Journal of Business-to-Business Marketing

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How Technology- Based Startups Can Use

Customer Value Propositions to Gain Pilot
Customers

Markus Kirchberger, Marc Wouters & James C. Anderson

To cite this article: Markus Kirchberger, Marc Wouters & James C. Anderson (2020)
How Technology- Based Startups Can Use Customer Value Propositions to Gain
Pilot Customers, Journal of Business-to-Business Marketing, 27:4, 353-374, DOI:
10.1080/1051712X.2020.1831212

To link to this article: https://doi.org/10.1080/1051712X.2020.1831212

Published online: 02 Dec 2020.

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JOURNAL OF BUSINESS-TO-BUSINESS MARKETING
2020, VOL. 27, NO. 4, 353–374
https://doi.org/10.1080/1051712X.2020.1831212

How Technology- Based Startups Can Use Customer Value Propositions to Gain
Pilot Customers
Markus Kirchbergera, Marc Woutersa,b, and James C. Andersonc
a
Institute of Management, Karlsruhe Institute of Technology, Karlsruhe, Germany; bAmsterdam Business School, University of Amsterdam,
Amsterdam, Netherlands; cWilliam L. Ford Professor of Marketing and Wholesale Distribution, Kellogg School of Management, Northwestern
University, Evanston, IL, USA

ABSTRACT KEYWORDS
Purpose: Customer value propositions are promoted as critical for technology startups. However, B-to-B; technology-based
empirical evidence supporting the beneficial effects of startups using customer value propositions startups; customer value
is lacking. We draw on a theory of integrating devices to develop and empirically test a model that proposition; pilot customers;
describes how a technology startup may use customer value propositions to learn about customers customer value
quantification; structural
and adapt its market offering to gain pilot customers. equation modeling; business
Methodology/approach: Using structural equation modeling, we test our theoretical model with marketing
a dataset of 293 German new technology-based startups.
Findings: We find support that adopting the customer’s perspective, quantifying monetary value,
and substantiating the value proposition are critical steps to gaining pilot customers.
Research implications: Our findings suggest that a customer value proposition can be understood
as catalyst for learning about customers and tweaking the market offering – making the offering
more compelling because of the value proposition’s specificity through monetary quantification.
Future research could investigate in more detail the role of monetary quantification in the uncertain
context of startups, the role of pilot customers to provide support and resources, as well as
antecedents and consequences for startups of working with pilot customers.
Practical implications: Our research underscores the importance for a technology startup to look
at its own market offering from the customer’s point of view – that is the starting point for
benefitting from customer value propositions. Furthermore, a startup should start early sharing
ideas with prospective customers about its market offering and the initial customer value proposi­
tion. And despite considerable uncertainty, a startup should aim for monetary quantification,
because that focusses data gathering and helps to substantiate the customer value proposition.
The role of a customer value proposition is not to portray a definite calculation of customer value,
but to provide a startup with a concrete but also evolving understanding of customer value to help
the startup improve its market offering and attract pilot customers.
Originality/value/contribution of the paper: Most of the literature on customer value proposi­
tions has focused on established supplier firms. Startups, however, face some unique conditions
that do not allow simply transferring ideas about customer value propositions for established firms
to startups. The primary contribution of this study is the development and empirical test of
a theoretical model of the process for how, together with customers, technology startups use
customer value propositions in business markets to guide learning about their market offerings to
achieve market success.

Introduction propositions has focused on established supplier

firms (Lindgreen et al. 2012; Payne, Frow, and
The literature claims that using customer value
Eggert 2017). In this setting, customer value pro­
propositions are important for startups and offers
positions rely heavily on an in-depth understand­
a variety of guiding instructions for creating one
ing of the offering’s application at the customer for
(Arteaga and Hyland 2013; Osterwalder et al. 2014).
quantifying the offering’s value, such as with value
Although this makes a lot of sense, there is limited
word equations (Anderson, Kumar, and Narus
research providing empirical evidence. Further,
2007).
a more nuanced understanding of how customer
Startups, however, face some unique condi­
value propositions would help startups is lacking.
tions that do not allow simply transferring ideas
Most of the literature on customer value

CONTACT Marc Wouters marc.wouters@kit.edu Karlsruhe Institute of Technology, Institute of Management (IBU), Karlsruhe 76049, Germany
© 2020 Taylor & Francis Group, LLC
354 M. KIRCHBERGER ET AL.
about customer value propositions for established
firms to startups. A startup is confronted with
enormous uncertainty for formulating its custo­
mer value proposition. It typically does not have
information from prior generations of similar
market offerings it can work with, no existing
customer base to pilot the new market offering
and gather information, and no general experi­
ence with customer value propositions that it
could draw on. This uncertainty is compounded
because many startups have a technology that
could be used for creating very diverse market
offerings (applications toward different products
and services and in different market segments),
making it extraordinarily challenging to develop
an in-depth understanding of customer value
(Wouters, Anderson, and Kirchberger 2018).
Further, customers may have doubts whether the
technology is viable and if it truly surpasses the
technology they are used to (Siegel et al. 2003).
Yet, few studies have investigated specifically how
startups can benefit from using customer value
propositions (Laage-Hellman, Landqvist, and
Lind 2018; Wouters and Kirchberger 2015).
Some research suggests that developing
a customer value proposition can help to under­
stand how the startup’s technology can be
exploited for new market offerings that are valu­
able for customers (Lindič and Marques da Silva
2011) and that the development of a customer
value proposition can be critical in the develop­
ment of a technology-based market offering
(Vohora, Wright, and Lockett 2004).
The contribution of this paper is to provide
empirical evidence of the benefits for technology-
based startups working with customer value pro­
positions. We focus on technology-based startups
that are aiming for innovations that differ signifi­
cantly from current offerings and established sup­
pliers in the market. We develop and empirically
test a model for the process of how a technology
startup may use customer value propositions to
learn about customers and adapt its market offering
to gain pilot customers. Customer value proposi­
tions are not expressed as a single construct in the
model, but are reflected in several constructs such
as sharing a customer value proposition with cus­
tomers, expressing it in monetary terms, gathering
information for developing a more persuasive value
proposition, and substantiating claims about custo­
mer value.
We test this model with survey data from a large
sample of technology startups using the two-step
approach for structural equation modeling. This
approach for structural equation modeling, devel­
oped by Anderson and Gerbing (1988), is suitable
for early stages of theory development and con­
struct validation in the social sciences. This was
relevant, because there is not much theory and no
well-defined constructs for customer value propo­
sitions in startups. Furthermore, structural equa­
tion modeling was fitting, because we needed
a statistical tool which is able to assess the full
picture, from possible antecedents of customer
value propositions and their consequences, to the
desired outcomes. Our results support that adopt­
ing the customer’s perspective, quantifying mone­
tary value, and substantiating the value proposition
are critical steps to gaining pilot customers.
We first review relevant literature and theory as
related to our model development, and then
describe the survey used to collect data. We follow
with analyses of the data and a statement of the
results. We end with a discussion and conclusions
from our findings.
Theoretical framework and hypotheses
The broader context for the present study is the
adoption and diffusion of innovations. There is
a huge body of research on the adoption and diffu­
sion of innovations, which has considered many
different perspectives, actors, and roles
(MacVaugh and Schiavone 2010; Woodside and
Biemans 2005). An innovation requires not only
a technological and operational successful launch
of a product or service, but also commercial success
in the market. “To become an innovation an inven­
tion has to be commercially successful” (Aarikka-
Stenroos, Sandberg, and Lehtimäki 2014, 36),
whereby the term innovation has been used “to
describe both radical, breakthrough novelties and
incremental, modest novelties” (p. 36). The diffu­
sion perspective considers how the innovation dis­
perses in the market (for example, looking at the
questions of how fast, in which regions, and what
kind of electrical cars are proliferating), whereas the
adoption perspective considers the innovation

