2003:336 CIV
M A S T E R ' S T H E S I S
How Co-operation Can Deliver Added Value to Customers
From the customers view
Frida Wittlock Holm
Luleå University of Technology MSc Programmes in Engineering
Department of Business Administration and Social Sciences Division of Industrial marketing and e-commerce
Preface
Preface
This master thesis concludes my studies for a master’s of science degree in Engineering Physics at Luleå University of Technology. The study was conducted at TeliaSonera in Stockholm during the period of February to July.
I would like to thank the people at TeliaSonera for giving me the opportunity to do my research for them and all help and information they have given me. I am thankful to all the respondents and personnel at TeliaSonera that have helped me to find an answer to the research question. A special thank you to my supervisor, Åsa Ohlsson at TeliaSonera, for her support and encouragement.
Furthermore, I would like to thank my supervisor at the division of Industrial division of Industrial Marketing at Luleå University of Technology for his help and inspiration in the process of writing this report.
Luleå, November 2003
Frida Wittlock Holm
Abstract
Abstract
The ways to do business are changing and relationships are becoming more important. One big change in relationship marketing is that companies are co-operating in many different ways. These different forms of co-operation have been a big part of this research since the theories are not consistent and business people do not have a clear picture of what concept of co-operation they are working with.
The purpose of this study is to reach an understanding of how co-operation between selling companies can deliver added value to the customer.
TeliaSonera’s personnel were interviewed and the literature was studied to get an understanding of how co-operations work. There were no theories about the customers’
experiences of selling companies in co-operation, bet there were some theories about how co- operations shall work between the co-operating companies to be successful. Because of the lack of relevant theories and since the studied co-operations are delivering services, are the theories that are brought up in this research from the service marketing and service
production.
Customers were identified and interviewed according to their earlier experiences of buying from co-operating companies. The service production theories and the success factors were used in analysing the interview results.
The analysis gave some clear results that the customers identified as values that companies
can deliver to them through co-operation. The customers want the companies to communicate
their co-operation so that they can see the value. The customers also identified the success
factors (summarised in table 7.1), from the theory, and if the co-operation follows those
factors the customer will feel secure. If the co-operating companies have an understanding of
the customer’s line of business it can make the customer gain trust. Gathering the right
competences can make the customer get a whole solution and save them time and money. If
the co-operation adjusts the level of involvement for the customer according to the complexity
of the problem the customers will get the most of the buy.
Table of Content
Table of Content
1 TO DELIVER VALUE THROUGH CO-OPERATION ... 1
1.1 INTRODUCTION TO THE PROBLEM AREA... 1
1.2 WHY THIS PROBLEM IS INTERESTING TO EXAMINE... 2
1.3 TELIASONERA... 3
1.4 PROBLEM DISCUSSION... 3
1.4.1 Research Problem ... 4
1.5 DISPOSITION OF THIS THESIS... 5
2 LOOKING INTO THE WORLD OF BUSINESS CO-OPERATION... 6
2.1 LITERATURE OVERVIEW OF CO-OPERATION... 6
2.2 TYPES AND FORMS OF CO-OPERATIONS... 7
2.3 SUCCESS FACTORS FOR CO-OPERATIONS... 8
2.4 CO-OPERATION AT TELIA...10
2.4.1 Telia Personnel’s Experience from Co-operation...10
2.4.2 Literature Overview of Telia’s Work with Co-operation ...12
2.4.3 Telia’s Comprehensive process map ...13
3 SERVICE MARKETING THEORIES AND VALUE...14
3.1 SERVUCTION MODEL...14
3.2 SERVICE MARKETING SYSTEM...14
3.3 SERVICE QUALITY MODEL...15
3.4 THE COMPONENTS OF SERVICE MARKETING...16
3.5 CUSTOMER PERCEIVED VALUE...16
4 FRAME OF REFERENCE ...17
4.1 THE THEORETIC ANALYSIS TOOL...17
4.2 RESEARCH PROBLEM AND RESEARCH QUESTIONS...20
4.3 DELIMITATIONS...21
4.4 CONCEPTUALISATION AND OPERATIONALISATION...21
5 THE METHODS USED TO SOLVE THE RESEARCH PROBLEM ...22
5.1 THE APPROACH TO THE RESEARCH PROBLEM...22
5.2 THE STRATEGY TO SOLVE THE RESEARCH PROBLEM...22
