A value-based decision models customer networks - a theoretical investigation and aplication in the product configuration context

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(1)A Value-Based Decision Model in Customer Networks A Theoretical Investigation and Application in the Product Configuration Context. By ANGELA MARIA ARDILA & VICTOR ANDRES GONZALEZ A thesis submitted in partial fulfillment of the requirements for the degree of. Master of Administration – MBA. Bogotá D.C. - Colombia. October, 2008.

(2) Acknowledgments The authors of this paper wishes to express sincere appreciation to Professors Marcus Thiell for his assistance in the preparation of this manuscript, his familiarity with the needs and ideas with this topic was helpful during the whole phases of this undertaking. In additio n, special thanks to our families, their support and encouragement had been a source of motivation..

(3) Abstract A thesis presented on the Value-Based Decision Models theoretical research, mainly in management decisions inside a Customer Network Environment. The theoretical investigatio n support a new Value-Based Decision Model proposal for product configuration process. Model proposal present five steps, within steps is included qualitative and quantitative tools and charts that progressively analyze several groups of attributes from a specific product or business idea inside a Customer Network Needs complexity. This model Called Attribute Configuration Value Model (ACVM) is then applied to a real C olombian Company in a new business product idea for electronic clinic registers management.. i.

(4) Table of Contents List of Illustrations _________________________________________________________________________vii List of Tables _______________________________________________________________________________x List of Equatio ns ___________________________________________________________________________ xi List of Abbreviations _______________________________________________________________________xii Glossary __________________________________________________________________________________ xiii Chapter 1 ___________________________________________________________________________________1 1.. INTRODUCTION _________________________________________________________________________1 1.1.. The Situation_______________________________________________________________________1. 1.2.. Relevance _________________________________________________________________________2. 1.3.. Antecedents _______________________________________________________________________3. 1.4.. Objectives _________________________________________________________________________4. 1.4.1.. Main objective ____________________________________________________________________4. 1.4.2.. Secondary objectives _______________________________________________________________5. Chapter 2 ___________________________________________________________________________________6 2.. THEORETICAL BASICS OF VALUE‐BASED DECISION MODELS AND CUSTOMER NETWORKS _________6 2.1.. Value _____________________________________________________________________________6. 2.1.1.. What is “Value”?___________________________________________________________________6. 2.1.1.1.. Design Notion of Value _________________________________________________________8. 2.1.1.2.. Marketing Notion of Value ______________________________________________________9. 2.2.. Value‐Based Models and Value Measurement Tools in Management____________________ 14. 2.2.1.. Value ‐ Based Models ______________________________________________________________15. 2.2.1.1.. The Value Chain______________________________________________________________16. 2.2.1.2.. Customer‐Based Marketing Model: Courtyard Marriot________________________________17. ii.

(5) 2.3.. Value ‐ Based Tools _______________________________________________________________ 25 VALUE‐BASED TOOL____________________________________________________________________25 CHARACTERISTICS _____________________________________________________________________25 The Attribute‐Score Comparison Chart _____________________________________________________25 This tool searches what the customer want and how he/she perceives products, services, brands, etc.____25 Customer Value Framework‐Value Map ____________________________________________________25 Looks for the best product that fulfill customer´s needs and the relation price – benefit. _______________25 Customer Framework Head To Head Value Com parison _______________________________________25 This tools contrast the product worth within a compe titor or important brand_______________________25 Importance‐Performance Analysis ________________________________________________________25 Its objective is to show gaps between importance and pe rformance pe rception from cus tomer evaluation 25. 2.3.1.. The Attribute‐Score Comparison Chart _________________________________________________26. 2.3.1.1.. Customer Value Framework‐Value Map ___________________________________________27. 2.3.1.2.. Customer Value Framework Head to Head Value Comparison __________________________29. 2.3.1.3.. Importance‐Performance Analysis _______________________________________________30. 2.4.. Customer Network________________________________________________________________ 32. 2.4.1.. What is a “Customer Ne twork”? ______________________________________________________32. 2.4.2.. Customer Netw ork Characteristics ____________________________________________________32. 2.4.3.. Customer Netw orks Samples ________________________________________________________34. 2.4.3.1.. After‐Sale Service for Car Dealers Customer Network _________________________________35. 2.4.3.2.. Insurance Companies Customer Network __________________________________________40. Chapter 3 _________________________________________________________________________________ 46 3.. PROPOSAL FOR A VALUE‐BASED DECISION MODEL IN A CUSTOMER NETWORK PRODUCT. CONFIGURATION CONTEXT __________________________________________________________________ 46 3.1.. Product Idea and Internal Stakeholder Vision_________________________________________ 48. 3.2.. Customer Network Identification and Structure ______________________________________ 49. 3.2.1.. Actors __________________________________________________________________________49. 3.2.2.. Actor Layer Identification ___________________________________________________________51. 3.2.3.. Structural Interaction Analysis (SIA) ___________________________________________________51. 3.2.4.. Drawing Customer Network _________________________________________________________53. iii.

(6) 3.3.. Attribute Identification and Specification ____________________________________________ 53. 3.3.1.. List of Attributes __________________________________________________________________53. 3.3.1.1.. In Depth Interviews ___________________________________________________________53. 3.3.1.2.. Focus Groups ________________________________________________________________54. 3.3.1.3.. Verbal Protocol Analysis _______________________________________________________56. 3.3.1.4.. Actor Attributes Coincidence Analysis _____________________________________________58. 3.3.2.. Grouping Attributes _______________________________________________________________60. 3.3.2.1.. Attributes Group Label ________________________________________________________61. 3.3.2.2.. Attributes Group Table ________________________________________________________61. 3.3.3.. Weighting Attributes by Actors _______________________________________________________62. 3.3.3.1.. Focus Surveys _______________________________________________________________62. 3.3.3.2.. Likert Scale _________________________________________________________________62. 3.3.3.3.. Semantic Differential Scale _____________________________________________________63. 3.3.4.. Attribute‐ Score Comparison_________________________________________________________64. 3.3.4.1.. Group Detaile d Comparison Chart________________________________________________65. 3.3.4.2.. Consolidated Attribute‐Score Comparison _________________________________________66. 3.3.5.. Define Order Qualifiers _____________________________________________________________69. 3.3.5.1.. What is an Order Qualifier? _____________________________________________________69. 3.3.5.2.. Setting Order Qualifiers ________________________________________________________69. 3.3.5.3.. Group Detail Qualifiers Chart (GDQC) _____________________________________________70. 3.3.5.4.. Product Qualifie rs Chart – Group Based ___________________________________________72. 3.4.. Value Measurement ______________________________________________________________ 74. 3.4.1.. Actor Individual Measurement _______________________________________________________75. 3.4.1.1.. Select Relevant Actor‐Group Relations ____________________________________________75. 3.4.1.2.. Consolidate Information from Quantitative Analysis__________________________________75. 3.4.1.3.. Build and plot Value Function ___________________________________________________76. 3.4.2.. Networking Measurement __________________________________________________________77. 3.4.3.. Maximizing Value Across Customer Network ____________________________________________79. 3.4.3.1.. Organize Actor‐Group Relations _________________________________________________79. 3.4.3.2.. Set Maximum Value Function By Group ___________________________________________80. 3.4.4.. Attribute T rade‐Offs Between Actors and Minimal Requirements ____________________________82. 3.4.4.1.. Attribute T rade‐Off Recognition _________________________________________________82. 3.4.4.2.. Sensitive Analysis_____________________________________________________________84. iv.

