Investigating Perceive Value in B2B Setting

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SAMINT-MILI-21004

Master’s Thesis 30 credits

June 2021

Investigating Perceive Value in B2B

Setting

Shubham Ambekar

Danny Duke Samuel Jonathan Andrews

Master’s Programme in Industrial Management and Innovation

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Abstract

Investigating Perceive Value in B2B Setting

Shubham Ambekar

Danny Duke Samuel Jonathan Andrews

Value is fundamental in business-to-business marketing, where marketing revolves around the term value. Understanding the value of offering through customers' eyes is important for business success. Due to the subjective nature of value, it's imperative to understand the value based on the customer's individual interpretation. In this context, perceived value plays a central theme for this study, and analyzed in the terms of benefits and sacrifices. But to capture the broader picture of customers' value functional, social, and emotional perceived values were considered. The research questions were formed to investigate the kind of values that customers perceive, and another question was framed to investigate the multidimensionality of values. In order to answer the research questions, a qualitative descriptive approach was applied and through judgmental sampling, respondents were chosen. The five potential customers were interviewed through semi-structured technique.

The authors applied the model “value hierarchy” to investigate the customer's perceived value which consists of three layers: attributes, consequences and objects; it shows correlation among the three layers. The laddering technique was used in connection with hierarchy, through this technique authors understood how consumers were able to perceive value in each layer. The tangibilization strategy was used to provide cues that helped build mental construct of services in customer’s minds. Customers assess the services by evaluating its value. The value from the consequences were perceived multidimensionally by customers depending on the attributes. Customers perceived functional value in aspects of saving time and ease of workload. They were able to perceive value socially, when some features helped manage stress among the employees and through provision of these services to end customers saw an increase in firm awareness in the market. Customers also felt a feeling of happiness when using certain attributes especially among the end customers thereby bringing emotional value into the picture. All the different values perceived helped reach their respective end-goals. The model found useful to investigate the customer value sequentially, also evaluating current customer’s needs. The study revealed that the attributes aren't chosen without a purpose. Customers perceive some benefits from the attributes that help achieve their specific needs. The study was confirmation about integrating the model with different value dimensions helped determine the connection of these dimensions with customer value. The study ends with presenting managerial, theoretical and practical implications and provides ground for future research in exploring other framework of values, followed by limitations of the study.

Keywords: Customer Perceived Value, Functional value, Social value, Emotional value,

Laddering technique, Value Hierarchy Model, B2B Marketing. Supervisor: Olof Lundström

Subject reader: Jens Eklinder Frick Examiner: David Sköld

SAMINT-MILI-21004

Printed by: Uppsala Universitet

Faculty of Technology Visiting address: Ångströmlaboratoriet Lägerhyddsvägen 1 Postal address: Box 536 751 21 Uppsala Telephone: +46 (0)18 – 471 30 03 Telefax: +46 (0)18 – 471 30 00 Web page: http://www.teknik.uu.se/education/

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Scientific Summary

In the 21st century, where technology runs the world, organizations tend to develop new products/services that provide all the necessary things to customers for survival and to live a luxurious life. With the arrival of new technology, the competition in the market is increasing day by day. As a result, over the years the way of doing business has been continuously changing. Today, it is necessary for firms to pay more attention to the customer's perception towards product/service to be successful in this competitive environment. Therefore, the firms must know the customer value perception for a deeper understanding; what they desire and need. In B2B marketing, the transaction of services/products happens between firm to firm, where the receiving firm enjoys the benefits rather than developing in-house and the other gains the price. But it is not simply easy to offer one product/service to another since business customers only intend to adopt the new technology if it brings value to them. In the marketing discipline, value plays a crucial role. Value constructs can explain customers' intention to adopt specific things, show customers' behaviour before and after purchase, and are the basis to understand marketing management. The shift towards the perception of customer value is seen as a competitive strategy for the firm, in this regard, perceived value” came into the picture. Customer perceived value refers to customers' perception towards product/service of what they receive and what they provide to acquire it. Perceived value plays a key role in the marketing discipline, as it is closely linked to customers' behaviour, purchase intention, and customer satisfaction. Before anything else perceived value does not show the price of product/service, rather it shows the real value of product/service through the customer’s lens. Firms develop new technology and look to offer similar settings of firms to boost their presence in the market and economic value. But they are not always sure how the specific product/service works for other organizations since they are not aware of the current situation or need of a specific organization. So, it's imperative to understand customer values. Hence, through our research, we wanted to reveal how the customer perceives the value from one of the firm’s services. As a part of this research, the authors employed a “value hierarchy model” for understanding customer perceived value. We have followed this framework to investigate the customer perception of services offered by the firm in three-layer attributes, consequences, and objects. With the help of this model, we have understood the customer perception; what value the customer perceived to the comparison of benefits and sacrifices. To not neglect other dimensions of value, the authors also captured the functional, social and emotional values through this model. Although we wanted to understand how customers sequentially link their perception to these three layers to reach personal value, a laddering technique was used which allowed us to understand the customer's perception, progression from attribute layer to consequence to more abstract value. With the findings, we were able to discuss them in relevance with the literature review. We hope that their study could be useful for understanding customer value and, also provides ground for future research into the theory of value dimensions.

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Acknowledgment

This master thesis has been carried out in connection with L2GO, the work has been developed by Shubham Ambekar and Danny Duke Samuel Jonathan Andrews

First and foremost, the authors of this study would like to express gratitude towards our subject reader Jens Eklinder Frick for his unreserved attention and for guiding us in the proper direction to improve in the thesis. Apart from the constructive feedback, we also learned a lot of things from him that helped produce quality work.

Secondly, the authors would like to give special thanks to the CEO of L2GO for giving us an opportunity and allowing us to work in conjunction with them. Adding to this, he also helped throughout the study and provided practical information that provided valuable contributions to our research work.