5.3 ELECTION OF RESPONDENTS...24
5.4 INTERVIEW GUIDE DESIGN...24
5.5 CREDIBILITY OF THE RESEARCH...26
6 THE RESULTS FROM THE INTERVIEWS ...27
6.1 HOW DO THE CO-OPERATING COMPANIES WORK WITH THEIR CO-OPERATION TO DELIVER ADDED VALUE TO THEIR CUSTOMERS? ...27
6.2 WHERE IS THE INTERFACE BETWEEN THE CO-OPERATION AND THEIR CUSTOMERS?...27
6.3 WHAT DO THE CUSTOMERS IDENTIFY AS ADDED VALUE WHEN BUYING FROM CO-OPERATION?...28
6.4 HOW DO THE CUSTOMERS WANT THE CO-OPERATING COMPANIES TO WORK TO DELIVER ADDED VALUE? 29 7 ANALYSIS OF THE RESULTS ...31
7.1 HOW DO THE CO-OPERATING COMPANIES WORK WITH THEIR CO-OPERATION TO DELIVER ADDED VALUE TO THEIR CUSTOMERS? ...31
7.2 WHERE IS THE INTERFACE BETWEEN THE CO-OPERATION AND THEIR CUSTOMERS?...31
7.3 WHAT DO THE CUSTOMERS IDENTIFY AS ADDED VALUE WHEN BUYING FROM CO-OPERATION?...32
7.4 HOW DO THE CUSTOMERS WANT THE CO-OPERATING COMPANIES TO WORK TO DELIVER ADDED VALUE? 32 7.5 THE FRAME OF REFERENCE...33
7.5.1 Success Factors for Co-operations ...34
8 CONCLUSIONS...35
Table of Content
8.1 ANSWERS TO THE RESEARCH PROBLEM...35
8.2 REFLECTIONS...36
8.3 FURTHER RESEARCH...36
REFERENCES...37
ARTICLES...37
BOOKS...37
REPORTS...38
INTERNAL DOCUMENTS AT TELIA...38
APPENDIX 1 - TELIA’S PROCESS MODEL ...39
APPENDIX 2 - INTERVIEW GUIDE FOR PERSONNEL AT TELIA...40
APPENDIX 3 - INTERVIEW GUIDE FOR PERSONNEL AT TELIA...49
APPENDIX 4 - INTERVIEW GUIDE TO CUSTOMERS THAT HAVE HAD CONTACT WITH CO- OPERATIONS WERE TELIA IS ONE PARTNER ...50
APPENDIX 5 - INTERVIEW GUIDE TO CUSTOMERS THAT HAVE HAD CONTACT WITH CO- OPERATIONS WERE TELIA IS NOT A PARTNER ...53
APPENDIX 6 - INTERVIEW GUIDE TO CUSTOMERS THAT HAVE NOT HAD ANY CONTACT WITH CO-OPERATIONS...56
APPENDIX 7 - SUMMERY OF THE INTERVIEW GUIDES ...59
Table of Content
Figures
FIGURE 1.1MAPPING THE ORDER OF THE CHAPTERS IN THIS PAPER.(AUTHORS OWN CREATION)... 5
FIGURE 2.1ILLUSTRATION OF WHAT THE WORD CO-OPERATION INCLUDE IN THIS STUDY.JOINT VENTURE IS GREY BECAUSE IT IS MOSTLY DEFINED AS A MERGER, AND THAT IS NOT STUDIED HERE.(AUTHORS OWN CREATION) ... 6
FIGURE 2.2DUSSAUGE AND GARRETTES (1999) CATEGORISATION OF ALLIANCES. ... 8
FIGURE 2.3ILLUSTRATION OF THE TWO WAYS TO DESCRIBE CO-OPERATION.C=CUSTOMER...10
FIGURE 2.4MODELS OF HOW REAL LIFE CO-OPERATIONS ARE WORKING.C=CUSTOMER;A,B,D,E=PARTNER COMPANIES;TS=TELIASONERA...10
FIGURE 2.5A REAL LIFE CO-OPERATION MODEL. ...11
FIGURE 2.6THE IDENTIFIED MODELS FROM THE INTERVIEWS.THE CIRCLES ILLUSTRATE THE PARTNERSHIP AND C STANDS FOR CUSTOMER...11
FIGURE 2.7PART OF TELIA’S COMPREHENSIVE PROCESS MAP, TRANSLATED INTO ENGLISH FROM SWEDISH...13
FIGURE 3.1SERVUCTION MODEL (HOFFMAN AND BATESON 2001). ...14
FIGURE 3.2SERVICE MARKETING SYSTEM (LOVELOCK;1996). ...15
FIGURE 3.3THE SERVICE QUALITY MODEL (GRÖNROOS AND GUMMESSON;1985)...15
FIGURE 3.4THE COMPONENTS OF SERVICE MARKETING (GRÖNROOS AND GUMMESSON;1985). ...16
FIGURE 4.1THE START ON CREATING THE FRAME OF REFERENCE...17
FIGURE 4.2ILLUSTRATING THE FUSION OF “TELIA’S COMPREHENSIVE PROCESS” MAP AND THE “SERVICE MARKETING SYSTEM”...18
FIGURE 4.3THIS IS DEMONSTRATING HOW THE PROCESSES AT THE SIDES OF THE CONSTRUCTED MODEL ARE SHIFTED...18
FIGURE 4.4THE FRAME OF REFERENCE THAT WILL BE USED TO HELP TO SOLVE THE RESEARCH PROBLEM...19
FIGURE 4.5ILLUSTRATION OF WHERE THE RESEARCH QUESTIONS FIT IN WITH THE FRAME OF REFERENCE...20
FIGURE 5.1THIS ILLUSTRATES THE SEQUENCE IN WHICH THE RESEARCH WAS CONDUCTED. ...23
FIGURE 6.1THIS IS THE SAME FIGURE AS FIGURE 2.6 TO HELP THE READER FOLLOW IN THE TEXT WITHOUT HAVING TO TURN BACK TO CHAPTER 2 AGAIN...28
FIGURE 7.1THE MODIFIED FRAME OF REFERENCE. ...33
Tables
TABLE 3.1SHOWS CONCEPTUAL DIFFERENCES BETWEEN SATISFACTION AND VALUE (EGGERT AND ULAGA;2002). ...16TABLE 5.1THIS TABLE SHOWS HOW THE INTERVIEW QUESTIONS GOES TOGETHER WITH THE RESEARCH QUESTIONS AND THE FRAME OF REFERENCE...25
TABLE 7.1THIS TABLE SHOWS WHICH SUCCESS FACTORS THAT ARE THE SAME FORE THE CUSTOMERS AS FOR THE CO-OPERATION. ...34
To Deliver Value through Co-operation
How Co-operation can deliver added Value to Customers
From the customers view
1 To Deliver Value through Co-operation
This chapter will lead you through the problem area to the objective of the report. The problem area for this study is in value creation and relationship marketing. TeliaSonera will be introduced here because they are a company that have worked with co-operations for a while and therefore have experiences to learn from.
Motives to why this area is scientifically interesting and an outline of possible research problems will also be presented below.
