Customer Value Formation in Practice: A Practice-Theoretical Approach

This thesis introduces a practice-theoretical approach to understanding customer value formation to be used in the field of service marketing and management. In contrast to current studies trying to understand value formation by analysing customers as independent actors and thinkers, it is in this work suggested that customer value formation can be better understood by analysing how value is formed in the practices and contexts of the customers. The theoretical approach developed in this thesis is applied in an empirical study of family cruises. The theoretical analysis in this thesis results in a new approach for understanding customer value formation. Customer value is, according to this new approach, something that is formed in practice, meaning that value is formed in constellations of the customer and contextual elements like tools, physical spaces and contextually embedded images and know-how. This view is different from the current views that tend to see value as subjectively created, co-created, perceived or experienced by the customer. The new approach has implications on how we view customer value, but also on the methods and techniques we can use to understand customer value in empirical studies. It is also suggested that services could in fact be reconceptualised as practices. According to the stance presented in this thesis the empirical analysis of customer value should not focus on individual customers, but should instead take the contextual entity of practices as its unit of analysis. Therefore, ethnography is chosen as a method for exploring how customer value is formed in practice in the case of family cruises on a specific cruise vessel. The researcher has studied six families, as well as the context of the cruise vessel with various techniques including non-participant observation, participant observation and interviews in order to create an ethnographic understanding of the practices carried out on board. Twenty-one different practices are reported and discussed in order to provide necessary insight to customer value formation that can be used as input for service development.

Time and Location as Customer Perceived Value Drivers

Since the emergence of service marketing, the focus of service research has evolved. Currently the focus of research is shifting towards value co-created by the customer. Consequently, value creation is increasingly less fixed to a specific time or location controlled by the service provider. However, present service management models, although acknowledging customer participation and accessibility, have not considered the role of the empowered customer who may perform the service at various locations and time frames. The present study expands this scope and provides a framework for exploring customer perceived value from a temporal and spatial perspective. The framework is used to understand and analyse customer perceived value and to explore customer value profiles. It is proposed that customer perceived value can be conceptualised as a function of technical, functional, temporal and spatial value dimensions. These dimensions are suggested to have value-increasing and value-decreasing facets. This conceptualisation is empirically explored in an online banking context and it is shown that time and location are more important value dimensions relative to the technical and functional dimensions. The findings demonstrate that time and location are important not only in terms of having the possibility to choose when and where the service is performed. Customers also value an efficient and optimised use of time and a private and customised service location. The study demonstrates that time and location are not external elements that form the service context, but service value dimensions, in addition to the technical and functional dimensions. This thesis contributes to existing service management research through its framework for understanding temporal and spatial dimensions of perceived value. Practical implications of the study are that time and location need to be considered as service design elements in order to differentiate the service from other services and create additional value for customers. Also, because of increased customer control and the importance of time and location, it is increasingly relevant for service providers to provide a facilitating arena for customers to create value, rather than trying to control the value creation process. Kristina Heinonen is associated with CERS, the Center for Relationship Marketing and Service Management at the Swedish School of Economics and Business Administration

Understanding Customer Loyalty and Disloyalty The Effect of Loyalty-Supporting and -Repressing Factors (first edition sold out, 'print on demand' 60 €)

Customer loyalty has been a central topic of both marketing theory and practice for several decades. Customer disloyalty, or relationship ending, has received much less attention. Despite the close relation between customer loyalty and disloyalty, they have rarely been addressed in the same study. The thesis bridges this gap by focusing on both loyal and disloyal customers and the factors characterising them. Based on a qualitative study of loyal and disloyal bank customers in the Finnish retail banking market, both factors that are common to the groups and factors that differentiate between them are identified. A conceptual framework of factors that affect customer loyalty or disloyalty is developed and used to analyse the empirical data. According to the framework, customers’ loyalty status (behavioural and attitudinal loyalty) is influenced by positive, loyalty-supporting, and negative, loyalty-repressing factors. Loyalty-supporting factors either promote customer dedication, making the customer want to remain loyal, or act as constraints, hindering the customer from switching. Among the loyalty-repressing factors it is especially important to identify those that act as triggers of disloyal behaviour, making customers switch service providers. The framework further suggests that by identifying the sources of loyalty-supporting and -repressing factors (the environment, the provider, the customer, the provider-customer interaction, or the core service) one can determine which factors are within the control of the service provider. Attitudinal loyalty is approached through a customer’s “feeling of loyalty”, as described by customers both orally and graphically. By combining the graphs with behavioural loyalty, seven customer groups are identified: Stable Loyals, Rescued Loyals, Loyals at Risk, Positive Disloyals, Healing Disloyals, Fading Disloyals, and Abrupt Disloyals. The framework and models of the thesis can be used to analyse factors that affect customer loyalty and disloyalty in different service contexts. Since the empirical study was carried out in a retail bank setting, the thesis has managerial relevance especially for banks. Christina Nordman is associated with CERS, Center for Relationship Marketing and Service Management at the Swedish School of Economics and Business Administration. The doctoral thesis is part of the Göran Collert Research Project in Customer Relationships and Retail Banking and has been funded by The Göran Collert Foundation.