The authors would like to convey our heartfelt thanks to family and friends back in India. We would like to especially thank our parents who have been a pillar of emotional and financial support for our 2 yrs. journey of Master Program. Without their constant love and support, we wouldn't have made it this far.

The authors are also thankful to the respondents who have provided valuable insights into the research. It has been a great time with them, without them this study would have not been possible to complete.

The authors truly hope that this study will provide a good contribution to the theory concerning perceived value in the B2B setting and also for firm LtoGO Sweden AB (“L2GO”) to successfully implement B2B marketing and offer the services of App to their business customers.

It was an interesting journey where we learned concepts and applied them in real life. It also gave us a chance to meet new interesting people. We also faced some challenges and hurdles on the way but the effort we to overcome was worth the struggle.

Thank you, Best Regards,

Shubham Ambekar and Danny Duke Samuel Jonathan Andrews

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6. DISCUSSION ... 53 6.1. RQ 1: ... 53 6.1.1. Attributes ... 54 6.1.2. Consequences ... 56 6.1.2.1. Social Value ... 56 6.1.2.2. Functional Value ... 57 6.1.2.3. Emotional Value ... 59 6.2. RQ 2 ... 61 7. CONCLUSION ... 65 7.1. Theoretical Implications ... 67 7.2. Managerial Implications ... 68 7.3. Practical Implications ... 69

7.4. Direction for future research ... 69

7.5. Limitations ... 70

8. REFERENCES ... 72

APPENDIX A: INTERVIEW GUIDE ... 81

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List of Figures

Figure 1. Structure of thesis ... 6

Figure 2. Value Hierarchy Model Source: Original Version: Woodruff (1997) and Gutman (1982) Modified Version: Authors...22

Figure 3. Overview of Research Methodology ... 37

Figure 4. value hierarchy model (A) ... 38

Figure 5. value hierarchy model (B) ... 53

List of Tables

Table 1. List of Respondent’s profile ... 38

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1. Introduction

In this section, we have highlighted a brief overview of the research background and analysed how the research can be carried out. It follows the problem discussion, which provides research information more theoretically. Further, the purpose and research questions are also outlined in this chapter.

1.1. Background

Every business organization follows the core principle of developing a product/service that meets the unfulfilled needs and desires of a target market while making a profit out of it. This is where the concept of marketing comes into the picture. It also aids in identifying the target markets, so that the organization can decide upon which appropriate products/services will serve these markets (Obasan, et al., 2015). Firms implement marketing strategies to reach out to their target market. According to Aremu et al., (2012), marketing strategy mainly focuses on delivering greater value to customers and the firm, which can be achieved by providing quality product/service at an affordable price that satisfies customer needs (Adewale, et al., 2013). For a firm to remain in a competitive market environment, marketing strategy has proved to be an effective tool, and everything that a company does ultimately revolves around creating customer value and devising strategies to ensure maximum customer value and satisfaction are reached. Customers want quality products/services and expect businesses to overwhelm and surprise them by giving beyond the ordinary of what they expect to meet their needs and wants (Mcfarlane, 2013). A customer's overall assessment of the utility of a product/service is based on perceptions of what is received and what is given to (Zeithaml, (1988), p. 14). Each customer has their perceptions of the value, obtained from the benefits of products/services, by defining these relational exchanges as transactions between two parties in which each party gives up “something of value” in return for “something of greater value”, this is where the concept of perceived value comes into the picture.

Perceived value has proven to be a useful strategy in the 21st century. Consumption values, service quality, and customer satisfaction all have a significant impact on perceived value (Yulianti & Zamrudi, 2017; Roig, et al., 2006). Firms must work on improving perceived value strategy to build and maintain long-term relationships with customers, in return to gain benefit in the form of customer loyalty and active participation. Customers often perceive good quality from products/services followed by their good functionality. Maintaining customer loyalty by providing quality product/service that customer finds value and can perceive benefits that product/service offers are the firm’s strategic goal to sustain their business. Increased competition and consumer expectations encourage SMEs to focus on creating value embedded services to maintain their existing customers and to attract new potential customers (Arslanagic-Kalajdzic & Žabkar, 2017). In our research, a similar SME, a Swedish-based start-up service company called L2GO. The firm is still in the development phase and aiming to offer a certain service to potential business customers. Thus, leading to the inception of the

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B2B marketing concept. However, to do that, the firm wants to test the services first through customers' eyes, by this means how customers interpret the benefits of these services. Following the B2B approach, the CEO of the firm aims to understand the business customer perception towards their services (Lundström, 2021). The customer's value perception plays a crucial role in this study.

Since L2GO is a service provider company, our task at hand is to reveal the business customers' perception of the values of the firm's service offering. In B2B marketing, products/services cannot be bought unless it creates value, so if we think of value in the context of B2B, then O'Cass & Ngo (2012), conveys on emphasizing in creating values to gain an advantage in a highly competitive marketplace also to maintain/attract business customers from other business firms. When offering services, it's a prerequisite for organizations to understand whether the customer was able to perceive the value embedded in the product/services and can fulfil their expectations. In B2B, the word “value” is the central theme that firms need to understand, what are the values that can be created and delivered to the customers to establish B2B relationships. The firm’s value offering targets the ideal customers and explains why the products/service are a good solution, and this increases the chance of attracting the right customers. The values can be developed via two specific capabilities. The first capability is the firm's “innovative capability” to stimulate product/service renewal. In this, the firms should know whether their products/services should undergo any developmental changes and this depends upon the firm's capability to innovate. The second capability is effective “marketing of the value offering”. Firms can cultivate superior marketing capability if they can maintain pricing, distribution, planning, communication, and selling, which allows them to create value and market it to business customers (O'Cass & Ngo, 2012). In B2B marketing, firms should know how their customers perceive the value of the services. The better the firm can determine the customer perception and expectation, the better it will be able to deliver services that meet the customers’ expectations (Molinari & Abratt, 2008). Overall, the thesis work emphasizes on identifying values perceived by the customer that makes them satisfied, which can aid in determining whether these services are valuable to firms that help reach their end goal (Trasorras, et al., 2009).

