Customer Energy in Relationships

All companies have a portfolio of customer relationships. From a managerial standpoint the value of these customer relationships is a key issue. The aim of the paper is to introduce a conceptual framework for customers’ energy towards a service provider. Customer energy is defined as the cognitive, affective and behavioural effort a customer puts into the purchase of an offering. It is based on two dimensions: life theme involvement and relationship commitment. Data from a survey study of 425 customers of an online gambling site was combined with data about their individual purchases and activity. Analysis showed that involvement and commitment influence both customer behaviour and attitudes. Customer involvement was found to be strongly related to overall spending within a consumption area, whereas relationship commitment is a better predictor of the amount of money spent at a particular company. Dividing the customers into four different involvement / commitment segments revealed differences in churn rates, word-of-mouth, brand attitude, switching propensity and the use of the service for socializing. The framework provides a tool for customer management by revealing differences in fundamental drivers of customer behaviour resulting in completely new customer portfolios. Knowledge of customer energy allows companies to manage their communication and offering development better and provides insight into the risk of losing a customer.

Exploring Customer Value Formation: A Customer Dominant Logic Perspective

This paper extends current discussions about value creation and proposes a customer dominant value perspective. A customer-dominant marketing logic positions the customer in the center, rather than the service provider/producer or the interaction or the system. The focus is shifted from the company´s service processes involving the customer, to the customer´s multi-contextual value formation, involving the company. It is argued that value is not always an active process of creation; instead value is embedded and formed in the highly dynamic and multi-contextual reality and life of the customer. This leads to a need to look beyond the current line of visibility where visible customer-company interactions are focused to the invisible and mental life of the customer. From this follows a need to extend the temporal scope, from exchange and use even further to accumulated experiences in the customer´s life. The aim of this paper is to explore value formation from a customer dominant logic perspective. This is done in three steps: first, value formation is contrasted to earlier views on the company’s role in value creation by using a broad ontologically driven framework discussing what, how, when, where and who. Next, implications of the proposed characteristics of value formation compared to earlier approaches are put forward. Finally, some tentative suggestions of how this perspective would affect marketing in service companies are presented. As value formation in a CDL perspective has a different focus and scope than earlier views on value it leads to posing questions about the customer that reveals earlier hidden aspects of the role of a service for the customer. This insight might be used in service development and innovation.

Customer Relationship Dissolution - What Do We Know and What Do We Need to Know?

Our paper can be seen as a supplement to Halinen-Kaila and Tähtinen' s (2000) review of different direct research approaches on the ending of exchange relationships. Our purpose is to illuminate the borderline between research explicitly focusing on ending and research implicitly considering ending of relationships. Another purpose is to give an overview of how researchers within the Nordic School of Service Management and Nordic School of Relationship Marketing have approached customer relationship ending. A third purpose is to put forward a managerial perspective and managerial issues related to relationship ending. Finally we present some conclusions regarding further research avenues concerning relationship ending.

What Can A Service Logic Offer Marketing Theory

The goods-dominated marketing model has major shortcomings as a guiding marketing theory. Its marketing mix approach is mainly geared towards buying and does not include consumption as an integral part of marketing theory. Although it is during the process of consuming goods and services that value is generated for customers and the foundation for repeat purchasing and customer relationships are laid, this process is left outside the scope of marketing. The focus in service marketing is not on a product but on interactions in service encounters. Consumption has become an integral part of a holistic marketing model. Other than standardized goods-based value propositions can be better understood when taking a servicebased approach. It is concluded that marketing based on a goods logic is but a special case of marketing based on a service logic and applicable only in certain contexts with standardized products.

