Processes of Value Creation in Service Marketing - Essay Example

Processes of Value Creation in Service Marketing Name Professor Institution Course Date Processes of Value Creation in Service Marketing Introduction Research in service marketing is one of the fields which have gained momentum in the last two decades. Despite being in existence from 1970s, various scholars and researchers have continued to add their contribution in this area of research. In particular, these scholars have been focusing on value creation as an aspect of competitive advantage. Grönroo & Ravald (2011) are some of the management experts contributed to this topic through various publications. In their article “Service as business logic: implications for value creation and marketing”, the two researchers have adequately analyzed value co-creation within a service logic-oriented perspective of value creation. More emphasis has been put in perspective of customer in the supplier-customer relationship and the customer and supplier’s role in the value creation and the co-creation. At the end, two process of value creation can be derived; the process of suppliers offering resources for the use by customers and the process in which customers turn services into value. In two essays, this paper will analyze the work of Grönroo & Ravald and shows how the concept can be used in current organizations. From the analysis, three points of view can be presented; managers must make research and development part of value creation, value-creation must be customer driven and value creation is a determiner of growth. The second essay will critically review of the different of the issues discussed in essay one based on evidences from academic literature. Why research and development part of value creation Research and development s a factor of growth so is the value creation. The company which creates customer value attracts more customers hence increasing sales and profits. High profits are indicators of growth, and the company can use it expand its expansion further. However, without research and development it has becomes very difficult for a company to create value. The research and development in this aspect means a company which go out to the market and conduct market research to get the customer perspective. In other words this form of research and development is one which involves the customer in production. Grönroo & Ravald (2011) pointed out that the old process of value creation majorly concentrated at the company level and the managers used resource-based view, resource-advantage theory and business process view to create value to the customers. The companies have been trusting their resources and staff for production and ignoring customer in value creation. Value is often realized during consumption or after consumption and that is the point companies have put less emphasis on. Even though market research is conducted by company, this is only limited to the period before production. The companies never concentrate on research on customers’ feedback, and as a result, it becomes very difficult to create value. The resource-based view which is majorly used by companies’ views value generation majorly as the process of exploiting and maximizing incoming resources. However, material resources could not work on their own, customer perspective is high needed be involved to shape production. According to O'Cass and Ngo (2011, p. 649) the companies can create value through product and this is called functional value. In the dimension, the companies normally conduct market research to understand what the customers require of a product in terms of color, packaging and branding. In addition, Consumers normally attach various products to different experiences and emotions, and companies can only understand this secret through research so as to seek materials resources which make products that satisfy such need. Research and development also does not only focus on customers in the market but also suppliers. Suppliers always determine the success of the company because they provide the company with resources for production. Their important is justified with the fact that value creation process start with quality of resources and not just production. The research and development help the company establish a credible supplier which can supplier the company with quality resources at a reasonable price. In fact research has found out positive correlation between research and development and effective value creation. Value-creation must be customer driven In the recent times, literatures on value creation have written about the change which has led to the move away from the tradition company-drive perspective. The new process which involves the company (producer) and customers is called The S-D logic (Vargo & Lusch 2008, p.4). Sometimes, other actors like suppliers, partners and allies also become players in value creation. This process of co-value creation through other economic actors is called Value Constellation. The process places responsibility on customers to be part of value creation hence also called the customer logic. The process of value creation may not start at the firm but at the side of customers more so after consumption. This is backed by value-in-use view which hold that value for the customers arise within the sphere of customer during usage. Baron and Harri (2008, p.114) argued that the process of value creation now majorly concentrates on customers. In other words, companies now make customer part of their key agenda. Now, customers need customized products, and the process of customization requires strong participation of customers. Furthermore, the process of customization requires the organization