1.1 Introduction to the Problem Area
Relationships are in the core of human behaviour. As citizens and family members we are surrounded by relationships in our daily lives. We have relationships at work, with neighbours, with stores and other providers. Driving a car is a complex social interaction with other drivers in a network of roads. People have girlfriends or boyfriends, go steady, marry, have an affair, and divorce. Matrimony is often used as a metaphor for business relationships:
to enter into marriage with a customer or to divorce a supplier. Relationships are also central for business people. Craftsmen exchange services with other craftsmen whom they know and trust. (Gummesson; 1999)
Two American researchers, W Edwards Deming and Josef M Juran, began in the 1940-th to develop theories of how long term relationships with suppliers could create increased value, with the goal to reach zero errors in the production and to get deliveries in time. These ideas were first acknowledged in Japan, where the car industry started to think in these new ways, with flawless production, deliveries just in time, no stock, development of whole systems by the subcontractors, and shorter production times. The whole industrialised world followed their example. Not only the production where rationalised but the whole business, and new concepts like Business Process Reengineering, Outsourcing, and Strategic alliances surfaced.
(Unt; 2000)
Today is the essence of the marketing concept; understanding customer needs and wants. If a company offers goods and services that satisfy needs and create value for the customer, customer satisfaction and the right customer perceived quality, the company stands the best chance of success. (Gummesson; 1999) Hoffman and Bates (2001) also discuss this concept,
“the importance and benefits of customer satisfaction”, in their book Essentials of Service Marketing.
And since every one is chasing increased value is everything getting harder. It is necessary to
stay one step ahead. Two pair of eyes and ears can see and hear better than one. Two brains
think better than one and it makes it easier to see synergies. (Unt; 2000)
To Deliver Value through Co-operation
1.2 Why this Problem is Interesting to Examine
Close business relationships are not new, but the purposeful development of relationships to achieve strategic goals is a recent development. Traditional relationships developed organically as the key individuals in each firm built close personal or business friendship. The slow naturalistic development of traditional relationships permitted governance structures and a relationship culture to develop that supported the continuance of the relationship. Both partners (firms and individuals) found value in the relationships and strove to enhance and protect the relationship. Today are strategic relationships “forced growth relationships” and the failure rate as reported by scholars and the popular press is high. (Ford; 1997)
Alliances are formed to develop new products or enter new markets. Joint ventures are developed to enter markets or to vertically integrate resources. New distribution patterns are emerging as firms seek low cost ways to reach competitors and to create competitive advantage. (Ibid.)
The increase of strategic alliances is one of the most striking changes that have occurred in the business environment over the past 10 to 15 years. Hardly a day goes by without the media reporting the signing of some agreement between two or more firms.
The recent and rapid growth in the number of strategic alliances can be explained by various changes in the international business environment; in particular, the globalisation of trade and the acceleration of technological progress seem to be major driving forces that have led firms to enter into significant numbers of co-operative agreements. (Dussauge and Garrette; 1999) Hybrid arrangements such as long term buyer-supplier relationships are created with an expectation of synergy, i.e. an expectation that the hybrid will create value in a way that each of the partners alone could not. Knowledge of where value lies for the buyer is critical for the supplier firms. (Borys and Jemison; 1989)
Researchers in marketing have extensively examined the concept of value in the context of consumer products; the focus of which has been the relationships among price, brand name, quality, and perceived value. (Ford; 1997)
Value is often described as the ratio of quality and service to price, V=Q/P. In many markets, however, customers respond to service improvements as if the value equation has an exponential function in the numerator, V=Q ²/P. (Dwyer and Tanner; 1999)
This means that the quality of a service or product is in many cases more important than the
price.
To Deliver Value through Co-operation
1.3 TeliaSonera
This study is done at TeliaSonera and here follows a background on the company for better understanding later on.
The Swedish company, Telia, and the Finnish company, Sonera, merged in 2003 and are creating the leading telecommunications group in the Nordic and Baltic regions TeliaSonera.
TeliaSonera’s home market comprises the Nordic countries and Baltic region. TeliaSonera operates under the Telia brand in Sweden and Denmark, under the Sonera brand in Finland, and under the NetCom brand in Norway. In the Baltic regions TeliaSonera operates through subsidiaries and associate companies.
Since this study is only looking at the Swedish customers and conditions will the name that is used throughout this report be Telia.
Telia have always been in the front in all steps through mobile telephone history and today they are trying to make companies even more mobile.
By finding new ways to communicate their offers, and making companies even more interested in mobile data communication, they can make companies become more mobile.
One way for Telia to do this is to offer their products and services trough system integrators and business consultants. They have the knowledge about applications and the customers IT- systems, and can with mobile data communication make the customers more efficient by, for example, doing their business applications mobile. When these companies offer mobility together they can make the offer easier to understand, than it is one by one.
Telia want to do this in the first stage by using existing products and services but in the long run also develop new ones. (Ki Consulting; 2001)
The reason to do this study on Telia is that they have worked with a co-operation for a while and have now come to the point where they need to know if they are on the right track.
They had a two-day workshop, in November 2001, where the group made a strategy roadmap for how Telia shall manage partnerships (Ibid.). Now they want to find out more from the academic view.
1.4 Problem Discussion
As competition intensifies, products and services become more homogeneous, and markets become mature, it is becoming harder for companies to differentiate themselves from other organisations. Merely providing customers with technical solutions is not sufficient to be competitive in today’s market. Various value added services, have to be delivered in order to stay competitive. (Wetzels, de Ruyter and van Birgelen; vol. 13 no.4/5 1998)
By using a well-managed strategic alliance agreement, companies can gain in markets that would otherwise be uneconomical. (Elmuti and Kathawala; 39/3 2001)
How is these alliances supposed to work, both towards each other and towards the customer?
Can strategic alliances be seen as a value added service for the customer?
Byers’ perceptions of value represent a trade-off between the perceived benefits of the service to be purchased and the perceived sacrifice in terms of the costs to be paid. Total customer costs include more than simply the monetary price paid for the service. Other costs include;
time costs, energy costs and psychic cost, which reflect the time and trouble the customer has
to endure to acquire the service. Similarly, total customer value extends beyond product value
and includes service value, personnel value and image value. (Hoffman and Bateson; 2001)
To Deliver Value through Co-operation
So, by reducing the perceived sacrifices like costs and time spent on finding the right offering, and thereby having a high total customer value the buyer’s perception of the value of the offer would be high?