(7) 3.5.. Product Configuration_____________________________________________________________ 84. Chapter 4 _________________________________________________________________________________ 87 4.. APPLICATION OF THE PROPOSED MODEL IN REAL BUSINESS: THE SOF TWARE CONFIGURATION _ 87 4.1.. Presentation of the product and relevance of business and product selection ____________ 87. 4.2.. ATTRIBUTE CONFIGURATION VALUE MODEL REAL WORLD APPLICATION ________________ 89. 4.2.1.. Stage 1: Product Objective __________________________________________________________89. 4.2.2.. Stage 2: Identify Customer Network ___________________________________________________90. 4.2.2.1.. Actors _____________________________________________________________________90. 4.2.2.2.. Actor Layer Identification ______________________________________________________95. 4.2.2.3.. Structural Interaction Analysis (SIA) for Amnesia Software‐Customer Network _____________96. 4.2.2.4.. Drawing Customer Network ____________________________________________________95. 4.2.3.. Stage 3: Attribute Research__________________________________________________________96. 4.2.3.1.. List of Attributes _____________________________________________________________96. 4.2.3.2.. Grouping attributes __________________________________________________________103. 4.2.3.3.. Weighting Attributes by Actors _________________________________________________106. 4.2.3.4.. Setting Order Qualifiers _______________________________________________________109. 4.2.4.. Stage 4: Value Measurement _______________________________________________________111. 4.2.4.1.. Actor Individual Measurement _________________________________________________112. 4.2.4.2.. Networking Measurement ____________________________________________________116. 4.2.4.3.. Maximizing Value Across Customer Network ______________________________________118. 4.2.4.4.. Attribute T rade‐Offs _________________________________________________________120. 4.2.5.. Stage 5: Product Configuration ______________________________________________________125. Chapter 5 ________________________________________________________________________________ 128 5.. CONCLUSIONS________________________________________________________________________ 128 5.1.. Summary of the Results __________________________________________________________ 129. 5.2.. Model Limitations _______________________________________________________________ 130. 5.3.. Future Outlook __________________________________________________________________ 131. Annex ___________________________________________________________________________________ 133 v.

(8) Annex 1 – In Depth Interviews_______________________________________________________________ 133 Interview Format _______________________________________________________________________ 133 In Depth Interviews _____________________________________________________________________ 136 Annex 2 – Focus Group _____________________________________________________________________ 153 Guide of Discussion _____________________________________________________________________ 153 Focus Group Developement______________________________________________________________ 156 Annex 3 – Protocols________________________________________________________________________ 162 Entrevistado 1. Dra. Clara Linda Guerrero __________________________________________________ 162 Entrevistado 2. Dra. María Constanza Latorre_______________________________________________ 164 Annex 4 – Quantitative Analysis Survey Form _________________________________________________ 166 Web based Survey Form _________________________________________________________________ 166 Annex 5 – Quantitative Analysis Charts_______________________________________________________ 168 Annex 6 – Value Measurement Amnesia Software Charts_______________________________________ 173 Annex 7 – Fix Value Function Amnesia Software Charts_________________________________________ 175 Bibliography_____________________________________________________________________________ 177 Index ____________________________________________________________________________________ 179. vi.

(9) List of Illustrations Illustration 1: Energy Customer Network. Source: (CCN/M.S. Gerber Management Consulting, 2003)......... 2 Illustration 2: Evolutio n of the opportunity for the company to create customer`s satisfaction. Source: (Ahmed & Yannou, 2003)..................................................................................................................... 9 Illustration 3: Purchase Transaction. Source: (Ahmed & Yannou, 2003).................................................. 11 Illustration 4: Process of Purchase and Consumption. Source: (Ahmed & Yannou, 2003) .......................... 13 Illustration 5: Porter´s Value Chain. Source: (Porter, 1985).................................................................... 17 Illustration 6: Customer‐Based Marketing Model Steps. Source: Based on value chain management class. Source: (Brooks, 2008) ....................................................................................................................... 18 Illustration 7: Stimulus cards of this type were used for all seven facets for the self‐explic ated conjoint analysis task. Source: (Wind & Green,2001) ........................................................................................ 23 Illustration 8: Value function Sample Courtyard Marriot. Source: (Wind & Green, 2001) .......................... 24 Illustration 9: Trade‐offs sample ‐ Importance Attribute Ranking, Courtyard by Marriot. Source: (Wind & Green, 2001)..................................................................................................................................... 24 Illustration 10: Attribute‐Score Comparison Chart, Commercial Filtration Sample. Source: Based on (Customer Value, Inc., 2006)............................................................................................................... 27 Illustration 11: Value Map Sample Min ivans 2001. Source: Based on (Customer Value, Inc., 2006) ........... 28 Illustration 12: Head to Head Value Comparison Sample ‐ Commercial Filtration. Source: Based on (Customer Value, Inc., 2006)............................................................................................................... 29 Illustration 13: Weight vs. Performance Gap Sample ‐ Commercial Filtration. Source: Source: Based on (Customer Value, Inc., 2006)............................................................................................................... 31 Illustration 14: After‐Sale Service Process. Source: Own Illustration........................................................ 36 Illustration 15: After‐Sale Service for Car Dealers Customer Network. Source: Own Illustration................. 37 Illustration 16: After‐Sale Service Customer Network. Source: Own Illustration ....................................... 38 Illustration 17: Insurance Product Sell Process. Source: Own Illustration................................................. 41 Illustration 18: Insurance Companies Customer Network. Source: Own Illustration.................................. 42 Illustration 19: Insurance Company Customer Network. Source: Own Illu stration.................................... 43 Illustration 20: Attribute Configuration Value Model Steps. Source: Own Illustration ............................... 47 vii.

(10) Illustration 21: Interaction Value Diagram (IVD). Source: Own Illustration .............................................. 50 Illustration 22: Focus Group. Source: Own Illustration........................................................................... 55 Illustration 23: Procedure for Planning and Conducting Focus Groups. Source: (Malhotra, 2007).............. 56 Illustration 24: Protocol Buying Process, Sample Questions. Source: Based on (Ospina, 2008) .................. 58 Illustration 25: Actor Attributes Coincidence Matrix ‐ AACM. Source: Own Illustration ............................. 59 Illustration 26: How to Group Attributes. Source: Own Illustration ......................................................... 60 Illustration 27: Likert Scale. Degree of Satisfaction of Cable TV Service. Source: Own Illustration .............. 63 Illustration 28: Semantic Differential Scale. Cable TV Service. Source: Own Illustration ............................ 64 Illustration 29: Group Detailed Comparison Chart Sample. Source: Own Illustration ................................ 66 Illustration 30: Consolidated Attribute‐Score Comparison Chart Sample. Source: Own Illu stration ............ 68 Illustration 31: Group Detail Qualifiers Chart (GDQC). Source: Own Illustration ....................................... 70 Illustration 32: Aggregate Attribute Group Qualifiers Consolidated Chart (GQDCC). Source: Own Illustration ........................................................................................................................................................ 74 Illustration 33: Value Function Chart for Actor‐Group Relation. Source: Own Illustration.......................... 76 Illustration 34: Integrated Value Index (IVI) Calculation. Source: Own Illustration.................................... 78 Illustration 35: Inverse Proportionality Sample. Source: Own Illustration................................................ 83 Illustration 36: Attribute Mix Selection Sample. Source: Own Illu stration................................................ 85 Illustration 37: Amnesia Software Customer Network Relations. Source: Own Illustration........................ 91 Illustration 38: Amnesia Software Customer Network. Source: Own Illustration ...................................... 95 Illustration 39: Detailed Attribute Group Comparison Chart Amnesia Software ‐ Statistics Features. Source: Own Illustration .............................................................................................................................. 107 Illustration 40: Aggregated Attribute Group ‐Score Comparison Chart for Amnesia Software. Source: Own Illustration ...................................................................................................................................... 108 Illustration 41: Attribute Group Qualifiers Chart GDQC for Amnesia Soft ware. Source: Own Illustration .. 110 Illustration 42: Aggregate Attribute Group Qualifiers (GDCC) for Amnesia software. Source Own Illustration ...................................................................................................................................................... 111 Illustration 43: Rheumatologist ‐ Attributes Security Features. Source: Own Illustration......................... 114 Illustration 44: Patient ‐ Attrib utes Security Features. Source: Own Illustration ..................................... 114 Illustration 45: Government Health‐Control Entity ‐ Attributes Security Features. Source: Own Illu stration ...................................................................................................................................................... 115 viii.