from the users’ point-of-view and investigates why
and how they take up the innovation (for example,
looking at the question why customers might
acquire an electrical car) (MacVaugh and
Schiavone 2010).
Many different actors are important for the
adoption and diffusion of innovations and they
play various kinds of roles in these processes. For
example, distributors may make the innovation
available to users, other companies create comple­
mentary offerings, policy makers and regulators
create the legal and regulatory conditions, and
pilot customers or lead users test and help improve
the offering (Aarikka-Stenroos, Sandberg, and
Lehtimäki 2014; Laage-Hellman, Lind, and Perna
2014). Another framework for adoption differenti­
ates between factors related to supplier marketing
efforts, environmental influences (network extern­
alities, for example), social network (such as word-
of-mouth), perceived innovation characteristics
(relative advantage, for example), buying center
structure and dynamics, and adopter characteristics
(Woodside and Biemans 2005). Against this back­
ground, the present study zooms-in on a very spe­
cific setting. We focus on two particular actors –
a technology startup and potential pilot customer –
and we consider how their collaboration leads to
a better understanding of the innovation in terms
of customer value, which may enable the startup to
enhance customer value and may lead the pilot
customer to try and potentially adopt the innova­
tion (Laage-Hellman, Lind, and Perna 2014).
In that setting, the present study adopts
a particular theoretical lens for conceptualizing
the adoption process. We draw on a theory of
integration devices, which support people who
need to work across functional and organizational
boundaries (Carlile 2002, 2004). Examples of inte­
grating devices are sketches, realistic physical pro­
totypes, scale models, and three-dimensional CAD
pictures (Bechky 2003; D’Adderio 2001). We con­
sider customer value propositions also as integrat­
ing devices that support the technology startups
and prospective pilot customers to work together
and jointly learn. The theory of integrating devices
of Carlile (2002, 2004)) has been used in the mar­
keting and product development literature to
understand collaboration (Andersen, Kragh, and
Lettl 2013; Eslami, Lakemond, and Brusoni 2018;
JOURNAL OF BUSINESS-TO-BUSINESS MARKETING 355
Slotegraaf and Atuahene-Gima 2011). Integrating
devices provide a shared language that supports
representing knowledge, learning to identify issues,
and transforming knowledge to resolve issues
(Carlile and Rebentisch 2003). However, integrat­
ing devices also limit the need for knowledge shar­
ing and do not aim to create identical and complete
understandings at both sides of the knowledge
boundary. People need to understand only particu­
lar aspects of what people at the other side of the
boundary know – enough to be able to be working
together. We contend that the specificity of
a quantitative, monetary customer value proposi­
tion improves the representation and exchange of
knowledge between the technology startup and
prospective customers, and it also increases the
likelihood of identifying misunderstandings that
can be investigated and resolved. In this way, the
customer value proposition guides the learning
about customers and adaptation of the startup’s
market offering. The underlying hypothesis of our
work could be summarized as follows: A customer
value proposition wherever possible expressed in
monetary terms stimulates the technology startup’s
learning about customers and adaptation of its
technology and market offering. This learning
leads to better R&D decisions that provide a more
appealing innovation outcome for customers and
greater startup success.
Several papers offer reviews of the literature on
customer value propositions (Lindgreen et al. 2012;
Payne, Frow, and Eggert 2017; Terho et al. 2012;
Ulaga and Chacour 2001). A customer value propo­
sition specifies the value a company intends to deli­
ver to its customers (Anderson, Jain, and
Chintagunta 1992; Payne, Frow, and Eggert 2017).
Customer value in business markets can be defined
as “the worth in monetary terms of the technical,
economic, service, and social benefits a customer
firm receives in exchange for the price it pays for
a market offering” (Anderson, Kumar, and Narus
2007, 24). Customer value in this approach is
expressed in monetary terms, aiming “to craft
a market offering in such a way that benefits are
translated into monetary terms, based on an in-
depth understanding of the customer’s business
model, thereby convincingly demonstrating their
contribution to customers’ profitability” (Terho
et al. 2012, 178). According to this conceptualization,
356 M. KIRCHBERGER ET AL.
customer value and purchase price are separate char­
acteristics of a market offering (i.e., changing the
price of the offering does not change the value of it
for the customer) (Anderson, Thomson, and
Wynstra 2000; Anderson and Wynstra 2010).
Furthermore, prospective customers are usually
comparing alternatives, and the differential price
and differential value create an incentive to pur­
chase for a customer. Therefore, customer value is
measured in relation to the next-best alternative for
the customer in this approach. The next-best alter­
native is whatever the customer wants to compare
the supplier’s offering against. It could be an
obvious competitor product or service, but it may
also be an entirely different kind of solution that,
from the customer’s perspective, represents
a feasible alternative option.
Customer value propositions may be co-created
with customers (Ballantyne et al. 2011; Park and
Lee 2015). “An effective value proposition cannot
be crafted by the seller alone but requires at least
some mutuality and participation from the custo­
mer based on dialogue, customer-specific data, and
other customer inputs” (Terho et al. 2012, 180).
Understanding customer value can also be an
input for pricing in business markets (Anderson,
Wouters, and van Rossum 2010). However, all this
research on customer value propositions has
focused on established supplier firms.
Research about customer value propositions for
established firms is not simply transferrable to
startups, because many conditions are essentially
different in startups (Guercini and Milanesi 2016).
The customer value proposition of a technology
startup is often uncertain and evolving.
Technology startups often are searching for the
most promising applications for their technology
and typically cannot extrapolate from experiences
with previous generations of similar offerings
(Chiesa and Frattini 2011). Startups also lack the
opportunity to gather information from an existing
customer base, and have no general experience with
customer value propositions that it could draw on.
And so, for example, it can be difficult for a startup
to know what the next-best alternative for the cus­
tomer might be. The startup may have a good
understanding of the technology itself and what
further developments might be possible. Yet, it
may be only superficially aware of possible
applications of its technology and not know many
specifics about current problems customers are
dealing with or about potential improvements that
would be valuable for customers. Conversely,
a customer may also not be able to identify which
of its current problems or needs could be addressed
with the new technology.
To learn more and reduce uncertainty, startups
try to interact with potential customers, and the
literature suggests that collaboration processes
between startups and potential customers are
often iterative and unpredictable (Corner and Wu
2012; Laage-Hellman, Landqvist, and Lind 2018;
Maine and Garnsey 2006; Rasmussen, Mosey, and
Wright 2011). This is about trying, learning and
adapting – “characterized by an ‘almost ready, fire,
do a bit more, refire’ approach” (Coviello and
Joseph 2012, 101). For example, Rasmussen,
Mosey, and Wright (2011) present data from four
cases of new technology ventures. In all cases, the
initial idea had to be refined several times before
gaining external credibility. These were iterative,
‘trial and error’ process where potential customers
and other relevant actors responded to a series of
revised concepts. As one of the founders in this
study described it: “It was so frustrating, each
medic we spoke to gave us another hurdle to
jump over that we had no idea was there. We
went away, jumped over it and then came back
with positive results only to find another hurdle,
another type of test or whatever. It was such
a rollercoaster” (p. 1333). Yet, we do not under­
stand in detail the process of how startups could use
customer value propositions as they collaborate
with potential customers to achieve success
(Lindič and Marques da Silva 2011).
Focus of the research model
We focus on technology-based startups that are
aiming for innovations that differ significantly
from current offerings and established suppliers in
the market. Based on new technology, a technology
startup has developed and can demonstrate
a potential offering (e.g., in laboratory tests or
with prototypes), but requires further development
and cooperation with customers to produce the
final market offering. In contrast to firms that gen­
erate revenues with the technology itself (e.g., by

