the value. Lindgreen and Wynstra (2005) also saw the

customers as valuable assets because maintaining existing customers is often more profitable

than gaining new ones. The economic value of the customers is an output of the value-creating

process; customers are valuable to the company only if the company has something of value to

offer them.

Kumar et al. (2012) proposed four components of a customer’s engagement value with a firm.

The first component consists of the customer lifetime value (the customer’s purchase

behaviour), the second is called the customer referral value (as it relates to incentivized referral

of new customers), the third is the customer influencer value (which includes the customer’s

behaviour influencing other customers that is increasing acquisition, retention, and share of

wallet through word of mouth between existing customers as well as prospects). Finally, the

fourth aspect consists of customer knowledge value (the value added to the firm by feedback

from the customer).

This view can be classified into Relationship Marketing School of Thought (cf. Lagrosen and

Svensson, 2006), because it emphasizes relationships with customers as intangible assets (cf.

Galbreath, 2002).

Eight alternative views on value and creative value design

Lee and Park (2006) concluded that the creation of new value is necessary to ensure the survival

of a company. When designing new product offerings, it is necessary for the designer to explore,

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identify and understand the searched value and its dimensions in order to create the product

offering that meets the needs and expectations of the consumers, business customers, and the

manufacturers. Lee and Park (2006) defined a creative value innovation strategy as a concrete

method of creating value, and illustrated tools and methods in creative value design. The answer

to the second research question is given in Table 2, where those tools and methods are linked

with each alternative view on value.

Alternative views on value and their key

characteristics

Tools and methods in creative value

design

Value, competitive advantage, competitive position –

“value-in-offering”, “value-in-exchange”

- lower prices compared to competitors (cost

advantage)

- differentiation with unique benefits

(differentiation advantage)

- value is measured by total revenue

- value is created in the process composing of

primary and support activities (value chain)

- Customer’s requirement value

analysis (Lee and Park, 2006): “It is

important to develop products that

can satisfy customer needs after

understanding the characteristics of

the predefined customers.”

- Creative value quality design (Lee

and Park, 2006): “After deciding the

product’s design and quality of

components, all steps, including

design of the manufacturing line and

process, are systematically

developed and planned.”

Value of product offering - “value-in-offering”,

“value-in-use”

- differentiation of the product through product

attributes creating value

- product value equals the cost of the product plus

a subjective marginal value

- customer-perceived value of an offering has to be

suitable to customer’s value chain being

situation-specific

- value include tangible, social, emotional and

other characteristics of the product as perceived

by the customer

- Creative value concept design (Lee

and Park, 2006): “To develop

products that customers want to

have, target specifications should be

established after collecting and

analysing customer needs.”

- Creative value quality design

(Lee and Park, 2006): “Customer

needs are switched to product

characteristics.”

Value in customer-supplier relationships (dyad) –

“relationship value”

- total episode value = episode value and

relationship value

- direct function and indirect function form bases

for supplier-perceived value

- four types of relationship value: operational

performance, integration-based value, capability-

based value, financial performance

- performance, knowledge, information sharing,

innovations







- Customer function value analysis

(Lee and Park, 2006: “Data is

collected … so that we can clearly

understand the structure of the

problem that should be solved.”

Value in B-to-B markets (triad, network) – “value-

in-exchange”

- value in exchange vs. price; costs plus subjective




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marginal value

- use value, esteem value, cost value, exchange

value

- technical, economic, service, social benefits

- operational performance, integration, capability,

financial performance









Value proposition to the customer – “value-in-

offering”

- value proposition is a statement of the functional,

emotional, self-expressive, and economic

benefits

- value = perceived tangible and intangible

benefits and costs

- Customer’s market value analysis

(Lee and Park, 2006): “Market is a

gathering of products and brands

that can satisfy customer’s needs.”

