The cycle of customer value: a model integrating customer and firm perspectives

For Peer Review Only The cycl e of customer value: A model of return Journal: Journal of Business Economics and Management Manuscript ID: SBEM-2012-0422 Manuscript Type: Original Paper Keywords: perceived value, value creation, value appropriation, customer value, strategic management, value URL: http://mc.manuscriptcentral.com/sbem Email: [email protected] Journal of Business Economics and Management For Peer Review Only 1 The cycle of customer value: A model of return Abstract. The aim of this paper is to contribute to the strategic management literature by identifying a relationship between customer value seen from the customer perspective and customer value seen from the firm perspective, and how this relationship might affect the value created for the customer. We propose that such a relationship exists, and attempt to create an integrated view of customer value. We have not found any papers that focus on the relationship between these two perspectives of customer value, and our aim is to bridge this gap in the literature. Our proposed model shows that what really creates value is the relationship between customer value from the customer’s point of view and customer value from the firm’s point of view. Keywords: value, perceived value, value creation, value appropriation, customer value, strategic management 1. Introduction It has long been recognized that the essential elements of a firm’s business strategy are understanding the value that customers perceive in an offer, creating value for them and then managing it over time (Porter 1985, 1998; Slater, Narver 1998). Determining what the customer seeks from a product/service also helps a firm to formulate its value proposition. Porter (1985) notes that a firm’s competitive advantage stems from its ability to create value for its customers, which exceeds the firm’s cost of creating it (DeSarbo et al. 2001). ‘Customer value’ emerged in the 1990s as a growing topic of interest for firms, both at an academic and a professional level. The concept is considered one of the most significant factors for a firm’s success (Gale 1994; Parasuraman 1997; Woodruff 1997; Zeithaml 1988; Zeithaml et al. 1996) and has been highlighted as an important source of competitive advantage (Mizik, Jacobson 2003; Spiteri, Dion 2004; Woodruff 1997). Customer value is also recognized as the fundamental basis of all marketing activity (Holbrook 1996) and is regarded as a critical strategic tool to attract and retain customers (Lee, Overby 2004; Sánchez, Iniesta 2006; Wang et al. 2004), as well as being an indicator of repurchase intentions (Parasuraman, Grewal 2000). In recent decades, firms have been operating in a new and complex competitive environment in which more and more customers are demanding the creation of value (Sánchez et al. 2009) and firms are increasingly regarding customer value as a key factor in their search for new ways to obtain and maintain a competitive Page 1 of 28 URL: http://mc.manuscriptcentral.com/sbem Email: [email protected] Journal of Business Economics and Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Only 2 advantage (Woodruff 1997). This has generated a growing interest in creating and delivering superior value to the customer (Smith, Colgate 2007; Wang et al. 2004). The existing literature demonstrates that customer value can be viewed both from the customer’s point of view and from the firm’s point of view. Some authors focus on perceived value (the customer perspective), while others focus on value creation and appropriation (the firm perspective). But it is important to find an integrated view of both perspectives from which to study customer value. In fact, according to Priem (2007), the customer perspective presents an alternative point of view that is potentially important for strategic management. Indeed, we suggest that the unification of these two perspectives is what really creates value. The firm only truly creates value when the customer perceives that value. Therefore, we propose the existence of a relationship between the different perspectives and will attempt to create an integrated view of customer value. It is clear therefore, that the ability of the firm to create and appropriate value needs to encompass the customer perspective. We have not found any papers that focus on the relationship between these different perspectives of customer value, and our aim is to bridge this gap in the literature, and carry out an analysis of how these perspectives can be related. Our objective therefore is a) to identify the relationship between customer value from the customer’s point of view and customer value from the firm’s point of view; b) to produce a model that shows this potential relationship; and c) to demonstrate that it is this relationship that really creates value. To summarize, the aim of this paper is to contribute to the strategic management literature by identifying a relationship between customer value from the customer perspective and from the firm perspective, and the potential influence of this relationship on the value created for the customer. The paper begins with an explanation of the theoretical context, followed by a presentation of the study model and the positing of our hypotheses. The third section contains a description of the principal aspects of the methodology, including the research context, measures, data collection and analysis. A discussion of the results and implications of the study follows, and the paper concludes with the limitations of the study and suggests further areas of research. 