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1.2. Problem Discussion

One argues that by implementing business marketing the firms should ensure maximum customer value and satisfaction are met in the marketing of products/services (Mcfarlane, 2013). The main drivers of customer value in B2B setting are expectations, quality, price, and emotional feelings (Srivastava, et al., 2007). However, literature broadly classifies value into concepts: Objectively measured concept and perceived concept. These concepts can be exemplified by taking the case of the actual quality of product/service and the perceived quality, another case could be actual price and the perceived price. The customer's perception of value varies since every customer does not have the same preferences or needs. Thus, making the value subjective in nature, and depends on the customer's assessments of an offering. It is said that the notion of value can be assessed based on how customer perceive, which is also central for understanding customer value and business success (Helgesen, 2007). It has also been proven that if customers perceive value from the product/service then it shows positive customers' intention to adopt it and also it meets their needs. In this regard, literature refers to the concept of customer perceived value, which is often measured by the comparison of benefits and sacrifices. By this means customers perceive the benefits of the product/service and they make sacrifices in terms of resources to gain those benefits. However, this traditional approach is limited to understanding customer perceived value since it mainly revolves around the economic dimension of perceived value. It's also noted that previous studies mostly emphasize understanding price and quality perception of value from the evaluation of product/service attributes (Zeithaml, 1988). This traditional approach of perceived value is often called a unidimensional approach, and due to the simple view of unidimensionality, it has been criticized for not revealing the multifaceted nature of consumer value. The unidimensional approach is based on the assumption where customers evaluate the product/service purely for rational reasons, such as comparing received benefits and sacrifices in terms of time and price. Therefore, this research creates the need in creating a broader perspective of perceived value that helps determine various dimensions of value that customers perceive (Maliyetler & Memnuniyeti, 2013). This is why authors came forward with the multidimensional model of perceived value, the authors adopted the three value dimensions proposed by Sweeney and Soutar (2001) in their study of “the development of multiple items of scale” i.e., functional, social, and emotional to obtain a holistic view of the customer value. These dimensions show how a customer perceives value in regards to emotions, utilitarian benefits, and expectations, and also it complements the economic dimension.

Moreover, understanding customer value is an important source for both business marketing success as well as for competitive advantage for the firms. It has been strategically important for the firms to attract and retain customers. The literature, argues that firms must understand what customer value is, how the value can be perceived by the customers, and which value that customer values the most (Graf & Maas, 2008). The position of product/service is to be placed in the minds of customers, but the question remains what value customers perceive. Perceiving a product is a cognitive process that includes, the knowledge possessed by customers on one hand, and on the other hand using the knowledge to assess the product/service by determining its value, i.e., why that product/service is important or valuable for the customers (Grunert &

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Grunert, 1995). The perception of value from a product/service occurs through its attributes, and also how these consequences arising from the attributes help satisfy their personal needs. Moreover, products/services consist of several attributes that result in numerous consequences, and not all of these have the same importance from the eyes of customers. Some may not be important for them, while some are depending on the value it poses to customers. So, the task lies in finding out the right combination of attributes and consequences through which customers want to satisfy their end goals.

Since the problem arising from the background is an analysis of the value that customer expects from a service-based firm in a B2B setting, hence the theoretical concept of customer perceived value is central to the thesis work. Under this, the model that helps capture value from a business customer perspective is the “customer value hierarchy”. The customer value hierarchy framework takes a broader perspective of value and regards higher-order outcomes that customer experiences. The model explains why the consumer's selection of certain products or services is helpful in terms of satisfying their goals. The goal here represents the ultimate motivation that customers desire from the value perceived of a product/service. Since value is subjective, thus the value perceived in achieving the goal is dynamic and depends upon the customer’s personal preferences or needs (Woodruff, 1997). The model value hierarchy discusses the customer’s perception of value in three layers; attributes, consequences, and end goals, and the value is captured through iterative questioning by using a method called the laddering technique. The literature suggests that the laddering technique for interviewing customers is a far more important methodology for measuring customer's mean end states i.e., attribute, consequence, and end goals. It is useful in encouraging the self-analysis of behaviour and motivation. By applying this technique in conjunction with a value hierarchy model it helps to gather a complete list of consequences that help climb towards the customer's value (Lee & Lin, 2011). Since the study is conducted by considering the multifaceted nature of values. The assessment of multidimensional value in the consequence layer helps determine the customer’s perception of what is gained and what is given by taking into account functional, social, and emotional values, and how all these values interact and help reach customer goals.

To sum up, the whole point of this thesis is primarily concerned with the value perception of customers. Since the authors are trying to understand the value of an offering from the customer lens in a B2B setting. Through this path of investigation, it helps understand the value of services from customer perspectives, as well as why customers prefer certain attributes of services, and how customers feel satisfied with them.

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1.3. Purpose

The importance of understanding customer value through the product/service is an important source of business success. Since the value is subjective it's imperative to understand the perception of value that customers perceive based on their evaluation of the offering. As a result, the study requires scholarly research on the subject's perceived value to gain a better understanding of the value that customers perceive. By understanding the concept of perceived value, it helps see the value of a product/service through customers' eyes in the comparison of benefits and sacrifices. However, this traditional approach makes it difficult to understand the multifaceted nature of customers' value. Therefore, the study focuses on taking the approach of multidimensionality of perceived functional, social, and emotional values to help capture different values arising from an offering. In this regard, the model value hierarchy is useful to capture the values customers perceive sequentially in three layers: attributes, consequences, and objectives. This model provides a deep insight into how customers learn about the product/service which facilitates them to achieve the desired consequences in terms of functional, social, and emotional values. Since the study has been conducted from a B2B perspective, where customers seek the benefits or solution to their problem rather than the product/service, the model sheds light on how customers attach the importance of these value dimensions to their value in the context of an organization. The laddering technique is a useful and important technique for measuring and analysis of customers' mean end chain. This technique refers to how customers relate the value of services to meaningful associations. However, the academic purpose of this study is to complement the existing literature by investigating the perception of customers towards an offering, values that customers perceive through the offering of services, and how these values attach to customers' respective personal values.

