LIST OF ABBREVIATIONS
CHAPTER 1: INTRODUCTION
2.2. Identification and Description of the Key Concepts
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Table 2 1. Definitions of Value
Concept Author, year Approach Conceptualization
Value Marx (1990) Conceptual Value in use presents "the physical properties of the commodity" while value in exchange is "the exchange relation of commodities….
characterized precisely by its abstraction from their use- values"
Schechter (1984) Descriptive/Explanatory Value means all factors that make up the overall shopping experience: quantitative and qualitative, subjective and objective
“Value means all factors that make up the overall shopping experience: quantitative and qualitative, subjective and objective”
Meglino and Ravlin (1998)
Objectivist approach “Value is what an individual places upon an object or an
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outcome, i.e. the value one places on pay”
Töytäri and Rajala, (2015)
Conceptual “Value is future oriented, as many of the benefits and incurred costs will be realized only over a long period of time.”
Etgar (2008)
Descriptive/Explanatory “Intrinsic values imply that an experience is appreciated for its own sake, while extrinsic values serve as means to an end.”
(Compiled by the author)
Schechter (1984) presents value as the complex of factors composing the experience of the shopper. In contrast, Meglino and Ravlin (1998) define value as an objective assessment of the expected outcomes from the purchase. This view is supported by Marx (1990) who distinguishes between value in use connected to the quantitative subjective assessment of the ability of a product to serve its purpose, and value in exchange that presents the quantitative assessment of the consumer of a good, or the amount of money they are willing to sacrifice for a good. The utility is placed in the center of the value concept. Etgar (2008) divides the values into intrinsic (internal to the consumer) and extrinsic (means to an end). Holbrook (1994) further emphasizes the multidimensional nature of the value concept in their typology of the values distributing 8 different values over the extrinsic and intrinsic value dimensions. According to the author, the extrinsic
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values include efficiency, excellence, status, and esteem, while the intrinsic category entails the values of play, aesthetics, ethics, and spirituality. In contrast, Lepak, Smith and Taylor (2007) present a multi-level perspective of value, dividing the value concept into the cost of goods, the perceived value of the organization, the customer perceived value as well as experience value. The consumer perceived value, in turn, is defined by Zeithaml (1988) as “... the consumer’s overall assessment of the utility of a product based on perceptions of what is received and what is given”, while the value perceived by the organization is related to the profits generating potential of the relationship between the business entity and its clients. This view presents the interplay between benefits and sacrifices that lead to the complex process of consumers’ value perceptions.
Furthermore, Töytäri and Rajala (2015) emphasize the future orientation of the value concept, as a multitude of the benefits, as well as the costs of a product or service can be derived in the long run.
The present review uncovered the complexity and multi-dimensional nature of the value concept, justified by the diverse views and classification of values. It can be defined from the perspective of the interplay between costs and benefits, while the value perceived by the customer and the business organization varies. Upon the discussion of the value concept, the discussion in the following sub-section continues with a multi-layered perspective of the value creation.
2.2.2. Value Creation on the Multi-Layered Perspective
The creation of value is a problem covered in the works of different authors. For instance, Lepak, Smith and Taylor (2007) believe that value is created from a multi-layered perspective of individuals, organizations and societies. Organizations are thought to create value when they develop new strategies or designs and customers create value when they buy or use this product
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or service, creating the value experience for the customer (Ramaswamy 2008). The authors also point out that creating value is the result of interactions between the organization and the customer, and further notes that value creation is an important strategic concept in the field of management and organization literature. They further differentiate between the individuals and groups providing value at the micro-level (SDL), and the ability to absorb this value information at the macro level to enable better strategic management and organizational strategies involved (ACT).
To define value creation, Lepak, Smith and Taylor (2007) emphasize certain conditions and objectives based on conceptual studies and expert analysis, such as that value creation depends to a large extent on the participants involved. Popular definitions of value creation and value co- creation are presented in Table 2.2.
Table 2 2. Definitions of Value Creation and Value Co-Creation
Author, year Approach Conceptualization Value
Creation Lepak, Smith and Taylor (2007)
Descriptive/Explanatory “Value creation depends on the relative amount of value that is subjectively realized by a target user (or buyer) who is the focus of value creation? Whether individual, organization, or society? And that this subjective value realization
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must at least translate into the user's willingness to exchange a monetary amount for the value received.”
