New developments in customer value research
The customer-perceived value research has roots in the consumer value, augmented product concept and the customer satisfaction and service quality literatures, This approach is important because it links desired product or service attributes and performances to desired consequences within the usage context, as well providing a linkages to the customers’ goals and purposes. To date, much of the work here has been conceptual and there is a need for further empirical work.
This stream of literature, in emphasizing the central role of the customer, does not focus sufficiently on the potential costs and gains to organizations seeking to increase customer-perceived value. We have explained above how the research in customer value has shifted from studying the values of individuals; to looking at how value can be created by an organization both internally and with respect to customers; and finally to a perception of value that considers both the customer’s and the organization’s perspectives.
However, the three recent perspectives on customer value, while largely customer-centric approaches, also suggest the need for a broader approach to value. More recently, the thrust of value research has started to reflect more explicitly the role of other stakeholders in the value process. We now review two newer developments in value research: customer value and shareholder value, and relationship value. Customer value and shareholder value: Shareholder value has become an increasingly dominant area of interest among practitioners and academics.
Many organizations now consider the creation of shareholder value as their principal focus. However, more recently organizations have to consider the role of both shareholder value and customer value where they have some form of share-ownership structure. We consider much of what has been written to date on shareholder value emphasizes maximizing shareholder value without sufficient attention being directed to the customer.
Whilst increasing shareholder value is widely accepted as the major goal of management, Bughin and Copeland (233-543) believe that maximizing shareholder value may come at the expense of other stakeholders, leaving in its wake diminished job security, higher unemployment and poorer products and services and, ultimately therefore, reduced shareholder value. For example, in the short term, shareholder value could be enhanced by reducing customer value as a result of cutting budgets in an area such as customer service.
Measuring shareholder-value creation has also received attention in the last few years (e. g. Dobbs and Coller, 68-95). A considerable number of approaches have been developed. Cornelius and Davies (181-221) outline nine consulting firms which have advocated a range of shareholder value-measurement approaches. Amongst these approaches are SVA (shareholder value added -e. g. Day and Fahey, 306-363; Wenner and LeBer, 231-265), EVA(TM) (economic value added e. g. Stewart, 365-734) and VBM (value based management — e. g. Bannister and Jesuthasan, 181-221; Slater and Olsen, 56-85).
Although there is considerable argument as to the best means of measuring economic or shareholder value-added, Day and Fahey (89-98) point out that shareholder-value analysis must not be undertaken without a detailed examination of strategic fundamentals. Some researchers argue that customer value drives shareholder value (e. g. Corpulsky, 365-734; Laitamaki and Kordupleski, 185-271; Leemon, 180-211; Slywotzky, 76-85).
However, Cleland and Bruno (233-543) point out that customer value is a necessary but not sufficient condition for shareholder value and that an enterprise must `make sure that its customer value strategies deliver rigorous revenue growth and the profit margins needed to beat its cost of capital and thereby build wealth for Share holders … we start with customer value because it opens the opportunity for shareholder value, although it by no means leads automatically to it’.
McTaggart, Kontes and Mankins (213-243) make a similar point when they argue that high levels of customer satisfaction can be achieved by an organization without it being translated into adequate returns for shareholders. More recently Doyle (430-454) has emphasized that shareholder value maximization requires a focus on delivering customer value through marketing. The customer value and shareholder value stream of research is important because it introduces a further stakeholder, the shareholder, into the consideration of value.
The shareholder-value element of this research tends to be highly mechanistic. Customer value and shareholder value need to be considered together. It is possible that if too much emphasis is placed on either of them this could have an adverse long-term impact. It is possible for some organizations to deliver high customer value with poor shareholder value. Other organizations may maximize shareholder value but in the process may reduce customer value.
Cleland and Bruno (56-85,181-221) discuss how business strategic involving an understanding of the interdependencies between customer value and shareholder value need to be considered. Again, there is a lack of rigorous empirical research which explores the interaction of the relationships between customer value and shareholder value in the context of different businesses. The potential contribution role of the employee and the internal processes is not taken into account within this literature.