Fading Customer Relationships

This dissertation is based on the assumption that fading customer relationships are important phenomena to understand in order for companies to prevent a future relationship termination, manage a desired relationship termination, or manage the situation where the relationship strength temporarily or permanently has weakened but where the customer still stays with the same service provider. It is assumed that fading could take different forms and develop through a range of different processes. The purpose of the thesis is therefore to define and describe fading, reveal different types of fading relationship processes, and discuss the dynamics of these processes. In services literature there is a lack of research focusing on the weakening of customer relationships. Fading therefore represents a new approach to understanding issues related to the ending of customer relationships. A fading relationship process could precede a relationship ending, but could also represent a temporal weakening of the relationship without leading to termination. It thus distinguishes the concept from other concepts within ending research which focus solely on relationships that have been terminated, taking a larger aspect of the relationship into account (as a relationship could build on constant changes). A pilot study created an understanding of difficulties related to understanding and detecting fading customer relationship, which led to a follow-up study incorporating qualitative interviews in relationship dyads characterised as fading with both private banking customers and their respective financial advisor. The focus remained on the understanding of the fading process resulting in a model for analysing different types of fading processes. Four types of fading processes were also revealed; the crash landing process, the altitude drop process, the fizzle out process and the try out process. The dissertation contributes to a broadened understanding of different types of fading processes within the research area of ending relationships emphasising the dynamic aspects of the phenomenon. Managerial implications include the management of different types of fading processes and also the understanding of the financial advisor’s role in influencing the development of these processes. Helena Åkerlund is associated with CERS, the Centre for Relationship Marketing and Service Management at Hanken, Swedish School of Economics and Business Administration, Helsinki

The Impact of New Capital Requirements on the Portfolio Decisions of Finnish Pension Institutions

This paper examines the potential impact of new capital requirements on asset allocations of Finnish pension institutions. We describe the new requirements and consider portfolio construction to minimize regulatory capital, given the investor’s preferred level of expected return. Results identify portfolio transactions that enhance expected return without increasing capital needs. Regulation calls for portfolio diversification and prudence in management, but this paper shows that market participants can exploit inconsistencies in regulation. Possible future consequences include capital outflows from the pension system and an unintended decrease in pre-funding of old-age pensions.

Key Account Management and Quality in Business-to-Business Relationships

What are the main elements of successful Key Account Management (KAM)? What is the nature of quality for the company and for the individual in business-to-business relationships? What kind of managerial practices are required at the company and individual level in Key Account Management? This paper focuses on these central aspects of KAM. It describes the main elements of KAM, which is a systematic marketing management approach in the business-to-business context with the objective to build profitable and long-lasting relationships with major accounts. Although paying customers in the business-to-business market are organizations, they are always represented by individuals. Thus, successful KAM requires appropriate handling of both the organizational and the individual levels. This paper describes the nature of quality for the company and for the individual in business-to-business relationships. As a synthesis, this paper suggests a framework for KAM practices deploying the main elements of KAM and the company and individual levels of business-to-business relationships. The weakness of the traditional quality management approach is that it pays little, if any, attention to customer importance. By providing similar quality to each customer, more important customers are penalized and less important customers are rewarded. This paper broadens the traditional quality management approach by introducing the concept of targeted quality based on customer importance.