1.4. Research Questions

Based on the purpose, the following questions have been formulated and will be explored throughout the project by collecting interview data from business customers and performing a comprehensive literature review.

RQ 1. What are the values that business customers perceive from the service-based firm?

RQ 2. How functional, social, and emotional values customers perceive correspond to the customer's objective or purpose?

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1.5. Disposition

The study begins with an introduction and is followed by problematization of the research which gives the reader information about the contextual frame of investigation. In section 2, we have outlined the literature review, which contains different approaches that are needed for the study and which is further followed by a theoretical framework in section 3 that serves as a base to carry out the investigation. In section 4 we have drawn out the methods that we have applied, detailed description of each topic related to the research approach, research design, sampling, interview design, and data analysis are given. Followed by section 5, we have given which outlines the finding and analyses based on the data collected from the participants, and section 6 devoted to the discussion of the finding. At last, section 7 brings the study to the conclusion.

Figure 1. Structure of thesis

Introduction Literature Review Theoretical Framework Methodology Empirical Finding & Analysis Discussion Conclusion

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2. Literature Review

The motivation behind writing the literature review is to discover interesting theories and concepts that provide a brief overview and debates that address the existing research we are dealing with. The literature review helped us to develop conceptual frameworks to address the research purpose and simultaneously research questions. In this section, various theories and concepts have been discussed, by reviewing different works of literature that are needed for comprehension. Under this, we start the first chapter, by talking about the B2B setting in general, then move on to the section concept of Value, customer value, perceived value, and end up exploring the concept of satisfaction. Overall, the literature review helped us follow the footsteps author’s discussion and debates about the concerned topic and familiarize ourselves with different kinds of literature.

2.1. Business to Business marketing

Marketing generally encompasses all the business activities that primarily concern the production, development, and distribution of products/services to their match. Every organization tends to engage itself in marketing activities to gain loyal support from its customers (Ayuba, et al., 2015). Marketing takes the form of two major roles: B2B and B2C. Business to Business marketing is the practice of firms that sell services/products to business customers, whereas in B2C it is more on carrying out activities to attract end customers (Rėklaitis & Pilelienė, 2019). Most attention is often paid to B2C marketing since B2C enables firms to reach out to a large number of audiences while B2B marketing has recently gained importance due to large transactions between the two parties, and target audience are the enterprises which often are less in number and more attention can be given to meet customer’s needs. Although the perception of B2B marketing varies in the literature, for example, the author Ford, et al., (2002) argues building relationships is imperative for the success of B2B marketing, on the contrary for the sake of delivering value as an imperative strategy to achieve success.

In B2B marketing, managers must understand these needs and develop products/services that include sets of benefits or have unique solutions that pose value for the customers. The importance of Business-to-Business marketing has also grown up since it encompasses the activity of building mutual value relationships between the firms. In B2B marketing, firms interact separately and form business relationships with one another, although these firms often are independent entities, they work with each other to varying degrees to achieve the goals (Fill & Fill, 2005). Business-to-Business marketing provides the opportunity for the firms to leverage their products/services and to target specific business customers to carry out the marketing activity (Lilien & Grewal, 2012). According to the study, there is a lot of potential for the firms if they adopt B2B marketing since B2B opportunities deal with transaction motives between the firms thus helping in building relationships with business customers. Study shows that there are also some challenges in implementing B2B marketing since there is a high volume of transactions involved, more stakeholders get engaged in the buying process

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so that the B2B purchasing process usually takes substantial time and also involves extensive negotiations (Grewal, et al., 2015). But, when it comes to decision making, unlike in B2C where the decision rests upon a particular person in deciding to purchase a product, in B2B, it involves more than one person needed in deciding and is more focused on the logic of product/services rather than emotional aspect unlike in B2C, and sales in B2B sector typically has larger order values and longer sales cycles (Rėklaitis & Pilelienė, 2019).

2.2. Characteristics of Services

Traditionally, firms have been proficient in communicating and visualizing the value based upon product offering, where customers can easily understand the value of products based on their physical attributes, but when it comes to service domain it is often more difficult and complex due to its intangibility of the service performance (Mittal, 1999). Value from services is often regarded or perceived as being more difficult to visualize when compared to values from products because of its intangibility in nature of the service performance, especially when it comes to purchasing of services in prior (Anderson, et al., 2007). In product-based value, suppliers tend to focus more on visualizing the typical value parameters which include product performance, quality, and price. Service-based values are more difficult when it comes to evaluation and quantification because of their intangibility in nature which is harder to visualize. The creation and communication of value have been in focus for many studies, so to offer value-based services, requires more and more customer knowledge.

Studies by many researchers showed that implementing “Tangibilization Strategies” helps customers to visually construct the value of services. This strategy can be illustrated into three general strategies: Envisioning, Documentation, and Representation. Envisioning is the process of persuading customers to make them experience the services mentally, as a result, it creates a clear and vivid image of the services in their mind (Hill, et al., 2004). The documentation process follows by providing pertinent information about the services like key attributes, features, benefits of services to the customers. The last part, which is physical representation, involves focusing on core attributes which are peripheral parts of the service, they may be employees (Mittal, 1999).

