When and Why Do Customer Solutions Pay Off in Business Markets?

Worm, Stefan, Bharadwaj, Sundar G., Ulaga, Wolfgang and Reinartz, Werner J., When and Why Do Customer Solutions Pay Off in Business Markets? Journal of the Academy of Marketing Science, Forthcoming

51 Pages Posted: 15 Mar 2017 Last revised: 3 May 2017

See all articles by Stefan Worm

Stefan Worm

BI Norwegian Business School

Sundar G. Bharadwaj

University of Georgia--Terry School of Business; University of Georgia - C. Herman and Mary Virginia Terry College of Business

Wolfgang Ulaga

Arizona State University (ASU)

Werner J. Reinartz

University of Cologne

Date Written: December 15, 2016

Abstract

Manufacturers invest in customer solutions to differentiate their offerings and sustain profitability despite declining margins from goods sales. Notwithstanding strong managerial and academic interest, an examination of whether and explanations for when and why solutions translate into superior performance are lacking. We test hypotheses developed from the resource-based theory and transaction cost economics, supplemented with in-depth theory-in-use interviews, on primary and secondary data collected from 175 manufacturers. From a model that corrects for endogeneity, the findings suggest that, compared with other service offerings, solutions are associated with increased return on sales. This positive profitability effect is enhanced in firms with greater sales capabilities; it is stronger in industries with greater buyer power but weaker in technology-intensive industries. These results caution against the simplistic view of solutions as a universal route to gaining competitive advantage and aid in better identifying the role of solutions in a manufacturer’s offering portfolio.

Keywords: Customer solutions, B2B services, B2B marketing, Firm performance, Return on sales, Differentiation

Suggested Citation

Worm, Stefan and Bharadwaj, Sundar G. and Ulaga, Wolfgang and Reinartz, Werner J., When and Why Do Customer Solutions Pay Off in Business Markets? (December 15, 2016). Worm, Stefan, Bharadwaj, Sundar G., Ulaga, Wolfgang and Reinartz, Werner J., When and Why Do Customer Solutions Pay Off in Business Markets? Journal of the Academy of Marketing Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2932089 or http://dx.doi.org/10.2139/ssrn.2932089

Stefan Worm (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

Sundar G. Bharadwaj

University of Georgia--Terry School of Business ( email )

105 Brooks Hall
Athens, GA 30602
United States

University of Georgia - C. Herman and Mary Virginia Terry College of Business ( email )

Brooks Hall
Athens, GA 30602-6254
United States

Wolfgang Ulaga

Arizona State University (ASU) ( email )

Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States

Werner J. Reinartz

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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