(11) Illustration 46: Network Value Function ‐ Security Features for Amnesia Software. Source: Own Il lustration ...................................................................................................................................................... 116 Illustration 47: Maximized Value Function ‐ Group of Security Features for Amnesia Software. Source: Own Illustration ...................................................................................................................................... 119 Illustration 48: Customer Network Value Range for Amnesia Software. Source: Own Illustration ............ 122 Illustration 49: Fixed Value Functions for Amnesia Software ‐ Security Features. Source: Own Illustration123. ix.

(12) List of Tables Table 1: Value‐Based Models and Tools Comparison. Source: Own Table____________________________ 15 Table 2: Factors that describe hotel features and services facts. Source: (Wind & Green, 2001) _________ 21 Table 3: Value‐Based Tool Characteristics. Source: Own Table _____________________________________ 25 Table 4: Structural Interaction Analysis (SIA) in an After‐Sale Service for Car Dealers Customer Network. Source: Own Table __________________________________________________________________________ 39 Table 5: Structural Interaction Analysis (SIA). Insurance Company Customer Network. Source: Own Table 44 Table 6: Actor Layer Identification Table. Source: Own Table ______________________________________ 51 Table 7: Actor Relation Matrix (ARM). Source: Own Table_________________________________________ 52 Table 8: Structure of Value Functions Table Sample. Source: Own Table_____________________________ 76 Table 9: Sample of Actor‐Group Relations Comparison Table. Source: Own Table_____________________ 80 Table 10: Maximize Network Value Function Table Sample. Source: Own Table ______________________ 81 Table 11: Actor Layer Identification Table. Source: Own Table _____________________________________ 96 Table 12: Interactions inside Amnesia Software Customer Network. Source: Own Table _______________ 94 Table 13: In Depth Interviews for Amnesia Soft ware. Source: Own Table ____________________________ 96 Table 14: Interviews Profile Review. Source: Own Table __________________________________________ 97 Table 15: Focus Group for Amnesia Software. Source: Own Table _________________________________ 100 Table 16: Verbal Protocols for Amnesia Software. Source: Own Table______________________________ 101 Table 17: Actor Attributes Coincidence Matrix (AACM) for Amnesia Software. Source: Own Table _____ 103 Table 18: Group Labels Amnesia Software. Source: Own Table____________________________________ 104 Table 19: Detailed Attributes Groups Table for Amnesia Software. Source: Own Table _______________ 105 Table 20: Actor Individual Measurement for Amnesia Software. Source: Own Table _________________ 113 Table 21: IVI Indicator Calculation For Amnesia Software. Source: Own Table_______________________ 117 Table 22: Maximized Group Value Function (MGVF) for Amnesia Software. Source: Own Table________ 118 Table 23: IVIMAX Indicator Calculation for Amnesia Software. Source: Own Table ___________________ 120 Table 24: Inverse Proportionality Table for Amnesia Software. Source: Own Table___________________ 121 Table 25: FIVI Calculation for Amnesia Software. Source: Own Table ______________________________ 124 Table 26: ACVM Application Result for Amnesia Software. Source: Own Table ______________________ 126 x.

(13) List of Equations Equation 1: Group Weight Value (GWV). Source: Own Equation ___________________________________ 67 Equation 2: Center of Gravity X funtion. Source: Own Equation ____________________________________ 71 Equation 3: Center of Gravity Y funtion. Source: Own Equation ____________________________________ 71 Equation 4: Group Importance Value (GIV). Source: Own Equation _________________________________ 73 Equation 5: Integrated Value Index (IVI). Source: Own Equation ___________________________________ 77. xi.

(14) List of Abbreviations AACM: Actor Attributes Coincidence Matrix ACVM: Attribute C onfiguration Value Model AInG: Number of Attributes in Group n ARM: Actors Relations Matrix AWV: Attribute Weight Value EPS: Entities Promoters of Health IVD: Interaction Value Diagram IVI: Integrated Value Index IVIMAX: Maximum Integrated Value Index? IWV: Importance Weight Value FVF: Fixed Value Function FIVI: Fixed Integrated Value Index GDQC: Group Detail Qualifiers C hart GIV: Group Importance Value GWV: Group Weight Value MAXW: Maximum Weight Value MGVF: Maximized Group Value Function SIA: Structural Interaction Analysis. xii.

(15) Glossary Benefit: The benefit of a product/service is the help that a person get from it or the results that comes with it. Customer Network: A group of actors that interact between each other in order to fulfill their expectation about a specific product which delivers value for them.. Direct Customer: Are those that received the service and the benefit from the whole process and paid for it. Direct Beneficiary: Person that without paying for a product/service receives a benefit from it. Indirect Beneficiary: Person that received a benefit from the product or service, but does not pay for it and is not in direct contact with it. Indirect Customer: Are those that pay or not for the service or receive a benefit from it, but are not directly involved in the process. Interaction: A mutual or reciprocal actio n where the object and/or the subject receive a benefit. Model: A human construct which helps in the understanding of real world systems. Models serve to identify entities and disaggregate elements of a system. Object: A physical entity recognizable by concrete, tangible and intangible attributes such as shape, color, smell, aspect, feelings, etc.. xiii.

(16) Subject: Someone who is affected during a process or to be likely to be affected by it. Value: What a customer perceives and company deliv ers. Something that brings benefits through a product/service which has certain specification that fulfills their expectations in terms of benefits and satisfaction. Value-Based Decision Model: A construction which measures value with the purpose of taking decision during a product configuration process.. Value Chain: Concept created by Michael Porter, describes the activities within an around an organization which together create a product or service. This model analyzes. the. value. creation. taking. into. consideration variables. inside. the. organization. Value Contribution: Difference of value that actor perceives comparing two par of attributes. Value Function: Shows in an integrated way the customer’s preferences and present the key attributes which company should focus on. Value Map: Tool for tracking how customers perceive products.. xiv.

(17) Chapter 1 1. INTRODUCTION 1.1.. The Situation. In these times where business are toweringly looking for the best solutions that maximize its profits, products attributes, characteristics and functionality day after day are more puzzling to configure. That situation brings to the development of small details that could represent a significant difference of value in front of the end customers and competitors. Our situation is framed in value definition and C ustomer Network environment. The first topic to understand is value. Defining value is a task that has been studied from different fields of knowledge like economics, logistics, marketing and design. This work will present the value concept from companies’ side and specifically. from marketing. and. design perspective,. where. the product. configuration process is identified by the conception of value inside a network of customer that interact and depend in some level with each other. Value is defined in the most simple way by Oxford dictionary as “the regard that something is held to deserve; importance or worth” (AskOxford.com, 2008).This definition shows that value is a characteristic that is given to a thing by someone who considers it valuable. For the matter of this work value can be perceived as a combination of attributes or characteristics of a specific product configuration, the actors whom perceive this value can also create it through integration, communications and relatio nships. The actor’s relationships builds a multi-system creating a network, this multi-system and multi-customer will be called “Customer Network”. 1.