2.3. The Concept of Customer Value

In B2B marketing, the study of customer value is significantly important, customer value is seen as an essential requirement in the long run for company survival and success. Understanding the way, the customer judges the product/service is fundamentally important for the competitive advantage. Many researchers have recognized the significance of identifying, delivering value and managing the customer’s behaviour. The concept of customer value dates back to early barter deals, where customers carefully evaluate the seller’s offering, and they only accept to do business if there are any benefits from the products, they receive which are relative to the cost perceived as a fair deal of the trade. The customer value can be seen from multiple perspectives, one from the organization's perspective and the other from the

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customer's perspective. The goal is to assess how valuable the individual customer is from the perspective of the organization. On the other hand, from the perspective of the customers, consider what they want, and what is worth for them customers believe they can get from buying certain value-based products/services (Graf and Maas, 2008). In this research, we are focussing on the organization's customer perspective.

Coming to the definitions of customer value, it has numerous variations, but two important aspects are commonly observed in various literature. Firstly, consumer value is naturally in-built in the usage of products/services. Secondly, it is perceived by customers that cannot be assessed objectively by the firms (Woodruff, 1997).

2.3.1. Understanding Customer Value

Customer value is one of the central aspects in all marketing activities, particularly within the applications, it's adapted in marketing and business management sciences, this is due to voluntary exchange among the market participants. This exchange occurs where all stakeholders involved expect a gain in value and customers decide to select that offering that provides them with the highest expected gain through the product/service. In B2B competitive markets, customer value may change over time due to the evolving market value that changes over time, it is understood that customers are unable to predict what they will value in the future (Keränen & Jalkala, 2013). Hence creating the need to understand the customer valuation in the firm's innovation processes that involves looking at the interaction between customer and firm’s innovation progress in technological product/services.

Customer value is considered as an essential factor in B2B marketing in determining the satisfaction of the customers (Hur, et al., 2012). Chances are that firms may deliver little value to the target customers if they don’t have a proper understanding of their customer's requirements, preferences, and what is worth to them (Anderson, et al., 2006). Thus, many authors state that what is more important is “How” clients interpret value and not “how” the supplier's belief of what value should be (Blois, 2004). The importance of delivering value to the customers has become an increasingly significant aspect of B2B marketing. Customers often imagine what value they want from a product/service, customers think about value in the form of preferred attributes, attributes performance, and consequences resulting from it in use. Adding to this, customers do make an evaluative judgment about the actual value in experiencing a product/service. Therefore, value can be measured concerning attribute-based preference.

Moreover, B2B marketers generally provide business customers with a reason to choose or purchase a product by enhancing its value according to customer’s perceptions. Customers buy products because it enables them to do what they want to achieve. For example, customers do not buy toothpaste for a minty taste, they do buy it to clean their mouth. Similarly, in business marketing, customers buy solutions to their business problems and not products/services.

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Another way of viewing these solutions as the needs of the customers is through the satisfaction of customer needs which is another way of delivering value (Keränen & Jalkala, 2013). The growing knowledge of customer value is quite fragmented and there is no way to pull out all the views together. With the understanding of customer value, there seems to be agreement on customer value, considering the common notions, customer value is customer perceived preference in regards with an evaluation of product/attribute and resulting consequences that help achieve their purpose. In other ways, the value is something perceived by customers to meet their needs, thus the term “perceived value”. However, these definitions adopted the perception of customers, what customers think about product/service in terms of value. In this regard, the “value hierarchy model” captures the essence of customer value in three layers: attribute-consequence-end purpose (Woodruff, 1997).

Before diving into customer perceived value, we now take a broad view of the term “value” in the next section.

2.3.2. Concept of Value

We now take a diagnostic view of the term “value” with the understanding of customer value. Value is the centre of marketing. value constructs can explain consumer behaviour before and after purchase, it also serves as a basis to understand marketing management (Suryadi, et al., 2018). Indeed, definitions of marketing revolve around the value and exchange of the term of value. According to (Kotler & Keller, 2006) the exchange of value is the core aspect in marketing, where the exchange takes place between two parties. One party must have a product/service that consists of value to offer to the other party. There is a range of definitions proposed by researchers on the term “value”, the most simplistic definition, “value” is defined as a customer's willingness to pay for a specific product/service (Urbig, 2003). In the B2B market, customer perception of value refers in terms of technical, social, service benefits, and economical in return for the price that firm receives for the service offering (Anderson, et al., 2006). In organizations, the purpose of business is often seen as to create value for the stakeholders, but stakeholder value is the outcome of the business organizations. The real purpose lies in delivering value-embedded products/services to the customers. So, in the long run, firms can create value for their stakeholders but only if it provides value embedded product/service to the customer.

(Suryadi, et al., 2018), states that all the activities of a firm happen to achieve and deliver some value. They described two important dichotomies between business value and customer value. Business values include the firm’s side that they want to achieve such as operational excellence, market position, and customer intimacy. Customer value refers to the value that they get through the product/service and meets their personal needs. According to (Evan, 2002) customer value is defined as the value that a customer brings to the firm, like in the form of recommendation of one firm product/service to others which gives rise to social value.

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This study focuses on business customer value, which refers to the value that they perceive through product/service and the term commonly refers to as “customer perceived value”. Since B2B marketing has applied, here customers refer to business customers.

2.3.3. Customer perceived value

Customer Perceived values has been acknowledged in several kinds of literature since it is one of the main marketing constructs affecting customer’s post-purchase (Fernández & Bonillo, 2007). In marketing literature, value generally refers to the difference between benefits and sacrifices from purchasing and using a product/service (Holbrook, 2007). Zeithaml (1988) put forward customers perceive value when the price is low, while some perceive when there is a positive balance between price and quality. Customers cannot precisely perceive all the benefits offered by the product/service, and the financial investment that is needed, so in this case perception of value relies on the customer's evaluation of the product/service. Therefore, customer perceived value can be viewed as a relationship between perceived benefits and perceived sacrifice of product/service. Gutman (1982) says, Perceived customer value is the combination of benefits that customers seek or experience through product/service and the resulting consequences that come with the benefits. Monroe (1980) describes the perceived value as a trade-off between the benefits customers perceive from the product relative to the sacrifice they made by paying the money. Zeithaml (1988) described value in four different ways: (1) value is low price, (2) value as whatever the consumer wants in a product/service, (3) value as the quality gets from the price for the customer pay, and (4) value as what one gives to get something. These four aspects of value are covered in one definition, Zeithaml (1988) defined perceived value as “the overall evaluation of utilization product/services based on customer’s perceptions of what is gained and what is provided”. The receive components refer to benefits gained from the product/service to the customers, while the “give” component refers to customer sacrifice in acquiring the product/service. Parasuraman, et al., (1988) argues that measuring perceived value is an important step in gaining a firm's competitive advantages. Identifying perceived value is essential because it helps firms to understand the customer's needs and their behaviour and invest in the product/service to attract more customers. Value is generally evaluated from the customer perspective, but customers perceive value based on the consumer's subjective feeling and understanding what buyers’ value within a given offering, creating value for them, and then maintaining it over time have long been recognized as central and essential elements of every organization’s core business strategy.

