Revisiting Customer Value Analysis in a Heterogeneous Market

Journal of Modelling in Management 5:1, pp 8-24 (2010)

Posted: 17 Jun 2016

See all articles by Wayne S. DeSarbo

Wayne S. DeSarbo

Pennsylvania State University

Peter Ebbes

HEC Paris - Marketing

Duncan K. H. Fong

Pennsylvania State University

Charles C. Snow

Pennsylvania State University

Date Written: 2010

Abstract

Purpose – Customer value has recently become a primary focus among many strategy researchers and practitioners as an essential element of a firm's competitive strategy. Many firms are engaged in some form of customer value analysis (CVA), which involves a structural analysis of the antecedent factors of perceived value (i.e. perceived quality and perceived price) to assess their relative importance in the perceptions of their buyers. Previous CVA research has focused upon using aggregate market or market segment level analyses. The purpose of this paper is to expose the limitations of implementing CVA on either an aggregate or market segment level basis, and propose an alternative individual level approach.

Design/methodology/approach – The paper develops an extended hierarchical Bayesian approach for cross‐sectional data with one observation per response unit, which allows for estimation at the individual firm level to make CVA more useful. This paper demonstrates the utility of the proposed Bayesian methodology involving a CVA study conducted for a large electric utility company. It also compares the empirical results from aggregate, market segment, and the proposed individual level analyses, and show how traditional approaches mask underlying price and quality importance.

Findings – Marketing and management strategy researchers need to exhibit care when conducting such CVA analyses as underlying heterogeneity can be masked when aggregate market or segment level analyses are conducted.

Originality/value – This paper provides a new hierarchical Bayes recursive simultaneous model formulation for CVA analyses to provide individual level insights with cross‐sectional data.

Keywords: Value analysis, Customer relations, Demand, Bayesian statistical decision theory, Prices, Quality

Suggested Citation

DeSarbo, Wayne S. and Ebbes, Peter and Fong, Duncan K. H. and Snow, Charles C., Revisiting Customer Value Analysis in a Heterogeneous Market (2010). Journal of Modelling in Management 5:1, pp 8-24 (2010), Available at SSRN: https://ssrn.com/abstract=2796242

Wayne S. DeSarbo (Contact Author)

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

Peter Ebbes

HEC Paris - Marketing ( email )

Paris
France

Duncan K. H. Fong

Pennsylvania State University ( email )

308 armsby
university park, PA 16802
United States

Charles C. Snow

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

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