Rethinking Service Companies’ Business Logic: Do We Need a Customer-Dominant Logic as a Guideline?

Purpose –This paper explores and expands the roles of customers and companies in creating value by introducing a new a customer-based approach to service. The customer’s logic is examined as being the foundation of a customer-based marketing and business logic. Design/methodology/approach – The authors argue that both goods-dominant logics and service-dominant logics are provider-dominant. Contrasting the customer-dominant logic with provider-dominant logics, the paper examines the creation of service value from the perspectives of value-in-use, the customer’s own context, and the customer’s experience of service. Findings –Moving from a provider-dominant logic to a customer-dominant logic uncovered five major challenges to service marketers: Company involvement, company control in co-creation, visibility of value creation, locus of customer experience, and character of customer experience. Research limitations/implications – The paper is exploratory. It presents and discusses a conceptual model and suggests implications for research and practice. Practical implications –Awareness of the mechanisms of customer logic will provide businesses with new perspectives on the role of the company in their customer’s lives. We propose that understanding the customer’s logic should represent the starting-point for the marketer’s business logic. Originality/value – The paper increases the understanding of how the customer’s logic underpins the customer-dominant business logic. By exploring consequences of applying a customer-dominant logic, we suggest further directions for theoretical and empirical research.

Requirements for information management system in agricultural contracting

Menneinä vuosikymmeninä maatalouden työt ovat ensin koneellistuneet voimakkaasti ja sittemmin mukaan on tullut automaatio. Nykyään koneiden kokoa suurentamalla ei enää saada tuottavuutta nostettua merkittävästi, vaan työn tehostaminen täytyy tehdä olemassa olevien resurssien käyttöä tehostamalla. Tässä työssä tarkastelun kohteena on ajosilppuriketju nurmisäilörehun korjuussa. Säilörehun korjuun intensiivisyys ja koneyksiköiden runsas määrä ovat työnjohdon kannalta vaativa yhdistelmä. Työn tavoitteena oli selvittää vaatimuksia maatalouden urakoinnin tueksi kehitettävälle tiedonhallintajärjestelmälle. Tutkimusta varten haastateltiin yhteensä 12 urakoitsijaa tai yhteistyötä tekevää viljelijää. Tutkimuksen perusteella urakoitsijoilla on tarvetta tietojärjestelmille.Luonnollisesti urakoinnin laajuus ja järjestelyt vaikuttavat asiaan. Tutkimuksen perusteella keskeisimpiä vaatimuksia tiedonhallinnalle ovat: • mahdollisimman laaja, yksityiskohtainen ja automaattinen tiedon keruu tehtävästä työstä • karttapohjaisuus, kuljettajien opastus kohteisiin • asiakasrekisteri, työn tilaus sähköisesti • tarjouspyyntöpohjat, hintalaskurit • luotettavuus, tiedon säilyvyys • sovellettavuus monenlaisiin töihin • yhteensopivuus muiden järjestelmien kanssa Kehitettävän järjestelmän tulisi siis tutkimuksen perusteella sisältää seuraavia osia: helppokäyttöinen suunnittelu/asiakasrekisterityökalu, toimintoja koneiden seurantaan, opastukseen ja johtamiseen, työnaikainen tiedonkeruu sekä kerätyn tiedon käsittelytoimintoja. Kaikki käyttäjät eivät kuitenkaan tarvitse kaikkia toimintoja, joten urakoitsijan on voitava valita tarvitsemansa osat ja mahdollisesti lisätä toimintoja myöhemmin. Tiukoissa taloudellisissa ja ajallisissa raameissa toimivat urakoitsijat ovat vaativia asiakkaita, joiden käyttämän tekniikan tulee olla toimivaa ja luotettavaa. Toisaalta inhimillisiä virheitä sattuu kokeneillekin, joten hyvällä tietojärjestelmällä työstä tulee helpompaa ja tehokkaampaa.

