Customer Value Communication in Indirect Distribution Channels

Abstract

Business customers’ purchase decisions are driven by their perceptions of value. However, the actual value of an offering is realized only when the offering is used by a customer. From a sales perspective, communicating the value associated with an offering can help a customer understand how the future use of the offering would impact the customer’s business. Due to the financial orientation inherent in business markets, the value of the offering should be communicated in monetary terms. Estimating the monetary impact the use of the offering has on the customer’s business requires customer value assessment. While previous literature acknowledges the importance of customer value communication and customer value assessment, previous research has focused on direct distribution channels and the supplier-customer interface.

The objective of this thesis is to explore a new research avenue by discussing customer value communication and customer value assessment in indirect distribution channels. To reach this objective, an extensive review of customer value literature was conducted, literature on distribution channel management was reviewed, and an empirical case study was conducted in a chemical company. Customer value communication and customer value assessment in indirect channels is discussed both through theoretical analysis and based on the empirical findings.

Based on the critical review and synthesis of previous literature, this thesis suggests that customer value communication has three dimensions: resources, customer value proposition formulation, and customer value proposition communication. Furthermore, this thesis proposes that customer value assessment can be viewed as part of customer value proposition formulation and thus as part of customer value communication. In this thesis, high-quality customer value assessment is viewed as an iterative process that collects more and more customer-specific data to produce increasingly accurate estimates of customer value.

Based on the theoretical analysis, this thesis suggests that customer value communication plays an important role in indirect channels because customers’ purchase decisions are based on their perceptions of value regardless of the channel. An intermediary’s value communication can therefore result in favourable sales outcomes for both the intermediary and the focal supplier. However, both previous research and the empirical findings of this study imply that inter-mediaries’ capabilities and, in particular, product and market knowledge may often be insufficient for effective value communication. Moreover, intermediaries might often not be able to maintain the capabilities required to communicate the value of all the offerings in their selections, meaning that intermediaries might have to focus on being able to communicate the value of a limited number of offerings. Based on both previous research and the empirical findings of this study, this thesis suggests that an intermediary focuses on those offerings that have the greatest value for the intermediary. To ensure that its offering is among those offerings whose value intermediaries are able to communicate, a focal supplier needs to ensure that its offering has superior value for intermediaries and that intermediaries have sufficient knowledge of how the offering enables superior value creation in end customers’ use situations.