Moreover, talking from the B2B perspective, according to Lindgreen et al., (2012) in B2B marketing more emphasis has been given for assessing value in the context of trade, as a cost-benefit trade-off relative to supplier’s offers which are perceived by decision-makers in the client organization, where researchers have related the perceived value to value for money as a trade-off to cover other benefits in terms performance, design, quality of service, or supplier image, etc. and sacrifices that includes commodity costs, change costs, etc. When it comes to classifying approaches in B2B in terms of stakeholders benefiting from the value creation, two perspectives are distinguished client and seller. From, client's perspective the value of the

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firm’s offer is defined from the standpoint of customers, and it's not solely created for the customer but also the seller. From the seller's perspective, value is defined by identifying the cost of producing, distributing, and putting the product/service on the market.

The following aspects mainly conceptualize the customer's perceived value:

2.3.4. Perceive benefits

The benefits components are what customers receive through product/service when they acquire it. The perceived benefits of buying construct are most often applied to purchasing activities (Liu, et al., 2013). Customers receiving the benefits or the results concerning the total costs paid plus other costs associated with the purchase. Here the benefits are represented as the customer’s desired values and they are viewed in business as perceived worth in monetary units of economic, technical, service, and social benefits by customers. Thus, value is represented as a bundle of product/service benefits, which can be split into core and add-on benefits. In the core benefits, it represents the core requirement that has to be met with the customer’s consideration set which may be specific to a product or service that the customer has in mind, and the add-on benefits represent the differentiating attributes or features of the product/services that encourages customers to opt from a certain supplier (Bajs, 2015). 2.3.5. Perceived sacrifice

Perceived sacrifice acts as a determinant of perceived value which represents what is given to obtain an offering. Perceived sacrifice is also considered as the primary component of the perceived value construct and it has a negative effect on the perceived value of product/service. The study suggests that sacrifice consists of both monetary and non-monetary aspects. From the monetary standpoint, here the customers pay a price to perceive the benefits of a product thus price plays an important element in purchasing decisions and is usually based on economic factors rather than emotional factors (Korda, et al., 2004). In general, price is considered according to two roles: To begin with, it is a tool in determining what must be sacrificed to obtain something. Secondly, it serves as a key to the perception of product/service quality. On the other hand, from a non-monetary aspect, in recent years more emphasis has been placed on the non-monetary costs that customers have to bear to acquire product/service in terms of physical and mental efforts, such as time, energy, etc. Non-monetary costs are substantial in adopting new technology due to the time and effort required to understand the technicalities of a new product/service (Maliyetler & Memnuniyeti, 2013). Since both monetary and non-monetary costs have a significant effect on customer perceived value, therefore the influence of both costs must be clearly understood to comprehend overall customer perceived value. Anything that can be built into products/services with the intent to reduce time, effort, and search costs can reduce perceived sacrifice, resulting in higher perceived value (Zeithaml, 1988).

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2.3.6. Perceived risk

The perceived risk can be seen in terms of uncertainty and the adverse consequences associated with products/services. Perceived risk is defined as the uncertainty customers face when they are unable to anticipate the consequences of a product/service during purchasing. In other words, the degree of familiarity of individuals with specific products/services. This definition highlights two main aspects of risk uncertainty and consequences (Collins, 2003). The customers encounter a risk when they are not familiar with the product/service. Dowling and Staelin (1994) defined risk as consumer perception of uncertainty and consequences of engaging in purchasing activity. The risk may manifest itself in several ways including concern that the services may not possess desirable attributes, uncertainty regarding the services, and integration of the services may result in social disapproval. Besides this risk can be classified into many types i.e., financial, economic, and social. Pathak and Pathak (2017), also states that consumers also try to reduce the perceived risk, for instance, consumers may perceive less risk if the quality of product/services is higher than expected, which ultimately affects the overall customer perceived value.

2.4. Perceived Value dimensions

Customers view the service/product as a source of value, by this means the services can be seen as a bundle of benefits. When it comes to purchasing activities, the primary focus lies in customers' expectations of benefits that customers seek from the product/service. These benefits can be observed from two fundamental perspectives of customers' needs, first, the services are capable of meeting functional needs, and secondly the needs for pleasure. In terms of the first perspective, it talks about the ability to solve problems of customers, which implies a reduction in manual work to make the task easier. Study shows that there are several attributes possessed in the service/product, some attributes may contribute to the functionality while others contribute to other dimensions of value (Aulia, et al., 2016). Thus, knowing the other dimensions of value is crucial. Concerning this, several authors proposed the various dimensions of value related to the service/product such as utilitarian value and hedonic value (Holbrook & Hirschman, 1982) in which value is based on product/service performance.