Service value – “value-in-use”, “value in the

experience”

- multiple dimensions of value-in-use

- the experience of consumption – value in the

experience

- value creation in service-profit chain; past,

current and future experiences

- value creation in the joint sphere in the service

profit chain

- Customer’s satisfaction value

analysis (Lee and Park, 2006):

“How high customer satisfaction

can increase or decrease when

customers experience products or

services.”

- Creative value concept design

(Lee and Park, 2006): “To develop

products that customers want to

have, target specifications should be

established after collecting and

analysing customer needs.”

Consumer value – “multidimensional perceived

value”

- value = perceived benefit or advantage

- perceived value = emotional, social, functional

- consumer value = efficiency, excellence, status,

esteem, play, aesthetics, ethics, spirituality

- consumer’s perceived value and its dimensions

(economic, psychological, social, relationship)

vs. sacrifices

- value is co-created through interaction between

producers and consumers

- Customer’s image value analysis

(Lee and Park, 2006): “The analysis

method of the human multi-

emotions that are felt from images

or feelings of products by

customers.”

Value of a customer to a firm – “relationship value”

- four components of a customer’s engagement

value with a firm: customer lifetime value;

customer referral value; customer influencer

value; customer knowledge value

- net present value

- the economic value of customers is an output of

the value-creating processes

- customers as valuable assets: economic value and

maintaining existing customers are often more

profitable than winning new ones.












Table 2. Eight alternative views on value linked with tools and methods in creative value design

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Industrial and customer view on value

As the answer to the third research question, the industrial and customer view on value based on

goods-dominant logic and service-dominant logic are presented in Table 3. In goods-dominant

logic, the creator of value is a firm linked with supplier’s and customer’s supply chain, and in

service-dominant logic, the creator of value is a firm, network partners, and customers (Vargo et

al., 2008). Ramírez (1999) presented two views of value production, namely industrial view and

co-productive view. The industrial view is based on Porter’s (1985) value chain, where value is

added. Values are ‘objective’ (exchange), and ‘subjective’ (utility). In co-productive view,

values are co-invented, combined and reconciled, and values are ‘contingent’, and ‘actual’.

According to Ramírez (1999), value co-production emphasizes the roles of economic actors to a

single counterpart and to different counterparts. Grönroos (2011) developed a “value-in-use”

creation model clarifying the roles of service providers and customers in value creation. In the

production phase, service provider is a value facilitator; in the interaction phase, customer

participates as a co-producer in the joint production process and the provider participates as co-

creator of value with the customer; and in customer’s value creation phase customer is and

independent value creator.

Goods-dominant logic Service-dominant logic

Industrial view on value:

value added

(manufacturer’s view)

Industrial view on value:

co-invented, co-

production

(manufacturer’s and B-to-

B customer’s view)

Customer view on value:

co-production, co-creation,

value creation

Use value

-----

Value-in-exchange Value-in-exchange Value-in-use

Value-in-offering Relationship value Multidimensional perceived

value

Value proposition Value in the experience

Table 3. Industrial and customer view on value including alternative views on value

The industrial view on value has a manufacturer’s view on value, where use value is

transformed into value-in-exchange, value-in-offering, and value proposition. In B-to-B

markets, industrial view emphasizes value-in-exchange and relationship value targeting co-

invention and co-production. In customer view on value, value-in-use, multidimensional

perceived value and value in the experience are subjective, and value is produced by co-

production, co-creation or customer’s own value creation.

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Mustak et al. (2013) synthesized extant research on customer participation and value creation.

Value outcomes for the seller were economic value, relationship value, value related to

innovation and development, and negative value outcomes. Value outcomes for the customer

were superior value though better fit of the offering, economic value, and skill enhancement to

accrue value from an offering. Those findings partly support the results in Table 3.

Concluding statements on value design

As a conclusion and the answer to the fourth research question, the following concluding

statements on value design are suggested based on the eight alternative views on value and tools

and methods in creative value design supported by the previous studies. The concluding

statements provide directions for the business managers what they should do to create value for

the customers (cf. Sánzhes-Fernández and Iníesta-Bonillo, 2006).

