Highlights from customer value literature

During my master’s thesis writing process I have encountered some very interesting literature on customer value. This post is to give some highlights from that area to others and to support my own thesis writing.

Gummerus (2013) serves as a good starting point. Her literature analysis about customer value says that the research can be divided into two main research streams: value creation logic and outcome determination.

Two main literature streams and their substreams. Adjusted from Gummerus (2013).

The first stream contains theories and research on how value is created. Value as firm created has the longest history with its value chains and business processes, but that substream has started to fade as ideas of value as co-created or solely customer created have emerged. Personally I align with the idea that the value is created by the customer themselves as it is the result of their cognition most of all. Outsiders are only able to facilitate that process.

The second research stream is interested in how the value is determined by the customer. Gummerus’ (2013) taxonomy from this research stream has four categories:

1. Benefits vs. sacrifices. Traditional approach to determine gained value is to count the difference in input and output. According to Gummerus (2013) this originated from Zeithaml (1988) article and was related to SERVQUAL measurement development.
2. Means–ends. People have goals and they are using products and services as means to achieve them. Customer value is defined as the consequences that help a customer to achieve their goals (Woodruff & Gardial, 1996).
3. Experience outcomes. Humans are “emotional sensation-seekers” in addition to “logical decision makers” and the holistic experience is used to determine value. There are different types of value. Holbrook (1994, p. 27) defines customer value as “interactive, relativistic preference experience”.
4. Phenomenological. Compared to the previous one, the definition of experience is larger. Here all is based on experiental phenomenon (individual’s “feeling, thinking, wanting, sensing, imagining, and acting”). Value is in the experiences. Gummerus (2013) accredits Service-Dominant logic initiated by Vargo & Lusch (2004) for this.

The latest part of my literature review has been basically expanding my understanding of this second stream on outcome determination. Next up are summaries of Woodruff & Gardial (1996) and Holbrook (1994) whose works I found helpful when thinking customer value as concept.

Woodruff & Gardial (1996) have written a Martineau (1838) kind of handbook for practioners. Instead of guiding their reader to observe morals and manners Woodruff & Gardial (1996) give frameworks and guidance to understand customer value and satisfaction. Insights and methods remain almost the same though.

A value hierarchy (Woodruff & Gardial 1996, p. 65)

Woodruff & Gardial (1996) expand means–ends theory on value determination into a 3-level value hierarchy. The hierarchy starts form product attributes. Interaction consequences with the product are means to achieve desired end-states, which in turn is the highest level in the hierarchy.

In their example of laddering interviewing method (p. 181) a person who who was “concerned about car instrument location” (attributes) was able to tell that it could “distract them from paying attention to the road” (negative consequences) and that would ultimately be in conflict with “family being safe” (desired end-state).

Woodruff & Gardial (1996) argue that these kind of value hierarchies are useful information for product development as they help to 1) prioritise product attributes, 2) move the perspective upwards, and as the upper levels tend to be more stable, 3) they help to guide radical innovation.

I believe that this kind of structure to analyse customer heuristics is useful also in my research and future projects.

Holbrook (1994) has edited a book that builds upon his taxonomy of customer value. The taxonomy is based upon three axioms 1) extrinsic versus intrinsic value, 2) self-oriented versus other-oriented value and 3) active versus reactive value. Based on these differentiating value dimensions eight types of value emerge: efficiency, excellence, politics, esteem, play, aesthetics, morality and spirituality.

A typology of value in consumption experience (Holbrook 1994, p. 45)

Typing value was characteristic for this research substream identified by Gummerus (2013) and Holbrook’s theory is the most widely adapted in marketing literature. With this typology in mind, I can probe wider range of customer value.

Is there other interesting literature that I can recommend? Let’s see..

• Shah et al. (2006) lay out a general path to customer centricity for an organization. What need to be taken care of are organizational culture, structure, processes, and financial metrics.
• Floh et al. (2014) have made an interesting step trying to form universal customer segments based on customer value–loyalty link. They introduce three segments (rationalists, value maximizers and functionalists) that each have different weights on different value types (functional, economical, emotional, social). I would wait longitudinal causal replications before I adapt this segmentation.
• Woodall (2003), Gallarza et al. (2017) and Gummerus (2011, pp. 40–41) all have a big lists of different types of customer value. If you like lists go for them.
• Timonen’s (2002) dissertation in Finnish is scrutinizing consumer everyday sense making and environmental responsibility in choices with qualitative methods. It manages to find heuristics that consumers use when selecting their washing powder. These kind of heuristics are something that I hope to find during my research as well.