2. Theoretical background 2.1. Different perspectives of customer value The study of ‘customer value’ is complicated by the different definitions of the concept, depending on the point of view adopted. For example, Payne and Holt (2001) note that the term ‘customer value’ can be used in a variety of contexts. These include ‘customer-perceived value’, ‘creating and delivering customer Page 2 of 28 URL: http://mc.manuscriptcentral.com/sbem Email: [email protected] Journal of Business Economics and Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Only 3 value’ and ‘value of the customer’. These three perspectives are explained more fully below: 1) Customer-perceived value: Traditionally, the principal mechanism for listening to the customer has been to measure satisfaction. Woodruff (1997) states that the measurement of satisfaction needs to shift towards a better understanding of what customers value in terms of which products/services help them to achieve their organizational goals and purposes. As a result, many researchers are now focusing on this extended view of customer-perceived value (Anderson, Narus 1998; Parasuraman 1997; Ravald, Grönroos 1996; Slater 1997; Woodruff 1997). From this perspective, customer value becomes a customer-oriented concept and the customer’s perception of what is created and delivered should be established and borne in mind when the firm defines its value proposition (Omar et al. 2011; Payne, Holt 2001). 2) Creating and delivering customer value: Customer value creation and delivery was the focus of much research during the 1990s (Band 1991; Day 1990; Gale 1994; Naumann 1995). This perspective focuses on the links between customer value, firm performance and competitive advantage and argues that a firm’s success depends on the extent to which it delivers what is of value to its customers (Acar, Zehir 2010; Payne, Holt 2001). Naumann (1995) stresses that product quality alone is not enough to guarantee a firm’s survival and states that the key success factor is the firm’s ability to create and deliver superior customer value compared to its competitors. 3) Value of the customer: Studies have also been undertaken into customer value from the perspective of ‘the value of the customer to the firm’ (Payne, Holt 2001). This stream of research focuses on the value of the customer to the firm; viewing it as an output, rather than an input, of value creation. As such, it focuses not on the creation of value for the customer but on the value outcome that can be derived from delivering superior customer value. According to Payne and Holt (2001), a key concept that forms part of this perspective is that of ‘customer lifetime value’. This perspective views customer value as the value that a firm can derive from its customers (Woodall 2003) and does not consider the value provided by the firm to its customers. From an analysis of Payne and Holt’s (2001) description of this customer value perspective, we would venture that this refers to firm value appropriation. This paper is based on a study of the three streams of investigation proposed by Payne and Holt (2001): perceived value; value creation; and value appropriation. In our opinion, their approach concurs with our idea of value. On the one hand, marketing literature focuses on the demand perspective of value –customer value Page 3 of 28 URL: http://mc.manuscriptcentral.com/sbem Email: [email protected] Journal of Business Economics and Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Only 4 and its perception– while on the other hand, strategic management literature views value creation and appropriation (and the firm’s ability to carry this out) as the distinctive competence. Business strategy aims to create firm value, but the real interest lies in appropriating the greatest possible amount of the value created. To achieve this, firms depend not only on their own organizational resources and capabilities, but also on customer perceptions and customer reactions to the firm’s value proposition compared to its competitors. We therefore propose this study of value creation from a double perspective: on the one hand, focusing on what needs to happen inside firms in order to develop a value creation capability; while at the same time focusing on customer perceptions, because these determine the extent to which firms can appropriate value. We propose that these two perspectives must be unified in order to achieve a more realistic understanding of value creation. Our main objective therefore is to connect these two contributions in order to clarify the whole process of value creation. 