Can companies create value through co-operation, by having an offer that saves time and has a high service level?
One key to provide superior customer service is to define service value from the customer’s perspective. Traditional approaches define value internally and frequently miss what is really important to customers. (Ibid)
Does the customer think that co-operation between companies can give them a better offer?
Dussauge and Garrette (1999) argue that allied companies are constantly obliged to trade off their own interests against those of the partnerships. According to Ravald and Grönroos (1996), “…the ability of a company to provide superior value to its customers is regarded as one of the most successful competitive strategies for the 1990s”. Therefore it is interesting for companies to know what the customer think is the main value for them with allied selling companies, so that the companies can make the changes that are best for the customer and thereby also the co-operation.
It is also interesting to see how value can be created for the customers since most of the studies done about co-operation is on how co-operations are to be managed for increased value for the partners, like the book, Alliance Advantage by Doz and Hamel (1998), where the book is designed to focus executive attention on the process of value creation within alliances.
1.4.1 Research Problem
Since it is just the last 10-15 years, that co-operations have been in large use by businesses, is not much research conducted yet. The authors that do look at the concept are always doing it from the co-operations point of view. So it would be interesting to look at the co-operation from the customers view.
Since companies works with the concept is it easy to think that they believe that they think that they are creating value, but for whom and how.
During the work with this research it has shown that the choice to analyse the concept partnership was to narrow. The literature did not give a clear definition and after the interviews it was evident that this study was about something larger then the concept
partnership. When the customers were asked to define the concept they described every kind of co-operation there is, from long-term customer-supplier relationships and projects to deep strategic relations that goes all the way to management level. This is the reason for the choice to research the large concept co-operation. Throughout the paper will the word co-operation be used, except for the times when other authors are being reviewed, and then their own choice of word will be used.
This led to the objective of this paper that is; to reach an understanding of how co-operation
between selling companies can deliver added value to the customer.To Deliver Value through Co-operation
1.5 Disposition of this Thesis
Here is the mapping of how this study is presented in this paper. It is first presented in words and then illustrated in figure 1.1.
Chapter 1: This chapter will give you an understanding of the problem area and present the objective of this study. Telia that was the company where this study were conducted, is also presented here.
Chapter 2: This chapter is here to give an understanding of the concept that are investigated and the jungle of definitions there are of the different co-operations.
Chapter 3: The theories that can be used to study this problem area summarised here.
Chapter 4: The frame of reference that will be used to analyse this problem area presented in this chapter.
Chapter 5: This is where the methodology is introduced. It will give a picture of how the study have been conducted and what choices that have been made.
Chapter 6: The results from the interviews are presented here.
Chapter 7: Analysis of the results can be found here.
Chapter 8: The conclusions that can be drawn from this study are given here. Suggestions for further studies are also given.
Figure 1.1 This map is illustrating the chapters’ orders in this paper. (Authors own creation)
Introduction
Co-operation
Theories
Frame of reference
Methodolog
Results
Analysis
Conclusions Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Service Marketing Theories and Value
2 Looking Into the World of Business Co-operation
This chapter is here to shed some light on what kind of co-operations there are, and that it is hard to find any boundaries between the concepts. It will start with a few examples of different researchers’ classification of co-operation, to show the number of definitions there are. There will be a brief summary of what the theory says is success factors, on how to manage co-operation, to use later and see how that works with the customers opinions. In the end Telia’s view of co-operation will be presented.
As explained in chapter 1.4.1, the objective of this study was at first to examine the concept partnership, but throughout the study it became evident that it is hard to make a distinction between the definitions, and therefore the broader sense was chosen.
The word co-operation will be used as an overall term for all the kind of co-operations, illustrated in the figure below. But when referring to other authors their own choice of word for the concept will be used.
Figure 2.1 Illustration of what the word co-operation include in this study. Joint venture is grey because it is mostly defined as a merger, and that is not studied here. (Authors own creation)
2.1 Literature Overview of Co-operation
“Strategic alliances are fashionable. They are discussed in boardrooms around the world and mentioned constantly in the media. What the term actually means, however, is rarely defined precisely”.
(Dussouge and Garrette; 1999)
In USA, the number of formal business alliances increased by an average of 27 per cent per annum between 1985 and 1991 and the growth continued in the 1990s. According to a study by McKinsey, out of forty-nine alliances, one third failed. Short-term alliances to reach quick results, such as cost reduction through downsizing, did not pay off; alliances should be strategic and long term. Another study showed that 70 per cent of all strategic alliances were discontinued or do not live up to its expectations. (Gummesson; 1999)
According to Jeannet and Hennessey (1995) are alliances different from traditional joint ventures since in the ventures two partners contribute a fixed amount of resources and then it develops on its own, in the alliance two entire firms pool their resources directly in a collaboration that goes beyond the limits of a joint venture. In an alliance, each partner brings a particular skill or resource and by joining forces each expects to profit from the other’s experience, typically it involves distribution access, technology transfers, or production technology.
A strategic alliance or partnership may be defined as a relationship where a synergistic combination of individual and mutual goals encourages the partners to invest time, effort and resources to create a long term collaborative effort that achieves individual and partnership strategic advantages. (Ford; 1997)
Co-operation
Partnership Strategic Alliance
Alliance
Joint VentureService Marketing Theories and Value
Aaker (1995) suggest that when the uncertainties of operating in other countries are considered, a strategic alliance is a natural alternative for reducing investment and the accompanying inflexibility and risk.
He also argues that a strategic alliance is a collaboration leveraging the strengths of two or more organisations to achieve strategic goals. There is a long-term commitment involved. It is not simply a tactical device to provide a short-term fix for a problem. The result of the collaboration should have strategic value and contribute to a viable venture that can withstand competitive attack and environmental change.