Wang, Hsieh and Yen (2011)
Conceptual “Value creation activities in which both the service provider and customer collaborate in the customer’s consuming and experiencing particular services.”
Helkkula and Kelleher (2010)
Empirical/Qualitative “Value is created by the customer based on the
“value-in-use”. While the firm can create and communicate value propositions, it is the customer, not the firm that creates value through dynamic situational specific value creating
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processes.”
Sashi (2012) Conceptual “Customers often add value by generating content and even become ardent advocates for the seller’s products and can influence purchase decisions of others in peer-to-peer interactions.”
Value co- creation
Prahalad and Ramaswamy (2004)
Descriptive/Explanatory “Armed with new tools and dissatisfied with available choices, consumers want to interact with firms and thereby “co-create” value.
Value exchange and extraction are the primary functions performed by the market, which is separated from the value creation process.”
“Co-creation experiences
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are the basis of value”
Breidbach and Maglio (2016)
Empirical “Service systems embody
an abstraction on value co- creation, and consist of entities or configurations of resources (including people, information, and technology) that are connected by value propositions.”
Vargo and
Lusch (2016)
Descriptive/Explanatory “Most important among the extensions has been a general zooming out to allow a more holistic, dynamic, and realistic perspective of value creation, through exchange, among a wider, more comprehensive (than firm and customer)
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configuration of actors.”
Vargo and
Lusch (2008)
Descriptive/Explanatory “The customer is always a co-creator of value. Value
networks and
constellations, as we later argued, will continue to mask the fundamental nature of exchange.”
Compiled by the author
Customers have been actually identified as the main factor in value creation. According to studies by Vargo and Lusch (2016), customers not only provide value but rather participate in value creation, with engagement being the main concept of value creation. Customer engagement both enhances the emotional and interactive relationships of the customer and helps the organization in the long run (Ahn & Rho 2014).
Based on service orientation, Grönroos and Voima (2013) distinguish between the concepts of
"value creation" and "value co-creation". The former relies on the customer's activities as economic participants, while the latter consists of the interaction of two or more economic participants (providers and customers). Grönroos (2011, p. 280) had earlier conceptualized value co-creation as "a collaborative process that adds value to one or two participants through direct interaction". The framework by Grönroos and Voima (2013) employs three key areas in which
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value can be created and co-created together, with the provider, jointly with the customer, as shown in Figure 2.1. It defines the role of the provider and the customer, as well as the boundaries, location and nature of value creation, where value creation refers to the use of value and value co- creation as a function of interaction.
Figure 2. 1: A framework of value creation spheres(Grönroos & Voima 2013, p. 141).
With regard to value co-creation, the cooperation between different participants helps to create value (Arkadan et al. 2013). In order to effectively seize the value created, organizations need to understand their target customer (Lepak, Smith & Taylor 2007). The value of experience can only be generated after the customer has purchased and gained knowledge of the product “Thus, it can be said that every time a customer buys any product or service, they both acquire value and deliver value to the organization through the exchange, making value multifaceted” (Zhang & Lin 2015).
This combination of experience value and exchange value creates the empirical value.
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On the basis of research cited, the main conditions necessary for the value creation include interaction between the organization and the customer, through the platform allowing the mutual creation of value. Furthermore, co-creation is presented as one of the external values that helps to obtain value. The value co-creation concept is reviewed in further details in section 2.4 of the present chapter to provide a thorough understanding of this notion, which is fundamental for the research problem in the present study.
2.2.3. Value of Experience (VoE):
The concept of value of experience (VoE) is specifically connected to service industries.
Therefore, it requires a special attention in the present study aimed at the hospitality industry.
Definitions of VoE are depicted in Table 2.3.
Table 2 3. Definitions of Value of Experience
Concept Author, year Approach Conceptualization Value of
Experience
Brodie et al.
(2011)
Conceptual “Value is always uniquely and phenomenologically determined by the beneficiary.’’ Specifically, Premise 10 emphasizes the highly experiential, inherently subjective, and contextual nature of the value co-creation concept. This particular premise has its roots in the notion of the ‘‘experience economy’’.”
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(2011)
Conceptual “The value that the subject gains from the consumption experience is created through that interaction.”