2.2. Perceived value (PV) The value perceived by the customer has received a lot of attention from both academics and practitioners due to the importance of predicting purchase behavior and achieving competitive advantages (Bolton, Drew 1991; Cronin et al. 2000; Parasuraman et al. 1985; Zeithaml 1988). Sánchez and Iniesta (2006) demonstrate that many terms have been used to refer to PV, such as ‘judgment value’ (Flint et al. 1997), ‘shopping value’ (Babin et al. 1994), ‘consumption value’ (Sin et al. 2001; Sweeney, Soutar 2001), ‘relationship value’ (Ravald, Grönroos 1996), ‘product value’ (Bowman, Ambrosini 2000), ‘service value’ (Bolton, Drew 1991; Cronin et al. 2000), ‘desired value’ (Flint et al. 2002), ‘expected value’ (Van der Haar et al. 2001), ‘customer value’ (Woodruff 1997), ‘perceived value’ (Agarwal, Teas 2001; Zeithaml 1988) or ‘received value’ (Flint, Woodruff 2001). In the review of the PV literature carried out by Woodall (2003), 18 different terms were found that describe the idea of value from the demand side. In fact, some authors use different terms within the same paper. According to Sánchez and Iniesta (2006), these terms all refer to the same idea; that of customers’ perception of value, but different terminology has developed from the study of value from different perspectives and in different contexts. Although PV has often been defined as a trade-off between quality and price, many researchers note that it is a more obscure and complex construct, which Page 4 of 28 URL: http://mc.manuscriptcentral.com/sbem Email: [email protected] Journal of Business Economics and Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Only 5 encompasses ideas such as price, quality and perceived benefits and sacrifices (Bolton, Drew 1991), and a more specific investigation of its dimensions is required (Sinha, DeSarbo 1998). As several authors have done (Boksberger, Melsen 2011; Cengiz, Kirkbir 2007; Sánchez, Iniesta 2006; Ulaga 2003; Ulaga, Chacour 2001), we identify a number of convergences and divergences within the different existing definitions of PV. Among the convergences, we would highlight the following: 1) The perceptual nature of value is probably the most widely accepted aspect of the concept (Day, Crask 2000). Value is perceived subjectively by customers and is not determined objectively by the firms (Anderson, Narus 1998). As Doyle (1989) states, ‘value is not what the producer puts in but what the customer gets out’. Most of the literature agrees on this subjectivity of value (Babin et al. 1994; Bolton, Drew 1991; DeSarbo et al. 2001; Monroe 1990; Zeithaml 1988). 2) Value is inherent or is linked to the use of the product/service, which distinguishes it from personal and organizational value. According to Woodruff and Gardial (1996), ‘customer value is not inherent in products/services themselves; rather it is experienced by customers as a consequence of using the firm’s products/services for their own purposes’. 3) The process of perceiving value typically involves a trade-off between perceived benefits and sacrifices; that is, between what the customer receives (e.g. quality, benefits, utilities) and what he/she gives up (e.g. price, opportunity cost and maintenance cost) to acquire and use a product/service (Zeithaml 1988), although some definitions do not refer to this trade-off. Perceived benefits are a combination of elements that include physical attributes, service attributes and the technical support available relating to the use of the product/service, as well as the purchase price and other indicators of perceived quality (Monroe 1990; Payne, Holt 2001). Perceived sacrifices are sometimes described in monetary terms (Anderson et al. 1993), although there are other, broader definitions of sacrifices. An important point in the conceptualization of value is that the direct monetary cost (price) is only one of the components that the customer gives up to obtain the product/service (Zeithaml 1988). Sacrifice is a wider and richer concept, that includes non-monetary costs such as time, effort and the assumed risk associated with a particular purchase (Cronin et al. 1997; Dimitriadis 2011). 4) Value is perceived in relation to the competition (Gale 1994). A position of superior customer value is achieved when a firm creates more value than its competitors (Slater, Narver 2000), and offering better value than the competition Page 5 of 28 URL: http://mc.manuscriptcentral.com/sbem Email: [email protected] Journal of Business Economics and Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Only 6 will help a company to create sustainable competitive advantage (Ulaga, Chacour 2001). With regard to the divergent definitions of PV, we would highlight the following points: 1) The way in which the definitions have been developed makes it difficult to compare concepts (Sánchez, Iniesta 2006), because these usually differ in the terms employed, such as utility, benefits, quality, price and satisfaction. 2) Researchers disagree on the positive and negative components of customer value. According to Sánchez and Iniesta (2006), quality is the most commonly cited benefit, while price, time, effort and psychological cost are the most frequently cited sacrifices. 3) It is unclear whether a comparison between different objects is required for the generation of value. Not all authors consider this element in their studies of value (Gale 1994; Van der Haar et al. 2001). Holbrook (1999) asserts that value is comparative because the value of an object can only be understood when compared to that of another object evaluated by the same person. 4) There are different opinions on the circumstances in which a customer thinks about value. Some authors have studied value in the context before the purchase (Chen, Dubinsky 2003; Monroe 1990), during the purchase (Holbrook 1999; McDougall, Levesque 2000; Ulaga, Chacour 2001) and at different times during the purchase decision process (Van der Haar et al. 2001; Woodruff 1997). This phenomenon reflects the dynamic nature of the concept (Sánchez, Iniesta 2006). 