licensing it, selling it, or conducting fee-for-service
R&D on the basis of it), these technology startups
intend to sell a market offering that is based on
their technology.
The model developed in this research provides
a more in-depth understanding of how customer
value propositions can support a startup’s learning
processes with potential customers, leading to
startup success. The fundamental idea of the pro­
cess reflected in the research model is that both
parties are jointly conceptualizing and validating
the value proposition. Customers do not have to
blindly trust the startup and these value proposi­
tions are not like value calculators (often called
TCO calculators) on the internet, which the sup­
plier unilaterally presents and will often be seen
skeptically by customers. In contrast, this is about
jointly and openly substantiating the value proposi­
tion and tweaking the value. Both parties can gain
from the additional, jointly created and shared
insights.
Formulating the theoretical model was a creative
process, drawing on the literature as well as our
findings from a series of interviews and case studies
we conducted prior to our survey with new tech­
nology-based firms. We covered a range of indus­
tries comprising the automotive industry, chemical
industry, semiconductor and electronics industries,
and IT companies. The time span of cases was two
to three years. We conducted interviews, examined
internal documents, and in some cases helped craft
a customer value proposition. To better understand
the customer’s perspective, we also conducted
interviews with companies that either purchased
from or cooperated with technology startups, or
acted as intermediaries between technology start­
ups and prospective customers.
The proposed substantive model is shown in
Figure 1, and Table 1 lists all construct definitions.
Figure 1. Theoretical model.
JOURNAL OF BUSINESS-TO-BUSINESS MARKETING 357
Table 1. Construct definitions.
Adopting customer perspective: The propensity of the startup’s people
to adopt the customer’s perspective when making decisions about its
offering, thereby considering requirements and preferences of target
customers and alternative offerings those customers might consider.
Sharing initial value proposition: The extent to which the technology
venture shares its envisioned market offering, such as first ideas,
designs, prototypes, applications, benefits, and estimates of customer
value, with potential customers.
Gathering details: The level of activity by the technology venture to
acquire comprehensive and elemental information to guide and
substantiate the team’s decisions about development of the market
offering.
Quantifying monetary value: The extent to which the development
team translates performance-attribute advantages of its offering into
a monetary unit of measure.
Substantiating value proposition: The degree to which the technology
venture is able to provide persuasive proof or evidence supporting its
claims for the value of its offering for the customer’s business.
Tweaking application value: The willingness or the ability of making
small changes in the venture’s innovative technology that deliver
correspondingly larger improvements in the value of the market
offering to the customer.
Gaining pilot customers: The readiness of potential customers to
become initial customers for the venture’s market offering and relate
their experiences with using the offering.
We formulate and test a set of causal hypotheses, and
we see this model as representing an iterative process
for how technology startups learn about customers,
guided by the specificity of a customer value propo­
sition that helps them share and refine their under­
standing. In other words, one construct is
hypothesized to lead to another, but this does not
require strict time precedence.1 We structure the
model exposition into three parts: (1) the starting
points of customer value propositions, (2) strength­
ening customer value propositions through learning,
and (3) desirable consequences for startup success.
The starting points of customer value propositions
We define adopting customer perspective as the pro­
pensity of the startup’s people to take the customer’s
viewpoint when making decisions about its offering,
thereby considering requirements and preferences of
target customers and alternative offerings that cus­
tomers might consider. We draw on previous studies
of innovation using survey data that have considered
market orientation (or comparable constructs, such
as customer orientation, customer focus, or custo­
mer involvement in product development) and its
effect on innovation outcomes (De Luca, Verona,
and Vicari 2010; Hadcroft and Jarratt 2007; Hurley
and Hult 1998; Im et al. 2016).
While being committed to the customer’s point of
view is one important element, the startup must also
358 M. KIRCHBERGER ET AL.
be able to communicate the potential market offer­
ing to prospective customers. This requirement is
reflected in the second exogenous construct in our
model, sharing initial value proposition with custo­
mers, which we define as the extent to which the
technology venture shares information with poten­
tial customers about its envisioned market offering.
The market offering could be represented by descrip­
tions of first ideas, design drawings, prototypes,
experimental applications, estimates of benefits,
and calculations of customer value. The technology
startup’s sharing of initial ideas about the customer
value of its offering enables both parties to discuss
the offering, allowing the technology startup to
obtain more information for improving its market
offering (Covin et al. 2015; Lehoux et al. 2014).
These two constructs lead the technology startup
to collect further information. We define gathering
details as the level of activity by the technology
venture to acquire comprehensive and elemental
information to guide and substantiate the team’s
decisions about development of the market offer­
ing. This information may be monetary, quantita­
tive but non-monetary, or qualitative, and may
come from various sources, such as supplier site
visits, reference customers, internal pilot programs,
or industry experts. The startup may also collect
information jointly with prospective customers and
through means such as laboratory tests with mate­
rials and products similar to those a prospective
customer would apply or pilot tests at the custo­
mer’s site (Salminen and Möller 2006). We expect
companies that more intensely adopt the customer
perspective and more extensively share initial cus­
tomer value propositions with potential customers
will engage in more activities to gather further
information. Such technology startups will have
a greater understanding of what they do not yet
know and will be more compelled to start
a learning process to better understand their pro­
spective customers (Covin et al. 2015; Griffin et al.
2009; Slater and Mohr 2006). The following two
hypotheses summarize our thinking:
H1:Adopting customer perspective leads to gather­
ing details.
H2:Sharing initial value proposition leads to gath­
ering details.
Further, the more the technology startup looks at
its offering from the perspective of the customer,
the more it will realize that it must express how that
offering will enable the customer to earn a greater
profit, because monetary information tends to mat­
ter most when making purchasing decisions
(Morssinkhof, Wouters, and Warlop 2011). We
define the construct quantifying monetary value as
the extent to which the development team trans­
lates points of difference of its offering into
a monetary unit of measure. Potential customers
will likely interpret attempts at monetary quantifi­
cation as a signal that the technology startup wants
to understand the customer’s situation in detail so
that it can provide an offering that is valuable for
that customer, even if the numbers themselves may
not be very accurate. For example, one study found
that “even if sales people cannot precisely quantify
the value of their offerings, our interviews under­
line the importance of making the size of the value
opportunity visible to the customer. Respondents
emphasized widely that this may be more impor­
tant than trying to quote the most precise numbers”
(Terho et al. 2012). Similarly, our qualitative
research provided support for the important role
of monetary quantification. Corporate managers
responsible for selecting technology startups to
work with stated that monetary quantification of
customer value indicated to them that a technology
startup wanted to understand its offering from the
customer’s perspective. Thus, our final hypothesis
for the first part of the proposed process model is:
H3:Adopting customer perspective leads to quanti­
fying monetary value
Strengthening customer value propositions through
learning
However, the startup is facing significant uncer­
tainty, which makes gathering details and quantify­
ing monetary value challenging. Collaboration of
the startup and a prospective pilot customer pro­
vides the basis for jointly learning and strengthen­
ing the customer value proposition. Quantifying
monetary value can be catalyst for these activities,
because it is a very particular way for the technol­
ogy startup to look at its offering from the