Value of Image in Service

Purpose This paper takes a customer view on corporate image and value, and discusses the value of image in service. We propose a model depicting how the customer’s corporate brand image affects the customer’s value-in-use. Methodology/approach The paper represents conceptual development on customers’ value and image construction processes. By integrating ideas and elements from the current service and branding literature a model is proposed that extends current views on how value-in-use emerges. Findings From a current service perspective it is the customer who makes value assessments when experiencing service. Similarly, if branding is a concept used to denote the service provider’s intentions and attempts to create a corporate brand, image construction is the corresponding process where the customer constructs the corporate image. This image construction process is always present both in service interactions and in communication and has an effect on the customer’s value-in-use. We argue that two interrelated concepts are needed to capture corporate image construction and dynamics and value-in-use – the image-in-use and image heritage. Research implications The model integrates two different streams of research pointing to the need to consider traditional marketing communication and service interactions as inherently related to each other from the customer’s point of view. Additionally the model gives a platform for understanding how value-in-use emerges over time. New methodological approaches and techniques to capture image-in-use and image heritage and their interplay with value-in-use are needed. Practical implications The company may not be able to control the emergence of value-in-use but may influence it, not only in interactions with the customer but also with pure communication. Branding activities should therefore be considered related to service operations and service development. Additionally, practitioners would need to apply qualitative methods to understand the customer’s view on image and value-in-use. Originality/value The paper presents a novel approach for understanding and studying that the customer’s image of a company influences emergence of value-in-use. The model implies that the customer’s corporate image has a crucial role for experienced value-in-use.

Dimensionality of quality from a customer perspective in the wood industry

The research analyzes product quality from a customer perspective in the case of the wood products industry. Of specific interest is to understand better how environmental quality is perceived from a customer perspective. The empirical material used comprises four data-sets from Finland, Germany and the UK, collected during 1992 2004. The methods consist of a set of quantitative statistical analyses. The results indicate that perceived quality from a customer perspective can be presented using a multidimensional and hierarchical construct with tangible and intangible dimensions, that is common to different markets and products. This applies in the case of wood products but also more generally at least for some other construction materials. For wood products, tangible product quality has two main sub-dimensions: technical quality and appearance. For product intangibles, a few main quality dimensions seem be detectable: Quality of intangibles related to the physical product, such as environmental issues and product-related information, supplier-related characteristics, and service and sales personnel behavior. Environmental quality and information are often perceived as being inter-related. Technical performance and appearance are the most important considerations for customers in the case of wood products. Organizational customers in particular also clearly consider certain intangible quality dimensions to be important, such as service and supplier reliability. The high technical quality may be considered as a license to operate , but product appearance and intangible quality provide potential for differentiation for attracting certain market segments. Intangible quality issues are those where Nordic suppliers underperform in comparison to their Central-European competitors on the important German markets. Environmental quality may not have been used to its full extent to attract customers. One possibility is to increase the availability of the environment-related information, or to develop environment-related product characteristics to also provide some individual benefits. Information technology provides clear potential to facilitate information-based quality improvements, which was clearly recognized by Finnish forest industry already in the early 1990s. The results indeed indicate that wood products markets are segmented with regard to quality demands

Marketing and the Logic of Service: Value Facilitation, Value Creation and Co-creation, and Their Marketing Implications

The discussion of a service-dominant logic has made the findings of decades of service marketing research a topic of interest for marketing at large. Some fundamental aspects of the logic such as value creation and its marketing implications are more complex than they have been treated as so far and need to be further developed to serve marketing theory and practice well. Following the analysis in the present article it is argued that although customers are co-producers in service processes, according to the value-in-use notion adopted in the contemporary marketing and management literature they are fundamentally the creators of value for themselves. Furthermore, it is concluded that although by providing goods and services as input resources into customers’ consumption and value-generating processes firms are fundamentally value facilitators, interactions with customers that exist or can be created enable firms to engage themselves with their customers’ processes and thereby they become co-creators of value with their customers. As marketing implications it is observed that 1) the goal of marketing is to support customers’ value creation, 2) following a service logic and due to the existence of interactions where the firm’s and the customer’s processes merge into an integrated joint value creation process, the firm is not restricted to making value propositions only, but can directly and actively influence the customer’s value fulfilment as well and extend its marketing process to include activities during customer-firm interactions, and 3) although all goods and services are consumed as service, customers’ purchasing decisions can be expected to be dependant of whether they have the skills and interest to use a resource, such as a good, as service or want to buy extended market offerings including process-related elements. Finally, the analysis concludes with five service logic theses.

