PRODUCT SERVICE SYSTEMS
THE MODERATING EFFECTS ON THE RELATIONSHIP BETWEEN
CRITICAL SUCCESS FACTORS AND CUSTOMER VALUE
Master Thesis
Peter-Paul van der Geijs 10901760
Executive MSc Business Administration - Strategy January 2017
Supervision
Lecturer: Dr. C.V. Gelhard
STATEMENT OF ORIGINALITY
This document is written by Student Peter-Paul van der Geijs who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
INDEX
Abstract 4
1. Introduction 4
2. Literature Review, Theoretical Framework, and Hypothesis 8
2.1 Customer Value 8
2.2 Critical Success Factors 9
2.3 The Moderating Role of Product Service Systems 13
3. Method 14 3.1 Procedure 14 3.2 Sample 15 3.3 Measures 15 4. Results 18 4.1 Statistical Procedure 18 4.2 Correlation Analysis 18 4.3 Testing Hypothesis 20 5. Discussion 27 5.1 Theoretical Implications 27 5.2 Practical Implications 30 5.3 Limitations 30 5.4 Future Research 31 6. Conclusions 32 References 33
ABSTRACT
Prior research suggests that product service systems become more valuable for customers. This study investigates how suppliers of product service systems can add value for the customer. This is done by searching for relationships between several critical success factors, which are perceived quality, relative price, switching costs, innovativeness, brand preference and supplier commitment and customer value. On the other hand this study investigates the moderating role of the type of product service systems on the relationship between the critical success factors and customer value. Research under 100 respondents do show significant support for the propositions. The moderating role of the type of product service system on the relationship between critical success factors and customer value is found to be significant. Explanations for these results are elaborated and implications for future research are proposed. Keywords: Perceived Quality, Relative Price, Switching Costs, Innovativeness, Brand Preference, Supplier Commitment, Customer Loyalty, Customer Satisfaction, Customer Expectation, Customer Retention, Customer Value, Product Service Systems
1. INTRODUCTION
In a world where sustainable products and the term sustainability becomes more and more important, product service systems (PSS) will play a bigger role in the future (Tukker& Tischner,2006). PSS are a specific type of value proposition that offers or co-produce a business to clients. The term PSS is defined as “a mix of tangible products and intangible services designed and combined so that they jointly are capable of fulfilling customer needs”(Tukker&Tischner,2006). Other than traditional product oriented offerings, due to increasing global competitions and focus on the product life cycle, suppliers of PSS want to provide the use of a certain value through integrated solutions of products and services (Tan&McAloone,2006). By combining products with a corresponding service that constantly provides value to the customer, companies can develop innovative and individual solutions to
attract customers and compete on the global market. Therefore PSS are related to the functional use of a product (Stahel,1997). PSS are distinguished based on their different focus in value creation for the customer. When a pure product is being provided, the value is mainly achieved due to the product content. On the other hand, when a pure service is being provided, the value is mainly achieved due to the service content. The three different types of PSS are defined in this study as; product oriented, use oriented and result oriented. Each type has its own focus on value creation for the customer.
Product oriented service systems: Adding a service to an existing product. An example of this is buying a certain product with a corresponding service contract.
Use oriented service systems: Intensify the use of the products, the customer does not buy the product but buy the function of it, examples are renting and leasing.
Result oriented service systems: The PSS supplier develops a fully novel way of functional fulfilment. Examples are buying a utility, like transport by cab, get clean clothes from the laundry.
Prior research suggests that PSS are becoming sustainable when they are designed to provide customers with a particular result or function (clean clothes, mobility, warmth) without them necessarily having to own or buy the physical products (Roy, 2000). Therefore the literature suggests that due to the globalization the result oriented service systems are becoming more important due to a more important role of sustainability. Because of an increasing world population it is not desirable anymore to produce unlimited amount of cars and products. To avoid the need of buying, it is important that suppliers know which are the most valuable factors for customers. Recycling (circular economy) and the role of the government might become more important is this, an example of this would a change in regulations. Therefore the potential shift in strategy allows companies to move competition beyond product-oriented parameters
such as low cost, short product cycles and superfluous technical features (Tan, McAloone,2006).
