Recent Developments (1990s)

In their review of the value literature, Payne and Holt (2001) emphasize perspectives developed in the 1990s as ‘recent developments’. These include: creation and delivery of superior customer value, customer value to the firm, and customer-perceived value. For chronological reasons on the one hand, and because they ground the latest developments on value on the other hand, the concepts of value systems and shareholder value also appear in the present section contrary to Payne and Holt’s initial classification (respectively presented as ‘key-influences-1980s’ and ‘newest developments-late 1990s’).

3.2.2.1. Creation and Delivery of Superior Customer Value

In the 1990s, a stream of literature anchored both in marketing (customer-oriented approach to value) and in strategy (role of value in creating a competitive advantage) emphasized the linkages between customer value and organizational profitability, performance, and competitive advantage. The ability of a company to provide superior value to its customers has recently become a means of differentiation and a source of sustainable competitive advantage (Ravald and Grönroos 1996). Thus, success depends on how organizations can deliver what is of value to customers. According to Payne and Holt (2001), this approach is closely related to the market orientation strategy. Accordingly, Stoelhorst and Van Raaij (2004) underline the importance of market orientation approaches in value generation processes and in differential customer value in their review of theories explaining performance differentials between firms. Several pieces of work have focused on understanding the phenomenon of creation or generation of value vs. the phenomenon of its capture, extraction, or migration, extending the analysis to the phenomenon of value exchange, value distribution and value sharing among parties (e.g., Bowman and Ambrosini 2000; Lepak et al. 2007; Prahalad and Venkat 2004; Sharma et al. 2001; Wilson and Möller 1992).

3.2.2.2. Customer Value to the Firm and Customer Relationship Management

The value of the customer to the firm focuses on the value outcome that can be derived from providing and delivering superior customer value (Payne and Holt 2001). A key concept that forms part of this perspective is the customer lifetime value (CLV) defined by Reichheld and Sasser (1990) as ‘the net present value of the future profit flow over a customer’s lifetime’ (Payne and Holt 2001: 167). According to Flint et al. (2002), the customer value concept founds the growing development of customer relationship

management (CRM). Indeed, the idea of portfolio management in which customers are dealt with according to their importance to the firm lies in the recognition that different customer segments have different value. Understanding the CLV un/profitability of different segments will enable organizations to focus on the profitable customers (Payne and Holt 2001). Finally, the concept of customer value to the firm must be clearly distinguished from the customer value concept (presented in the following subsection), as it refers to ‘quantifying the monetary worth of individual customers to the organization’ when customer value represent ‘what customers want and believe they can get from buying and using a seller’s product’ (Woodruff 1997: 140).

3.2.2.3. From Satisfaction to Customer Value (CustomerDesired and -Perceived Value)

The concept of desired value refers to ‘what customers want to have happen when interacting with a supplier and/or using the supplier’s product or service’ (Flint et al. 1997;

2002: 103). This concept is similar to the notion of customer desires in the satisfaction literature as both concepts describe evaluative judgments about products, and place special importance on the use situation (Flint et al. 2002; Woodruff 1997). An extension of the traditional mechanism for listening to the customer’s satisfaction led to the development of the customer-perceived value notion (Payne and Holt 2001). This concept intends to comprehend what in products and services help customers to achieve their organizational goals and purposes (Anderson and Narus 1998; Parasuraman 1997; Ravald and Grönroos 1996). Anderson and Narus’s (1998) concept of customer value model is based on the assessment, in monetary terms, of the costs and benefits of a given market offering in a particular customer application. They are described as a representation of the worth of what the supplier is doing or could do for its customers (Anderson and Narus 1998). According to Lapierre (2000), some researchers have presented perceived value as only made of benefits (e.g., Berger and Huntington 2002). In this perspective, customer-perceived value

results from the assessment of what customers perceive they have received from a seller in a specific purchase or use situation (Flint et al. 2002).