customer’s perspective. We expect that this enables
a customer value proposition to become a device
for knowledge integration. As mentioned above,
integrating devices support people who need to
work across functional and organizational bound­
aries (Carlile 2002, 2004). Integrating devices estab­
lish a shared language for representing knowledge;
they provide a concrete method for learning about
differences and dependencies; they facilitate
a process of transforming knowledge – that is,
developing and negotiating solutions for dealing
with these differences and dependencies (Carlile
and Rebentisch 2003).
A customer value proposition may also act as to
a device for knowledge integration. It represents the
understanding of people from the startup and the
customer about how the technology can be used for
a new market offering and its customer value.
Learning occurs, for example, if it becomes appar­
ent that the startup does not understand what the
customer considers the next best alternative or if
the startup discovered that both value particular
effects very differently. Based on issues that materi­
alize, transformation of knowledge happens when
the startup and customer work together more
intensively to find ways to resolve the issues for
understanding and improving customer value.
Thus, a customer value proposition reflects
a detailed understanding of how the offering will
be used, what favorable points of difference it will
provide in the specific context of the customer, and
a translation of those into the monetary impact for
the customer (Anderson, Kumar, and Narus 2007).
In a customer value proposition, words are com­
bined with units of measurement, numbers, and
monetary quantification. Such information, includ­
ing information about the limitations and assump­
tions for the monetary quantification, needs to be
very specific, consistent, and accurate. Remaining
ambiguities, contradictions, and mistakes are more
easily identified, which triggers new questions and
investigations by the startup and its potential cus­
tomers. For example, “energy efficiency improve­
ment” could appear to mean the same thing to the
startup and a prospective pilot customer. However,
specifying that “energy efficiency improvement” is
measured in kWh would bring the following mis­
understanding to light: one firm meant improved
energy efficiency in the sense of using less energy,
JOURNAL OF BUSINESS-TO-BUSINESS MARKETING 359
so using fewer kWh, while the other firm wanted
improved energy efficiency in the sense of better
peak load management. The issue with peak loads
is a high use of energy per second during the busy
moments of the day, so it concerns the amount of
power required at particular points in time and
would be measured in kW (instead of kWh) during
peak times. Another offering with different features
would be valuable for peak load management, for
example, an offering that would enable to flexibly
schedule power-intensive production processes.
Adding limitations and assumptions for the mone­
tary quantification, such as “we based our quantifi­
cation of customer value on a price of €0.174 per
kWh,” but “we did not have accurate data on oper­
ating times,” provides further means of represent­
ing specific knowledge of customer value. This way,
the customer value proposition’s specific and expli­
cit nature makes it a compelling catalyst for repre­
senting, learning, and transforming knowledge
about the startup’s market offering (Wouters and
Kirchberger 2015).
Our qualitative research supported this idea. It
showed that customers may prefer that
a technology startup attempts to estimate the
value in monetary terms and be explicit about its
assumptions, as the basis for further talks to learn
and adjust. One of the startups we interviewed
noted that it had shared its estimate of the mone­
tary value of its technology in a particular applica­
tion with a potential customer and found new
insights. The startup explained the calculations
and assumptions underlying this estimate,
acknowledging that these “are probably wrong, or
at best imprecise,” and it asked the customer to
“please show us where we are wrong.” This request
signaled the technology startup’s desire for an
exchange to improve mutual understanding of
how the offering specifically provides superior
value for the customer. It also guided the discus­
sion. The startup and customer could then work
together to test and refine the assumptions and
calculations. The result was a more specific and
structured value proposition, well understood
assumptions, and a shared understanding of the
potential monetary value. So, we hypothesize:
H4:Quantifying monetary value leads to gathering
details.
360 M. KIRCHBERGER ET AL.
We expect that gathering more information
enables the startup to collect proof or evidence of
its offering’s superior value and to improve its value
proposition in the eyes of prospective customers
(Töytäri et al. 2011). We define substantiating
value proposition as the degree to which the tech­
nology startup can provide persuasive evidence
supporting its claims of its offering’s value for the
customer’s business. We also expect a direct effect
of conducting monetary quantification on substan­
tiating the value proposition, because monetary
quantification produces results that will make the
value proposition more “solid” and convincing. For
example, an experimental study showed that pro­
viding documentation about the monetary worth of
an offering reduced the need for other incentives
(like discounts) in the sales process (Anderson and
Wynstra 2010).
Our qualitative research supported this idea.
A large technology customer company emphasized
in our interview that a startup’s claims about cus­
tomer value needed to be transparent. It wanted to
see not just a final number but the whole calcula­
tion, with explicit formulas and underlying
assumptions. “We need scenarios with input vari­
ables.” Such disclosure often revealed that some
assumptions were unrealistic and needed to be
adjusted. The customer and the startup could then
work together to test, refine, and validate the
assumptions and calculations. Two hypotheses
complete this part of the process model:
H5:Gathering details leads to substantiating value
proposition.
H6:Quantifying monetary value leads to substan­
tiating value proposition
In sum, crafting a customer value proposition
in monetary terms forcefully requires technology
developers to look at their own technology from
the customer’s perspective. Monetary quantifica­
tion requires the gathering of supplementary
information, which enables the technology
startup to provide more persuasive evidence sup­
porting its claims of its offering’s value for the
customer’s business. Monetary quantification is
also more likely to expose differences in under­
standing, creating a need to resolve these
differences, which leads to greater information
sharing as well as a specific and common under­
standing of the potential monetary value of the
offering. Thus, drawing on a theory on knowledge
integration devices (Carlile 2002, 2004), monetary
quantification of the customer value proposition
becomes a catalyst for interorganizational learn­
ing about the customer and adaptation of the
offering.
Two desirable consequences for startup success
An in-depth, specific understanding of customer
value can help the technology startup direct its
limited development resources toward features
and resulting points of difference that increase the
value of the market offering for customers. We
define tweaking application value as the willingness
or the ability to make small changes in the venture’s
innovative technology that deliver correspondingly
larger improvements in the value of the market
offering for the target customer. Such changes
would not be possible without the experience the
technology startup gains through contact with the
customer (Anderson and Wouters 2013).
A technology startup related a noteworthy example
in our interviews. It could use testing facilities of
a major company and prospective customer, and
could make trial installations at a major European
utilities company. In doing so, the technology
startup learned from the customer firm what
kinds of measurements (i.e., accuracy, precision,
and frequency) would really be valuable to that
company for its process control optimization cap­
ability. “We are mainly physicists and mathemati­
cians. We view the world by thinking more
measurements and greater accuracy is better.
Through [the customer firm] we learned that
there is a threshold after which additional measure­
ments deliver diminishing returns.” Thus, we
expect:
H7:Gathering details leads to tweaking application
value.
The second and main desirable outcome of cus­
tomer value propositions in our model concerns the
technology startup’s ability to attract pilot custo­
mers. We define gaining pilot customers as the

readiness of potential customers to become initial
customers for the venture’s market offering and
relate their experiences using the offering. Getting
pilot customers to try out the offering is a crucial
step into the market (von Hippel 1986), and it is
therefore a suitable proximate construct for success
of technology startups in business markets. First
sales are important for new firms (Pitkänen,
Parvinen, and Töytäri 2014), and customers acting
as approvers and promoters is a success factor
(Coviello and Joseph 2012; Salminen and Möller
2006). Pilot customers or lead users have been stu­
died in the literature on the adoption and diffusion
of technological innovations. They often play an
important role by testing the new offering, giving
feedback, and proposing changes, additional func­
tionality, or new applications (Aarikka-Stenroos,
Sandberg, and Lehtimäki 2014; Laage-Hellman,
Lind, and Perna 2014). Thus, they differ from reg­
ular customers in that they have more influence on
the startup’s offering and they receive more atten­
tion than regular customers. Pilot customers may
also receive lower prices for providing useful infor­
mation or other specific roles they have, such as
serving as reputable reference customers. Thus, not
every early customer may be a pilot customer – it
needs to be a managed process with clear objectives
for the supplier and incentives for pilot customers
(Anderson, Wouters, and van Rossum 2010).
Tweaking application value increases customers’
motivation to cooperate with the technology startup
in pilot projects, because pilot customers receive
additional focus and the cooperation will lead to
product improvements from the customer’s perspec­
tive (Anderson and Wouters 2013; Tomas Gomez-
Arias and Montermoso 2007). Our qualitative
research also provided support. A startup founder
experienced that customers liked working with his
startup as pilot customers, because they knew their
wishes were high on the technology startup’s priority
list for development and would be realized quickly.
He could also compare this to his eighteen years of
prior experience working at a large technology cor­
poration. “Big companies have a 2-mile priority list,
and a request gets put somewhere at the bottom and
the customer will only get it in two years. We say, . . .
is a strategic customer, we put all our resources on it,
and we will deliver in two weeks.” A manager of
a customer firm of this technology startup confirmed
JOURNAL OF BUSINESS-TO-BUSINESS MARKETING 361
that his company preferred to cooperate with tech­
nology startups that are in the prototyping phase and
are willing to adjust the offering.
The second antecedent of gaining pilot customers
concerns the ability to effectively “prove” the value of
the offering to prospective customers – a challenging
task for technology startups, as established compa­
nies can be hesitant to buy from technology startups
because of a lack of information about their offering
(DeKinder and Kohli 2008). Substantiating value
proposition increases customers’ motivation to coop­
erate with the technology startup in pilot projects,
because prospective customers expect suppliers to
understand their specific requirements and to show
how the offered solution will create value for their
company (Tuli, Kohli, and Bharadwaj 2007).
Furthermore, working with pilot customers may
provide valuable insights the technology startup can
use to overcome important problems and continue
the commercialization trajectory (Vohora, Wright,
and Lockett 2004). Our qualitative research also
provided support for the critical nature of substan­
tiation. One customer firm mentioned that “bad”
technology startups make claims about their applica­
tion but cannot back them up. In contrast, “good”
technology startups support their strong understand­
ing of customer value by naming potential applica­
tions. This part of the process model can be
summarized through the following hypotheses:
H8:Tweaking application value leads to gaining
pilot customers.
H9:Substantiating value proposition leads to gain­
ing pilot customers.
Research method
Sample frame recruitment
We used a survey to gather information from tech­
nology startups in Germany with offerings in busi­
ness markets. We compiled a list of technology
startups by starting with organizations that are
working with technology startups, such as venture
capital investors, government-funded investment
funds, industry organizations for startups, and
incubators associated with universities or research
centers.
362 M. KIRCHBERGER ET AL.
We looked for startups that fit the focus of our
research model. This model was expected to hold in
the same way for all startups that were included in
the carefully put together sample of technology
startups (i.e., we did not have different hypothesis
for subsamples). We checked the companies’ web­
sites, and we included only companies with a B2B
focus and with their own product development,
and which appeared to be working on innovations
that differed significantly from current offerings
and established suppliers in the market.
Furthermore, we selected firms that were obviously
smaller than 30 people and younger than 10 years.
In this step we also collected contact information
(e-mail address, telephone number, postal address).
We tried to find contact details of a person with
a suitable function (CTO, CSO, CEO, co-founder,
and comparable functions) whom we could address
personally. After this selection process, we had a list
of 602 companies.
Questionnaire development and substantive
validity assessment
We reviewed comparable studies to find similar
existing constructs and scales and, inspired by
these, we developed our own measures for each
construct in the model. These are listed in the
Appendix. Construct definitions and measures
were developed in English and then translated into
German by two native speakers. This translation was
verified by a German language expert. As an ade­
quate tradeoff between creating a scale with enough
measures to test the convergent validity of the mea­
sures with respect to their intended construct, yet
few enough measures for participants to find the
survey length acceptable, we aimed to have four
measures for each of the seven constructs in the
final study and eight measures for the pretesting.
To refine and reduce the number of potential
measures for our model constructs, we conducted
a substantive validity pretest assessment (Anderson
and Gerbing 1991). We asked pretest participants
to perform an item-sort task by assigning each of
the resulting 56 measures to the one construct that
they believed it reflected best. The pretest sample
contained 20 founders or team members of tech­
nology startups, who were representative of our
target group but were not included in the survey.
We calculated the proportion of substantive agree­
ment (PSA) (Anderson and Gerbing 1991). The
PSA is equal to the number of correct assignments
to a construct divided by pretesting sample size (e.g.,
with 15 right assignments to sharing initial value
proposition in our sample of 20, the PSA for sharing
initial value proposition would equal 0.75). A PSA
close to 1.0 indicates high substantive validity,
whereas a PSA near 0.0 indicates low substantive
validity.
As a test of statistical significance, we also com­
pared the number of assignments to the intended
construct directly to the critical values based on of
the binomial distribution for p = .5 and n is the
number of research participants making an assign­
ment (n = 20 in our case). The underlying logic for
this binomial test is as follows. Each assignment of
a measurement item is a competition between the
target construct and all the other non-target con­
structs, which are viewed as a general category. This
approach establishes the null hypothesis of no dif­
ference between the assignment of a measure to the
intended construct and to all of the other constructs
in the set. The probability for the total number of
correct assignments follows a binominal distribu­
tion. For p = .5 and n = 20, having 15 or more
correct assignments has a probability of 0.0207 and
having 16 or more correct assignments has
a probability of 0.0059. We used 16 as the critical
value that expresses that a measurement item is
assigned to its intended construct significantly
more than to all other constructs together (p < .01).
This approach led to the exclusion of four mea­
surement items in total. Thus, we had many more
usable measurement items (i.e., with 16–20 correct
assignments) than we could use, which allowed us
to select the set of measurement items that best
spanned the theoretical meaning of the construct.
Each measure was cast on a 7-point fully anchored
Likert scale, ranging from 1 = strongly disagree to
7 = strongly agree. The unit of analysis was a parti­
cular offering (and the startup may have only one)
for which the technology startup was seeking (first
or additional) pilot customers.
Data collection
The first contact we had with the technology start­
ups was via e-mail. Whenever possible we