This research extends the existing literature by focusing on the differences between the three types of PSS. There is not much existing literature that is particularly focusing on the differences of PSS and the actual literature discusses only PSS users, not the differences among them (Tukker&Tischner,2006). In previous research perceived quality, relative price, switching costs, innovativeness, brand preference and supplier commitment are correlated to the value for the customer. These factors are referred as critical success factors because factors that can lead to success are the basis for achieving value (Shen&Liu,2003). Perceived quality is important for the customer because a customer likes to have a product with a certain quality level. It is interesting to see if this relation will change when we focus on a particular type of PSS. The relative price is a basis for the buyer memory that serves as a basis for creating value (Grewel, 1989). Switching costs is a critical success factor because the product or service becomes less valuable for the customer if there arises a personal loss or waste of time when the customer is switching to another service provider (Hellier, Geursen, Carr,Rickard (2000). Innovativeness is becoming more important because the customer wants a good fit with his needs (Nasution,Mavondo,2009) so is likely to effect the customer value. Organizations with a high brand preference are in favor of selling the product to customers (Hellier, Geursen, Carr,Rickard ,2000). When the supplier is committed it might not directly lead to more value for the customer, but in a later stadium when the customer demands are changing and the supplier shows to have a flexible focus on customer needs it certainly does (Selnes, 1995). Customer value takes the perspective of organization’s customers, considering what their satisfaction is that they get from buying and using a seller’s product (Woodruff, 1997). Therefore six independent factors seen as critical success factors will be tested on customer value. The variables are tested independently because we assume that every type of PSS has its own critical success factors.
This research investigates the effect on the six critical success factors on customer value. Second, it investigates the moderating role of the type of PSS (product oriented, use oriented, result oriented) on the relationship between critical success factors and customer value.
The research question underlying this study is: What is the role of the three types of product service systems on the effect that perceived quality, relative price, switching costs, innovativeness, brand preference and supplier commitment have on customer value?
In the following section the theoretical foundations on which the research model is based will be illustrated. Thereafter, the research method is explained, including the sample and measures. The paper presents the results from the statistical procedure. Lastly, a discussion and conclusion of the findings are being presented, together with implications, limitations and suggestions for future research.
Figure 1. Proposed model of the relationship among critical success factors (perceived quality, relative price, switching costs, innovativeness, brand preference, supplier commitment) (IV), customer value (DV) and product service systems (moderator)
Switching Costs Relative Price Perceived Quality Innovativeness Brand Preference Supplier Commitment
Product Service Systems
2. LITERATURE REVIEW, THEORETICAL FRAMEWORK AND HYPOTHESIS
In this section the current state of art of the research is reviewed and the aim is to explain the important and underlying theory of the research model.
2.1 Customer Value
Customer value takes the perspective of an organization’s customers, considering what their satisfaction is that they get from buying and using a seller’s product (Woodruff, 1997). In the literature customer value is linked to the term value, which has several meanings. Value is the consumer's overall assessment of the utility of a product based on perceptions of what is received and what is given (Zeithaml,1988). Value in business markets is the perceived worth in monetary units of the set of economic, technical, service and social benefits being received by a customer in exchange for the price to be paid for a product, taking into consideration the alternative suppliers offerings and prices (Anderson,Jain&Chintagunta,1993). Buyers perceptions of value represent a tradeoff between the quality or benefits they perceive in the product compared to the sacrifice they experience by paying the price (Monroe,1990). Customer value is market perceived quality adjusted for the relative price of your product. (Gale 1994) By customer value, we mean the emotional bond established between a customer and a producer after the customer has used a salient product or service produced by that supplier and found the product to provide an added value. (Butz&Goodstein,1996).
Because of the several terms for customer value, several outcome variables are combined to measure the term customer value. Taylor and Goodwin (2004) suggests that ultimate customer loyalty is a function of perceived product superiority, personal fortitude, social bonding, and their synergistic effects that will lead to a higher degree of customer satisfaction and value. Customer loyalty and satisfaction increase the valuableness of products for customers (Taylor&Goodwin,2004) .Customer satisfaction has an effect on the expectation for the customer, especially in a service oriented environment (Kelley&Davis,1994). Customer
orientation is considered as an important leverage for service firm’s economic success (Hennig-Thurau, 2004). Therefore in this research we refer to customer value, which is computed from the four variables; customer loyalty, customer satisfaction, customer expectation and customer retention.
2.2 Critical success factors
In this research several critical success factors are used to measure their influence on customer value; perceived quality, relative price, switching costs, innovativeness, brand preference and supplier commitment. Explained is why these particular critical success factors are included in this research and the corresponding hypothesis. Each critical success factor will be explained separately.