P1: When targeting competitive advantage, competitive position in an industry and

total revenue, the predefined customers’ needs have to be satisfied in product offering (“value-

in-offering”) by product design and quality of components including design in the value chain in

order to create value added and superior value to the customers in the form of lower prices or

unique benefits (“value-in-exchange”) (cf. Lee-Mortimer, 1994).

P2: When creating product offering by differentiation and customization, customer’s

needs have to be analysed based on collected data, and the customers’ tangible, social,

emotional and other needs and perceptions of the product have to be incorporated into the

product as attributes (“value-in-offering”) in order to create value (“value-in-use”) to the

customers (cf. Miller et al., 2005; McEachern and Schröder, 2004).

P3: When co-inventing a product solution in a dyad customer-supplier relationship,

customer’s requirements and functions have to be analysed in order to understand the structure

of the problem to be solved and to co-produce searched total episode value (“relationship

value”) (performance, knowledge, information, and innovations) (cf. Barry and Terry, 2008).

P4: When co-inventing a product offering to B-to-B markets (triad, network), the

customer’s structure of the problem should be understood in order to that it could be solved by

integrating design and customer’s business which emphasizes the searched value (“value-in-

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exchange”) (product, operational, integration, capability, financial performance) (cf. Abecassis-

Moedas, 2006; Mascarenhas et al., 2004).

P5: When creating a competitive value proposition statement (“value-in-offering”) to

the customers, their needs and experiences have to be analysed including functional, emotional,

self-expressive and economic benefits and integrate them into the product attributes by design in

order to satisfy customers (cf. Rintamäki et al., 2007).

P6: When creating a service offering to the customers, data from customers’

experiences and needs on services have to be collected and analyzed in order to find out how

customer satisfaction can be achieved by co-creating service elements with customers in the

service profit chain emphasizing multiple dimensions of “value-in-use” and “value in the

experience” (cf. Teixeira et al., 2012; Edvardsson et al., 2010).

P7: When co-creating the product offering through interaction between producers and

consumers, their multidimensional and multi-emotion perceptions of value (“multidimensional

perceived value”), images and feelings of products and services (economic, psychological,

social, functional) have to be incorporated into the design of products and services (cf. Roig et

al., 2006).

P8: When increasing the value of the customers (“relationship value”) to a firm as

valuable assets, it is important to co-invent products that satisfy existing customers’ needs and

problems to be solved (cf. Tukel and Dixit, 2013).

Discussion and implications

The definitions of value indicated the output value derived from the product, offering, brand,

service or the output from the value creation processes or customers’ as assets. When evaluating

the contribution the paper, the following aspects could be raised. The eight alternative views on

value give an overview on the theoretical discussion on value covering the last decades both

from the supplier’s and customer’s point of view. The eight views also indicate how the values

differ when comparing the views of the manufacturer/supplier to the business customer and the

consumer. The understanding of alternative views on value is important in the value system

including supplier’s suppliers and business customer’s customers. Moreover, the understanding

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of the alternative views on value is important when moving from good’s dominant logic to

service dominant logic in the same value system (cf. Vargo et al., 2008).

As to managerial implications, the results provide ideas for the product and service designers on

how to increase the value by design, when the searched value is first explored and understood.

The results help business managers to make better decisions when analysing, planning, and

implementing actions to increase the value for various actors in the value system.

The results based on the tools and methods in creative value design (Lee and Park, 2006) linked

with alternative views on value are tentative. However, the results offer ideas for the business

managers and the designers, how value and design could be linked both in theory and in

practice. The secondary data emphasized the articles and books published mostly in 1990’s and

2000’s, which made the analysis “thinner” and biased compared to the articles from previous

decades. A deeper evolutionary analysis of value would also be beneficial from the theoretical

point of view in further research.

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