Incentive mechanism to control customer buy-down behaviour

Airlines have successfully practiced revenue management over the past four decades and enhanced their revenue. Most of the traditional models that are applied assume that customers buying a high-fare class ticket will not purchase a low-fare class ticket even if it is available. This is not a very realistic assumption and has led to revenue leakage due to customers exhibiting buy-down behaviour. This paper aims at devising a suitable incentive mechanism that would incite the customer to reveal his nature. This helps in reducing revenue leakage. We show that the proposed incentive mechanism is profitable to both the buyer and seller and hence ensures the buyers participation in the mechanism. Journal of the Operational Research Society (2011) 62, 1566-1573. doi:10.1057/jors.2010.57 Published online 11 August 2010

Product intelligence in warehouse management: A case study

The need for more flexible, adaptable and customer-oriented warehouse operations has been increasingly identified as an important issue by today's warehouse companies due to the rapidly changing preferences of the customers that use their services. Motivated by manufacturing and other logistics operations, in this paper we argue on the potential application of product intelligence in warehouse operations as an approach that can help warehouse companies address these issues. We discuss the opportunities of such an approach using a real example of a third-party-logistics warehouse company and we present the benefits it can bring in their warehouse management systems. © 2013 Springer-Verlag.

Technology management tools: Generalization, integration and configuration

Managers in technology-intensive businesses need to make decisions in complex and dynamic environments. Many tools, frameworks and processes have been developed to support managers in these situations, leading to a proliferation of such approaches, with little consistency in terminology or theoretical foundation, and a lack of understanding of how such tools can be linked together to tackle management challenges in an integrated way. As a step towards addressing these issues, this paper proposes the concept of an integrated 'toolkit', incorporating generalized forms of three core technology management tools that support strategic planning (roadmapping, portfolio analysis and linked analysis grids). © 2006 World Scientific Publishing Company.

The ways in which new public management ideas impact upon the administrative culture of 'street-level' bureaucrats and professionals working within Irish social policy

The conventional meaning of culture is ‘widely shared and strongly held values’ of a particular group or society (Bradley and Parker, 2006: 89). Culture is not a rigid concept; it can be influenced or altered by new ideas or forces. This research examines the ways in which one set of ideas in particular, that is, those associated with New Public Management, have impacted upon the administrative culture of 'street-level' bureaucrats and professionals within Irish social policy. Lipsky (1980: 3) defined 'street-level' bureaucrats as ‘public service workers who interact directly with citizens in the course of their jobs, and who have substantial discretion in the execution of their work’. Utilising the Competing Values Framework (CVF) in the analysis of eighty three semi-structured interviews with 'street-level' bureaucrats and professionals, an evaluation is made as to the impact of NPM ideas on both visible and invisible aspects of administrative culture. Overall, the influence of NPM is confined to superficial aspects of administrative culture such as; increased flexibility in working hours and to some degree job contracts; increased time commitment; and a customer service focus. However, the extent of these changes varies depending on policy sector and occupational group. Aspects of consensual and hierarchical cultures remain firmly in place. These coincide with features of developmental and market cultures. Contrary to the view that members of hierarchical and consensual culture would pose resistance to change, this research clearly illustrates that a very large appetite for change exists in the attitudes of 'street-level' bureaucrats and professionals within Irish social policy, with many of them suggesting changes that correspond to NPM ideas. This study demonstrates the relevance of employing the CVF model as it is clear that administrative culture is very much a dynamic system of competing and co-existing cultures.

Bio-folio: applying portfolio theory to biodiversity

Genes, species and ecosystems are often considered to be assets. The need to ensure a sufficient diversity of this asset is being increasingly recognised today. Asset managers in banks and insurance companies face a similar challenge. They are asked to manage the assets of their investors by constructing efficient portfolios. They deliberately make use of a phenomenon observed in the formation of portfolios: returns are additive, while risks diversify. This phenomenon and its implications are at the heart of portfolio theory. Portfolio theory, like few other economic theories, has dramatically transformed the practical work of banks and insurance companies. Before portfolio theory was developed about 50 years ago, asset managers were confronted with a situation similar to the situation the research on biodiversity faces today. While the need for diversification was generally accepted, a concept that linked risk and return on a portfolio level and showed the value of diversification was missing. Portfolio theory has closed this gap. This article first explains the fundamentals of portfolio theory and transfers it to biodiversity. A large part of this article is then dedicated to some of the implications portfolio theory has for the valuation and management of biodiversity. The last section introduces three development openings for further research.