Perceived quality. In this research it is predicted that perceived quality has an effect on customer value, resulting in a higher degree of customer value. In this study perceived quality is studied as an independent variable because presumably it may affect the customer value. Kelley&Davis (1994) searched for a relationship between perceived quality and customer satisfaction. In this research customer satisfaction is one of the factors that depends on the degree of customer value. Therefore prior research showed a significant relationship between perceived and customer satisfaction. In this research customer satisfaction is combined with loyalty, expectation and retention. Perceived quality is chosen because quality is a
multidimensional concept that cannot be easily measured, a distinction can be made between objective quality and perceived quality. Objective quality refers to the actual technical excellence of the product that can be verified and measured (Monroe & Krishman 1985). In contrast, perceived quality is the consumer’s judgment about a product’s overall excellence or superiority (Zeithaml 1988). Therefore we choose to use perceived quality as a critical
success factor. We assume that there is a relationship between perceived quality and customer value. Therefore we formulated the corresponding 1st Hypothesis.
Hypothesis 1: A high degree of perceived quality will lead to a higher degree of customer value.
Relative price. In this research it is predicted that relative price has an effect on customer value, resulting in a higher degree of customer value. Therefore relative price is considered as an independent variable because it is assumed it may affect the customer value. In this study the relative price is defined as a price in buyers memories that serves as a basis for judging or comparing actual prices (Monroe 1973;Monroe, Grewel, and Compeau 1991). Earlier research has shown that buyers relative price make the buyer adjust their reference price of accept the reference price to make judgements, therefore the relative price is tested on the value of the deal, not the customer value (Grewel, Monroe and Krishnan 1998). The value of the deal is related to the value of the customer. The relative price has an effect on the value of the deal. Therefore we assume we will find significant effects when testing the relative price on customer value we will find significant effects.
It is argued that the relative price is positively related with customer value due to the accepting value of the product.
Hypothesis 2: A high degree of the relative price will lead to a higher degree of customer value.
Switching costs. In this research it is predicted that switching costs has an effect on customer value, resulting in a lower degree of customer value. Therefore switching costs is considered as an independent variable because it is assumed that it may affect the customer value. In this study switching costs is defined as the customer’s estimate of the personal loss or sacrifice in time, effort and money associated with the customer switching to another service provider (Hellier,Geursen,Carr&Rickard,2000). Prior research has shown that
switching costs will affect the preference for a certain supplier/product. Because switching costs makes it more expensive for consumers to change their supplier, consumers are less likely to change suppliers (Sharma&Patterson,2000). Therefore we assume that a high degree of switching costs will have an effect on the value for the customer.
It is argued that low switching costs are positively related to customer value because customer aren’t free to change when they have a service provider on which they are
dependent.
Hypothesis 3: A low degree of switching costs will lead to a higher degree of customer value.
Innovativeness. In this research it is predicted that innovativeness has an effect on customer value, resulting in a higher degree of customer value. Therefore innovativeness is considered as an independent variable because it is assumed that it may affect the customer value. In this study innovativeness is hardly to define. Due to the amount of definitions, we use “the creation of first successful application of a new product or process (Cumming,1998). Product innovation are new products and services to meet the market and external users needs (Damanpour,1991). They adapt themselves based on the needs of the customer, therefore innovativeness is seen as critical success factor in this study. Prior research has shown that when a firm is not adapting itself to the needs of the environment (Morgan,2006) it will split or die. Therefore we assume that a high degree of innovativeness will lead to a higher degree of customer value.
It is argued that a high degree of innovativeness is positively related with customer value because adapting to the customer needs will lead to more value.
Hypothesis 4: A high degree of innovativeness will lead to a higher degree of customer value.
Brand preference. In this research it is predicted that brand preference has an effect on customer value, resulting in a higher degree of customer value. Therefore brand preference is considered as an independent variable because it is assumed that it may affect the customer value. In this study brand preference is defined as the extent to which the customer favors the designated service provided by his or her present company, in comparison to the designated service provided by other companies in his or her consideration cost (Hellier,Geursen,Carr& Rickard,2000). Previous research has shown that an increasing brand preference will affect the satisfaction of the customer (Westbrook&Oliver,1981). Although this is tested on
companies and not consumers, in this study we focus particular (80%) on consumers. But it is likely to assume that a high degree of brand preference will have an effect on customer value. It is argued that a high degree of brand preference is positively related with customer value because a higher preference for a certain product service system supplier will lead to more value.
Hypothesis 5: A high degree of brand preference will lead to a higher degree of customer value.