(18) Referring to the Customer Network is for example the energy industry (see Illustration 1), where the final customer is involved in a systemic and interconnected network of multiple agents. These agents are the energy companies, services vendors, equipment vendors, end-customers and others. What happen if the value is only end-customer oriented?. Illustrat ion 1: Energy C ustomer Network. (C C N/M .S . Gerber Management C onsulting, 2003 ). Source:. The answer to the questions “who is my customer?” is more complex in a network environment. This complexity would be concerned for the configuration of a product or service in order to maximize value perception. The situation for this work is oriented to answer how should products look like inside a Customer Network? Identifying what are the attributes, its value functions and dependencies that maximize the value on this network.. 1.2.. Relevance. This work is oriented to understand and propose a Value-based model that supports Value Managers and Innovation Directors in the following sense: “Thus, 2.

(19) the simplistic value-chain metaphor is given up in favor of a slightly more complex network perspective, including indirect exchange rela tionships. The managerial implication of extending and interlocking customer horizons is related to the challenge of how companies with different assets, capabilities and positions within value-creating systems can gain knowledge about the value considerations of indirect exchange partners, including their final customers” (Naudé, Henneberg, & Zolk iewski, 2007). The importance of our work is based on the complexity of Customer Networks that companies have to face. If companies decipher its Customer Networks and adjust its product configuration process to bring maxim value, the outcome could represent an improvement on customer fulfillment, customer trustworthiness, efficiency and of course profit.. 1.3.. Antecedents. Value has diverse perspective depending on different attributes that affect it; that is also why it cannot be universally accepted, is a perception, a notion of a person about something that is giving some kind of benefit to him/her. Michael Porter introduced the concept of Value C hain, suggesting that activities in the organization add value to the products that companies produce and should give a competitive advantage to the company. If the activities are run effectively the value obtained should exceed the cost of running it (Porter, 1990). It is important to understand that porter’s value is located inside of the organization context. Nowadays the concept of Value C hain Management had gain the attention of many academics. It can be defined as “The management of a connected series of organizations and resources (e.g. information, knowledge) involved in the creation, transformation and delivery of value to end-customers.”(Thiell, 2008) It is important to stress that in contrast with Porter approach the Value Chain 3.

(20) Management includes an external view of organization. It is inferred that the value concept has evolved changing and gaining new important elements for the product configuration and the external connections that could affect it. The connected series of organizations studied in Value C hain Management create networks. According to Qualtman & Chelladurai, “…the term network is often understood as the webs of relationships in which people or entities are embedded. In some senses, the word network is used to describe such things as organizations aligning together to form inner organizational networks or a type of flexibly designed network structure (e.g., the regional businesses of Silicon Valley) that an organization should embrace to remain competitive in today’s business markets” (Qualtman & Chelladurai, 2008). Value has been evolving and the organizations are now more connected even with their customers. The customers are entities, actors inside a connected series of organizations. The actors interact and relate between them building complex networks where value has to transcend.. 1.4.. Objectives. Based on a theoretical investigation, this document and content intents to support product configuration by the use of a Value-Based Decision Model. Despite the lack of existent information, this research, and as consequence design of a Value-Based Decision Model will give a new tool for the recognition of value perception in multi-customer systems, define in this document as Customer Networks, inquiring to recognize how a final product should look like in terms of fulfilling value expectations in C ustomer Networks.. 1.4.1. Main objective Define a Value-Based Decision Model for Customer Networks, considering interactions and also dependency between different actors. The result of this 4.

(21) model will be a product configuration that show value perception inside a studied C ustomer Network.. 1.4.2. Secondary objectives Based on the general objective the following particular objectives are used to set the dimension of this work: i.. Present theoretical findings about Value-based decision models.. ii.. Identify and characterize C ustomer Networks.. iii.. Show main differences and similarities between value perception for single end customers and Customer Networks. iv.. Integration of theoretical Value-based tools into C ustomer Networks context.. v.. Propose a model oriented to support product configuration decisions in Customer Networks.. vi.. Apply step by step the decision model in real world business simulating the product configuration process.. The next part of our work is to describe the theoretical foundation that will support the development of this work.. 5.

(22) Chapter 2 2. THEORETICAL BASICS OF VALUE-BASED DECISION MODELS AND CUSTOMER NETWORKS This chapter will introduce the core concepts of this work based on a theoretical research starting from elementary definitions and evolving to the presentation of models and tools used in management to deal with value measurement. According with the scope of this work the theoretical research of value will be specially focused on the attribute configuration of a product and their impact in value perceptions.. 2.1.. Value. Value is a key term for this work; the following section will present origin and definitions that will frame “Value” in this work:. 2.1.1.. What is “Value”?. The concept of Value has been studied for centurie s, that is why this word had received diverge visions which can be similar or different, depending on the discipline or field of work. This concept goes back to the ancient Greek philosophers.. “It was materialized through a debate between two different. conceptions: an absolutist conception and a relativist one: • Absolutist conception (objectivist): The notion of Value is recorded by the object, which have an absolute Value, independent from the subject who desires it. • Relativist conception (subjectivist): We try hard, we want something and we wish to have it, not because we judge that is good, but contrary, we judge that something is good, because we inspire it, we wis h and we want. 6.

(23) it” (Spinoza)(Ahmed & Yannou, 2003). With this conception, an object does not have an intrinsic Value. “Plato was probably the first to make a distinction between the “Value in use” and “Value in exchange”. Later, Adam Smith emphasized the difference “The things which have the greatest Value in use have frequently little or no Value in exchange; and on the contrary, those which have the greatest Value in exchange have frequently no Value in use”(Haksever, Chaganti, & Cook, 2004). In 1985 Porter defined Value as “what buyers are willing to pay” (Porter, 1985), in contrast to what the competence is offering as benefits. Later, Kurt Baier defined Value as “the capacity of a good, service, or activity to satisfy a need or provide a benefit to a person or legal entity” (Baier, 1966). This definition broader the meaning of what value is, because it includes any type of good or service that gives satisfaction an provides benefit. The approximation to a value definition described above is based on the work of Ben Ahmed & Bernad Yonnou whom gave a multi-disciplinary analysis of what is value in their paper Polysemy of Values or Conflict of Interest. This is important because is imperative to clarify that for the value to exist there must be perceived as such by the beneficiary or recipient. Then value can be defined as what a customer perceives and the company delivers. As mention before, the concept of value depends on the field of study which in this case related to the design and marketing of a product it can be define:. 7.

(24) 2.1.1.1. Design Notion of Value In design Value is materialized into the product. “It is the first stage in the development cycle of a product where the customer's expectations (analyzed by the marketing service) are translated into the language of the company. For the customer, the main part of his/her satisfaction is built at this stage. Indeed, a poorly conceived product cannot reach the satisfaction of the customer despite the efforts made in the stages downstream such as manufacturing, distribution or maintenance. The more the product evolves in its cycle of development, the more the margin of intervention of the company decreases” (Ahmed & Yannou, 2003). Illustration 2 shows the development cycle of a product, where the designing component should fulfill the customer expectative to create satisfaction and receive by the end a monetary retribution in the sale.. 8.