addressed a person directly, such as a co-founder,
CEO, CTO, or CSO. We stated that we had picked
their company purposefully, followed by one to
three individualized sentences stating why we
selected this specific company. We assured the
recipient that the survey would take only
10–15 minutes. We further emphasized that we
would not publish any sensitive data and that filling
out the questionnaire anonymously was an option.
We sent out surveys to 602 companies. Of these,
40 companies could not be reached by e-mail,
postal mail, and phone calls because the contact
data were no longer related to the firm. We received
376 answers, for a response rate of 67%. From all
answers, 357 contained the complete data needed
for our structural model. From this set we deleted
46 companies that were over 10 years old and 10
companies with more than 30 employees, which
reduced the sample to 301 startup companies.
Finally, we looked at the free text field at the end
of the questionnaire and eliminated 8 companies
that explicitly commented that the survey did not
fit their situation (e.g., “these questions do not
relate to my company” or “the survey does not fit
our reality”). The final dataset contained 293 com­
panies (52% usable response rate).
Data analyses and preparation
We analyzed our sample data with structural equa­
tion modeling, following the two-step approach of
Anderson and Gerbing (Anderson and Gerbing
1988). The first step is to specify and analyze
a multiple indicator measurement model using
confirmatory factor analysis. In this kind of mea­
surement model, two or more measures posited to
be alternate indicators of an underlying construct
are specified as reflective indicators and each mea­
sure is specified as being an indicator of only one
underlying construct. All other potential relation­
ships of the measures to other latent variables are
set to zero. The latent variables, or estimated con­
structs, are allowed to co-vary freely. Re-
specifications to the measurement model are
made as needed to provide acceptable fit, so this
analysis is not exclusively confirmatory.
In the second step, the structural model specify­
ing the posited relationships of the estimated con­
structs to one another is estimated simultaneously
JOURNAL OF BUSINESS-TO-BUSINESS MARKETING 363
with the re-specified measurement model. The dif­
ference in fit of the simultaneously estimated struc­
tural and measurement submodels with the fit of
the re-specified measurement model provides an
asymptotically independent test of the substantive
structural model (cf. Anderson and Gerbing 1988).
The second step may also lead to comparing alter­
natives to the initial structural model, driven by the
data and theoretical considerations. Thus, the two-
step approach enables respecifications of the mea­
surement model and comparisons of alternatives
for the initial structural model – these are fully
disclosed – which is realistic since there is not
much theory and no well-defined constructs for
customer value propositions in technology start­
ups. This approach implies that in practice, struc­
tural equations modeling is both confirmatory and
exploratory (cf. Anderson and Gerbing 1988). For
the structural equation modeling, we used SPSS and
AMOS 22 for the data analysis.
Following Hu and Bentler (1999), we report the
CFI, SRMR, and RSMEA and use recommended
cutoff values of 0.95 or greater for the CFI, 0.08 or
less for SRMR, and less than 0.05–0.08 for RMSEA
(Bentler 1990; Hu and Bentler 1999; Rigdon 1996;
Schreiber et al. 2006; Schumacker and Lomax
2010). The authors position their recommenda­
tions as no “golden rules” but rather as useful for
making judgments about alternative models of the
same data (Marsh, Hau, and Wen 2004).
Results
The companies in the sample were, on average,
4.2 years old and had team size of 8.8 (untabulated
descriptive statistics). Of the 293 companies, 188
(64%) were spin-outs of universities, 176 (60%) had
an investor, 201 (68%) received coaching, and 159
(54%) had at least one patent. In 273 (81%) of the
participating startups more than 50% of the team
members had an educational background in engi­
neering and technology. These are the characteris­
tics we were looking for. The industry background
of the participants was very broad, with most par­
ticipants having an IT background (79 companies).
In all of our models, the chi-squared test prob­
ability remained smaller than 0.001, indicating
a significant difference between implied and sample
covariance matrix. Since the chi-square significance
364 M. KIRCHBERGER ET AL.

test is directly related to sample size, this result can specified model, leading to excellent values for the
be expected due to our 293 observations. SRMR (0.045), the RMSEA (0.033) and the CFI
(0.975) of the final measurement model
(χ2 = 367.136, d.f. = 278, p < .001). We report the
Confirmatory measurement model
factor loadings and correlations of the final mea­
The confirmatory measurement model specified surement model in Table 2. All of the unstandar­
initially provided reasonable fit (the SRMR was dized factor loadings were significant (p < .001).
0.059, the RMSEA was 0.049, and the CFI value To assess discriminant validity between two
was 0.937), although the chi-squared value latent variables, Anderson and Gerbing (1988)
remained significant (χ2 = 608.506, d.f. = 356,
p < .001). Table 2. Estimated factor loadings and construct correlations
Examination of the factor loadings and the pat­ (measurement model).
terns and absolute magnitude of the standardized Measure Constructs
residuals suggested three worthwhile re- (1) (2) (3) (4) (5) (6) (7)
Factor loadings
specifications of the measurement model. Given Adopting_1 0.754
the newness of our constructs and measures, this Adopting_2 0.871
Adopting_3 0.761
finding was to be expected and we report these Adopting_4 0.770
below (Anderson and Gerbing 1988). We assessed Sharing_1 0.695
Sharing_2 0.733
for which measurement items the standardized Sharing_3 0.874
residual covariances exceeded 2.0 in magnitude. Sharing_4 0.753
Gathering_1 0.751
We focused on those that were furthest above this Gathering_2 0.749
critical value and, more importantly, the pattern of Gathering_4 0.788
Quantifying_1 0.771
those standardized residuals greater than 2.0. Quantifying_2 0.868
Quantifying_3 0.870
The measure substantiating_3 had nine standar­ Quantifying_4 0.697
dized residuals larger than 2.0, mainly for measures Substantiating_1 0.644
Substantiating_2 0.828
intended to reflect the constructs tweaking applica­ Substantiating_4 0.673
tion value (4) and gathering details (3). We decided Tweaking_2 0.889
Tweaking_3 0.805
to delete substantiating_3 and estimated this re- Tweaking_4 0.677
specified measurement model (χ2 = 501.572, d. Gaining_1 0.718
Gaining_2 0.747
f. = 329, p < .001). The values for the SRMR Gaining_3 0.745
(0.054) and the RMSEA (0.042) improved, as did Gaining_4 0.828
Gaining_5 0.709
the CFI; with a value of 0.955 it was now also above Construct
correlations
the recommended cutoff value. Next, examining (1) Adopting 1
the standardized residuals for this re-specified customer
perspective
model, we found that the measure tweaking_1 had (2) Sharing initial 0.533 1
seven standardized residuals larger than 2.0, mainly value
proposition
for measures intended to reflect adopting customer (3) Gathering 0.417 0.247 1
perspective (3) and gaining pilot customers (2). We details
(4) Quantifying 0.219 0.318 0.348 1
removed tweaking_1 from the measurement model monetary
and estimated this re-specified measurement model value
(5) Substantiating 0.367 0.484 0.444 0.318 1
(χ2 = 429.55, d.f. = 303, p < .001). The values for the value
proposition
SRMR (0.049), the RMSEA (0.038) and the CFI (6) Tweaking 0.367 0.32 0.171 0.15 (0.091 ns) 1
(0.966) improved further. Finally, examining the application
value
standardized residuals for this re-specified model, (7) Gaining pilot 0.394 0.369 0.272 0.155 0.393 0.162 1
we found the measure gathering_3 had seven stan­ customers
dardized residuals larger than 2.0, mainly for mea­ Note: We report standardized factor loadings, but the statistical significance
of the factor loadings was assessed using unstandardized estimates. Each
sures intended to reflect sharing initial value measure is significantly related to its intended construct (p <.001). All
factor loadings we estimated are shown in the table, the measures on all
proposition with customers (4). We removed gath­ other constructs are set to zero. Construct correlations are statistically
ering_3 from the model and estimated the re- significant (p <.05) if not indicated otherwise (ns).