5) There are different views of the cognitive nature versus the affective nature of value. Some researchers have posited value as a strictly cognitive concept (Oliver 1999; Zeithaml 1988), while others defend both the cognitive and affective nature of PV (Babin et al. 1994; Babin, Kim 2001). The ‘value for money’ paradigm that has traditionally defined value from a cognitive perspective as a trade-off between quality and price has been considered very simplistic in consumption experiences (Sweeney, Soutar 2001). Thus, a large number of authors have defended the existence of both cognitive and affective systems in the nature of value (Babin et al. 1994; Babin, Kim 2001). 2.3. Value creation (VC) and value appropriation (VA) It has been suggested that a firm’s purpose is to create value (Slater 1997) and that this is a precursor to customer satisfaction and loyalty (Woodall 2003). Slater Page 6 of 28 URL: http://mc.manuscriptcentral.com/sbem Email: [email protected] Journal of Business Economics and Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Only 7 (1997) asserts that firms should be committed to the idea that VC should be the reason for their existence and, undoubtedly, their success. According to Drucker (1973), the mission and purpose of every business is to satisfy the customer. This satisfaction is achieved when the firm delivers superior customer value. Superior performance is not an end in itself; it is the result of providing superior customer value (Slater 1997). Two processes, which combine and interact with each other, are fundamental to achieving this outcome (Mizik, Jacobson 2003). One of the processes involves the creation of customer value, while the other focuses on appropriating value in the marketplace. VC alone, however, is insufficient for a firm to achieve success in the marketplace; it must also have the ability to restrict competitive forces (such as erecting barriers to imitation) so that it can appropriate some of the value that it has created, in the form of profit (Mizik, Jacobson 2003). Therefore, due to increasing turbulence and constant changes in the current economic and competitive environment, some authors (Hitt et al. 2001; Nonaka, Toyama 2002; Venkataraman, Sarasvathy 2001) have recently stressed that for a strategy to be effective it should adopt both VC and VA. Similarly, Tuominen (2004) views VC as an organizational capability that, along with the VA capability, is required in order to gain competitive advantage in the marketplace. The superiority of firms that lead the competition cannot be based solely on the creation of value; they also have to be able to appropriate the value created through market share and profits (Mizik, Jacobson 2003; Tuominen 2004). In any event, it is likely that these advantages would only be temporary, as market dynamism and uncertainty generate the need not only to create new value, but also to maintain the value created in previous periods (Eisenhardt, Martin 2000; Morrow et al. 2007; Sirmon et al. 2007). Priem (2007) defines VC and VA capabilities as follows: 1) Value creation: When value is created the customer is a) willing to pay for a novel benefit; b) willing to pay more for something perceived to be better; or c) will choose to receive a previously available benefit at a lower unit cost, which often results in a greater volume being purchased. Therefore, this organizational capability refers to an innovation that establishes or increases the customer’s evaluation of the benefits of consumption. 2) Value appropriation (also referred to as value capture, allocation, realization, dispersion or distribution). Priem (2007) states that value is appropriated when a firm a) receives customer payments by preventing its competitors’ attempts to appropriate those payments, for example, through imitation; and b) simultaneously Page 7 of 28 URL: http://mc.manuscriptcentral.com/sbem Email: [email protected] Journal of Business Economics and Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Only 8 retains those payments by denying claims on them from other members of the same value system, for example, through channel power. Therefore, this organizational capability refers to the appropriation and retention by the firm of payments made by customers in the expectation of obtaining future value from their consumption. These definitions appear to state that VC and VA should not be considered separately, but that both capabilities are required for securing a competitive market position and achieving superior performance (Han et al. 1998). According to Mizik and Jacobson (2003), VC influences the potential magnitude of the firm’s competitive advantage, while VA influences the scale of the advantage the firm is able to capture and the duration of that advantage. VC involves new or modified products/services, while VA focuses on restricting competitive forces and extracting benefits from the marketplace (Han et al. 1998). According to Mocciaro and Battista (2005), the firm is not considered to be oriented exclusively towards either VC or VA, but rather, they both characterize the progress of a firm’s development. They argue that there must be a period during which the firm pursues VA in order to benefit from its innovations, by increasing the efficiency of its resource allocation. They also suggest that VA alone cannot stand the test of time in a hypercompetitive environment and argue that there is a need to anticipate and proactively contribute to the creation of the future ‘rules of the competitive game’. This will protect them from the actions of rival firms. According to Mocciaro and Battista (2005), during phases of stability firms lay down the