(25) Illust rat ion 2: E volution of the. opportunity. for the. company to create c ustomer`s satisfac tion. Source: (A hmed & Y annou, 2003 ). 2.1.1.2. Marketing Notion of Value The way customers gets in touch with products, and create a notion of value is related with the marketing notion of value, were: “Marketing may be seen as a managerial and social process by which individuals and groups obtain what they need and what them desire through the creation, the offer and the exchange of products that have Values. This marketing, called transactional, is limited to the study of the customers' behavior in the act of purchasing. Today, the object of the discipline has been widened to adopt a new perspective, which is called relational perspective, and 9.

(26) which encompasses the act of purchasing to include the process of consumption” (Ahmed & Yannou, 2003). It can be studied through a transactional and a relational approach, where the way the subject is related with the object/service may define his/her notion, perception of value. 2.1.1.2.1. Transactional Approach of Value Judgment Based on “the paradigm exchange”(Aurier, Evard, & N´Goala, 2003), the subject interacts with the object and with a context of purchase and then an exchange of Value is made. This exchange is made through a 'cognitive confrontation' between the attributes of the object and the value of the individual. In a transaction of purchase we identify: the object (the product), the subject (the individual) and the context of purchase, as is shown in Illustration 3, where an interchange of benefits and cost takes place based on the expectations of value perception. •. Object: A physical entity recognizable by concrete, tangible and intangible attributes such as shape, color, smell, aspect, feelings, etc.. •. Subject: A person or thing that is shaped for a physical entity and abstract entity. “The physical part is formed by the vision system (eye, etc.), the smell detection system (nose, etc.), the shape detection system (eye, hand, etc.), etc. The abstract part is formed by the Values built in this subject through his/her environment, culture, experience, and also his/her own sensibility”(Ahmed &. 10.

(27) Yannou, 2003). In general terms a subject can be define as someone who is affected by it or to be likely to be affected by it.. Illustrat ion 3: P urchas e Transaction. Source: (Ahmed & Yannou, 2003)1. 1 The context of purchase is a multidimensional frame, which contains the object and the subject. This context is characterized by many variables as the c ompetition, the impact of fashion, the image of. 11.

(28) 2.1.1.2.2. Relational Approach of Value Judgment The relational approach makes reference to the creation of value during the process of consumption, it means after the buying decision is made, it is an experience. “Value is born during the process of consumption, which is an interaction between one person (the demand), and the object (the offer) in a situation or a context of consumption. During this process of consumption, there is an evaluation in a widened perspective of relational, durable and cumulative exchange”(Ahmed & Yannou, 2003). Illustration 4 shows how the relational approach is configured during the transactional process taking into consideration personal and cultural values and other contextual variables.. companies, comfort, etc. T he specificity of the purchase context lies in its very instable as pect, given the instability of its variable. The subject meets the object in a context of purchase During the first confrontation, the physical entity of the subject (eye, hand, nose, etc.) catches the physical attributes of the object (color, sharp, smell, etc.). T his is motivated by the abstract entity of the subject asking him/her to apprehend a product amid a set of products. The abstract entity of the subject projects the physical attributes of the object on its scale of V alue, transforming these attributes into cultural, functional, emotional, epistemological, conditional, hedonist, aesthetic or holistic Values . The subject is the looking for his /her V alues through the product. A s there is a similarity or opposition between this V alues (the V alues of the object and the Value of the subject), there will be conditional, social, aesthetic , emotional, epistemological, hedonist or holistic profits and costs (in general meaning, it includes all the drawbacks linked to the product). A cognitive confrontation is the performed between profits and costs. It allows the subject (the person looking for the object) to decide to buy the object or to cancel the purchase.. 12.

(29) Illustrat ion 4: P rocess of Purc hase and C onsumption. S ource: (A hmed & Yannou, 2003)2. Both approaches,. transactional and rational, are complementary:. “during the purchase, the subject estimates the potential of satisfaction of the object, using his or her previous experiences as a foundation of the current. assessment. At. the same time, the subject draws. expectations, which will serve as an assessment criterion of effective satisfaction during the process of consumption (the use of the product). Indeed, during the consumption there will be an evaluation of the disparity between the expectations and the realized Values” (Ahmed & Yannou, 2003). Through the transaction and the consumption, the product is not only limited to a transfer of material values, but it involves a transfer of ideas, feelings, and even values, such as moral ones.. 2. An experience of consumption is constructed and it’s expressed through the form of predisposition (favorable/unfavorable), of judgment (good/bad), valence (more/less) or affection (like/dislike). T his cognitive experience leads to the building of V alue assessment model, which will be used as a foundation for a further transaction.. 13.

(30) Taking into consideration the above approximation to value definitions and the needs for this work; in general, value can be define as what a customer perceives and the company delivers, as mentioned before. For the matter of this paper customer is a network of actors. Value is something that brings benefits through a product/service which has certain specification that fulfills their expectations in terms of benefits and satisfaction. The following part of this chapter will bring to the reader a more precise idea of how value can be measured through models and tools that specify certain characteristics that a product should have in terms of customer satisfaction. Also the term “C ustomer Network” is going to be defined.. 2.2.. Value-Based Models and Value Measurement Tools in Management. This section will present the result of the value-based models research which also shows tools and models used in management value measurement. The research provides understanding of how models and tools are presented and the actor orientation that they have. Models and tools help to understand how Value is created or lost in terms of activities, attributes, measurements and preferences from customers accessed on a product offer from a company. Table 1 shows the list of models and tools object of research for the theoretical foundation this work. Important elements from this models and tools are going to be crucial to the design and configuration of the proposal for a Value-Based Decision Model.. 14.

(31) Name. Type. Porter Value Chain. MODEL. Customer-Based Courtyard Marriot Impact/Value Framework Customer Value Framework :AttributeScore Comparison Chart. MODEL. FRAMEWORK. Objective. Value Source. Value creation inside a company based on. Company. primary and support activities. Shareholders. The model gives course of action to support a. End. new product development. Customer. Correlate attributes vs. Efficiency and. Not. Effectiveness. Applicable. FRAMEWORK. Set scores for attributes and benefits that. End. TOOL. customers look for in a product. Customer End. Customer Value. FRAMEWORK. Track how customers are perceiving value in. Customer. Framework : Value Map. TOOL. a world continuously changing. and Competitors. Customer Value Framework : Head to Head Value Comparison Customer Value Framework : importance/Performance. FRAMEWORK. Measure performance characteristics that. TOOL. give an advantage or disadvantage. FRAMEWORK. Combine information about attributes relative. End. TOOL. scores and importance weights. Customer. Table 1: V alue-Based Models. Competitors. and Tools C omparison.. S ource: O wn Table. 2.2.1.. Value - Based Models. Based on the definition of what is a model given by Thomas Kühne it can be infer that models are instruments for support decision process. Models serve to identify entities and disaggregate elements of a system. The definition given by Kühne: “A model is a description of something” (Kühne, 2005). The following sections describe and specify details from two value-based models used in management to analyze and to face management decisions. This models were chosen due to the importance of their content and their relevancy, also both models represent two different approaches of value creation for an specific product/service.. 15.

(32) 2.2.1.1. The Value Chain This concept was created by Michael Porter and is related with the creation of value in the interior of the company. “The Value Chain describes the activitie s within an around an organization which together create a product or service. It is the cost of these Value activities and the value that the deliver that determines whether or not best value products or service are developed”.(Johnson, Scholes, & Whittington, 2006). Illustration 5 shows the model diagram that is complemented with the following explanations. This concept divides the activities, as explain above, in primary and secondary activities.. 2.2.1.1.1. Primary Activities Those that are directly concerned with the creation or delivery of a product or service and can be grouped into five main areas. For example: operations, service, marketing and sales, inbound and outbound logistics.. 2.2.1.1.2. Support Activities Those that help to improve the effectiveness and efficiency of primary activities it can be div ided in four areas: procurement, technology development, human resource management and infrastructure.. 16.