to work through the model which is multi-directional to the value chain. Coca-Cola through their FreeStyle machine uses customization to create customer value. As stated earlier, S-D logic and service logic supported the notion that value is should be co-created by firm and the customer. The underlying reasoning is that customer involvement wills results to improved productivity. According to S-D logic, Customers are viewed as resource integrators who use resources to when establish and improve their personal consumption experiences (Grönroo & Ravald 2011, p.8). The customers’ resource can be categorized into cultural, physical or social in which cultural resources are ones which capture imagination, history, and skills and knowledge. These are some of the issues which drive their consumption hence can help them determine product value their want. Value creation is a determiner of growth In essence, value creation has been regarded as a factor for creating growth with more emphasis put on competitive advantage. The company’s of competitive advantage is normally derived from various factors including price, product feature and marketing or promotion. Growth is realize when company attracts more customers, has popular products, has a larger market share compared to other market players and more loyal customers. Company with more loyal customers gets more profits to increase shareholders’ return. In addition, popular companies attract more sales hence growth in revenue size and increase of production. However, such growth downs to one factor and that is customer value creation. The process of value creation should satisfy various customer needs. Companies also create values to customers through provision of functional value, hedonic or experiential value, expressive or symbolic value and cost value (O'Cass & Ngo 2011, p.653). For example value Companies use cost value to create value to their customers (Grönroo & Ravald, 2011). In most cases companies use high cost or premium pricing to mean that the product provide high value proposition. An example can be that customers who purchase business class ticket in aircraft believe that the company offers to best and high quality services. How Concepts and tools learnt from this article(s) can be applied to current workplace and/or life The concept of value creation learnt here can be used in many ways. Grönroo and Ravald (2011, P.15) sated that the role of customer in value creation is an important in which the company can use to create good business relations with the customers. The role of customer in the process requires the customer is involved in value creation. The customer provides information on the type of products how or she wants in terms of packaging, features, price and distribution. In addition, the role of supplier in the process enable the company to seek strong relations to enable them gets the best resource for production (Grönroo, C & Ravald 2015, p.15). As the first step value creation, relationship with supplier is important. From the relation, the company can derive reasonable prices, quality resources and increase lead time. This to0l has been used to manage supply chain, to manage customers and to manage production (Gummerus 2013, p.22). Second Essay: Critical Reflection Service industry has shown a great transformation in the recent past. The market has moved from the old way of value creation process to a new and effective process. Vargo and Akaka (2009, p.35) stated that the old way in which companies use to be the determiner of value creation is long gone and replaced by S-D logic and service logic which incorporates both firm and the customer in value creation. Holttinen (2010, p.99) posited that the old process isolated customer who value is intended for from taking part in it. In most cases, when you deny participate to a person whom something is intended, chances are he or she may not like it at the end. The situation also happened with old view of customer value creation. There are several cases where companies tried to create value but did not satisfy the customer value proposition needs. The new process if called co-creation because it incorporates various actors in value creation process (Grönroo & Ravald 2011, p. 10). Viewed to among the most important change in modern business way of reasoning, co-creation has become a new concept of reference for the attainment of the primary objective of the value creation. Grönroo and Ravald (2011, p.9) asserted that the co-creation is anchored on the concept that companies are not the sole determiner of value anymore as customers now take active participation in the value creation. Compared to the past, customer and companies currently and frequently collaborate productive and in innovative endeavors. Embracing the collaborative strategy needs a major change in business reasoning on the side of co-creating company. Cova and Salle (2008) contended that as opposed to regarding the customers to just end consumers, firms ought to look for mutually and engaged beneficial business relationships by empowering and enabling customers to be innovative collaborators in the process of production. These concepts put the focus directly on the interface of the company-consumer, and recommends that tailored relations between consumers and the company, including among consumer has turned to be the value creation locus. The firm's vision concerning production and constituent of customer value does not get the first priority in the agenda anymore. The value is presently in cooperation created by the customers, who are allowed to articulate their knowledge, requirements, and even take part in manufacturing (Cova & Salle 2008, p.272). The newly discovered collaboration