Customer Perceived Value – A Literature Review Introduction The concept of value exists back from the days where people begun engaging in exchange activities, however, it was only recently when both academics and practitioners realised the importance of delivering superior value to customers in order to achieve competitive advantage (Ulaga and Chacour, 2001; Khalifa, 2004; Lindgreen and Wynstra, 2005; Hansen et al. ,2008).
In the following section, a literature review upon the issue of customer perceived value will be performed by looking at the key theories developed in an attempt to address this topic. Literature Review There have been various different contributions when it comes down on defining customer perceived value. For example, some academics tend to look upon the issue of creating value from a functional point of view whereas some others prefer to focus mainly on the monetary value of the equation.
Nevertheless, despite the relative differences that exist within the various definitions one can identify common grounds between them such as the importance of competition, the multiple components of value and the subjectivity of value perceptions (Eggert and Ulaga, 2002). Broadly speaking, customer perceived value is the difference between the total perceived benefits such as product, service, personnel and image values; and the total perceived costs such as monetary, time, energy and psychic costs (Lapierre, 2000; Kotler and Keller, 2006; McDougall and Levesque, 2000).
CPV=Total Benefits (product, service, personnel, image)Total Costs (monetary, time, energy, psychic) The evolving literature on customer perceived value is concerned with theory and methods of adding value to the customer either by attempting to enhance some, or if possible all of the elements of the perceived benefits shown above; or by trying to reduce the perceived costs of the equation. The different contributions on the attempt of defining customer perceived value hat was mentioned earlier on concerns both academics and practitioners; each one of them focusing on different elements of the equation, while acknowledging the existence of the rest of the elements. Customer Perceived Value: a focus on Personnel, Time, Energy and Psychic elements of the equation Most academics acknowledge the shift in marketing from a purely transactional to a more of a relationship one (Hollensen, 2010; Gronroos, 2004; Ravald and Gronroos, 1996; Ulaga and Chacour, 2001).
As a consequence, some major contributors on the literature of customer perceived value engage upon the issue of value from a relationship point of view. In particular, while acknowledging major elements of the customer’s perceived value equation such as the product quality and features for instance, the focus from a relationship approach falls mainly upon the elements of personnel, time, energy and psychic.
Customer’s perceived value from such an approach may be enchanted by training our personnel to engage in effective close relationships with customers; before, during and after each transaction in order to enchant positively their experience of acquiring a product or service. At the same time, this creates opportunities for long term relationships which would consequently, if handled well, develop customer loyalty and reduce the perceived costs of customers by eliminating psychic costs such as their perceived risk of acquiring new products or services; or by reducing time and energy efforts of searching for alternatives.
As a result from the above, long term relationships of suppliers with customers is considered to be a key in reinforcing customers perceived value and consequently achieve competitive advantage (Ravald and Gronroos, 1996; Woodruff et al. , 1997; Gronroos, 2004; Lindgreen and Wynstra, 2005). Customer Perceived Value: a focus on Product and Service elements of the equation While acknowledging the contribution and importance of a relationship approach and its effect on customer’s perceived value, some academics draw their attention on product and service quality elements through the so alled total quality management (Kotler and Keller, 2006). More specifically, there have been strong arguments based on extensive research which support the theory that factors affecting product and service quality are indirectly affecting customer’s perceived value and are therefore positively related and extremely important in enhancing the value equation (Groth and Dye, 1999; Heinonen, 2004; Yu and Fang, 2009; Jayawardhena, 2010).
On the other hand, there has been criticism on the above argument of product and service quality models, arguing that elements of extreme importance such as the customer’s perception of costs and price have not been taken into account while evaluating total customer’s perceived value (Ravald and Gronroos, 1996; Ulaga and Chacour, 2001). Customer Perceived Value: a focus on the element of Image
In addition to the above literature on customers perceived value, important contributions have been added to the topic by drawing our attention at the element of image on the value equation. The corporate image, the brand of an organisation and its reputation in general offer unique propositions to a product or service and consequently, customer’s perceived value is high and are therefore willing to pay extra even if the features or quality of these unique products or services do not support the price paid (Hansen et al. 2008; Yu and Fang, 2009). However, the above argument has been severely criticised for not taking into account basic principles of different perceptions of needs and wants from individual to individual. This takes us back on the famous pyramid of Maslow’s hierarchy of needs, identifying that each individual has different needs and wants that need to be satisfied and that individuals are not homogeneous; therefore each customer perceive different values within the same product or service (Ulaga and Chacour, 2001; Yu and Fang 2009).