A strategic alliance can take many forms, from a loose informal agreement to a formal joint venture. The most informal arrangement might be simply trying to work together and allowing systems and organisation forms to emerge as the alliance develops.
The potential of strategic alliances strategy is enormous. If implemented correctly, some authors claim it can dramatically improve an organisations operations and competitiveness.
It is even said that strategic alliance goes beyond normal company-to-company dealings, but fall short of a merger or a full partnership.
The alliances range from informal “handshake” agreements to formal agreements with lengthy contracts in which the parties may also exchange equity, or contribute capital to form a joint venture corporation. (Elmuti and Kathawala; 39/3 2001)
Joint venture is set up when two organisations come together to create a jointly owned third company. The two parents share the ownership, control and profits, as well as the risks. There are many reasons for taking this route. The partners might feel that separately they do not have the necessary resources to develop or make an impact on a market. This motivation could be especially important if they are up against larger, more powerful competitors. The partners are likely to have complementary assets or skills. (Bassington and Pettitt; 2000) A formal joint venture involving equity and a comprehensive legal document, on the other hand, has very different risks. When equity sharing is involved, there is often worry about control, return on investment, and achieving a fair percentage of the venture. (Aaker; 1995)
2.2 Types and forms of Co-operations
Not all alliances are the same. A simple collaborative agreement between an original equipment manufacturer and its subcontractors, a joint venture with a local partner to expand into a developing country, and a partnership between major global competitors for the joint development and production of a new car or aircraft correspond to extremely different circumstances. Strategies must therefore be tailored to each main type of alliance. (Dussauge and Garrette; 1999)
A study by Coopers and Lybrand (1997) (referred to in Elmuti and Kathawala, 2001) brings up different forms of alliances:
Joint marketing/promotion
Joint selling or distribution
Production
Design collaboration
Technology licensing
Research and development contracts
Other outsourcing purposes
Service Marketing Theories and Value
Another classification, presented in Elmuti and Kathawalas (2001) article, of alliances:
Marketing and sales alliances:
• Joint marketing agreements
• Value added resellers
Product and manufacturing alliances
• Procurement-supplier alliances
• Joint manufacturing
Technology and know-how alliances
• Technology development
• University/industry joint research
Dussauge and Garrette (1999) categorise alliances as shows in figure 2.2 below.
Figure 2.2 Dussauge and Garrettes (1999) categorisation of alliances.
2.3 Success Factors for Co-operations
This information gives an understanding of how companies shall work from the inside. It can be useful in the analysis of how co-operation can give the customer added value. The following information is from Elmuti and Kathawala’s article “an overview of strategic alliances”.
Senior Management Commitment: The commitment of the senior management of all companies involved in a strategic alliance is a key factor in the alliance’s ultimate success.
For alliances to be truly “strategic” they must have a significant impact on the companies’
overall strategic plans; and must therefore be formulated, implemented, managed, and monitored with the full commitment of senior management. Senior management’s commitment to alliances is important not only to ensure the alliances receive the necessary resources, but also to convince others throughout the organisation of the importance of the alliance.
Similarity of Management Philosophies: Corning inc. is a leader in forming successful strategic alliances and they prefer to form partnerships with those companies whose management philosophies, strategies and ideas are most similar to their own. In order to ensure the best chance of success, companies should either seek partners who do have similar management philosophies, or draft an alliance agreement that adequately addresses the differences, and provides for their resolution.
Partnerships between non-competing firms
Alliances between competitors
International expansion joint ventures
Vertical partnerships
Cross- industry agreement
s
Complementary alliances Quasi-
concentration alliances Shared-
supply
alliances
Service Marketing Theories and Value
Effective and Strong Management Team: Alliances do not fail in the planning stage; it fails in the implementation stage due to poor management. Therefore the best way to work with alliance may be to move slowly, and start with simple alliances and then move towards more complex ones as alliance experience and talent is obtained.
Frequent Performance Feedback: The alliance must continually be measured and evaluated against the short and long-term goals and objective. Strategic alliances are very tough to measure and evaluate, but can be done with the help of understanding the form used and understanding the goals of the companies involved.
Clearly Defined, Shared Goals and Objectives: Whatever the relationship between the two partners, the merging of separate corporate cultures in which the parent firms may have different, even ultimately conflicting, strategic intents can be difficult and anything but smooth. It is extremely important that alliances are aligned with the company strategy. Top management are the ones that should articulate where an alliance fit into the company’s plan.
Thorough Planning: Planning, commitment, and agreement are essential to the success of any relationship. The overall planning of the alliance must be mutually developed.
Clearly Understood Roles: In forming strategic alliances the partners must have clearly understood roles. It is crucial that the question of control is resolved before the alliance is formed.
If the partners in an alliance decide up front exactly what each partner’s role is in the newly formed business, then there is no misunderstanding or uncertainty as to how decisions will be made.
International Vision: In order to succeed in an international strategic alliance, managers of firms must incorporate a global strategic vision into their enterprise.
Partner Selection: Partner selection is perhaps the most important step in creating a successful alliance. A successful alliance requires the joining of two competent firms, seeking a similar goal and both intent on its success. Having selected a partner, the alliance should be structured so that the firm’s risks of giving too much away to the partner are reduced to an acceptable level.
Communication between partners; maintaining relationships: As any relationship,
communication is an essential attribute for the alliance to be successful. Without effective
communication between partners, the alliance will inevitably dissolve as a result of doubt and
mistrust.
Service Marketing Theories and Value
2.4 Co-operation at Telia
After talking to people at Telia that are involved in co-operations and reading internal documents this is Telia’s view on co-operation.
2.4.1 Telia Personnel’s Experience from Co-operation
For the understanding of how Telia work with co-operation, nine people from different parts of Telia were interviewed. Some works in co-operations today, others have earlier experiences from it or do research in that area. Answers from the interviews can be found in Swedish in appendix 2.
Models of how the partners interact with their customers in the co-operation.