(33) Illust rat ion 5: P orter´s V alue C hain. S ource: (Porter, 1985). This proximity to the creation of value help the company tracking and creating changes inside the company that could give benefit to its costumer, due to the fact that this model gives a description of activities that are providing particular profit to customer located within particular areas of the Value chain. 2.2.1.2. C ustomer-Based Marketing Model: Courtyard Marriot This model was developed by the marketing department of Wharton School and D.K Shifflet & Associates, Ltd for Marriot International Inc. The model gives course of action to support a new product development. “The study provided specific guidelines for selecting target market segments, positioning services, and designing an improved facility in terms of physical layout and services”. (Wind & Green, 2001). 17.

(34) The model includes the following steps showed in illustration 6 and explained after it:. 0. Identify the problem. 7. Develop measures/metrics form measuring achievement of objectives. 8. Determine a value function for the metric. 1. Identify the Domain, The Target Market. 6. Label Groups by Topic = Objectives. 9. Tradeoffs between Objectives. 2. Identify Key Stakeholders. 5. Group Issues by common topic (Each Groups with Sublist). 3. Take a Guided tour of the domain (Current State). 4. Discuss domain issues (Lists) = Voice of the customer.. Illustrat ion 6: C ustomer- Based Marketing Model Steps. S ource: Based on value c hain management class. Source: (B rooks , 2008). 0. Identify the problem: The first step is to understand the purpose of the research in terms of product and services development. For Marriot International Inc. was “What type of hotel facilities and services should the company design and offer to attract these travelers away from the competitive facilities they were currently using”. (Wind & Green, 2001). 18.

(35) 1. Identify the domain, the target market: The domain is the selection of segment where the relevant customers are. For Marriott International Inc. these segments are “Business Travelers (who travel at least six times a year)” and “Pleasure Travelers (who travel at least twice a year)” 2. Identify key stakeholders: This is an important task because the model objectives would be aligns with the stakeholders purposes. For Marriot International Inc. these stakehold ers are stockholders, owners, investors, employees, and hotel operators. 3. C urrent state, guided tour of the domain: Is a customer study to answer key questions and realize how the target market is reacting to actual offerings. For Courtyard Marriot this study was conducted among 601 customers, selecting four metropolitan areas – Atlanta, Dallas, San Francisco and C hicago. Using a psychological segmentation to find the number and type of trips, incomes and the type of accommodation that they choose, this task was divided in three stages: Surveys, pre-tests and phone interviews. 4. Discuss domain issues: Domain issues are the result of research deeply with surveys the preferences and motivation of the target domain. For Marriot Courtyard the issues were discovered through stimulus cards and hotel profile descriptions. 5. Group Issues by common topic: The issues can be grouped in order to make a structured list of topics that would be evaluated. For Marriot International Inc. the groups were external and internal factors that describe hotel features and services like, rooms, foods, lo unge, services and security. Table No 2 shows an example of how issues were associated and structured. This structure has three levels: First the bold titles denote the group names; second titles are sub-categories of each factor and third 19.

(36) are the available options in it. The underlined options are the preferences of the customers that are result founded in the research for Marriot international Inc. EXTERNAL FACTORS. Very large/tub for 2. Building Shape. Sink location. In-room kitchen facilities. None. L-Shaped W/landscape. In bath o nly. Coffee maker o nly. Outdoor courtyard. In separate area. Coffee. In bath a nd separate. refrigerator. Landscaping Minimal Elaborate. Shower massage Steam bath. facilities. in. Car maintenance. Gas on premises /bill to room. Lively, popular bar/lounge. Car. Type of people. Reservations. rental/Airline. Large. Hotel guests and friends. None. soap/shampoo/shoeshin. only. Car rental facility. In courtyard. e. Open to public – general. Airline reservations. Not in courtyard. Large. appeal. Car. Pool Location. Corndor/View. kit. access/restricted view. Above. Enclosed. toothpaste,. access/unrestricted. mouthwash. view/. soap/bath. gel/shower. Outside. balcony. cap/sewing +. deodorant,. window. Lounge nearby. rooms,. 2. stories). SERVICES. door). Reservations. Indoor Exercise room. Large (600 r ooms, 12. Restaurant/lounge. Call hotel directly 800. stories). combo, limited menu. reservations number Check-in. Full-service restaurant,. Standard. Entertainment. full menu. Pre-credit clearance. Coffee shop/ full menu and go od restaurant Restaurant nearby. $5. Basic facility w/weights w/Nautilus. equipment. Machine in lobby. Racquet Ball Courts None Yes. Check out. Tennis Courts. At front desk. Color TV w/30 channel. None. Bill. cable. Coffee shop. key. Fast food. Key to front desk/bill by. Fast food or coffee shop. mail. None. Machine in lobby. Electric games/pinball. Color. TV. w/HBO,. movies, etc. Color. TV. w/free. and. moderate. movies Entertainment/. restaurant. Rental. Fast food or coffee shop. under. None Facility. ROOMS. Color TV w/movies at. None Outdoor. None (coffee shop ne xt. Color TV. Yes Whirlpool/Jacuzzi. w/entertainment nearby. Coffee shop, full menu. reservations. None. Restaurant in hotel. Small(125. and airline. Sauna. None. Lounge/bar FOOD. rental. Leisure. Lounge/bar nearby. or. Hotel size. Open to public – ma ny singles. items. and. None. Quiet bar/lounge. Small bar soap. Indoor/outdoor. machine. typist. LOUNGE. Amenities. Free from shape. Xerox. Take car to service. Whirlpool (Jacuzzi). Rectangular shape. Xerox machine and. room. None. No pool. maker. Cooking. Bathroom Features. Moderate Pool type. Secretarial Services. None. Limo to airport. 20. None. do or/leave. None Yes Game room/Entertainment. Electric games/pinball/ping pong.

(37) None. Yes. and go od restaurant. Rental. cassettes/in-. Free continental. Above + movie theater,. Bellman. bowling. room Atari. None. None. Children´s. Rental. Continental included in. Yes. playground. cassettes/stereo cassettes. room rate. playing. in. Message service. Room Service. playroom/. None Pool w/slides. Not at front d esk. Pool. w/slides. and. room. None. Light on p hone. Rental Movies/ in-room. Phone-in or der/guest to. Light. BetaMax. pick up. message under door. Pool w/slides, waterfall,. Room service, limited. Recorded message. equipment. Size. on. phon e. Small (standard). menu. Cleanliness/upkeep. Slightly larger (1foot). Room service, full menu. management skills. Much larger (2½ feet). Store No foo d in store. Holiday Inn level. Large suite (2 rooms). Snack items. Nonconventional. of. Decor. (in. Snacks, items,. standard room). refrigerated wine,. beer,. liquor. Old Holiday Inn decor. Above. New Holiday Inn decor. gourmet food items. items. and. Vending service. New Hilton decor. Security Guard None. Hyatt. level. 11a.m to 7p.m 7p.m to 7a.m. Convention Hyatt level Fine hotel level. Budget motel decor. equipment. SECURITY. Budget motor level. Small suite (2 rooms) Quality. and. 24 h ours Smoke Detectors. Laundry/valet. None. None. Lobby. Client drop off and pick. only. an d. hallways. None. up. Soft drink machine o nly. Self-service. Wall unit/full control. Soft. Valet drop off and pick. None. Wall. machines. up. Parking/hallway/ public. unit/soundproo f/full. Soft drinks, snack and. Special. control. sandwich machines. (concierge). New Hyatt decor Heating and Cooling. Central. H. or. C/full. control. drink. and snack. Above and microwave. None. Available. Information restaurants,. Size of Bath Standard bath. etc.. Slightly. Arrangement. larger/sink. separate Much. Lobby/ hallways/rooms 24-ho urs video camera. services. areas Alarm Button None. on theaters,. Button in room, rings desk. and. reservations larger. bath. Travel. w/larger tub. problem. resolution. Table 2: Fac tors that describe hotel features and services fac ts . Source: (Wind & G reen, 2001 ). 6. Label Groups by Topic: According with the results of surveys and research the group labels show the attribute that is important for customers and reflect how is valued.. 21.