The study suggests that product/service should be evaluated using two criteria, firstly utilitarian factor, which refers to the performance of the product/service, second consider the hedonic criteria, which refers to the immediate pleasure arising from the product/service. The study also claims that cognitive perspective plays a crucial role in the evaluation process. Cognitive criteria are concerned with individual mental functions such as memory, perception, etc (Khan, et al., 2013). However, several researchers later proposed that cognitive and affective criteria to product/service stimulus form customer’s evaluative judgments. In this regard, Hartman (1967) was the first to develop the generic value model which focuses on the multidimensional value that comprises both cognitive and affective criteria. More specifically, the value of a model lies in terms of extrinsic, intrinsic, and systematic value, where extrinsic reflects utilitarian aspect, intrinsic refers to emotional aspect and systematic value defines logical

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aspect. Mattsson (1992) followed the framework of Hartman and presented the three value dimensions as emotional, practical, and logical. These values are independent of one another and may change concerning the market. Sheth, et al., (1991) established five dimensions of value based on this theoretical framework including functional value, epistemic value, emotional value, social value, and conditional value. William and Soutar (2000) adopted the functional, social, emotional, and epistemic to measure the value in the service industry. Sweeney and Soutar (2001) later adopted only three dimensions of value (functional, social, and emotional).

However, several frameworks have been developed to construct customer value as a multidimensional construct. Among them “value hierarchy” takes a broader look at value. And, referring to this multidimensional value, it is very interesting to find not all researchers considered all five dimensions of value, since all dimensions are not always suitable or relevant for the study. For this research, the three dimensions of value (functional, social, and emotional) were included in the study.

2.4.1. Functional value

The dimension of functional perceived values involves the customer's perception of the performance of a certain product/service. In another word, it relates to the product/service's ability to serve utilitarian purposes. In the literature, “Next source of competitive advantage” Woodruff (1997), defined performance as one of the dimensions of functional value, such as low cost, time-saving, superior quality. The functional value can be referred to the level of performance excellence of product/service, utility, and function sought in the product/service, so it's imperative to know what value or benefits have been seen or received by the customers that contribute to the operational activities, and also to know in acquiring those benefits there needs sacrificing of resources such as time spent or money invested or energy used (Gomis, et al., 2020; Calvo-Porral, et al., 2015). The functional value consists of physical aspects. It is defined as the rational and economic valuation of individuals and the quality of products or services from these dimensions. A range of functional values has been explained in the literature such as flexibility, reliability, accessibility, and price, which are considered as key dimensions of functional value (Khan, et al., 2013). According to Khan (2010), functional benefits relate to the quality of the product or service provided. It represents value derived from task fulfilment, flexibility, and responsiveness. Function value mainly stems from the fact that reducing the work of individuals that they have to do, from the context of consumers, is considered as the perceived value of consumers generated by providing a solution for their needs. In the B2B setting, buyers require tangible features which meet their needs effectively, and the significance of functional value such as performance and quality of product/service has been confirmed by many studies (Bendixen, et al., 2004).

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2.4.2. Emotional value

The dimension of emotional perceived value refers to one form of benefit that one gets by experiencing the product/service. The customer perceives emotional value when the customer values through product/service by their pleasure (Asshidin, et al., 2016). Moreover, to understand more the emotional value, Shao, et al., (2019), states that the utility generated from the customer feelings such as happiness or pleasantness by experiencing the product/service referred to as perceived emotional value.

The author also states that the higher the customer experiences positive emotions from a product/service higher the customer perceives value. The importance of emotional value arises since customers relate their feelings during evaluating the service/product, which shows customer loyalty towards using the service/product. Author Dodds, et al., (1991), argue that identifying the emotional bonds of customers towards services is essential since it shows the customer loyalty for using or buying the services. Kotler and Armstrong, (2008) state that marketers within the B2B setting, recognize the significant importance of emotional value in the purchasing activities since it shows loyalty towards using the product/service. The emotional value that seems to be more appropriate for B2B marketing is trust, peace of mind, and reliability.

2.4.3. Social value

The dimension social perceived value refers to the firm status and prestige that a product/service brings for the customers. Sweeney and Soutar, (2001) refer to social value as one’s enhancement of social status obtained from the utility of particular product/services. Business customers primarily require a product/service that meets their needs for which they are willing to pay, but in addition, they also want status and prestige in the market. In their works, social value is mentioned as the benefit obtained at the level of a person’s relationship with his/her social environment. However, the benefits perceived by firms are concerning their social class and status in the market.

2.5. Different aspects of Perceived Value

Section 2.3 talks about different dimensions of value. To take a deep dive in performing analysis of these above value dimensions, other relevant concepts of perceived value such as perceived quality, ease of use, usefulness helps visualize a broader picture of perceived value dimensions. These theoretical concepts have been used in several kinds of literature in determining the consumer behaviour towards products/services that help better conceptualize the value that consumer perceives from a product/service.

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2.5.1. Perceived quality

There is a tendency to understand the customer's value based on product/service quality. According to this bundle of benefits can be represented as quality, which provides utility to customers. Perceived quality usually lies at the heart of what customers are buying. The quality of product/service is developed according to customers' standards that enable firms to channel the resources efficiently and meet customer expectations. According to this author Korda, et al., (2004), quality of service can be understood when it is of value to the customers. Determining what customers perceive from the product/service as quality is essential in terms of the firm's ability to meet their needs and thereby satisfy their customers (Stylidis, et al., 2020; Korda, et al., 2004). Perceived quality is a multidimensional entity, an outcome of product/services, and can be seen in a variety of ways. Perceived quality is also defined as the assessment, by the consumer, of the excellence of the product/service (Zeithaml, 1998). In the context of this study, perceived quality refers to the overall performance of a service and it is a measure of the extent to which its interface looks simple, smooth, reliable, and effective, and if customers receive the quality product/service then it highly influences the overall perceived value. In other words, the degree to which quality consumers perceive that characteristic of services meets customer requirements (Al-Debei, et al., 2015). However, the definition differs depending on the context. For instance, in accounting services, perceived quality means consistently accurate bookkeeping and confidentiality of the information, whereas quality in a logistic firm delivering the product within the timeline. Moreover, the meaning of quality differs among the customer perception, since the perception of quality reflects individual judgment and is therefore subjective about what is important to customers (Stylidis, et al., 2020). However, it is imperative to identify the features or attributes of product/service communication of high quality to understand the customer's value.