Activityscape Mapping: Consumer Activity Systems as Service Context

Activity systems are the cognitively linked groups of activities that consumers carry out as a part of their daily life. The aim of this paper is to investigate how consumers experience value through their activities, and how services fit into the context of activity systems. A new technique for illustrating consumers’ activity systems is introduced. The technique consists of identifying a consumer’s activities through an interview, then quantitatively measuring how the consumer evaluates the identified activities on three dimensions: Experienced benefits, sacrifices and frequency. This information is used to create a graphical representation of the consumer’s activity system, an “activityscape map”. Activity systems work as infrastructure for the individual consumer’s value experience. The paper contributes to value and service literature, where there currently are no clearly described standardized techniques for visually mapping out individual consumer activity. Existing approaches are service- or relationship focused, and are mostly used to identify activities, not to understand them. The activityscape representation provides an overview of consumers’ perceptions of their activity patterns and the position of one or several services in this pattern. Comparing different consumers’ activityscapes, it shows the differences between consumers' activity structures, and provides insight into how services are used to create value within them. The paper is conceptual; an empirical illustration is used to indicate the potential in further empirical studies. The technique can be used by businesses to understand contexts for service use, which may uncover potential for business reconfiguration and customer segmentation.

Profitable Customer Management: A Study in Retail Banking

The increasing focus of relationship marketing and customer relationship management (CRM) studies on issues of customer profitability has led to the emergence of an area of research on profitable customer management. Nevertheless, there is a notable lack of empirical research examining the current practices of firms specifically with regard to the profitable management of customer relationships according to the approaches suggested in theory. This thesis fills this research gap by exploring profitable customer management in the retail banking sector. Several topics are covered, including marketing metrics and accountability; challenges in the implementation of profitable customer management approaches in practice; analytic versus heuristic (‘rule of thumb’) decision making; and the modification of costly customer behavior in order to increase customer profitability, customer lifetime value (CLV), and customer equity, i.e. the financial value of the customer base. The thesis critically reviews the concept of customer equity and proposes a Customer Equity Scorecard, providing a starting point for a constructive dialog between marketing and finance concerning the development of appropriate metrics to measure marketing outcomes. Since customer management and measurement issues go hand in hand, profitable customer management is contingent on both marketing management skills and financial measurement skills. A clear gap between marketing theory and practice regarding profitable customer management is also identified. The findings show that key customer management aspects that have been proposed within the literature on profitable customer management for many years, are not being actively applied by the banks included in the research. Instead, several areas of customer management decision making are found to be influenced by heuristics. This dilemma for marketing accountability is addressed by emphasizing that CLV and customer equity, which are aggregate metrics, only provide certain indications regarding the relative value of customers and the approximate value of the customer base (or groups of customers), respectively. The value created by marketing manifests itself in the effect of marketing actions on customer perceptions, behavior, and ultimately the components of CLV, namely revenues, costs, risk, and retention, as well as additional components of customer equity, such as customer acquisition. The thesis also points out that although costs are a crucial component of CLV, they have largely been neglected in prior CRM research. Cost-cutting has often been viewed negatively in customer-focused marketing literature on service quality and customer profitability, but the case studies in this thesis demonstrate that reduced costs do not necessarily have to lead to lower service quality, customer retention, and customer-related revenues. Consequently, this thesis provides an expanded foundation upon which marketers can stake their claim for accountability. By focusing on the range of drivers and all of the components of CLV and customer equity, marketing has the potential to provide specific evidence concerning how various activities have affected the drivers and components of CLV within different groups of customers, and the implications for customer equity on a customer base level.

Making Sense of Value and Value Co-Creation in Service Logic

In order to further develop the logic of service, value creation, value co-creation and value have to be formally and rigorously defined, so that the nature, content and locus of value and the roles of service providers and customers in value creation can be unambiguously assessed. In the present article, following the underpinning logic of value-in-use, it is demonstrated that in order to achieve this, value creation is best defined as the customer’s creation of value-in-use. The analysis shows that the firm’s and customer’s processes and activities can be divided into a provider sphere, closed for the customer, and a customer sphere, closed for the firm. Value creation occurs in the customer sphere, whereas firms in the provider sphere facilitate value creation by producing resources and processes which represent potential value or expected value-in use for their customers. By getting access to the closed customer sphere, firms can create a joint value sphere and engage in customers’ value creation as co-creators of value with them. This approach establishes a theoretically sound foundation for understanding value creation in service logic, and enables meaningful managerial implications, for example as to what is required for co-creation of value, and also further theoretical elaborations.