From product through service and solution to performance: Value propositions, interaction patterns and capabilities
2013 (English)Conference paper (Refereed)
Purpose – This paper explores differences in inter- and intra-organizational interaction patterns depending on the nature of customer value propositions. It also discusses capabilities related to these value propositions.
Design/Methodology/Approach – We perform a case study of the evolving value propositions of a Swedish truck manufacturer. Interviews are conducted with key representatives of the manufacturer, dealers, customers, and customers’ customers. We draw on literature in the business marketing and purchasing area.
Findings – The manufacturer makes four types of value propositions (cf. Anderson et al., 2006) associated with different interaction patterns. (1) A first type involves a basic product, i.e. a vehicle along with basic services, such as a warranty. The sales process represents a short dealer-customer negotiation to determine truck customization and price and is a general solution to a general problem. Interaction remains simple throughout the truck’s operating cycle; feedback to the product development and manufacturing function comes mainly from the manufacturer’s service organization. (2) A second type of value proposition involves optional add-on services that support the use of the product, such as repairs and maintenance, tire replacement, financing, and insurance. Although each service component is standardized, the package of services is selected by the buyer based on its needs. Interaction in regard to purchase and use is therefore more complex and ongoing. (3) In a third type, the customer buys truck(s) and services as an integrated solution to its specific sourcing problem. This requires a deeper understanding of how the customer uses trucks. Such an analysis relies on interaction between the manufacturer’s sales representatives and various functions at the customer. As the truck is used, interaction between manufacturer and customer is continuous. E.g., driving patterns can be analyzed and driving training be tailored to the needs of the customer; service needs are monitored, etc. (4) A fourth type involves not only a solution to a sourcing problem, but a co-created solution to support the customer’s value-creation. The customer buys solution performance that supports its revenue generation, not just its efforts to reduce costs. A deep understanding of the customer’s business is required with a focus on how the customer uses trucks to support its customers’ value creation. As payment is based on uptime (or other form of utilization), knowledge of truck usage is also needed by the manufacturer to determine price per km and to set service level agreement. Interaction is continuous and complex, with the manufacturer’s service organization taking over part of fleet management from the customer. These value propositions exist simultaneously and place very different demands on capabilities, which increase in number and particularity with more complex value propositions.
Originality/value – We empirically identify four distinct value propositions that rely on different inter- and intra-organizational interaction patterns and require different capabilities.
Place, publisher, year, edition, pages
interaction, relationship perspective, solution, value proposition, business-model transformation
IdentifiersURN: urn:nbn:se:hj:diva-29181OAI: oai:DiVA.org:hj-29181DiVA: diva2:896901
Naples Forum on Service 2013, Napoli, 18-21 June, 2013.