(38) 7. Develop measures/metrics form measuring achievement of objectives: Knowing the issues and attributes is important to show with weights how the right attributes could achieve the objectives of the managers. For Marriot International Inc researchers created a stimulus. cards for. measurements about importance and weights. Illustration 7 shows the stimulus card used in the research to measure in just one template the current customer experience, the unacceptable level and the optimized mix of attributes that maximizes the customer experience. 8. Determine a value function for the metric: Value functions shows in an integrated way the customer’s preferences and present the key attributes which company should focus on. Illustration 8 shows a chart for the bathrooms evaluation, this is the result of the stimulus cards analysis. For bathrooms evaluation the research found that customer’s value perception is growing in significant percentages for shower massage and pool but a steam bath don’t represent a value improvement in the perception of the customer. 9. Tradeoffs between Objectives: The value functions show desires that would be evaluated in terms of objectives to balance the value offer and prioritize the decisions to make. Illustration 9 shows how could change the value improvement with sensitivity analysis reducing attributes in order to use in favor of another to balance and benefit the fulfillment of objectives.. 22.

(39) Illustrat ion 7: S timulus cards of this type were used for all seven facets for the self- explicated conjoint analysis task. S ource: (Wind & G reen, 2001 ). 23.

(40) Illustrat ion 8: V alue func tion Sample C ourtyard Marriot. S ource: (Wind & G reen, 2001 ). Illustrat ion 9: T rade- offs sample - I mportanc e Attribute R anking, C ourtyard by Marriot. S ource: (Wind & G reen, 2001). 24.

(41) The Result: The model gives answers about customer’s dissatisfactions with hotel offerings and also actual features (attributes) that are not valued. The model result present, “extremely detailed guidelines for the selection of close 200 features and services”. All of this to design a Hotel that maximizes the experience of the business travelers and leisure travelers. Both models described give different perception or value measurement first Porter with their Value C hain propose value measurement in an internal way taking. into. consideration. the. structure and work flow with activities. categorized as primaries’ and secondary’s. On the other hand Customer Based Marketing Model extend the Porter’s value proposal including customer’s perceptions adding important approaches to find the characteristics of each attribute studied. These two models are important for the development of this work since in chapter three features of these two models will be integrated with value definitions in order to define a new Value-Based Decision Model.. 2.3.. Value - Based Tools. The value-based tools analyzed are described in table 3. VALUE-BASED TOOL The Att ribut e-Score Compari son Chart Cust omer Value Framework-Value Map Cust omer Framework Head To Head Value Compari son Import ance-Perf ormance A nalysis. CHA RA CTERISTICS This tool searches what the customer want and how he/she perceives products, services , brands , etc . Looks for the best product that fulfill customer´s needs and the relation price – benefit.. This tools contrast the produc t worth within a competitor or important brand. Its objective is to show gaps between importance and performance perception from customer evaluation. Table 3: V alue-B ased T ool Characteristics . S ource: O wn Table. 25.

(42) These four tools provide different elements regard value perception in customers. Also each of the models includes an important characteristic with regard to the perception of value in the client.. 2.3.1.. The Attribute-Score Comparison Chart. The Attribute-Score Comparison is a tool for value measurement that is based on attributes and the benefits that customer perceives or pursuit. The attributes measured in this tool include product attributes, service attributes, brand affinity and others. The objectiv e of Attribute-Score Comparison is “to find out what the customer wants, and to discover how customers perceive the different brands on the market”.(Customer Value, Inc., 2006) The following chart was modified by the authors of this work based on the original from (Customer Value, Inc., 2006). In the original the X axis represents the weight assigned by the customer and the Y axis represents the attribute, and the serie s line represents each brand. The original chart was modified (See Illustration 10) to show in a scale of 1 to 10 inside a radial chart to compare the fulfillment of customer expectations for each brand or combination of attributes.. 26.

(43) Illust rat ion. 10:. A ttribute-Score. C omparison. C hart,. C ommerc ial Filtration Sample. Source: Bas ed on (C ustomer V alue, I nc ., 2006). 2.3.1.1. C ustomer Value Framework-Value Map Value Map is a tool to follow the customer’s perceptions about a selected product, customers “look for products that give them the best value for their money” (C ustomer Value, Inc., 2006). The objective of Value Map is show to the manager how competitive their products are. The Value Map chart displays the relation between benefit vs. price that customers evaluated in a selected product and brands. The benefit is measured by an index (performance index) that combines the customer valuation for a set of attributes (See Attribute-Score Comparison Chart) Illustration 11 shows the Value Map chart for the product Minivans in 2001 for US market. 27.

(44) Illust rat ion 11: V alue Map S ample Minivans 2001. Source: B ased on (C ustomer V alue, I nc., 2006). The Value Map C hart plots price vs. performance for each brand. For Y axis the price can be measured as a monetary amount or on a scale of price attractiveness (1 to 10).(Customer Value, Inc., 2006) Fair-Value Reference Line: Shows fair price for performance. The slope shows customer’s price-for-performance tradeoff.(Customer Value, Inc., 2006) Fair-Value Zone: flanking the fair value line shows quartiles in customer perceived value.(C ustomer Value, Inc., 2006) Best-Value Frontier: Identifies the best performance levels available to the customer at different prices. Products here are likely to be the future market-share winners.(Customer Value, Inc., 2006). 28.

(45) 2.3.1.2. C ustomer Value Framework Head to Head Value Comparison The Head to Head Value Comparison is a graphical tool to contrast the product worth with a competitor or important brand. This tool show a set of attributes and evaluate the advantage or disadvantage in front of the customer evaluation. Illustration 12 shows a sample of Head to Head Value Comparison chart for commercial filtration between an evaluated brand and a strong competitor.. Illust rat ion 12: Head to Head V alue C omparison S ample C ommerc ial Filtration. Source: Based on (C ustomer V alue, Inc ., 2006). In Head to Head Value C omparison the bars show positive bars that means advantages relative to the competitor and disadvantages are showed as negative bars. 29.

(46) The bars are scaled to show the comparative worth of your benefit advantages in terms of either dollar to the customers or in terms of value as an index.(C ustomer Value, Inc., 2006) 2.3.1.3. Importance-Performance Analysis Importance-Performance Analysis is a chart tool whose objective is to show gaps between importance and performance index for product’s attributes. The importance and performance index are measures that comes from customer evaluation. The importance has weights assigned and they should sum 100%. The Importance-Performance Analysis is an X-Y chart where X axis shows the importance of the attribute and the Y axis shows the performance score assigned by the customer and relative to the average competitor. Illustration 13 presents a sample of Importance-Performance Analy sis chart for commercial filtration and seven attributes. The Importance-Performance Analysis chart has a “center of gravity” to highlight the relative weig hted attributes and the performance scores. Performance on important attribute with low relative scores needs fixing (see reliable supply and technical support in illustration 13). Attributes in the upper right contribute most to your overall performance score (see Clogging on illustration 13).”(C ustomer Value, Inc., 2006). 30.