Cassandra Marshall means that Telia’s co-operations are loose ends and single projects, today.
Mats Eriksson thinks there are two kinds of co-operations, one is a research oriented, and the other is commerce co-operation. The business models are different in the sense that, according to Mats, the customer should be involved in the research-oriented co-operation but not necessarily in the commerce oriented, as illustrated in the figure below.
Figure 2.3 Illustration of the two ways to describe co-operation. C=customer
Åsa Ohlsson has real examples of how the co-operations she have been working with interact with the customers (shown in figure 2.4).
Figure 2.4 Models of how real life co-operations are working. C=customer; A, B, D, E=partner companies;
TS=TeliaSonera
C C
A TS
C
B TS
C
TS C D
E
Service Marketing Theories and Value
Michael Nisell had a hard time identifying where exact the co-operations were, despite the fact that Telia label the relationship as co-operation.
There is some co-operation between the mobile phone companies (lightly dotted line in figure 2.5), and there are some co-operation between the Application system provider and the mobile phone companies (dark dotted line in figure 2.5), illustrated with dotted lines in the figure below.
Figure 2.5 A real life co-operation model.
These real life models are made easier to understand when they are consistent and general.
The identified models are presented in figure 2.6. The one to the left is from Michael’s example between the application system provider and the mobile phone operators, the second from Åsa, the third are from Mats, and the fourth are a modified model Michael’s example with the mobile phone operators.
Figure 2.6 The identified models from the interviews. The circles illustrate the partnership and c stands for customer.
What the co-operation has to offer the customer. The offer from co-operation is already coordinated and therefore cost- and time-effective. The customer can avoid being the middle hand and let one of the partners take the responsibility and that makes it easier. Telia’s contribution in co-operation is knowledge. Since the co-operation can create a whole new solution to a newfound problem, in their line of business, the customer can get the solution first. The offer can be made clearer with all the parts in it.
Application Supplier
Application System Provider
Vodafone Telia Tele2
User; SMS-competition, SMS-chatt
C C C C
Service Marketing Theories and Value
Crucial elements in the co-operation. The soft features in the interactions between the partners are important to handle, like; engagement, information flow, and the partners roles. It is important for the seller not to lose contact with its customers. Features that fall outside of companies’ core competence, or on several parts, are hard to manage. Exclusiveness is also hard to manage. The people that work with the co-operation are, as in service companies also a crucial part.
2.4.2 Literature Overview of Telia’s Work with Co-operation
Telia’s view on co-operation from internal documents from a workshop about their work with co-operation (Ki Consulting; 2001, translated from Swedish to English):
Mutual dependence and co-operation between operators in the value chain, this to create value for the third part. All actors have to contribute to added value.
Formal demands for co-operation:
Mutual goals
Openness
Trust
Lever effect on each others competence
Contracts on some levels
The customer is excluded as partner
The lowest degree of partnership is co-operation, which is a relatively lose bond
Partnership can exist on several levels (the degree of co-operation)
Partnership can exist within several areas, like marketing, sales, development etc.
The focus for partnership is to create more business with existing customers The strategy with co-operation within Telia is:
On the basis of every customer conditions/needs create an added value through supporting the customers activity with mobile solutions together with the other partners.
What Telia can bring to the co-operation:
Parts of the overall solution
Quality safe
Technical selling support
Offer quotation
Competence in mobile services
Supplier contracts
Service Marketing Theories and Value
2.4.3 Telia’s Comprehensive process map
This model comes from Telia’s internal document (T. Johansson, A. Nordkvist, F. Bergfalk, H. Olsson; 2002) “Telias processmodell och övergripande processkarta” and shows how Telia describes their work process, it is translated from Swedish to English.
The marketing process and customer process, fig 2.7, are the interesting parts, for this study, of the overall process map; the whole process can be seen in Swedish in appendix 1.
Figure 2.7 Part of Telia’s Comprehensive process map, translated into English from Swedish.
Below are the different parts from figure 2.7 in detail:
Marketing processes:
Offering Maintenance
This is about catching/seeking, investigate, test and implementing the offer.
Customer and Brand Management
It is again about catching/seeking, investigate, test and then go through with the customer care and the brand management.
Customer processes:
Initiating Customer Contact
This is where the customers and the problem are identified, solutions are given and the business is handed over.
Sales
The customer is contacted, analysis of requirements, offer quotation, contracts and order booking.
Delivery
Prepare for delivery, confirm the order from the customer, execute the delivery, and finish up the delivery.
Produce
Prevent customer problems, receive request to use the service, produce, and use consumption statistics.
Customer Care
Receive commission, analyse, suggest solutions, close commission, and give feedback to the customer.
Billing System
Summarise and approve debiting, charge, and receive payment.
Customer Processes
Use Buy
Customer’s Experience Customer’s
Expectation
Initiating Customer Contact
Customer Care Production
Delivery Sales
Billing System Customer and Brand Management Marketing
Processes Offering Maintenance
Service Marketing Theories and Value
3 Service Marketing Theories and Value
Here you can read about the theories that can help to solve the research problem. All the theories are taken from the service marketing research, since co-operations are formed to offer a service of some kind. And since the problem is to get an understanding of how the customer receives the service this chapter will study the service production part of the theories since there is no research in the production area of co-operations.
Since it is the value for the customer that is look into, it is also necessary to look at value theories.
3.1 Servuction model
This model (shown in figure 3.1) is used to illustrate the factors that influence the service experience, including those that are visible to the consumer and those that are not (Hoffman and Bateson 2001).
It makes it easy to see which parts that are visible for a service customer.
Figure 3.1 Servuction model (Hoffman and Bateson 2001).
The model is constructed of two parts: that which is visible to the consumer and that which is not. The visible part of the servuction model consists of three parts: the inanimate environment, contact personnel/service providers, and other customers. The invisible component of the model consists of the invisible organisation and system.