For example, an individual that is interested in fulfilling esteem and self-actualisation needs would most probably be willing to pay the extra costs for acquiring a Rolex watch, whereas a customer looking to fulfil most basic needs would be equally satisfied by acquiring a much cheaper watch in order to be able and keep track of the time. Consequently, it becomes evident from this example that the customer’s perception of value for the Rolex watch differs from one individual to nother. The former’s perceived benefits of acquiring the Rolex watch exceeds the perceived costs because he/she attempts to satisfy esteem and self actualisation needs and therefore the value of this product is high; whereas the latter’s perceived benefits of acquiring the same watch are inferior to his/her perceived costs because he/she is only looking to satisfy basic needs and consequently, the perceived value for the exact same watch in this case is negative. Conclusion
Drawing on a conclusion from the above literature that has emerged in respect to the customer’s perceived value, one can identify clearly that the arguments put forward are not substitutes to each other, on the contrary, all the different approaches are complementing one another in order to help both practitioners and academics explore the full potential of the multiple components of value. Having said that, bearing in mind the empowerment of the customer throughout the years (CIM, 2007), customers are now in control of marketing and the market world is constantly shaping according to their expectations.
Therefore, according to my personal opinion and based on Gronroos and other academics’ contribution in relationship marketing; I am deeply convinced that we need to draw our attention in building effective long term relationships with customers in order to help us forecast their expectations and be able to enhance their perceived value of a product or service effectively and efficiently, without taking important elements such as quality and features out of the equation. REFERENCES CIM, (2007), “Tomorrow’s word: Re-evaluating the role of marketing”, The Marketer Eggert, A. nd Ulaga, W. (2002), “Customer perceived value: a substitute for satisfaction in business markets? ”, Journal of Business & Industrial Marketing, Vol. 17, No. 2/3, pp. 107-118 Flint, D. J. , Woodruff, R. B. and Gardial, S. F. (1997), “Customer Value Change in Industrial Marketing Relationships: A Call for New Strategies and Research”, Industrial Marketing Management, Vol. 26, pp. 163-175 Gronroos, C. (2004), “The relationship marketing process: communication, interaction, dialogue, value”, Journal of Business & Industrial Marketing, Vol. 9, No. 2, pp. 99-113 Groth, J. C. and Dye, R. T. (1999), “Service quality: perceived value, expectations, shortfalls and bonuses”, Managing Service Quality, Vol. 9, No. 4, pp. 274-285 Hansen, H. , Samuelsen, B. M. and Silseth, P. R. (2008), “Customer perceived value in B-t-B service relationships: Investigating the importance of corporate reputation”, Industrial Marketing Management, Vol. 37, pp. 206-217 Heinonen, K. (2004), “Reconceptualizing customer perceived value: the value of time and place”, Managing Service Quality, Vol. 14, No. 2/3, pp. 05-215 Hollensen, S. (2010), “Marketing Management: A Relationship Approach”, 2nd ed. Edinburgh: FT Prentice Hall Jayawardhena, C. (2010), “The impact of service encounter quality in service evaluation: evidence from a business-to-business context”, Journal of Business & Industrial Marketing, Vol. .25, No. 5, pp. 338-348 Khalifa, A. S. (2004), “Customer value: a review of recent literature and an integrative configuration”, Management Decision, Vol. 42, No. 5, pp. 645-666 Kotler, P. and Keller, K. L. (2006), “Marketing Management”, 12th ed.
New Jersey: Pearson Prentice Hall Lapierre, J. (2000), “Customer-perceived value in industrial contexts”, Journal of Business & Industrial Marketing, Vol. 15, No. 2/3, pp. 122-140 Lindgreen, A. and Wynstra, F. (2005), “Value in business markets: What do we know? Where are we going? ”, Industrial Marketing Management, Vol. 34, pp- 732-748 McDougall, G. H. G. and Levesque, T. (2000), “Customer satisfaction with services: putting perceived value into the equation”, Journal of Services Marketing, Vol. 14, No. 5, pp. 392-410 Ravald, A. and Gronroos, C. 1996), “The value concept and relationship marketing”, European Journal of Marketing, Vol. 30, No. 2, pp. 19-30 Ulaga, W. and Chacour, S. (2001), “Measuring Customer-Perceived Value in Business Markets: A Prerequisite for Marketing Strategy Development and Implementation”, Industrial Marketing Management, Vol. 30, pp. 525-540 Yu, H. and Fang, W. (2009), “Relative impacts from product quality, service quality, and experience quality on customer perceived value and intention to shop for the coffee shop market”, Total Quality Management, Vol. 20, No. 11, pp. 1273-1285