(47) Illust rat ion 13: Weight vs . Performance Gap Sample C ommerc ial F iltration. S ourc e: Source: Based on (C ustomer V alue, I nc ., 2006). At this point the paper the theoretical foundation did present two key essentials elements for the objective for this work, value and value-based decision models to support management decisions. The next section will present the last key element that close the theoretical foundation of this work. The four tools presented shows different modes of value measurement for brands, companies and attributes. These four tools are important for this work because they will be modified and improved in chapter 3. Value–Based Tools will support the attribute measurement in the Value-Base Decision Model proposal.. 31.

(48) 2.4.. Customer Network. 2.4.1.. What is a “Customer Network”?. To define customer network, it is simpler if it decomposes in what is customer and what is a network. •. Customer: “The actual or prospective purchaser of products or services”.(American Marketing Association, 2008). •. Network: For the matter of this paper, a Network is defined as “the webs of relationships in which people or entities are embedded” (Qualtman & C helladurai, 2008). A Customer Network is defined as a group of actors that interact between each other in order to fulfill their expectation about a specific product which delivers value for them. Due to the fact that the value perception is configured on a network, its awareness is different, depending on the actor’s needs and requirements on that network.. 2.4.2.. Customer Network Characteristics. It is important to determinate what kind of relation of influence exist between the network actors. “Interaction between and among actors or entities in a system, determine the conditions under which those patterns arose, or attempt to identify the consequences of the structural patterns” (Qualtman & Chelladurai, 2008). Then, an interaction can be defined as a mutual or reciprocal action where the object and/or the subject receive a benefit.. 32.

(49) For the matter of this paper, there can be identify the following types of relations based on interactions analysis and interviews: •. Negative: One of the actors influence the other to avoid have any contact with a service, person, product or brand.. •. Positive: One of the actors influences the other to use, buy or demand a service, person, product or brand.. •. Regulative: Relation of control of one actor over the other based on a norm or a law.. •. Power: One of the actors has the power to make the other buy, demand or use a service, person, product or brand.. Other characteristics are based on the Social Network Theory, “the network perspective espouses two general points of emphasis: 1) a consideration of the concrete relationships between entities over the relationships between their attributes, and 2) a focus on concrete social structure rather than isolated individual entities or dyads” (Qualtman & C helladurai, 2008) According to Wellman´s Structural Analysis: from Metaphor to Substance: “Over the course of time, network analysis have emerged as a distinctive form of social inquiry having five paradig matic characteristics that provide its underlying intellectual unity” (Wellman & Berkowitz, 1988). The characteristics described by Wellman´s work about network analysis are: 1) Behavior is interpreted in terms of structural constraints on activity, rather than in terms of inner forces within units (e.g., “socialization to norms”) that impel behavior in a voluntaristic, sometimes tele ological, push toward a desired goal.. 33.

(50) 2) Analyses focus on the relations between units, instead of trying to sort units into categories defined by the inner attributes (or characteristic s) of these units. 3) A central consideration is how the patterned relationships among multiple alters (actors) jointly affect network members’ behavior. Hence, it is not assumed that network members engage only in multiple duets with separate alters (actors). 4) Structure is treated as a network of networks that may or may not be partitioned into discrete groups. It is not assumed a priori that tightly bounded groups are, intrinsically, the building blocks of the structure. 5) Analytic methods deal directly with the patterned, relational nature of socia l structure in order to supplement—and sometimes supplant— mainstream statistical methods that demand independent units of analysis.(Wellman & Berkowitz, 1988). These characteristics gave a complete approximation to the understanding of how a customer network works and their members (actors) act inside, and also how a network can interact with other networks; this final relation between network is not taking into consideration in this paper, but is important to have a clear understanding about the importance of the establishment of relation between different actors to configured a network that contains value perception among its members regarding an specific product or service. To better understand what is a Customer Network and its characteristics see the following examples.. 2.4.3.. Customer Networks Samples. The section of C ustomer Networks Samples will present two businesses that involve customer networks, after-sale service for car dealers and insurance companies. The following samples are detailed in terms of characteristics and 34.

(51) actors. The businesses will be different in terms of attributes and commercial sector to show how the characteristics arise in different contexts. The first example, after-sale service for car dealer’s customer network shows a simple interaction between a customer and the company, where different types of customer might have different levels of relation. This sample illustrates a less complex network. The second sample represents more levels of interaction between the actors in the network, due to the characteristics that the insurance business structure and service have. 2.4.3.1. After-Sale Service for Car Dealers Customer Network Car Dealers have in their portfolio of services the After-Sale Service where different types of customers might reach a certain kind of services like, oil change, warranty checks, purchase of vehicles supplies, and many others that can be as wide or narrow depending on the dealer and the dealer sponsoring brand requirements (ex. Chevrolet, Mazda, Toyota). Illustration 14 shows how the After-Sale Service is given in general terms; this is transactional model, not a consumption model.. 35.

(52) Illustrat ion 14: A fter-S ale Service Process. Source: O wn Illus tration. It is a simple process where a reduced number of actors are involved, but also the service and the type of customers are different depending on his/her benefits expectations. Also the actors involved depend on other actors in the network -which are at the same customers inside the web- to obtain a level of value perception according to the product or the service demanded. 2.4.3.1.1. Actors in the Network In the whole customer network of an After-Sale Service for Car Dealers can be found direct and indirect customers and direct and indirect beneficiaries. In Illustration 15 explained the different actors that are found and also how is their type of interaction with the product/service. •. Direct Customers: Are those that received the service and the benefit from the whole process and paid for it.. 36.

(53) •. Indirect Customers: Are those that pay or not for the service or receive a benefit from it, but are not directly involved in the process.. •. Direct. Beneficiary:. Person. that. without. paying. for. a. product/service receives a benefit from it. •. Indirect Beneficia ry: Person that received a benefit from the product or service, but does not pay for it and is not in direct contact with it.. Illustrat ion. 15:. A fter-S ale. Service. for. C ar Dealers. C ustomer Network. Source: O wn I llustration. Based on the example given in illustration 1, the Customer Network for a After-Sale Service for Car Dealers customer can be configured as shown in illustration 16, it is important to see that not all the actor have to interact with each other, it depends on multiple factor inside the company or the person to choose whom will provide the service that are not relevant in this work, but the importance of the relations merge in their co-dependency with a service, in this case after-sales. 37.

(54) Illustrat ion 16: A fter-S ale Service C ustomer Network. S ource: O wn Illustration. 2.4.3.1.2. Structural Interaction Analysis (SIA) in After-Sale Service for Car Dealers Customer Network As mentioned before, an interaction is a mutual or reciprocal action where the object and/or the subject receive a benefit. In table 4 is shown the type of relation that is established between customers in the After-Sale Service for Car Dealers.. 38.

(55) Regular. Other. Customer. Customer. Companies. Other Car. Insurance. Other Car. Car Dealer. Dealers. Companies. Brand Users. Sales Group. Regular Customer. Other Customer. Companies. Other Car Dealers. Insurance Companies. Other Car Brand Users. Car Dealer Sales Group Negative. Regulatory. Positive. Power. Conventions. Table 4: S tructural I nteraction A nalysis (SIA ) in an A fterS ale S ervic e for C ar D ealers C us tomer Network. Source: O wn Table. This. example illustrates the. interaction. between seven. different. customers with the same product. Indeed their relation is different due to the fact that their expectations of benefits differ if they are direct or 39.