The inanimate environment consists of all the nonliving features that are present during the service encounter. Because services are intangible, they cannot be objectively evaluated, as can goods. Hence, in the absence of a tangible product consumers look for tangible cues that surround the service on which to base their service performance evaluations.
3.2 Service Marketing System
Here is another way to describe the same phenomena as in the servuction model.
This represents all the different ways in which the customer may encounter or learn about the service organisation in question. Since services are experiential, each of these elements offers clues about the nature and quality of the service product.
The significance of this approach is that it represents a customer’s view of the service organisation, looking at it from the outside, as opposed to an internally focused operations perspective. Managers should remember that it is how customers perceive the organisation that determines their decisions to select one service rather than another. (Lovelock; 1996) The degree of contact between the customer and the service system illustrates by sideways moving the black circle, in figure 3.2, that symbolises the customer.
Invisible organisation
and system
Contact personnel or service provider Inanimate environmate
Invisible Visible
Customer A
Customer B
Bundle of service
benefits received
by Customer A
Service Marketing Theories and Value
Figure 3.2 Service Marketing System (Lovelock; 1996).
3.3 Service Quality Model
Quality is the customer’s subjective experience of the service delivered, compared to the customer’s expectations (Grönroos and Gummesson; 1985). Figure 3.3 makes it easy to understand what influences the customer in the perception of the service.
Figure 3.3 The service quality model (Grönroos and Gummesson; 1985).
The technical quality is result related and depending of what the customer gets. The functional quality is process related and depends on how the customer gets the service. (Arnerup and Edvardsson; 1992)
Technical Core
Backstage (invisible)
Front Stage (visible) Interior &
Exterior Facilities Equipment
Service People
Other Costumers
Other Customers
• Advertising
• Sales Calls
• Market Research Surveys
• Billing/Statements
• Miscellaneous Mail, Phone Calls, Faxes, etc.
• Random Exposures to Facilities/Vehicles
• Chance Encounters with Service Personnel
• Word of Mouth
TheCustomer
Service Operations System
Service Delivery System Other Contact Points
Company Image
Functional Quality
”How”
Technical Quality
”What” Service Delivery System
Satisfaction Parameter Customer’s Experience
Customer’s Expectation
Service Marketing Theories and Value
3.4 The Components of Service Marketing
Figure 3.4 shows the basis of a company’s marketing approach. The factors can all affect both present and potential customer’s opinions about us and must therefore be treated in a way that is in conformity with the chosen image.
Figure 3.4 The Components of Service Marketing (Grönroos and Gummesson; 1985).
3.5 Customer Perceived Value
This theory is from an article by Eggert and Ulaga (2002) about relationship marketing in business markets. The article investigates the interactions between customer value and customer satisfaction.
Satisfaction Customer Perceived Value
Affective construct Post-purchase perspective Tactical orientation Present costumers Supplier’s offerings
Cognitive construct
Pre-/post-purchase perspective Strategic orientation
Present and potential customers Suppliers’ and competitors’ offerings
Table 3.1 Shows conceptual differences between satisfaction and value (Eggert and Ulaga; 2002).Satisfaction and value are complementary but they aim at different directions. Customer satisfaction measures how well a supplier is doing with the present market offering perceived by existing customers. This can then give guidelines for action to improve current products and services. The customer value construct, on the other hand, can give future directions how to create value for customer.
Organisation Customer’s Experience
External Impulses
How does the Customer See
Us/Our Service
Sales Activities
&
promotion
Customer Care
Personnel
Product
Frame of Reference
4 Frame of Reference
The three latest chapters is the foundation for this one. It will start with a reminder of the research problem, and research questions. The frame of reference will be presented as the theoretic analysis tool. Delimitations, conceptualisation and operationalisation will end this chapter.
4.1 The Theoretic Analysis Tool
By combining the service marketing system, service quality model, Telia’s comprehensive process map, and customer perceived value the frame of reference, figure 4.4, was formed.
The components of the “service marketing system” model will not be used because it brings in components that can not be controlled, like external impulses, and it only mentions the visible resources, without making them any clearer.
The service quality model shows what the companies have to work with to affect the customer. The technical quality can be seen as the technical core that is the invisible part of the “service marketing system”, and the visible elements of the service can represent the functional quality, as illustrated in figure 4.1.
Company Image
Functional Quality
”How”
Technical Quality
”What” Service Delivery System
Satisfaction Parameter Customer’s Experience Customer’s Expectation
Technical Core
Backstage (invisible)
Front Stage (visible) Interior &
Exterior Facilities Equipment
Service People
Other Costumers
Other Customers
•Advertising
•Sales Calls
•Market Research Surveys
•Billing/Statements
•Miscellaneous Mail, Phone Calls, Faxes, etc.
•Random Exposures to Facilities/Vehicles
•Chance Encounters with Service Personnel
•Word of Mouth The
Customer Service Operations System
Service Delivery System Other Contact Points
Figure 4.1 The start on creating the frame of reference.
The servuction model and the “service marketing system” both makes it easier to see what
part of the service that is visible to the customer, but the “service marketing system” makes it
easier to see the customer in the process and is therefore the one of them that is used in the
frame of reference.
Frame of Reference
Telia’s comprehensive process map is used with the “service marketing system” because Telia are making the processes that are visible for the customer less theoretic. And since Telia is working in co-operation they have, unlike the “service marketing system”, the co-operation aspect in their processes. Therefore are the processes in Telia’s model inserted in the “service marketing system” as illustrated in figure 4.2. The arrows in the beginning, at the left side of figure 4.2, show that the marketing process will be inserted in the big box and the customer process will be inserted in the smaller box. The right side just illustrates the fusion further.
Customer Processes
Use Buy
Customer’s Experience Customer’s
Expectation
Initiating Customer Contact
Customer Care Production Delivery Sales
Billing System Customer and Brand Management Marketing
ProcessesOffering Maintenance
Interior &
Exterior Facilities
Equipment
Service People
Other Costumers
Other Customers
•Advertising
•Sales Calls
•Market Research Surveys
•Billing/Statements
•Miscellaneous Mail, Phone Calls, Faxes, etc.
