Operationalizing Relative Customer Value

Abstract

The construct of "value" has been central to explaining economic exchange since the time of Adam Smith. Despite its central importance, debate still exists as to what value entails. Absent a comprehensive understanding of value, researchers and managers have grappled with how to measure and manage value. Not surprisingly, absent a definition, no comprehensive, robust approach has emerged. We argue that value first must be viewed as a dual construct, i.e. value to the customer and value to the firm, that must be balanced to be sustainable. Given that value to the customer is clearly assessed as relative to competitive alternatives, we also argue that any robust measurement of value must account for competitive alternatives. We propose applying recent research on the use of relative metrics in linking to share of category spending as the foundation of assessing value to the customer (particularly since customers in most categories divide their spending across competing firms). This allows firms to assess the monetary value customers' assign to their offerings, and to estimate changes in this value from different market actions. As value to the firm is ultimately about the net present value of customers' economic contributions to the firm, this allows firms to balance value to the customer with value to the firm.

Share of purchases in B2B: relative customer satisfaction indicators and customer characteristics as main influencers

“…A good valuation could be a 9 for one customer, while another customer translates it to a 7, so the same qualitative valuation is translated to a different number. The result has been weak relationships between satisfaction and SOP in the literature and challenges by managers as to whether satisfaction and other absolute indicators are useful predictors of customer behavior and business growth (Keiningham et al , 2017; Otto et al , 2020; Reichheld, 2003).…”

“…This is particularly important because the way customers divide their purchases among competing firms provides the most tangible signal of their perceptions of the relative value these firms provide (Keiningham et al , 2017). The competition serves as a benchmark to evaluate satisfaction with the focal firm, impacting satisfaction scores and indicating the need to know the level of this reference point.…”

“…The main objective of the new proposed model is to identify the best explanatory variables of relative customer satisfaction related to SOP and to ensure alignment with the concepts and natural evaluations used in customer satisfaction analysis and their translation to customer loyalty (Aksoy et al , 2015; Garver and Williams, 2020; Keiningham et al , 2017; Keiningham et al , 2014b; Keiningham et al , 2015b; Keiningham et al , 2015c) (Figure 1).…”

An analysis of configurations of relationship quality dimensions to explain sources of behavioral outcomes in globalized manufacturing

“…Furthermore, and although we are aware that, ideally, in an analysis of perceptions and SOW, perceptions should be treated as relative in terms of accounting for the fulfilment that customers perceive from various suppliers (Keiningham et al , 2015b, 2017), data limitations have prevented us from empirically accounting for such relative constructs as the Wallet Allocation Rule (Aksoy, 2014; Keiningham et al , 2015c; Buoye, 2016; Aksoy et al , 2017).…”

Consumer Value Preferences in Healthcare: Insights for Value-centred Management

“…Emerging healthcare practices emphasize a value-driven approach in healthcare management by pressing the need to highlight more at what matters to the patient against what is generally offered in the service provision (Agarwal et al, 2020;Lynn et al, 2015;Keiningham et al, 2017). Agarwal et al (2020) observed that the healthcare landscape is shifting towards emphasizing value over volume (service provisions) as consumer preferences and experiences play a central role in determining healthcare experience.…”