Wang, Hsieh and Yen (2011)
Empirical/Quantitative “Customer value is generated from the customer’s experience in consumption, while a supplier’s service offerings are of value only through the customer’s cooperation in consuming and experiencing the offerings.”
Grönroos and Voima (2013)
Conceptual “Value as value-in-use cannot exist before it is created (or emerges) from the usage process, where it is accumulating, and therefore cannot be assessed before usage.”
Gilovich et al.
(2015)
Explanatory “Purchases do not come stamped
as “experiences” or
“possessions.” Instead, it is the set of psychological processes that tend to be invoked by experiences
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and material goods that determine how much satisfaction they provide.”
(Compiled by the researcher)
VoE is considered to be the insight customers gain based on their previous personal experience in communicating and consuming products or services, either individually or collectively, incorporating the emotions, knowledge and feedback from the customer (Prahalad & Ramaswamy 2004). Gummesson and Mele (2010) claim that these activities related to value-added experiences help shape the skills and knowledge of customers.
The concept of VoE is represented in the seminal academic paper by Holbrook (1994) where the author emphasizes the ability of the consumption process to trigger emotions, which in turn result in consumer behavioral responses, based on the interactive relativistic experience. According to the author, the focus in the value creation process is shifted away from the act of the purchase and connected with the determinants of the consumer experience, including the views of the customer, their extrinsic or intrinsic, active or reactive, orientation towards self or others.
Therefore, VoE is understood as the value created on the grounds of the knowledge or information about a product/service, acquired by a customer and the respective experience related to it (Helkkula & Kelleher 2010). This is primarily influenced by the customer’s level of self- understanding and other skills developed by the customer through experience with the product or service. This statement is supported by Wang, Hsieh and Yen (2011), who noted that customers can consume and create value experiences with the help of co-creation.
VoE is rooted in multi-dimensional psychological processes undergoing in the consumer’s mind.
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Experience, in turn is related to considerable hedonic effects, which result in higher satisfaction, as compared to the mere consumption of tangible goods, while at the same time it also has a significant socializing dimension, as it is very likely for the experience to become a topic of discussions between the consumer and their social environment (Gilovich et al. 2015).
Gilovich et al. (2015, p. 155) point out the significant value-creating potential of experience
“psychologically, it is the experience that lives on and the possession that fades away…as consumers are a total sum of their experiences”. Similarly, Wang, Hsieh and Yen (2011) clearly point out that this promotes individualism and enhances the knowledge and information that customers acquire, with value experience having a direct impact on customers and organizations.
Brodie et al. (2011) point out that the success of the organization depends primarily on the customer’s knowledge and skills, in concert with the organization’s skills and expertise.
Etgar (2008) points out that value creation depends on both customer interaction and resource integration, while value creation can only be accomplished if there is a continuous interaction between the organization and the customer, now technically available through the social network.
Co-creation scholars also believe that continuous interaction helps build a personal experience that is achieved through the consumption of products or services (Prahalad & Ramaswamy 2004).
Thus, value creation requires development of a co-creation strategy, a two-way communication platform, between the organization and its customers, which enables the transfer of value concepts.
Furthermore, both value recognition and value assimilation are equally important to the organization. Therefore, the consumer experience can be defined as an important channel for development of value co-creation and value acquisition. New marketing approaches to the development and promotion of products or services, organizations are adapting their knowledge and skills to the day-to-day use of the same product or service (Vargo & Lusch 2008). Thus, a
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product or service combines value into its actual use, or use-value, rather than through its sales price or exchange-value. Yet, while researchers are united on the importance of a more active role of customers, there is no consensus on defining terms and potential mechanisms to do so. On this basis, understanding the value acquisition strategy requires comprehension of the meaning of value, the different types of value and the different conditions that guide the process of value acquisition. Participation, customer buying behavior, management behavior and other organizational factors form part of the value acquisition process.
2.2.4. Summary and Synthesis of Research Gaps
The discussion in this section of the literature review chapter evidences that the concepts of value, value creation and co-creation, as well as VoE are considerably covered in diverse research. With respect to the focus of the present research on a service sector - the hospitality industry, the VoE concept takes a critical role. Experience takes a central role in the services and in the tourism industry specifically (Ritchie, Tung, & Ritchie 2011). Nevertheless, the evidence related to the creation of value and the VoE in the geographical and industry context selected for the present research is limited. This emphasizes the need for bridging the identified gap through the present study.