Communicating value of product as a service offering: Customizable value proposition

Abstract

To meet the needs of contemporary customers, companies focus on selling solutions that offer performance and functionality rather than offering simple products or services. Also, new possibilities unveiled by XaaS models in the IT industry have attracted the attention of both companies and customers in other sectors. Thus, companies increasingly more often decide to sell their products as a service. Even though product-as-a-service (PaaS) offerings have become more common, the existent definitions of a PaaS offering and discussions on how to analyse and communicate the customer value of a PaaS offering are rather vague. Then, customer value is discussed as context-specific and evolving over time, which means that customers customize the perceived value during the use of an offering. Nevertheless, customer value propositions are usually constructed at the beginning of the provider-customer relation-ship, and hence do not consider the impact of the evolving use situation on the value creation process and thus also the customer value proposition itself. The objective of this thesis is to introduce a concept of a customizable value proposition and to study how to create a customizable value proposition for the product as a service offering. To reach the objective of the study, service and customer value literature is reviewed, and a conceptual framework is created. The framework is then applied in the case of a company that operates in the domain of medical laboratory diagnostics. As value statement is one of the elements of a compelling value proposition and quantification of value in monetary terms is crucial in any market sector, a value assessment tool is developed for the case company. The tool is built based on the observations in a laboratory, interviews with the case company, laboratory, and hospital representatives, and existing materials on value assessment in healthcare. The developed tool is also used to test how the change in the case company’s offering use situation influences the initially estimated value potential and possibly other elements of a customer value proposition. The study shows that when attempting to communicate the value of a PaaS offering, a company must thoroughly analyse the impact their offering makes not only on the company’s direct customers but also on the customer’s customers. The understanding of how the direct customer creates value for its own customers can help the supplier to identify how its offering can help the customer to create value. Moreover, it has been found that value assessment and, in particular, value assessment tools may have other applications besides measuring and quantification of customer value. Value assessment tools can be used to analyse the offering’s use situation better and build a clear picture of the customer’s role in the value creation process. Then, value assessment tools can also serve as a platform enabling tracking the changes in the offering’s use situation or even help the customer to note potential issues that the customer has not been aware of. Hence, such tools can become an excellent platform for building a customizable value proposition. Finally, it has also been concluded that a customizable value proposition seems to be a suitable platform for communication of the value of a PaaS offering as it not only allows to reflect the changes in an offering’s use situation but also may help the customer and the provider to understand the impact of these changes on the value creation process and address potential issues.