Yet, most authors agree that the notion of sacrifice should also be taken into account and see perceived value as a trade-off between perceived benefits and perceived sacrifices experiences (or positive and negative consequences) within use situations (Flint et al. 2002;

Payne and Holt 2001). The literature generally agrees that the benefit side of value includes more than quality and the sacrifice side includes more than price. Specifically, Ravald and Grönroos (1996: 22) present customer-perceived value as the ratio of perceived benefits relative to perceived sacrifices when benefits are related to ‘a combination of physical attributes, service attributes and technical support available in relation to the particular use of the product’ and when sacrifices include ‘all costs faced by the buyer’ (such as the purchase price, acquisition costs, transportation, installation, order handling, repairs and maintenance, risk of failure or poor performance). In addition, non-monetary costs (related to the time/effort/energy and conflict invested by the customer to obtain the products or services or to establish a relationship with a supplier) are as important as monetary costs (Lapierre 2000). Lapierre also points out that perceived value is subjective and individual, and therefore varies among consumers. In addition, a person may indeed evaluate the same product differently on different occasions (Lapierre 2000).

The notion of perceived-value based on a trade-off is closely associated to the means-end theory (and means-end models) in addition to the hierarchical nature of value. In this framework, benefits and sacrifices are types of consequences of product, service or supplier use that occur in specific situations (Flint et al. 2002). Works in the area of consumer research intend to understand buying behaviors in the purchase situation through a means-end chain. Authors building upon this idea include Zeithaml (1988) who focuses on linkages between price, perceived quality and perceived value, and Woodruff (1997) with his customer value hierarchy model (linking desired product/service attributes and performances to desired consequences in use situations, and ultimately to the customer’s

goals and purposes). However, in emphasizing the central role of the customer, the perceived-value concept does not include the potential costs and gains to organizations seeking to create and deliver value (Payne and Holt 2001). Other approaches counterbalance this gap in focusing on another single stakeholder (e.g., the shareholder), or on multiple stakeholders as one finds in the network perspective.

3.2.2.4. Another Stakeholder in Value Assessment: the Shareholder

There is little consensus in the literature on which is the best measure for shareholder value. Some authors point out that customer value is a necessary but not sufficient condition for shareholder value, and that ‘high levels of customer satisfaction can be achieved by an organization without being translated into adequate returns for shareholders’ (Payne and Holt 2001: 169). Yet, others researchers argue that customer value drives shareholder value and its maximization. According to Payne and Holt, this stream of research is important, despite a lack of consensus, because it is a first step in the progressive introduction of other stakeholders into the consideration of value.

3.2.2.5. From Value Systems to Value Networks

During the 1990s, a shift in the analysis of value creation has been observed from the company’s level to the network’s level. At the firm level, the notion of value system (aligned with the value chain concept) helped in understanding how a number of organizational processes can lead to customer value noticeably with the development of relationship chain and relationship management chain (Payne and Holt 2001: 165). At the interorganizational level, several models and frameworks have contributed to a better understanding of dyadic relationships between firms in business markets (e.g., Anderson and Narus 1990; Dwyer et al. 1987; Hallen et al. 1991). Among the few publications

focusing on value creation within dyadic relationships, Walter et al. (2003) proposed a framework describing value creating functions in a buyer–seller relationship from the supplier’s perspective. The authors distinguished between direct functions (i.e., profit, volume, and safeguard functions creating value for a supplier within a given relationship) and indirect functions of value creation (i.e., innovation, market, access, and scout functions which create value for the supplier either in the future of the relationship under scrutiny or in other connected relationships). Doing so, Walter et al. (2003) have integrated to some extent the idea of considering dyadic relationships in a network context as is increasingly suggested in the literature (e.g., Achrol 1997; Anderson et al. 1994).

According to Anderson et al. (1994), this shift in the study of business relationships from dyads towards networks has been initiated by organizational theorists and scholars associated with the International Marketing and Purchasing Group. Business networks are regarded either as sets of connected firms or alternatively, as sets of connected relationships between firms (Anderson et al. 1994: 1). Regarding value creation in a network context, the concept of value constellation was developed by Norman and Ramirez (1993) in opposition to Porter’s value chain proposition. In their approach, strategy is not perceived as a matter of ‘positioning a fixed set of activities along a value chain’ but of ‘developing mutual value through reciprocal interactive relationships between organizations and stakeholders in a constellation or network’ (Payne and Holt 2001: 165). The concept of value constellation is defined as a value-creating system in which economic actors such as suppliers, business partners, allies, and customers co-produce value (Blankenburg Holm et al. 1999; Payne and Holt 2001). Value constellation precedes newest developments on value-creating networks.