spirit is cultivated by the fact that firms are certainly willing to give up some authority of resources to their consumers (Grönroo and Ravald 2011, p.9). A mixture of the aspects like ever and fast changing global markets, technological convergence, gradually demanding costumers, and ubiquitous connectivity is changing numerous factors within the business world. Firms and consumers have become partners in developing markets. Experts argue that firms that value the business partnership endeavor is likely to attain superior performance based on increased consumer engagement and satisfaction. Grönroo & Ravald (2011) argued that usually, the collaboration is done on the basis of sustained consultations and consumers require their way to access information regarding the numerous options available to their discourse. This lucky costumer position is somewhat aided by company’s management becoming much more open concerning the processes and products, and manner in which customers can employ the two factors for the mutual benefit. Grönroo & Ravald (2011, p.13) posited that by putting past proprietary resources and information into the hands of consumers, firms permit consumers to take part in efficient consultation, repeatedly outside the purview of the company. Newly open-minded, consumers' innovative zeal is applied towards generating tailored value propositions. By means of their massive inputs, firm’s resources can be re-worked and re-imagined within the grand scale. The classification of value into two i.e. creation and the outcome present the modern managers a more logical perspective into the value, determination of various actors enable them to analyze value from several point of view. The perspectives in which the managers can analyze value creation include firm’s view and customers’ view. Grönroo & Ravald (2011, p.17) is of the view that emphasis need to be on the whole value–creating processes and even its optimization. In the perspective, maximum value will be one which improves the results of every party which tool part; the firm and customers. However, Holttinen (2010, p.103) opined that value if often is subjective and not objective, implying that no objective net results are available. It means that what exist are subjective perceptions which are created by the value. Collaboration in value creation has been criticized using the argument that some parties within the arrangement might be losing as opposed to benefiting from the network activities (O'Cass & Ngo 2011, p.657). Therefore, it could be hard to describe system-specific value, though network view point could assist in understanding the link between the actors. The company can therefore plan to enhance the value results for themselves or for their partners. An analysis of various literatures shows that modern managers require recognizing the correlation between the actors in value creation. For instance, one consumer could consider that the involvement of another consumer weakness the general experience. A true example is where one client uses the brand to mean its identity, and other end, other clients avoids the brand since the individual–brand association is taken to be negative. The opposite situations also happen particularly when other consumers need value creation. The literatures analyzed on the topic about how to create value creation provides several alternatives. Grönroo & Ravald (2011, p.13) stated that the company can use one or combine depending on the resources and expertise available. The research on new processes and on how to create value can be useful to managers in two ways. First, mangers can them as the guideline for consumer value research to understand how value creation matter to the consumers. In addition, Grönroo & Ravald (2011, p.12) stated that managers can apply the consumer value dimensions and tools mentioned to compete with other market players along product features, price and experiential value among others. Despite the strength of combining several ways of creating value, there are shortcomings since it makes the company not to concentrate on individual products so as to maximize their values (O'Cass & Ngo 2011, p.653). Conclusion In conclusion, the essay has conducted various researches to bring to attention various issues pertaining value creation in service market. As an area which growing in terms of research several discoveries have been made include transition of processes from old way to new way of value creation. The old way, called firm or company value creation use to handle value creation process at the company level without involving customers. However, the new process called value co-creation bring the firm and customer together to collaborate on value creation. New development on how to create value to the company and customer has proved to be successful. Hence, students who aspire to work in the service sector are provided with topical issues which will enable them help their organizations gain competitive advantage. References Baron, S & Harris, K 2008, Consumers as Resource Integrators, Journal of Marketing Management, Vol.24, No.2, pp.113–30. Cova, B & Salle, R 2008, Marketing Solutions in Accordance With the S-D Logic: Co-Creating Value with Customer Network Actors, Industrial Marketing Management, Vol.37, No.3, pp.270–77. Edvardsson, B, Tronvall, B & Gruber, T 2010, Expanding Understanding of Service Exchange and Value Co-Creation: A Social Construction Approach, Journal of the Academy of Marketing Science, Vol.39, No.2, pp.327–39. Grönroo, C & Ravald, A 2011, Service as business logic: implications for value creation and  marketing, Journal of Service Management, Vol. 22, No.1, pp.5–22. 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