Value Creation in Professional Service Processes. Propositions for Understanding Financial Value from a Customer Perspective

Many service management studies have suggested that service providers benefit from having long-term relationships with customers, but the argument from a customer perspective has been vague. However, especially in the business-to-business context, an analysis of financial value creation seems appropriate also from a customer perspective. Hence, the aim of this study is to develop a framework for understanding monetary value creation in professional service assignments from a customer perspective. The contribution of this study is an improved insight and framework for understanding financial value creation from a customer perspective in a professional service delivery process. The sources for monetary differences between transactional and long-term service providers are identified and quantified in case settings. This study contributes to the existing literature in service and relationship management by extending the customer’s viewpoint from perceived value to measurable monetary value. The contribution to the professional services lies in the process focus as opposed to the outcome focus, which is often accentuated in the existing professional services literature. The findings from the qualitative data suggest that a customer company may benefit from having an improved understanding of the service delivery (service assignment) process and the factors affecting the monetary value creation during the process. It is suggested that long-term relationships with service providers create financial value in the case settings in the short term. The findings also indicate that by using the improved understanding, a customer company can make more informed decisions when selecting a service provider for a specific assignment. Mirel Leino is associated with CERS, the Center for Relationship Marketing and Service Management at the Swedish School of Economics and Business Administration

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

Language Influence in Services: Perceived Importance of Native Language Use in Service Encounters

A defining characteristic of most service encounters is that they are strongly influenced by interactions in which both the consumer and the service personnel are playing integral roles. Such is the importance of this interaction that it has even been argued that for the consumer, these encounters are in fact the service. Given this, it is not surprising that interactions involving communication and customer participation in the service encounters have received considerable attention within the field of services marketing. Much of the research on interactions and communication in services, however, appear to have assumed that the consumer and the service personnel by definition are perfectly able to interact and communicate effortlessly with each other. Such communication would require a common language, and in order to be able to take this for granted the market would need to be fairly homogenous. The homogenous country, however, and with it the homogenous market, would appear to be gone. It is estimated that more than half the consumers in the world are already speaking more than one language. For a company entering a new market, language can be a major barrier that firms may underestimate, and understanding language influence across different markets is important for international companies. The service literature has taken a common language between companies and consumers for granted but this is not matched by the realities on the ground in many markets. Owing to the communicational and interaction-oriented nature of services, the lack of a common language between the consumer and the service provider is a situation that could cause problems. A gap exists in the service theory, consisting of a lack of knowledge concerning how language influences consumers in service encounters. By addressing this gap, the thesis contributes to an increased understanding of service theory and provides a better practical understanding for service companies of the importance of native language use for consumers. The thesis consists of four essays. Essay one is conceptual and addresses how sociolinguistic research can be beneficial for understanding consumer language preferences. Essay two empirically shows how the influence of language varies depending on the nature of the service, essay three shows that there is a significant difference in language preferences between female and male consumers while essay four empirically compares consumer language preferences in Canada and Finland, finding strong similarities but also indications of difference in the motives for preferring native language use. The introduction of the thesis outlines the existence of a research gap within the service literature, a gap consisting of the lack of research into how native language use may influence consumers in service encounters. In addition, it is described why this gap is of importance to services and why its importance is growing. Building on this situation, the purpose of the thesis is to establish the existence of language influence in service encounters and to extend the knowledge of how language influences consumers on multilingual markets.

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

Use of Customer Information: An Ethnography in Service Development

Service researchers have repeatedly claimed that firms should acquire customer information in order to develop services that fit customer needs. Despite this, studies that would concentrate on the actual use of customer information in service development are lacking. The present study fulfils this research gap by investigating information use during a service development process. It demonstrates that use is not a straightforward task that automatically follows the acquisition of customer information. In fact, out of the six identified types of use, four represent non usage of customer information. Hence, the study demonstrates that the acquisition of customer information does not guarantee that the information will actually be used in development. The current study used an ethnographic approach. Consequently, the study was conducted in the field in real time over an extensive period of 13 months. Participant observation allowed direct access to the investigated phenomenon, i.e. the different types of use by the observed development project members were captured while they emerged. In addition, interviews, informal discussions and internal documents were used to gather data. A development process of a bank’s website constituted the empirical context of the investigation. This ethnography brings novel insights to both academia and practice. It critically questions the traditional focus on the firm’s acquisition of customer information and suggests that this focus ought to be expanded to the actual use of customer information. What is the point in acquiring costly customer information if it is not used in the development? Based on the findings of this study, a holistic view on customer information, “information in use” is generated. This view extends the traditional view of customer information in three ways: the source, timing and form of data collection. First, the study showed that the customer information can come explicitly from the customer, from speculation among the developers or it can already exist implicitly. Prior research has mainly focused on the customer as the information provider and the explicit source to turn to for information. Second, the study identified that the used and non-used customer information was acquired both previously, and currently within the time frame of the focal development process, as well as potentially in the future. Prior research has primarily focused on the currently acquired customer information, i.e. within the timeframe of the development process. Third, the used and non-used customer information was both formally and informally acquired. In prior research a large number of sophisticated formal methods have been suggested for the acquisition of customer information to be used in development. By focusing on “information in use”, new knowledge on types of customer information that are actually used was generated. For example, the findings show that the formal customer information acquired during the development process is used less than customer information already existent within the firm. With this knowledge at hand, better methods to capture this more usable customer information can be developed. Moreover, the thesis suggests that by focusing stronger on use of customer information, service development processes can be restructured in order to facilitate the information that is actually used.

