Radically Reassessing The Value Of Offerings

Business contexts and customer needs are constantly changing. In order stay competitive and successful, it is a must for companies to become customer and service oriented. Still, companies face challenges how to cope with changing customer needs. The Next Organization offers the opportunity for companies to participate in the one-year Value Proposition Research Program that views customer value from a radically different perspective leading to new fundamental insights. This ‘paradigm-shift’ in marketing which deploys from a use-value perspective, improves companies’ understanding of customer value, value propositions and value co-creation. As such, organisations will have an improved understanding of their customers’ needs in use, and how a fitting offering will optimally serve these customers to stimulate value created collaboratively. This leads to a stronger competitive position and an increased business performance in the long run.

Flexible value creation is key
Nowadays, companies face challenges due to constantly and rapidly changing trends and technologies. Therefore, customer needs change continuously and business contexts are becoming more turbulent. As a consequence, companies face the challenge of adapting themselves to these needs (i.e. their value proposition). It seems that management of flexible value creation practices within and across organisational boundaries becomes more relevant and critical in becoming and remaining more successful.

A ground-breaking and new view on value and marketing
This challenge is countered by a new and revolutionary perspective: the Service-Dominant (S-D) Logic. It views marketing in a broader perspective in which the customer and service stand central. Previously, in the ‘old-fashioned’ Goods-Dominant (G-D) Logic, the value was created through tangible resources by the provider and the customer was not involved in this process of value creation.

“The S-D logic shifts the focus of value creation to the customer’s sphere.”

Value is now created by customers in use (better known as ‘value-in-use’) and evolves over time. This concept, which is sometimes difficult to grasp, is illustrated by the case and figure below.

What milkshakes teach us about true value
Researchers conducted an in-depth observations study to investigate the rationales of customers buying milkshakes. They concluded that the value of milkshakes is not embedded in the product itself, but in the usage/consumption of the product. One’s rationale behind consuming a milkshake on a regular workday is different than consuming one during the weekends. In other words, a businessman buying a milkshake during a workweek at the McDrive prefers to quickly consume the milkshake in order to be satisfied until noon, compared to a father buying a milkshake over the weekend while spending quality time with his son. McDonald’s cleverly responded to this through offering a larger straw during the week (so people can consume their milkshake faster) and a smaller one over the weekend (so people can quietly enjoy their milkshake). Thus, after obtaining the product, the customer himself creates value during usage and over time. So, value is contextual, individually determined and temporal.

Figure 1 – This figure schematically illustrates ‘value-in-use’. The provider produces a product (whether this is a product or service) and delivers it to the customer. The true value – value-in-use –  is created by the customer during use of a product. Value-in-use evolves over time, depends on the context and per individual.

Agility throughout the value creation process
The S-D logic teaches to cope with this new concept of customer value. It illustrates how organisations should deal with ever-changing customer needs through offering a flexible value proposition. Such value propositions are a tool for companies to optimally serve their customers in the total value creation process. The S-D logic pushes organisations to become more ‘agile’ towards their environment and enhances their conception of the value (co)-creation process. The S-D logic proposes that organisations should aim for a ‘resonating focus’ between their business and their customers in order to remain competitive and profitable in the long run.

The Next Organization offers a top-notch research program that helps organisations to be profitable in the long run
The Next Organization creates the opportunity for businesses to participate in a brand-new research program (the Value Proposition Research Program – VPRP) in order to collectively co-create knowledge and enhance long term business’ performance. Together with nine companies (B2B and B2C) from different sectors and the University of Twente, a consortium will be formed to address the challenges how to benefit from this fundamental new perspective. The VPRP works on three levels:

  1. it creates insight for companies into the ‘new concept’ of customer value (value-in-use) to identify uncovered and customer needs from a more in-depth view;
  2. it conceptualises value propositions from a S-D perspective and how a fitting value proposition can be formed;
  3. what co-creation practices optimise the value co-creation process for companies.

These three building blocks are offered in three subsequent modules which consist of workshops and customer centricity sessions, a Value Proposition Lab to test new value propositions in practice with customers, and in-depth Action Research by a professional PhD researcher.

Exploring for revolutionary knowledge
Companies participating in the VPRP will be pioneers in high-level knowledge development which is of crucial importance for long term business performance and a stronger competitive position. Since the VPRP is part of a PhD research, state-of-the-art knowledge will be created that enhances organisations’ understandings about strategic marketing management. In other words, companies will better comprehend their customer and will be able to act upon this through offering a fitting value proposition. This promotes an optimal value co-creation process. The VPRP stretches current boundaries and will develop new ground-breaking knowledge about customer value, value propositions and value co-creation.

The VPRP is part of the PhD research conducted by Yasin Sahhar (consultant at the The Next Organization & PhD researcher at the University of Twente) who will supervise the program. The consortium will be formed with nine top companies from different sectors, The Next Organization and the University of Twente.

This article is the first in the series of the Value Proposition Research Program. For further information, please visit our website.

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