Customer value in consumer marketing literature

In the consumer marketing literature, customer value is often regarded as a trade-off between what customers give and get in a market exchange. This is echoed in Zeithaml’s (1988, p.14) popular definition of customer value: “perceived value is the consumer’s overall assessment of the utility of a product based on what is received and what is given”, on which much of the current research on customer value in marketing is built (Payne and Holt, 2001). However, in major streams of the consumer marketing literature, the notion of customer value as a trade-off between give and get components is addressed in two fundamentally different ways, either as a trade-off between benefits and sacrifices, or a trade-off between quality and price.

2.2.1 Customer value as a trade-off between benefits and sacrifices

In the consumer behavior literature, customer value is often regarded as a trade-off between benefits and sacrifices involved in an exchange. The reference to sacrifices instead of costs is often associated with psychological, emotional, and cognitive factors that go beyond monetary costs, such as time, effort, perceived risk and uncertainty, and usability that consumers need to expend in the search, purchase, and use of the offering (Heskett et al., 1997; Cronin et al., 2000; Graf and Maas, 2008). This emphasizes the perspective that, in the consumer marketing context, customer value is not only a function of monetary benefits but more likely a profound cognitive experience (e.g., Hollbrook, 1999; Helkkula et al., 2012).

For example, Sheth et al. (1991) argue that consumers’ purchasing choices are influenced by five types of core value¹⁴: functional, social, emotional, epistemic, and conditional values. Of these, only functional value implies a direct monetary benefit, while social, emotional, epistemic and conditional values emphasize emotional and cognitive benefits. While a purchase decision can be influenced by one or all five of the core values, customers usually accept less of one type of value if they get more of another type, thus trading-off different types of value.

13 For example, according to Khalifa, (2004) and Sánchez-Fernández and Iniesta-Bonillo (2007), customer value is one of the most ill-defined, misused, and ambiguous concepts in marketing and management sciences.

14 Functional value refers to the utility, features, or technical attributes of particular products or services. Emotional value refers to experiences of positive feelings during consumption, such as happiness, joy, and satisfaction. Social value refers to improvements in social status or positive feedback from peers in the individual’s social environment. Epistemic value refers to products or services that provide a sense of novelty, and satisfy curiosity and a desire for knowledge. Conditional value refers to a specific social situation that enhances the value of a particular product or services, such as a Christmas card, or popcorn at the movies (Sheth et al., 1991).

Building on Holbrook’s (1986) notion that evaluating a purchasing decision exclusively on utilitarian merits fails to recognize the intangible and emotional benefits and costs involved in a consumption experience. Babin et al. (1994) demonstrate that, in addition to utilitarian value, consumers also derive hedonic value from their purchase experiences. In their study, utilitarian value referred to an extrinsic and task-related outcome such as purchasing goods and services that fulfilled an intended goal or objective, while hedonic value referred to more intrinsic, personal, and emotional benefits such as pleasure, enjoyment, excitement, captivation, escapism, and spontaneity derived from the actual purchasing experience. The utilitarian value versus hedonic value highlights the distinction between doing something (i.e., conduct a purchase) to get something and doing something just because it is enjoyable (Babin, et al., 1994).

From a more philosophical point of axiology,¹⁵ Holbrook (1994; 1999; 2005) proposes a customer value typology in the consumer marketing context that is based on opposing dimensions¹⁶ of customer value, either extrinsic or intrinsic, self-oriented or other-oriented, and active or reactive, and produces eight types of value: efficiency, excellence, status, esteem, play, aesthetics, ethics, and spirituality. Here, efficiency and excellence refer to utilitarian and functional benefits such as increased output or improved performance, while the other six types of value emphasize more intangible and emotional benefits, such as achieving a favorable response from someone else, improved reputation, enjoyment, fun, increased appreciation and admiration of one’s own work, and also that of others (Hollbrook 1994, 1999). According to this perspective, customer value is experienced through interaction between consumers and their preferred objects (i.e., products compared with competition) in specific settings or contexts. This implies that customer value is perceived during all stages of a consumer’s interaction with an object, including before, during, and after consumption and usage (cf. Parasuraman, 1997; Sánchez-Fernández and Iniesta-Bonillo, 2007).

2.2.2 Customer value as a trade-off between quality and price

In addition to regarding customer value as a trade-off between benefits and sacrifices, another popular perspective in consumer marketing, especially in the literature that draws on service marketing and pricing domains, considers customer value as a trade-off between quality and price (e.g., Zeithaml, 1988; Bolton and Drew, 1991; Grewal et al., 1998).