What is A Virtual Service?- Broadening the Perspective on Technology-Based Services

This article expands the discussion of the impact of technology on services and contributes to a broader comprehension of the nature of virtual services. This is done by discovering dimensions that distinguish physical services from virtual services, i.e. services that are distributed by electronic means and where the customer has no direct human interaction with the service provider. Differences in the core characteristics of services, servicescape and service delivery are discussed. Moreover, dimensions that differentiate between virtual services are analysed. A classification scheme for virtual services is proposed, including the origin of the service, the element of the service offering, the customisation process, stage of the service process performed, and the degree of mobility of the service.

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.

Customer Needing - Conceptualising Industrial Service from a Customer Perspective

Views on industrial service have conceptually progressed from the output of the provider’s production process to the result of an interaction process in which the customer also is involved. Although there are attempts to be customer-oriented, especially when the focus is on solutions, an industrial company’s offering combining goods and services is inherently seller-oriented. There is, however, a need to go beyond the current literature and company practices. We propose that what is needed is a genuinely customer-based parallel concept to offering that takes the customer’s view and put forward a new concept labelled customer needing. A needing is based on the customer’s mental model of their business and strategies which will affect priorities, decisions, and actions. A needing can be modelled as a configuration of three dimensions containing six functions that create realised value for the customer. These dimensions and functions can be used to describe needings which represent starting points for sellers’ creation of successful offerings. When offerings match needings over time the seller should have the potential to form and sustain successful buyer relationships.

Urban ecosystem services at the plant-soil interface

Continuing urbanization is a crucial driver of land transformation, having widespread impacts on virtually all ecosystems. Terrestrial ecosystems, including disturbed ones, are dependent on soils, which provide a multitude of ecosystem services. As soils are always directly and/or indirectly impacted through land transformation, land cover change causes soil change. Knowledge of ecosystem properties and functions in soils is increasing in importance as humans continue to concentrate into already densely-populated areas. Urban soils often have hampered functioning due to various disturbances resulting from human activity. Innovative solutions are needed to bring the lacking ecosystem services and quality of life to these urban environments. For instance, the ecosystem services of the urban green infrastructure may be substantially improved through knowledge of their functional properties. In the research forming this thesis, the impacts of four plant species (Picea abies, Calluna vulgaris, Lotus corniculatus and Holcus lanatus) on belowground biota and regulatory ecosystem services were investigated in two different urban soil types. The retention of inorganic nitrogen and phosphorus in the plant-soil system, decomposition of plant litter, primary production, and the degradation of polycyclic aromatic hydrocarbons (PAHs) were examined in the field and under laboratory conditions. The main objective of the research was to determine whether the different plant species (representing traits with varying litter decomposability) will give rise to dissimilar urban belowground communities with differing ecological functions. Microbial activity as well as the abundance of nematodes and enchytraeid worm biomass was highest below the legume L. corniculatus. L. corniculatus and the grass H. lanatus, producing labile or intermediate quality litter, enhanced the proportion of bacteria in the soil rhizosphere, while the recalcitrant litter-producing shrub C. vulgaris and the conifer P. abies stimulated the growth of fungi. The loss of nitrogen from the plant-soil system was small for H. lanatus and the combination of C. vulgaris + P. abies, irrespective of their energy channel composition. These presumably nitrogen-conservative plant species effectively diminished the leaching losses from the plant-soil systems with all the plant traits present. The laboratory experiment revealed a difference in N allocation between the plant traits: C. vulgaris and P. abies sequestered significantly more N in aboveground shoots in comparison to L. corniculatus and H. Lanatus. Plant rhizosphere effects were less clear for phosphorus retention, litter decomposition and the degradation of PAH compounds. This may be due to the relatively short experimental durations, as the maturation of the plant-soil system is likely to take a considerably longer time. The empirical studies of this thesis demonstrated that the soil communities rapidly reflect changes in plant coverage, and this has consequences for the functionality of soils. The energy channel composition of soils can be manipulated through plants, which was also supported by the results of the separate meta-analysis conducted in this thesis. However, further research is needed to understand the linkages between the biological community properties and ecosystem services in strongly human-modified systems.

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.