suggest checking the standard errors of the correla­
tions. The estimated correlation increased by two
standard errors should not reach 1.0. In our case,
the largest correlation was 0.533 between sharing
initial value proposition and adopting customer per­
spective, with an estimated standard error of 0.051,
providing support for discriminant validity.
Use of self-reported measures is typical in struc­
tural equation modeling research. Informants pro­
vide their judgments on a number of measures,
based on their perceptions. This practice may
raise concerns about common method bias,
although that may not be a major issue (Spector
2006). Nonetheless, we performed an assessment of
common method bias on our final measurement
model (Podsakoff et al. 2003; Richardson,
Simmering, and Sturman 2009). We estimated
a model where a common method factor was
added to our final measurement model. This
method factor was specified as uncorrelated with
the estimated constructs and the loading of each
measure on this method factor was constrained to
be equal. This measurement model with the com­
mon method factor had a chi-square value of
332.666 (d.f. = 277, p <. 012). The chi-square dif­
ference value was 34.470 (d.f. = 1, p < .001), which is
statistically significant, as would be expected with
our large sample size. More telling, though, is that
the CFI value for this measurement model with the
common method factor is 0.984, compared to the
CFI value of 0.975 for our final measurement
model. Thus, the difference in CFI values is only
0.009, which means adding a method factor pro­
vides incremental explanation of less than 1% of the
observed covariances (cf. Anderson and Gerbing
1988). This result suggests that the presence of
common method bias in our data is not
a practical concern.
Structural models
Figure 2 shows our model with the standardized
structural parameter estimates. All hypothesized
relationships are statistically significant with the
exception of the path from sharing initial value
proposition with customers to gathering details (for
H2), which is not significant. The estimates are of
reasonable size but have some differences in mag­
nitude. Interestingly, adopting customer perspective,
JOURNAL OF BUSINESS-TO-BUSINESS MARKETING 365
Figure 2. Model with standardized parameter estimates.
gathering details, substantiating value proposition,
and gaining pilot customers form a strong connec­
tion. The alternative path through tweaking appli­
cation value has smaller structural parameter
estimates.
The proposed model provides reasonable fit
(χ2 = 464.340, d.f. = 289, p < .001). Our value for
CFI of 0.950 meets the recommendations.
Constraining the 21 construct correlations in the
measurement model to the 10 paths in structural
model leads to a reduction in the CFI of only 0.025.
This difference in CFI values shows that the differ­
ence in explanation of the observed covariances
between the structural model and the confirmatory
measurement model is less than 2.5% (Anderson
and Gerbing 1988). The RMSEA of the structural
model is 0.046, within the recommended range.
The SRMR value of 0.101 exceeds the recom­
mended cutoff value.
Following the two-step approach, we considered
alternatives to the initial structural model
(Anderson and Gerbing 1988). We focused our
attempts for sensible re-specifications on the rela­
tionships in the triangle between adopting customer
perspective, sharing initial value proposition, and
gathering details, because it could be suspected
that the path from sharing initial value proposition
with customers to gathering details (for H2) was not
significant due to a suppressor effect. As shown in
Table 2, the estimated correlation between adopting
customer perspective and sharing initial value pro­
position is 0.533, between adopting customer per­
spective and gathering details is 0.417, and between
sharing initial value proposition and gathering
details is 0.247 (all correlations p < .01). Thus, the
estimated correlation between adopting and sharing
is higher than the estimated correlations of either of
these with gathering details. As a result, the struc­
tural parameter estimate of the relationship
366 M. KIRCHBERGER ET AL.
between gathering details and adopting – the con­
struct with the higher estimated correlation with
gathering details – will be boosted.
Correspondingly, the structural parameter estimate
of the relationship between gathering details and
sharing – the construct with the lower estimated
correlation with gathering details – will be sup­
pressed, becoming non-significant (Markus 2012).
The above analysis of the suppressor effect moti­
vated a model re-specification (Figure 3) deleting
Hypotheses 2 and 3 and introducing new
Propositions 1 and 2. With Proposition 1 we pro­
pose that sharing initial value proposition is caused
by adopting customer perspective. When a company
is considering what its customer may think of an
offering, the next logical step would be to share
these thoughts with the customer. We also intro­
duced Proposition 2, suggesting that sharing initial
value proposition leads to quantifying monetary
value. Monetary quantification may take place
only after the firm has presented the customer
with the initial value proposition, so the sharing
of an initial value proposition may be a necessary
prerequisite.
This modification improves further all fit indices
(χ2 = 452.007, d.f. = 290, p < .001). The CFI and
RMSEA become 0.954 and 0.044, respectively. The
SRMR improves to 0.094 but is still just above the
recommended value of 0.08. Parameter estimates of
all structural relationships in the model are statis­
tically significant. Importantly, the structural esti­
mate coefficients for the paths that are the same as
in the previous structural model hardly change
(Figures 2 and 3).
We also checked if the model would change if we
added back Hypothesis 2, using a chi-square differ­
ence test (Anderson and Gerbing 1988). The chi-
Figure 3. Final structural model with standardized parameter
estimates.
square difference of 0.783 (with one degree of free­
dom) was not significant and the CFI did not
change within three decimals. The new estimate
for the path Hypothesis 2 was low (0.069) and did
not reach significance (p = .376). The change in the
other path estimates was very low (less than 0.01)
with the exception of Proposition 2, which still
changed inconsequentially from 0.329 to 0.288.
Adding back Hypothesis 2 does not improve the
model, so we prefer the more parsimonious model.
We conclude that the re-specified structural model
shown in Figure 3 is a theoretically grounded
model that is also motivated by our qualitative
data, and it is supported by the survey data.
Discussion and conclusions
The primary contribution of this study is the devel­
opment and empirical test of a theoretical model of
the process for how, together with customers, tech­
nology startups use customer value propositions in
business markets to guide learning about their mar­
ket offerings to achieve market success. We add to
the literature on collaboration processes between
startups and prospective customers by showing
how customer value propositions can contribute
to such interactive learning processes.
Our findings reinforce and extend the under­
standing of integrating devices (Carlile 2002,
2004). We find that a customer value proposition
can be understood as a new type of integrating
device that guides interorganizational learning.
Moreover, we find that monetary quantification is
a key characteristic of this kind of integrating
device. It stimulates a detailed and specific repre­
sentation of knowledge, which more likely brings to
light misunderstandings that need to be resolved.
Monetary quantification is driven by sharing initial
value proposition with customers, suggesting that
when a technology startup shares its envisioned
market offering with potential customers, such
interaction makes the technology startup realize
the importance of thinking about its offering in
terms of monetary value for its customers. Our
results suggest that the importance of quantifying
monetary value is not in the information this pro­
vides per se, but in how it stimulates information
gathering and learning: gathering details had
a stronger effect on substantiating value proposition