In the service marketing literature, customer value is regarded as the central outcome of the customer’s consumption or service experience (Parasuraman et al., 1985; Zeithaml et al., 1996; Cronin et al., 2000). In this stream of research, scholars have proposed conceptual frameworks that link customer value to service attributes and perceived quality dimensions, including SERVQUAL (Parasuraman, et al.,1988), PERVAL (Sweeney and Soutar, 2001), the means-ends model (Zeithaml, 1988), and the multistage model (Bolton and Drew, 1991);

each of which relate perceived quality and price to experienced customer value. In essence, these models measure service quality as the difference between expected and received service performance within specified service dimensions, and compare it to the purchase price to get the perception of the value customers received from the service experience (Parasuraman et al., 1988; Bolton and Drew, 1991).

15 Essentially, a judgment of goodness/badness.

16 Biggemann and Buttle (2012, p. 1133) provide a concise summary of the dimensions: “Extrinsic value is functional, utilitarian, and purpose oriented whereas intrinsic value is appreciated as an end itself. Self-oriented value is for the person’s own sake whereas other-oriented is value for their sake, beyond the self. Active value is the consumer doing something to or with a product whereas reactive value implies that a product does something to or with the consumer”.

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In the pricing literature, theories of price–value judgments are the foundation of all seminal works on perceived value (e.g., Kahneman and Tversky, 1979; Thaler, 1985; Tversky and Kahneman, 1991). According to Monroe (1990, p. 46), “buyer’s perception of value represents a tradeoff between the quality or benefits they receive in the product relative to the sacrifices they perceive by paying the price”. In essence, the general assumption in this stream of research is that customers’ purchase intentions are based on their value perceptions, which are formed by trading-off quality and price (Zeithaml, 1988; Rao and Monroe, 1989;

Dodds et al., 1991). In this sense, suppliers can enhance customers’ perceptions of value by emphasizing either the product’s quality or low price in comparison to alternative offerings (Grewal et al., 1998).

2.2.3 Current perspective(s) on customer value in the consumer marketing literature Although the assumption of customer value as a trade-off between quality and price has been the foundation of several value-related studies (e.g., Zeithaml, 1988; Bolton and Drew, 1991;

Grewal et al., 1998), several researchers have criticized the extant quality-price models for confusing customer value with satisfaction¹⁷, and ignoring important constructs such as the purchasing experience, perceived risk, emotional and hedonic benefits, and, in particular, the outcome of the service experience (Iacobucci et al., 1994; Buttle, 1996; De Ruyter et al., 1997; Sinha and DeSarbo, 1998; Macdonald et al., 2011).

Hence, while the literature on customer value in consumer markets is still developing towards a widely accepted conceptualization of customer value, there is a general consensus in the literature suggesting that customer value goes beyond the quality-price trade-off (e.g., Woodruff, 1997; Grisaffe and Kumar, 1998; Sánchez-Fernández and Iniesta-Bonillo, 2007).

Consequently, the majority of customer value research in consumer markets is increasingly adopting the perspective of customer value as a trade-off between both functional (tangible) and cognitive (intangible) benefits and sacrifices involved in an exchange.

Furthermore, the trade-off between functional and cognitive benefits and sacrifices involved in an exchange is not only limited to specific transactions, it involves the whole consumption experience that is aimed at realizing value for the customer by fulfilling an intended goal or a specific objective (Hirschman and Holbrook, 1982; Holbrook, 1994; Butz and Goodstein, 1996; Woodruff and Gardial, 1996). For example, customers who purchase travel tickets/services, tend to evaluate the total travel experience based on what was promised prior to purchase, and what was experienced during and after the purchase when the actual traveling (i.e., usage of the offering) took place (cf. Payne et al., 2008). This is in line with the means-end theory (Gutman, 1982, 1991), which explains how an individual’s choice of product or service aims to achieve a desired end state, meaning that consumers seek to obtain consequences that are of value to them.

Building on the means-end theory, Woodruff (1997, p. 142) defines customer value as “a customer’s perceived preference for and evaluation of those product attributes, attribute performance, and consequences arising from use that facilitate (or block) achieving the customer’s goal and purposes in use situations”. This suggests that perceptions of value are not only linked to the static product and service attributes determined by the supplier, but derived also from the specific usage situations experienced by the customers (cf. Levy, 2006;

17 For example, Eggert and Ulaga (2002) demonstrate that customer value and satisfaction are two distinct, although complementary, constructs.

Helkkula and Kelleher, 2010). This is also in line with Parasuraman (1997) and Woodall (2003) who argue that customers tend to change their cognitive criteria for evaluating value when moving from pre-purchase to exchange, usage, and after usage positions. The definition of customer value put forward by Woodruff (1997) has laid the foundations for much of the subsequent work¹⁸ on value in consumer markets, which considers customer value broadly to be the consumer’s own subjective and cognitive evaluation of the socially constructed value experiences in specific contexts over time (e.g., Hollbrook, 2006; Arnould et al., 2006; Carú and Cova, 2006; Holttinen, 2014).