•Random Exposures to Facilities/Vehicles
•Chance Encounters with Service Personnel
•Word of Mouth The
Customer Service Operations System
Service Delivery System Other Contact Points
Other Costumers
Other Customers The Customer Service Operations System
Service Delivery System Other Contact Points
Customer and Brand Management Marketing Processes Offering Maintenance
Customer Processes
Initiating Customer Contact
Customer Care Production Sales
Billing System Delivery
Offering Maintenance Customer and Brand Management Initiating Customer
Contact Sales Delivery Production Customer Care Billing System
Other Costumers
Other Customers The Customer Customer Processes
Marketing Processes
Figure 4.2 Illustrating the fusion of “Telia’s comprehensive process” map and the “service marketing system”.
The marketing process is the process that gives the customers their expectations of the offer and the customer process is the customers experience from the service, and all this is filtered through the image of the company.
The figure below (figure 4.3) shows how the customer process change sides with the marketing process to fit better in with the model created in figure 4.1.
Figure 4.3 This is demonstrating how the processes at the sides of the constructed model are shifted.
Offering Maintenance Customer and Brand Management Initiating Customer
Contact Sales Delivery Production Customer Care Billing System
Other Costumers
Other Customers The Customer Customer Processes
Marketing Processes
Initiating Customer Contact Sales Delivery Production Customer Care Billing System Other
Costumers
Other Customers
The Customer
Customer Processes
Offering Maintenance Customer and Brand Management
Marketing Processes
Frame of Reference
The customer perceived value theory, from chapter 3.5, is then brought into the model to bring in the value part of the research problem. And as said in the beginning, by Gummesson (1999), “if a company offers goods and services that satisfy needs and create value for the customer, customer satisfaction and the right customer perceived quality, the company stands the best chance of success”. This indicates that value is created somewhere in the satisfaction parameter, but it is not obvious how the value and the satisfaction influence each other so the lines, in figure 4.4, are dotted between the boxes for now and then decided in the analysis in chapter 7.
Figure 4.4 The frame of reference that will be used to help to solve the research problem.
The success factors from the article, by Elmuti and Kathawala (2001), in chapter 2.3 will also be used to analyse the results from the interviews, to see if those factors are the same factors that will bring the customer added value.
Technical Quality ”What”
Functional Quality ”How”
Customer’s Experience Customer’s Expectation Satisfaction Parameter
Offering Maintenance Customer and Brand Management
Initiating Customer Contact
Sales Delivery Production Customer Care Billing System Other
Costumers
Other Customers
The Customer
Customer Processes Marketing Processes
Customer perceived value
Technical Core
Company Image
Frame of Reference
4.2 Research Problem and Research Questions
In the end of the first chapter is the objective of this study presented as:
To get an understanding of how co-operation between selling companies can deliver added value to the customer.
The way to investigate this is to separate the research problem into smaller questions. These questions area created out of the frame of reference and how they come together are presented in figure 4.5 below.
It is necessary to understand the relationship form, co-operation, to be able to answer the research problem. It is seen in the frame of reference that the functional quality is necessary to understand. Is the marketing process the same for co-operations as for service production and how the characteristics are used to deliver added value? This leads to the question:
1. How do the co-operating companies work with their co-operation to deliver added value to their customers?
The customer process is also a part of the functional quality that needs to be investigated further to see where the interface between the co-operating companies and the customers are and how they can be used to deliver added value:
2. Where is the interface between the co-operation and their customers?
To understand how the customer wants the value delivered, it is necessary to se it from the customers’ perspective and investigate what the customers experience from the contact with co-operation:
3. What do the customers identify as added value when buying from co-operation?
Then is it also necessary to see what the costumers’ wishes to get from the contact with a co- operation:
4. How do the customers want the co-operating companies to work to deliver added value?
Figure 4.5 Illustration of where the research questions fit in with the frame of reference.
Technical Quality ”What” Functional Quality ”How”
Customer’s Experience Customer’s Expectation Satisfaction Parameter
Offering Maintenance Customer and Brand Management
Initiating Customer Contact Sales
Delivery Production Customer Care Billing System Other
Costumers
Other Customers
The Customer
Customer Processes Marketing Processes
Customer perceived value
Technical Core
Company Image
1.
2.
3. 4.
Frame of Reference
4.3 Delimitations
This study will not look at the technical quality, only functional. As said, by Wetzels, de Ruyter and van Birgelen, merely providing customers with technical solutions is not sufficient to be competitive in today’s market.
Only selling co-operations that hold the customer outside of the co-operations are studied, since the customer that is inside of the co-operation hopefully makes the co-operation work in the way they want.
4.4 Conceptualisation and Operationalisation
A concept does not have to mean the same thing for everyone so the concepts that are vital for this report is defined below.
The co-operation investigated in the interviews are partnership, but since that had all kind of meanings for both the personnel at Telia and for the interviewed customers. Therefore is the investigated concept co-operation and the meaning of that in this investigation is described in figure 2.1.
The research questions have to be operationalised to be able to be investigated.
How do the co-operating companies work with their co-operation to deliver added value to their customers?
This can be illustrated by the objectives of the co-operation and by the characteristics that the customer looks fore in a co-operation.
Where is the interface between the co-operation and their customers?
The interface is in this study the contact points and interactions, like in the customer process in the frame of reference (figure 4.4). This is investigated through business models and questions about the companies’ roles in the customer process.
What do the customers identify as added value when buying from co-operation?
The added value identified by the customer is based on what value the customers have experienced that the co-operation has given them.
How do the customers want the co-operating companies to work to deliver added value?
The answers to this question are purely wishful thinking and guesses, but hopefully well
based such. This is where the customers that have not experienced co-operations come in and
all the others bad experiences can help to learn more.
The Methods Used to Solve the Research Problem