Metsänomistajille tarjottavat palvelut, palveluntarjoajat ja palvelukentän rakenne

Suomessa metsänomistajille on tarjolla neljäntyyppisiä eri palveluita metsänhoidossa, puukaupassa, omaisuudenhoidossa ja informaatiopalveluissa. Palveluita tarjoaa joukko hyvin erikokoisia organisaatioita, joista osa toimii markkinalähtöisesti toisten tarjotessa palveluitaan lakiperusteisesti. Metsäalan palvelumarkkinat ovat nyt murrosvaiheessa, ja muutoksia on tapahtumassa sekä tarjonta- että kysyntäkentässä. Metsänomistajille tarjottavien palveluiden markkinoita ei tarjoajanäkökulmasta ole aiemmin tutkittu kattavasti. Tutkimukset ovat usein keskittyneet suppeasti johonkin palvelulajiin, eikä kokonaiskuvausta palvelumarkkinoista omaisuudenhoitopalvelut mukaan lukien ole ollut tarjolla. Tarjoajakenttään on odotettavissa muutoksia, sillä metsäalan palvelumarkkinoiden rahoituspohjaa ollaan muuttamassa, jolloin markkinoiden kilpailu vapautuu nykytilanteeseen verrattuna. Muutokset koskevat etenkin lakisääteisten organisaatioiden toimintaa, mutta ne tulevat vaikuttamaan koko toimialaan. Kysyntäkentässä aiempi tutkimus on ollut kattavampaa. Etenkin metsänomistajarakenteen muutosta, joka johtuu pääasiassa metsätilojen siirtymisestä kaupungistuneelle sukupolvelle, on tutkittu runsaasti. Lisäksi palveluiden kysyntään vaikuttavia tekijöitä ja palvelun eri laatu-ulottuvuuksia on tutkittu. Voidaan kuitenkin epäillä, kyetäänkö markkinoilla tarjoamaan sellaisia palveluita, jotka todella kattavasti tyydyttävät metsänomistajien tarpeita ja pystyvät tarjoamaan sellaisia hyötyjä, joista ollaan valmiita maksamaan. Tässä tutkimuksessa on tarkasteltu nykyisiä metsäpalvelumarkkinoita, sillä kokonaiskuvan luominen nykytilanteesta tarjoaa pohjan tulevien muutoksien ennakoimiselle. Tutkimusmenetelmänä on käytetty kvalitatiivista sisällönanalyysiä, ja tarkastelun kohteena on ollut palveluntarjoajien metsänomistajille suuntaama markkinointimateriaali – pääasiassa tarjoajien internetissä oleva materiaali. Markkinointimateriaalien tukena on käytetty palveluorganisaatioiden edustajien ja alan asiantuntijoiden teemahaastatteluita. Palveluita ja organisaatioita on tarkasteltu niiden asiakkaan kokemien hyötyjen pohjalta, joita markkinoinnissa palveluihin ja palveluntarjoajiin on pyritty liittämään. Teoreettisesti taustalla on käytetty mallia kuluttajan valintakriteereistä hankintapäätöstä tehtäessä. Tulosten perusteella on löydettävissä kysynnän kannalta kriittisiä palveluita, joiden ympärille palvelukokonaisuuksia on rakennettu. Metsänomistamisen odotetaan olevan kannattavaa, joten eräs palveluntarjonnan haasteista syntyy alan tarpeesta rahoittaa itsensä mielekkäällä aikajänteellä. Tämä luo tarpeen tuloja synnyttävien palveluiden yhdistämiseen kokonaisuuksiksi kustannuksia aiheuttavien, mutta muita hyötyjä tuottavien palveluiden kanssa. Tarjoajien kannalta tärkeää on kyetä luomaan asiakkaita hyödyttäviä palvelukokonaisuuksia muuttuville markkinoille.

An intelligent procurement marketplace for web services composition

This paper presents an intelligent procurement marketplace for finding the best mix of web services to dynamically compose the business process desired by a web service requester. We develop a combinatorial auction approach that leads to an integer programming formulation for the web services composition problem. The model takes into account the Quality of Service (QoS) and Service Level Agreements (SLA) for differentiating among multiple service providers who are capable of fulfilling a functionality. An important feature of the model is interface aware composition.

Incentive compatible mechanisms for group ticket allocation in software maintenance services

A customer reported problem (or Trouble Ticket) in software maintenance is typically solved by one or more maintenance engineers. The decision of allocating the ticket to one or more engineers is generally taken by the lead, based on customer delivery deadlines and a guided complexity assessment from each maintenance engineer. The key challenge in such a scenario is two folds, un-truthful (hiked up) elicitation of ticket complexity by each engineer to the lead and the decision of allocating the ticket to a group of engineers who will solve the ticket with in customer deadline. The decision of allocation should ensure Individual and Coalitional Rationality along with Coalitional Stability. In this paper we use game theory to examine the issue of truthful elicitation of ticket complexities by engineers for solving ticket as a group given a specific customer delivery deadline. We formulate this problem as strategic form game and propose two mechanisms, (1) Division of Labor (DOL) and (2) Extended Second Price (ESP). In the proposed mechanisms we show that truth telling by each engineer constitutes a Dominant Strategy Nash Equilibrium of the underlying game. Also we analyze the existence of Individual Rationality (IR) and Coalitional Rationality (CR) properties to motivate voluntary and group participation. We use Core, solution concept from co-operative game theory to analyze the stability of the proposed group based on the allocation and payments.