than quantifying monetary value (chi-square test
with the two parameters constrained to be equal
leads to a significantly worse model chi-square
= 8.12 with 1 degree of freedom it is significant at
p < .01). This reflects that developing and substan­
tiating value propositions involve meticulously
considering requirements and preferences of target
customers as well as acknowledging that those cus­
tomers most likely consider alternative offerings.
The value proposition’s specificity through mone­
tary quantification makes interorganizational
learning activities particularly compelling (Carlile
2002, 2004).
Finally, our findings go into more detail than
previous literature by specifying ways in which
a startup could interact with and learn about cus­
tomers. Our model includes constructs about shar­
ing a customer value proposition with customers,
expressing it in monetary terms, gathering infor­
mation for developing a monetary proposition,
substantiating claims about customer value, and
tweaking the market offering based on new
insights. We have a clearly-defined sample of tech­
nology startups and a very high response rate. The
sample fits the intended context of new technology-
based startups serving business markets. The tech­
nology startup can still modify its innovative offer­
ing, based on feedback from early customers that
can try out the new offering as pilot customers.
As to be expected, our study has some limita­
tions. All theoretical constructs and the measure­
ment items for these were newly developed for this
study. We drew on multiple literatures and our own
qualitative research. Research on the antecedents
and consequences of using customer value proposi­
tions by technology startups is in an early stage and
our constructs and measures are novel, so some re-
specification of the measurement model and the
structural model are to be expected. These turned
out to be modest and specifically concerned the
front end of the model. Parameter estimates for all
the unchanged paths remained essentially the same.
Several ideas for future research emerge from
this study. First, future research could look at entre­
preneurial origin as another exogenous construct
for the current research model, because this endows
founders with diverging knowledge bases (Agarwal
& Shah, 2014). Employees who found a firm in an
industry they have been working in, have a network
JOURNAL OF BUSINESS-TO-BUSINESS MARKETING 367
and possess knowledge of existing technology,
operational processes, and underserved customer
opportunities, which they can use for preparing
an initial value proposition and sharing this with
prospective customers. Such founders may also
have a greater understanding of what they do not
yet know and be able to gather details and quantify
monetary value in a more targeted way.
On the other hand, technology startups founded
by academics or users may develop market offer­
ings that differ more drastically from existing pro­
ducts and services. This aspect presents difficulty in
devising an initial value proposition and finding
prospective companies to share this proposition
with. However, such value propositions could be
very exciting for some customer firms if the offering
helps them to differentiate their own offerings.
Such initial value propositions, based on sometimes
unorthodox approaches proposed by academic or
user-founded technology startups, may propel
more intense cooperation for gathering informa­
tion, quantifying value, and adjusting the offering.
Thus, entrepreneurial origin could be a worthwhile
exogenous construct to consider in future research.
Second, future research could investigate in
more detail the role of monetary quantification in
the uncertain context of startups. Qualitative field
studies could be applied to discover different ways
in which technology startups gather information
and reduce uncertainty together with prospective
customers and other kinds of actors. The research
would still focus specifically on information for
monetary quantification, but it would look more
broadly at the various kinds of relationships of the
technology startup, because technology commer­
cialization occurs in networks of different kinds of
actors (Aarikka-Stenroos, Sandberg, and Lehtimäki
2014).
Third, the consequences for technology startups
of working with pilot customers could be investi­
gated in more depth, because pilot customers have
different roles (Jalkala and Salminen 2010). For
example, working with pilot customers could
enhance the reputation of the technology startup
in terms of the value of its offering, lead to the
startup having more information to substantiate
the value in a wider range of applications, or lead
to a larger innovation network for the startup with
other kinds of partners. Furthermore, the
368 M. KIRCHBERGER ET AL.
consequences of working with pilot customers for
startup success could be explicitly investigated,
such as startup survival, growth, or financial per­
formance (Bandera and Thomas 2018). A future
research model could include constructs reflecting
different kinds of consequences to the current con­
struct gaining pilot customers.
Fourth, future research may look specifically at
how pilot customers may support technology start­
ups to become viable suppliers to regular custo­
mers. A technology startup typically has limited
experience with many aspects that are vital for its
ability to actually deliver on its innovative offering,
such as manufacturing, purchasing, or protection
of intellectual property (Wouters, Anderson, and
Kirchberger 2018). Technology startups may expli­
citly ask for such support and construct a second
kind of value proposition. The leveraging assistance
value proposition conveys what support and
resources the customer firm will provide to the
startup to help it realize the innovative offering,
and what the customer firm will get in return for
providing the support and resources (Wouters,
Anderson, and Kirchberger 2018). Future research
could include a construct such as seeking leveraging
assistance as a key reason why startups want pilot
customers. We propose tweaking application value
and substantiating value proposition in the current
model as its antecedents and gaining pilot custo­
mers as the consequence.
To conclude, this research builds on the idea
that customer value propositions may guide the
cooperation between a technology startup and
prospective customers (Lehoux et al. 2014;
Vohora, Wright, and Lockett 2004). A customer
value proposition represents the offering in
a focused and powerful way, namely in terms of
the monetary value that it provides to a customer.
Such a concrete and customer-centric way to talk
about the offering raises very specific questions,
provides a means for the technology startup
internally and with customers to discuss the offer­
ing and discover what’s unknown or where they
disagree, and guides the further gathering of infor­
mation. In the context of technology startups, the
initial customer value proposition approximately
represents the offering, but more importantly,
supports learning about customers and helps
shape the startup’s market offering (Carlile 2002,
2004). The interaction of the technology startup
and prospective customers, guided by a customer
value proposition, enhances their understanding,
helps prioritize design efforts and tweak the offer­
ing, and stimulates companies to be pilot custo­
mers. The role of a customer value proposition is
not to portray a final calculation of customer
value, but to have something concrete to guide
a technology startup’s learning about customers.
A vital antecedent is an immersed adoption of the
customer’s perspective, and a significant beneficial
consequence for the technology startup is inter­
ested parties becoming actual pilot customers.
Implications for business marketing practice
How can a technology-based startup gain its first
customers? The answer to this question is crucial
for the success of any startup. That is why we
decided upon gaining pilot customers as the focal
consequence in our research. Gaining pilot custo­
mers means the readiness of potential customers to
become initial customers for the venture’s market
offering and relate their experiences with using the
offering. Our research findings provide guidance
for startups for how to use customer value proposi­
tions for converting prospective customers into
pilot program customers.
Technology startup managers can consider the
constructs, or concepts, that we study as tasks to
perform that will increase their ability to gain initial
customers. We begin this Implications for Business
Marketing Practice section by briefly discussing the
particular approach to customer value propositions
that motivates and directs these tasks. We then
consider each of tasks for the startup to perform.
Using customer value propositions to gain initial
customers
Our research shows that startups can use customer
value propositions as the means to gaining initial
customers for their market offerings. The approach
to customer value propositions that we adopt is one
that appears demanding for startups to use (cf.
Anderson, Kumar, and Narus 2007). This approach
requires that a supplier understands what target
customers regard as the next-best alternative to its
offering, what the points of difference are between