foundations for the future adoption of value-creating behaviors and start to construct new competitive advantages (i.e. phases of inner change). The adoption of value-creating behaviors must be followed by phases of stability in order to increase the efficiency of the production processes and to consolidate the stable rents derived from the innovations. In conclusion, innovation fosters VC and stability fosters VA. Although VC and VA are both required to achieve a sustainable competitive advantage (as shown in Figure 1), firms have to decide the extent to which they will focus on one or the other (Mizik, Jacobson 2003). Firms therefore face the task of balancing the two processes in their strategies and determining the appropriate amount of support for each. Insert Fig. 1 here Page 8 of 28 URL: http://mc.manuscriptcentral.com/sbem Email: [email protected] Journal of Business Economics and Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Only 15 Insert Table 1 here 5. Results After checking the psychometric properties of the measures, the next step was to evaluate the relationships set out in our hypotheses –H1 and H2– following a review of the relevant literature. Table 2 shows that the fit of the model is satisfactory (Satorra-Bentler χ 2 (5) = 28.81; χ 2/d.f= 5.76; CFI=0.93; RMSEA= 0.14), suggesting that the nomological network of relationships fits the data – another indicator that supports the validity of these scales (Churchill 1979). Table 2 shows that the goodness-of-fit measures are acceptable and the proposed model is therefore acceptable. Insert Table 2 here All of the results are set out in Table 3. Insert Table 3 here Table 3 shows a significant link between VC and PV, which supports Hypothesis 1; that customers are somehow able to perceive the value that is created for them by a firm. The scale used to measure PV (Martin et al. 2008) shows the relative importance of each dimension for PV (see Appendix A). It is interesting to highlight therefore, that, according to the model results, perceived sacrifices (-0.04) are not significant for customers when evaluating the service provided by the banks in our study. Conversely, confidence benefits (0.40) and service quality (0.31), followed by service equity (0.12), are important aspects for managers to consider in their attempts to improve customer value perceptions. Despite the theoretical arguments in its favor, Hypothesis 2 is not supported in our study. The positive/negative value of the link is opposite to that which would be Page 15 of 28 URL: http://mc.manuscriptcentral.com/sbem Email: [email protected] Journal of Business Economics and Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Only 16 expected, indicating that when customer perceived value increases, the value appropriated by the firm decreases. It is not logical or reasonable to propose such a relationship, since this would mean that firms should reduce their customer perceived value in order to increase their value appropriation. This result may therefore be explained by the following: 1) A wider gap is required between PV and VA data. This is supported by the idea that more time is needed before one variable affects the other. 2) Primary data (PV) could be linked to secondary data, which is then developed along a scale. It might be easier, if we are to use secondary data, to conduct the analysis separately for each indicator (i.e. market share, sales volume, overall profit levels, ROI, and profit margins) and look for indicators of robustness, that is to say, to repeat the analysis with more than indicator. 6. Discussion The first implication for research is that our paper shows that there are different views and ways of thinking about customer value, depending on the point of view that is adopted: namely, PV (the customer perspective); and VC and VA (the firm perspective). Secondly, we try to show the importance of linking the different views of customer value. We argue that when the concept of ‘customer value’ is discussed, it is important to consider both the customers and the firm, since the relationship between them is what gives rise to value. What we try to show in our study is that the real proxy of value creation is customer perceived value, that is, the firm only truly creates value when the customer perceives that value. Our paper not only contributes to the literature on both value and firm management, but will also influence the current management of firms with regard to customer VC. Firstly, we recommend that firms combine VC and VA, rather than focusing on only one of these aspects. As we have discussed, sustainable competitive advantage requires both VC and VA (see Figure 1), and the firm has to decide the extent to which one or other predominates. Secondly, as an extension of this recommendation, we outline the importance of analyzing the best way to distribute a firm’s scarce resources between its VC and VA capabilities. A firm’s resources are limited and they need to prioritize the allocation of their resources between their VC and VA capabilities. Page 16 of 28 URL: http://mc.manuscriptcentral.com/sbem Email: [email protected] Journal of Business Economics and Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Only 17 Thirdly, the scale used to measure PV (Martin et al. 2008) shows the relative significance of each dimension for PV. Without reference to this scale, managers might endanger customer value perceptions by concentrating on the less important dimensions of PV instead of pursuing the