Understanding Customer Value In

Business To Business Relationship

By : Group -2

Amit Sachan (20081004)

Ankur Srivastava (20081005)
Anup Mishra (20081006)
Deepak Goyal (20081013)
Mrugesh Brahmbhatt (20081031)
Subham Seal (20081052)
Objective Of The Paper
To advance our current understanding of
customer value in business to business
relationship by providing a systematic analysis
of the determinant of customer value.
To analysis how product, relational and supplier
characteristics affect the customer value.
 Customer Value

Customer Value = (Benefits, sacrifices)

Core benefits Purchase price

Add-on benefits Acquisition cost

Operation cost

Benefits = sacrifices Ideal

Benefits > sacrifices Delight
Benefits < sacrifices Unsatisfied
 Consumer Value Is Important For….
 Determinant for creating satisfaction
 Driver of customer loyalty
 Customer relationship management effort
 Significant to organizational performance
 Better management of Consumer value delivery process
 Root of molding purchase decision
 Relevant factor for vender selection
 Era of relationship marketing --- determine
relationship between buyer and seller
 Benefits & Sacrifices

H1a : Core benefits  Perceived customer value

H1b : Add-on benefits  Perceived customer value

H2a : Purchase price  1/ Perceived customer value

H2b : Acquisition cost  1/ Perceived customer value

H2c : Operation cost  1/ Perceived customer value
 Product Characteristics

H3a : Quality of a supplier’s product  perceived core
benefits

H3b : Quality of a supplier’s product  Purchase Price

H3c : Quality of a supplier’s product  1/ Acquisition
cost

H3d : Quality of a supplier’s product  1/ Operation
cost
 Product Characteristics Conti….

H4a : Quality of a supplier’s service  perceived core
benefits

H4b : Quality of a supplier’s service  Purchase Price

H4c : Quality of a supplier’s service  1/ Operation
cost
 Relational Characteristics

H5a : Trust in suppliers  perceived core benefits

H5b : Trust in suppliers  1/ Acquisition cost

H6a : Joint Working  perceived Add-on benefits

H6b : Joint Working  1/ Acquisition cost

H6c : Joint Working  1/ Operation cost
 Supplier Characteristics

H7a : Flexibility of the supplier’s  perceived Add-on
benefits

 1/ Acquisition cost
H7b : Flexibility of the supplier’s

H7c : Flexibility of the supplier’s  1/ Operation cost

H8a : Commitment of supplier’s  perceived Add-on
benefits

H8b : Commitment of supplier’s  1/ Operation cost
Methodology
 Sample & Data Collection

 Multiple country study: identical stratification

procedure

 Industries selected: chemical, mechanical & electrical

 Product categories: production material, component

part & raw material
Methodology contd.
 Measure development & Assessment
 Measure development: multi-item scales
 Operationalization of scales: formative measures
(items are not correlated)
 Configural & metric invariance: factorial structure &
units of measurements across the groups
 Assessment of measures: means, std errors, range
variances
 Discriminant validity: chi-square difference
 Findings
 Significant influence of add-on benefits on customer
value than core benefits.
 Stronger overall impact of benefits (core and add-on) on
perceived customer value relative to impact of sacrifices.
 Similar influence of price and operations cost on
perceived customer value but lower impact of acquisition
cost.
 Trust is a strong driver of benefits and sacrifices.
 Supplier flexibility reduce customer acquisition and
operations cost.
 Unanticipated Findings
 High product quality may not reduce the supplier
acquisition cost.
 Neither product nor service quality had a significant
impact on operations costs.
 Higher service quality may not increase the
purchasing price.
 Implications
 Managers must emphasize more on providing benefits than reducing price as it
has a greater impact on perceived value.

 As reduction in customer’s operation cost significantly affect the perceived value,

supply firms, by optimizing their internal processes and systems, can help reduce
it.

 Managers must make relationship specific investments that will help increase
customers’ trust and improve the perception of the supplier’s commitment in the
mind of the customer.

 As joint working can help differentiate potential suppliers, managers should

incorporate the buyer’s viewpoints when discussing issues that have a direct
impact on the buyer and include the buyer whenever possible in the decision
making process.
 Conclusion
 The study helped in better conceptualization and
understanding of the customer value.

 Categorization of benefits and sacrifices will help

managers to focus on the key drivers of customer
value.
“Value developed in long term
relationship was created through
better cost management”