Many manufacturers, from Rolls-Royce to IBM and Xerox, look to business solutions, which combine products and services into innovative offerings, to provide growth in sales and profits. While there are some notable successes, this success is far from guaranteed, and indeed in the transition to solutions, bankruptcies seem to increase. There is therefore a need to understand what drives success. This study takes a customer perspective to this challenge, asking: how do business customers judge the quality of solutions and the value they create?
The customer’s perceived value from solutions over time is conceptualized as value-in-use, of which we provide a new definition. Goal theory suggests that this value-in-use arises from an offering’s quality, but what constitutes the perceived quality of a solution is not known. We interview 36 managers in four customer firms to elicit their perceptions of solution quality and value-in-use. Using repertory grid technique, means-end chains, and hierarchical value maps, we develop a framework summarizing how customers judge the quality and value of solutions.
When judging solutions, customers assess the quality not just of the supplier’s resources but also their own, and of joint resource integration. This creates value-in-use which is not just collective but also individual, arising from goals of customer managers. Value auditing is a crucial process.
Whereas some providers think of solutions mainly as a bundle of products and services, customers judge the quality not just of the supplier’s inputs to the solution but also of their own. Customers also judge the quality of the resource integration process through which a joint team decides how to manage assets and responsibilities. A key element is the quality of value auditing processes, which track and optimize value creation over time. Value-in-use itself comprises the meeting not just of organizational goals but also of individual goals, extending business marketing literature on value.
To shift towards solutions, manufacturers need to do far more than price a product/service bundle. They need joint resource integration efforts with customers to make decisions such as where the boundary between firms should lie; they require competences in optimizing not just their own processes but also those of the customer; they need to continually audit and enhance benefits from the solution, rather than simply meeting the contract; and they require market research that extends beyond the customer’s judgement of the supplier to include the customer’s judgement of their own inputs.
Questions for the Classroom
- What metrics should a solutions provider be using to evaluate its success? What research is needed to develop these metrics?
- How might a solutions provider best organize themselves to make the resource integration process work through the life-time of a solution? e.g. structure, roles, skills?
- What might constitute value-in-use for a consumer solution? e.g. a building company providing a living environment for households? What resources would each party (i.e. provider and household) provide?
Emma K. Macdonald, Michael Kleinaltenkamp, and Hugh N. Wilson (2016) How Business Customers Judge Solutions: Solution Quality and Value in Use. Journal of Marketing: May 2016, Vol. 80, No. 3, pp. 96-120. doi: http://dx.doi.org/10.1509/jm.15.0109
- Emma K. Macdonald is Associate Professor of Marketing, Cranfield School of Management, Cranfield University, and Adjunct Senior Research Fellow, Ehrenberg-Bass Institute for Marketing Science, University of South Australia (e-mail: Emma.Macdonald@cranfield.ac.uk).
- Michael Kleinaltenkamp is Professor of Business and Services Marketing, School of Business and Economics, Freie Universitaet Berlin (e-mail: Michael.Kleinaltenkamp@fu-berlin.de).
- Hugh N. Wilson is Professor of Strategic Marketing, Cranfield School of Management, Cranfield University (e-mail: Hugh.Wilson@cranfield.ac.uk).