the two offerings and what each point of difference
is worth in monetary terms.
Startups have some unique challenges in put­
ting this kind of customer value proposition
together. A startup is confronted with enormous
uncertainty because it typically does not have
information from prior generations of similar
market offerings it can work with, no existing
customer base to pilot the new market offering
and gather information, and no general experi­
ence with customer value propositions that it
could draw on. This uncertainty is compounded
because many startups have a technology that
could be used for creating very diverse market
offerings (applications toward different products
and services and in different market segments),
making it extraordinarily challenging to develop
an in-depth understanding of customer value.
These challenges may lead technology startups to
conclude that attempting to put together
a customer value proposition for their offerings
would not be worthwhile. Yet, as our research
results persuasively demonstrate, startups should
pursue putting customer value propositions
together as a process to learn about potential cus­
tomers, adapt their offerings to provide greater
value, and gain pilot customers. By sharing its
initial value proposition and making an attempt to
quantify its offering’s monetary value to target cus­
tomers, a startup learns about ambiguities, contra­
dictions and mistakes, which triggers new
questions and investigations by the startup and its
potential customers.
Adopting customer perspective
The initial task for a technology startup is to adopt
the customer’s perspective. Adopting customer per­
spective refers to the propensity of the startup’s
people to adopt the customer’s perspective when
making decisions about its offering, thereby con­
sidering requirements and preferences of target
customers and alternative offerings those custo­
mers might consider. While business marketers
routinely advocate taking the customer’s perspec­
tive, doing this at all or consistently is challenging
for technology startups.
Because many technology startups come out of
university settings, the familiar and comfortable
JOURNAL OF BUSINESS-TO-BUSINESS MARKETING 369
focus for startup managers is the technology that
they seek to commercialize. It is relatively familiar
and straightforward for these managers to assess
how their innovative technology compares with
other technologies on technical performance para­
meters. Most often, standard tests exist to assess
advances in technical parameters. It is much less
familiar or apparent on how advancing the perfor­
mance parameters provides monetary value to
businesses.
Adopting customer perspective begins with
defining customers that are of special interest to
the startup. Narrowing down the potential applica­
tions of a technological innovation to the few most
promising ones is a difficult, yet critical, first step.
Startups can then focus on learning about customer
priorities and concerns in these selected applica­
tions and how the technological innovation might
better enable those customers to achieve a priority
or alleviate a concern. Interacting with target appli­
cation customer managers at industry events and
academic society meetings can begin to establish
relationships and arrange visits to potential custo­
mers. The more that startup managers interact with
managers at potential customers, the more likely it
will be that they can adopt and consistently draw on
the customer perspective in making their technical
and commercial decisions.
Sharing initial value proposition with customers and
gathering details
Our research found that adopting customer per­
spective leads to sharing initial value propositions
with customers and gathering details. Sharing
initial value proposition means the extent to which
the technology venture shares its envisioned market
offering, such as first ideas, designs, prototypes,
applications, benefits, and estimates of customer
value, with potential customers. The technology
startup’s sharing of initial ideas about the customer
value of its offering enables both parties to discuss
the offering, allowing the technology startup to
learn more about the prospective customers’ prio­
rities and concerns and the role that the prospective
marketing offering might play.
Gathering details means the level of activity
by the technology venture to acquire compre­
hensive and elemental information to guide and
370 M. KIRCHBERGER ET AL.
substantiate the team’s decisions about develop­
ment of the market offering. This information
may be monetary, quantitative but non-
monetary, or qualitative, and may come from
various sources, such as supplier site visits,
reference customers, internal pilot programs,
or industry experts. The startup may also col­
lect information jointly with prospective custo­
mers, through means such as laboratory tests
similar to those a prospective customer would
apply or through pilot tests at the customer’s
site.
Quantifying monetary value
Our research found that sharing initial value pro­
position with customers leads to quantifying mone­
tary value. Quantifying monetary value means the
extent to which the development team translates
performance-attribute advantages of its offering
into a monetary unit of measure. Further, we
found that quantifying monetary value leads to
gathering details.
Potential customers will likely interpret attempts
at monetary quantification as a signal that the tech­
nology startup genuinely wants to understand the
customer’s situation in detail so that it can provide
an offering that is valuable for that customer, even
if the numbers themselves may not be very accu­
rate. Our qualitative research supports that custo­
mers prefer that a technology startup attempts to
estimate the value in monetary terms and be expli­
cit about its assumptions, as the basis for further
talks to learn and adjust.
One of the startups noted that it had shared its
estimate of the monetary value of its technology
in a particular application with a potential custo­
mer and found new insights. The startup
explained the calculations and assumptions
underlying this estimate, acknowledging that
these “are probably wrong, or at best imprecise,”
and it asked the customer to “please show us
where we are wrong.” This request signaled the
technology startup’s desire for an exchange to
improve mutual understanding of how the offer­
ing specifically provides superior value for the
customer. It also guided the discussion. The
startup and customer could then work together
to test and refine the assumptions and
calculations. The result was a more specific and
structured value proposition, well-understood
assumptions, and a shared understanding of the
potential monetary value.
Substantiating value propositions and tweaking
application value
Our research found that quantifying monetary
value and gathering details each lead to substantiat­
ing value propositions. Substantiating value propo­
sition means the degree to which the technology
venture is able to provide persuasive proof or evi­
dence supporting its claims for the value of its
offering for the customer’s business. Our research
also found that gathering details leads to tweaking
application value. Substantiating value propositions
and tweaking application value, in turn, are the
direct antecedents of our focal consequence, gain­
ing pilot customers.
Substantiating value proposition increases custo­
mers’ motivation to cooperate with the technology
startup in pilot projects, because prospective custo­
mers expect suppliers to understand their specific
requirements and to show how the offered solution
will create value for their business. Quantifying
monetary value and gathering details enable
a technology startup to refine and improve their
value propositions. Further, they can support their
claims by providing proof or evidence of superior
value that prospective customers seek.
Tweaking application value means the willing­
ness or the ability of making small changes in the
venture’s innovative technology that deliver cor­
respondingly larger improvements in the value of
the market offering to the customer. Tweaking
application value increases customers’ motivation
to cooperate with the technology startup in pilot
projects, because pilot customers receive addi­
tional focus and the cooperation will lead to
product improvements from the customer’s per­
spective. By working with a technology startup to
tweak its offering, prospective customers assist
the startup to tailor a prospective offering to
their specific priorities and concerns, making the
startup’s tweaked offering more valuable to their
businesses. Our research supported this, finding
that tweaking application value significantly leads
to gaining pilot customers.

In sum, our research provides guidance for tech­
nology startups to convert prospective customers
into pilot program customers. Startups should pur­
sue putting together customer value propositions –
including monetary quantification of points of dif­
ference – not to portray a definite calculation of
customer value, but as a process to learn about
potential customers, adapt their offerings to pro­
vide greater value, and gain pilot customers. The
paper describes the tasks for the startup to perform
for implementing this approach.
Note
1. For example, quantifying monetary value is expected
(and found) to lead to gathering details. This sequence
may happen more than once for a particular startup and
prospective pilot customer, though: startups first con­
sider how to quantify value, then gather details, perhaps
finding that not all data are available, next reconsider
how to quantify, then again look for data, and so forth.
In each instance, pursuing the quantification of mone­
tary value leads to gathering details.
Acknowledgments
We thank many individuals at startups and customer firms for
their support of this research.
Funding
The authors gratefully acknowledge the financial support of
the Institute for the Study of Business Markets (ISBM), located
at Penn State
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Appendix. Measures of the constructs

Measure Measure wording

Sharing_1 When we identify potential customers, we share detailed information about our new offering with them.
Sharing_2 We have relationships with various potential customers whom we approach and with whom we share our initial value proposition.
Sharing_3 We share our thinking about the benefits and customer value of our offering with potential customers.
Sharing_4 We share our vision of the design, application, and potential worth of the offering we are developing, with potential customers.
Adopting_1 When we are developing our products and services, we frequently consider how the customer will use them.
Adopting_2 We make an effort to take the customer’s perspective in making decisions about our intended offering.
Adopting_3 We go out of our way to learn our customers’ priorities and concerns for their businesses.
Adopting_4 We test decisions about our offering by adopting the customer’s perspective.
Gathering_1 Each development team member gathered the relevant information from their areas of expertise and functional areas before we drew
conclusions on what we do.
Gathering_2 Our team went out of its way to gather comprehensive and detailed information to guide and substantiate our decisions.
Gathering_3 We did research to estimate costs and other data for guiding key decisions on the design of our products and services.
Gathering_4 Before we made decisions about our products and services, there needed to be some good data on the table.
Quantifying_1 Our team translated performance attributes into a common monetary metric, such as Euros per year.
Quantifying_2 As frequently as we could, we attempted to express features and benefits of our offering in a common monetary metric, such as Euros per
unit.
Quantifying_3 We explained the benefits of our offering to customers, and whenever possible, we express these in euros and dollars.
Quantifying_4 When we considered a feature of our offering, we always thought about the monetary worth it may have for the customer.
Tweaking_1 As we learned more during the development process, we made small changes to our market offering that yielded the greatest increase in
value to customers.
Tweaking_2 We modified our product slightly in an attempt to upgrade its customer value.
Tweaking_3 We sought to make small changes in our technology that delivered considerable gains in functionality and performance to customers.
Tweaking_4 We looked for small changes that would significantly enhance our offering’s value to customers.
Substantiating_1 Our value proposition is backed by proof of the specific features of our market offering, such as measurement of technical attributes.
Substantiating_2 We support our value proposition with persuasive evidence about the specific benefits of our market offering.
Substantiating_3 Our value proposition is substantiated with explicit evidence for the value of our offering to the customer, such as testimonials.
Substantiating_4 We have convincing evidence to support the claims in our value proposition such as independent tests or testimonials of other customers.
Gaining_1 We are finding enough pilot customers for our market offering.
Gaining_2 Potential customers we contact are open to working with us on our solution.
Gaining_3 A number of potential customers we contact are ready to participate in a pilot program.
Gaining_4 Potential customers are willing to try our offering and relate their experience with it.
Gaining_5 Potential customers we contact are showing considerable interest in participating in our pilot program.