2.5.2. Perceived ease of use

Customers experience perceived ease of use when they believe using a particular product/service would reduce their effort (Davis, 1989). Similarly, Zeithaml et al., (2002) also defined perceived ease of use as the degree to ease in understanding and using a new product/service. Here, the effort is a source that users allocate to activities for which they are responsible. In this regard, a study shows that ease of use of technology or specific systems reduces the efforts of customers more likely to be accepted by customers and hence customers perceive the value from it (Davis, 1989). Similarly, in the context of this study, perceived ease of use refers to the extent where business customers believe that using an app offered by L2GO is free from effort and consists of good quality. It means, if a system is relatively easy to use, individuals will be more willing to learn about its features and finally intend to continue using it.

Several works of literature regarding perceived ease of use in online shopping states that customer experiences ease of use if the input required for purchasing online is kept at a minimal level (Avcilar & Özsoy, 2015). Similarly, (Cheema, et al., 2013) noted that perceived ease of

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use refers to the customers prefer to experiment with innovation to evaluate its benefits easily. The author also affirmed that the drivers of growth in online shopping/booking are determined by the perceived ease of use which is a combination of convenience provided to those with easy access, proper navigation, less input, and high privacy. However, the product/service is likely to be accepted by customers if they find perceive it as free of effort.

2.5.3. Perceived usefulness

The perceived usefulness is defined as the users’ evaluation of a particular system that will enhance the performance of his/her work in an organization (Davis, 1989). the notion here is that utilizing a specific product/service will increase one’s performance in an organization. Similarly, Liu et al., (2013) refer to perceived usefulness as customers' belief about the improvement of their task performance through the adoption of new technology/system. It is believed that customers are impressed by features of a specific product/service if they find the job performance to some extent that can be improved, which means the product/service has a greater influence on usefulness and that customer has perceived functional value from it. Therefore, it can be said that perceived usefulness is strongly related to the user's perceived value. Perceived usefulness is the determinant of actual behaviour which encourages firms to use more innovative and user-friendly service technologies that give more autonomy in performing the task (Popoola, et al., 2019). Evidence from past studies conveys that the significant effect of perceived usefulness influences the customer intention adaption. The Study suggests perceived usefulness is an important determinant in determining the adoption of a specific product/service (Jahangir & Begum, 2008).

2.6. Criteria for characterizing value

Despite the existence of many conceptual approaches in the literature, features of value are frequently accepted by many authors (Woodruff, 1997).

2.6.1. Value derives from comparative assessment

Value is the result of a relative judgment made by customers concerning a product/service. This judgment can be classified into two categories; First, intra-product comparison: according to Zeithaml (1988) individuals make a comparison between cost and benefits associated with the offering. Second, cross-product comparison, the consumer makes a judgment of the offering by taking the reference of one firm’s offering and comparing it with another firm’s product/service. Thus, Woodruff (1997) pointed out that value exists if there are alternative options to compete with.

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2.6.2. Value is personal

In several pieces of literature, it is recognized that value is subjective and individual. As pointed out by Zeithaml (1988), when considering the nature of benefits and sacrifices it may vary depending on an individual's evaluation of an offering. Some customers evaluate the offering based on quality aspects, others on price, and yet others on its both price and quality. Customers attach value to an offering depending on its perceived ability to help solve their problems or fulfill their needs. Holbrook (1998) also acknowledges that value can be perceived differently depending on the individual. The individual characteristics may influence the level of valuation, the degree of familiarity of consumers with the offering, and the level of consumer involvement in a particular product/service category.

2.7. Influencing Perceived Value: Marketing Communication

The reason why firms often lose their customers is due to the firm’s inability to deliver value to the customers which ultimately leads to misinterpretation of what is offered. This may be due to a lack of interaction to properly understand the customer. Thus, communication in marketing is considered to be the most effective strategy in building relationships and a key determinant of outcomes. By increasing two-way communication, and understanding the dimensions in aspects of interactive communication, will ultimately help create an impact on relational exchange and understanding the customer's behaviour (Murphy & Sashi, 2017). In research, especially marketing communication is significantly important to communicate the service attributes, values of services to the customers, so customers can make strong value judgments. Marketing communication involves, correct understanding of product/service attributes determining the value, and hence perception of customers must be influenced. Managers in the firms also vastly recognized the importance of marketing communication to increase the value of offering (Rizomyliotis, et al., 2017). To increase the value of the offering, it needs well-structured campaigns and accurate information to attract customers, which necessitates the use of marketing communication (Povolna, 2017). Marketing communication contains the value for the consumer and this value consists of detailed information as well as the means for delivering information. Communication is an essential part of the firms, it can either destroy the service value or create (Ravald & Grönroos, 1996). Ashan and Shivany (2010), identified that marketing communication can shed light on designing important aspects of services. Thus, it plays a crucial role in the firm effort to create perceived value.

Moreover, customers are also often not aware of the new product/service attributes, they don’t know how to use them or how it meets their needs. Here, effective communication plays a role and is essential to communicate the benefits of a product/service and place a good image in the mind of customers. Thus, the value of marketing communication is obvious in this situation to deliver the right information and attract potential customers, as a result, influences the customer's perceived value. The study also shows that 60% of customers intend to choose a product/service due to the significance of communication (Deac, et al., 2016).

Investigating Perceive Value in B2B Setting

Master’s Thesis 30 credits

June 2021

Investigating Perceive Value in B2B

Setting

Shubham Ambekar

Danny Duke Samuel Jonathan Andrews

Master’s Programme in Industrial Management and Innovation

Abstract

Investigating Perceive Value in B2B Setting

Scientific Summary

Acknowledgment

Table of Contents

List of Figures

List of Tables

1. Introduction

2. Literature Review