more important dimensions. We aim to help managers to identify the key dimensions for increasing customer value perceptions. This will guide them in the best way to allocate their resources to reduce perceived sacrifices, increase service quality, improve service equity or develop confidence benefits, depending on the relative weights of each of those dimensions within PV. We also underline the importance of linking VC and customer PV. A firm’s VC should be guided by the value perceived by the customers. Irrespective of how much value a firm creates, if customers do not perceive it, then firms are not creating value. With this in mind, our intention is to identify the nature of the relationship between VC and PV in terms of their components. As Appendix A shows, we refer to value creation for firms in terms of levels of loyalty and satisfaction from the firm point of view. Thus, if firms can successfully translate these elements into products/services, customers will perceive it. Our findings support this assertion because value creation perception for managers has a significant impact on customers’ value perceptions. Finally, our paper proposes a set of capabilities that firms can use to create value and to appropriate the value created. These capabilities can also serve as a reference point for firms seeking to develop other capabilities to facilitate their VC and VA. 7. Conclusions and future research In recent years, customers have become the focus of attention, and every firm seeks to satisfy them in one way or another. Understanding what it is that customers value in an offer, creating value for them and then managing it over time, have long been recognized as essential elements of a firm’s business strategy. Customer value emerged in the 1990s as an area of increasing interest for firms, both at an academic and a professional level. On the one hand, service marketing literature focuses on the demand perspective of value, customer value and its perception. On the other hand, service management literature considers that the distinctive competence is VC and the firm’s capabilities for it. Page 17 of 28 URL: http://mc.manuscriptcentral.com/sbem Email: [email protected] Journal of Business Economics and Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Only 18 The existing literature demonstrates that customer value can be seen from the point of view of both the customer and the firm, but a relationship between these two perspectives is required in order to study customer value. In this paper, we offer a model that links PV, VC and VA, and demonstrates that it is the relationship between these three concepts that really creates value for the customer. One of the main limitations of our study is that the investigation was carried out at a single point in time, which is a particularly limiting because customer value is a dynamic construct. Time has traditionally been considered in the management literature as a constant rather than a variable, a belief Bluedorn (2000) ascribes to people in general. Further, as Bluedorn notes, the belief that time is a constant is deeply institutionalized, which suggests that most people, most of the time, do not even consider the possibility that time may vary. Furthermore, our study was carried out in a single industry (the Spanish banking industry), which does not allow us to generalize the results attained to other economic industries. It would also be interesting to carry out a more fine-grained analysis of every aspect of the relationship between VC, PV and VA, as it is likely that some kind of interaction can be found between all of these concepts. Although we have initiated this investigation, more extensive studies are necessary. Finally, it is important to stress the situation that the industry was facing at the time of the study. While we believe that this situation provided an ideal opportunity for our study, it also created problems for collecting data for the empirical investigation. Given the high degree of turbulence in the industry at the time and that the industry and its problems and uncertainties were the subject of much public discussion, some managers were wary of giving out data. We consider that this investigation provides a starting point for future investigations into the creation of value or its maintenance in the current environment, where the customer is daily more demanding and the competition is stronger. Possible future investigations might extend the timescale of our study and expand into other economic industries, to be able to generalize the results. Page 18 of 28 URL: http://mc.manuscriptcentral.com/sbem Email: [email protected] Journal of Business Economics and Management 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 For Peer Review Only 19 References Acar, A. Z.; Zehir, C. 2010. The Harmonize Effects of Generic Strategies and Business Capabilities on Business Performance, Journal of Business Economics and Management 11(4): 689–711. Agarwal, S.; Teas, R. K. 2001. Perceived Value: Mediating Role of Perceived Risk, Journal of Marketing Theory and Practice 9(4): 1-14. Anderson, J. C.; Jain, D. C.; Chintagunta, P. K. 1993. Customer Value Assessment in Business Markets: A State of Practice Study, Journal of Business to Business Marketing 1(1): 3-30. Anderson, J. C.; Gerbing, D. W. 1988. Structural Equation Modeling in Practice: A Review and Recommended Two-Step Approach, Psychological Bulletin 103(3): 411-423. 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