Ideologies behind customer value research

During the literature review I have encountered a few cases where the writer has embraced a certain mindset consciously. In most of the cases it goes unnoticed. A rough division between ideologies that are used in the research can be seen through simple Do-Think-Say framework representing a single consumer. I have placed each ideology to the corner where they would base their arguments.

A person does, says and thinks different things. Which of them constitute the reality?

Objectivity, Pragmatism and Behaviorism are first and foremost interested in actual observable universe. Individual’s actions determine what they really value and thus e.g. A/B-testing tells the truth. In organizational literature the objective metric that is used to meassure things is profitability or revenue. Narver & Slater (1990) conclude that “market orientation is an important determinant of profitability”.

Surveys rely on what people say. A good research is able to show causal link between that and what they do. This is all in line with empiricism.

Social constructivism is and interesting stepping stone in literature as it is a move from empiricism to interpretivism. For example Timonen (2002) and Woodruff & Gardial (1996) have taken a subjectivistic stance as they believe that each consumer has their own reality. The shared reality is constructed socially by what they say in the interviews and this is the closest that we can get to their reality.

Other customer value definitions mention interactions (e.g. Holbrook, 1994) pointing us to interactionism, where the value (or reality) is based on interactions rather than objects.

Phenomenology resembles idealism as it bases its view of the world with the subjective mind and experiences. Gummerus (2013) points out that authors of Service-dominant logic were inspired to define value trough phenomenology.

In the end what I believe as the most suitable ideology for my research is interpretivism as it will recognise subjective realities of the customers and thus reveal new information on customer value.

Any thoughts? Pointers? Be sure to tweet them to me @aarneleinonen

This post is the 1st part of a series — me doing my master’s thesis on customer perceived value. Read the next one on methodology “Cultural probes for service design in 2018” here and the last one summarising the results “How do customers perceive value?” here.

References

• Floh, A., Zauner, A., Koller, M., & Rusch, T. (2014). Customer segmentation using unobserved heterogeneity in the perceived-value-loyalty-intentions link. Journal of Business Research, 67(5), 974–982. http://doi.org/10.1016/j.jbusres.2013.08.003
• Gallarza, M. G., Arteaga, F., Chiappa, G. Del, Gil-Saura, I., & Holbrook, M. B. (2017). A multidimensional service-value scale based on Holbrook’s typology of customer value: Bridging the gap between the concept and its measurement. Journal of Service Management, 28(4), 724–762. http://doi.org/https://doi.org/10.1108/JOSM-06-2016-0166
• Gummerus, J. (2011). Customer Value in E-Service : Conceptual Foundation and Empirical Evidence. Ekonomi och samhälle. Hanken School of Economics. Retrieved from http://urn.fi/URN:ISBN:978-952-232-116-9
• Gummerus, J. (2013). Value creation processes and value outcomes in marketing theory. Marketing Theory, 13(1), 19–46. http://doi.org/10.1177/1470593112467267
• Holbrook, M. B. (1994). The Nature of Customer Value: An Axiology of Services in the Consumption Experience. In R. T. Rust & R. L. Oliver (Eds.), Service Quality. New Directions in Theory and Practice (pp. 21–71). Sage Publications.
• Martineau, H. (1838). How to observe morals and manners. New York: Harper & Brothers, 82 Cliff Street.
• Narver, J. C., & Slater, S. F. (1990). The Effect of a Market Orientation on Business Profitability. Journal of Marketing, (October), 20–35. http://doi.org/10.2307/1251757
• Shah, D., Rust, R. T., Parasuraman, A., Staelin, R., & Day, G. S. (2006). The Path to Customer Centricity. Journal of Service Research, 9(2), 113–124. http://doi.org/10.1177/1094670506294666
• Timonen, P. (2002). Pyykillä — Arkinen järkeily ja ympäristövastuullisuus valinnoissa. Helsinki: Kuluttajatutkimuskeskus.
• Vargo, S. L., & Lusch, R. F. (2004). Evolving to a New Dominant Logic for Marketing. Journal of Marketing, 68(1), 1–17. http://doi.org/10.1509/jmkg.68.1.1.24036
• Woodruff, R. B., & Gardial, S. F. (1996). Know your customer: New approaches to understanding customer value and satisfaction (1st ed.). Cambridge, Massachusetts, USA.
• Zeithaml, V. A. (1988). Consumer perceptions of price, quality, and value. Journal of Marketing, 52(3), 2–22. http://doi.org/10.2307/1251446