Supplier commitment. . In this research it is predicted that supplier commitment has an effect on customer value, resulting in a higher degree of customer value. Therefore supplier commitment is considered as an independent variable because it is assumed that it may affect the customer value. In this study supplier commitment is defined as the relationship between customer and supplier where the parties expect each other to be committed to what they have in common (Cook&Emerson,1984). Suppliers can be committed to the consumer to make adjustments to product or invest in the relationship (Johanson,1991). Previous research has shown that commitment of the supplier will increase satisfaction for the customer
(Selnes,1995). This study does research in the effect supplier commitment has on the
customer value. We assume that a high degree of supplier commitment will increase the value for the customer, when the supplier is acting as an organization that responses to the ask for adjustments they will probably increase the value for the customer due to a better fit
(Burgelman,1991).
It is argued that a high degree of supplier commitment is positively related with customer value because being committed as supplier to the customer probably makes the customer satisfied.
Hypothesis 6: A high degree of supplier commitment will lead to a higher degree of customer value.
2.3 The moderating role of product service systems
This study wants to investigate whether the type of PSS is affecting the relationship between critical success factors and customer value. The three different types of product service systems; product oriented, use oriented and result oriented all have a different focus on delivering value to the customer (Tukker&Tischner,2005). The past decades a lot of research has been done regarding product service systems, but there has been a lack in searching for customer acceptance (Kazasian,2008). This study investigates several potential relationships between perceived quality, relative price, switching costs, innovativeness, brand preference, supplier commitment and customer value. Due to the focus on value creation for the customer and the differences between the three types of product service systems
(Tukker&Tischner,2005) it is interesting to see if these relationships will differ from each other by adding the type of product service system as a moderator.
Product oriented service systems just add services to an existing product system. The focus is on the product and therefore one could assume that success factors as the original
price, the quality of the product and potential switching costs are important for this type of PSS.
Use oriented service systems intensify the use of the product. The product is owned for a limited period of time by the customer. When the need of the customer is changing we assume that the degree of supplier commitment is a crucial factor for the value of the customer.
Result oriented service systems are focusing on the service. Consumers do not own a product but pay for a result. We assume that the commitment of the supplier is not as
important because the consumers already decided what they want.
Assumed is that every type of PSS will need another approach to create value while the PSS product oriented and use oriented are the same and differ from user oriented due to the different focus on product and services.
In this study the prediction is that the type of product service system does influence the relationship between the critical success factors and customer value. Due to different needs of the consumer we assume that there is a difference between testing the entire sample and testing the different the samples.
Hypothesis 7: The type of product service system influences the relationship between the critical success factors and customer value.
3. METHOD 3.1 Procedure
In this research an online survey was used, conducted under consumers and companies. The survey was distributed via E-mail, LinkedIn and other social media platforms. Before starting the survey, a brief introduction explained the purpose of the study and emphasized anonymity of participants. The differences among types of PSS, that are necessary to test the moderator, where clearly explained.
3.2 Sample
This research is conducted under 107 respondents, participants which not filled in the survey completely are excluded from the research. After excluding 7 respondents the sample consists of 100 participants that filled in the survey correctly.
Of the 100 participants 74% were male and 26% were female. The age of the participants was between 18 and 61, 21% was between 18-24, 27% between 25-34, 22% between 35-44, 21% between 45-54 and 9% between 55-61. The type of employment of the participants was 70% employed full time, 18% employed part time, 1% unemployed looking for work, 3% retired and 8% were students. Of the participants 20% were companies and 80% were consumers.
3.3 Measures
Perceived quality (α.760). The independent variable is measured based on five items. The measurement is based upon a measure used by Hellier, Phillip K (2003) to measure the customer repurchase intention. The answers are given on a 7-point Likert scale (1=strongly agree, 7= strongly disagree). Averaging the response is justified on the basis of a mean of 2.59.
Relative price (α.973). The independent variable is measures based on 2 items. The measurement is based upon a measure by Grewel D, Monroe B. and Krishman R (1998) to measure the effects of price-comparison advertising on buyers intentions. The answers are given on a 7-point scale (1= € 50,-, 7= € 75.000,-). Averaging the response is justified of a mean of 2.84.
Switching Costs α.930). The independent variable is measures based on 4 items. The measurement is based upon a measure by Hellier, Phillip K (2003) to measure the customer
repurchase intention. The answers are given on a 7-point Likert scale (1=far above average, 7=far below average. Averaging the response is justified of a mean of 3.45.
Innovativeness (α.844). The independent variable is measured based on 5 items. The measurement is based upon a measure by Nasution H, Mavondo, F. (2011) to measure the relationship with market learning orientation and as antecedents to innovation and customer value. The answers are given on a 7-point Likert scale (1=strongly agree, 7= strongly disagree). Averaging the response is justified on the basis of a mean of 3.10.
Brand preference ( α.690). The independent variable is measured based on 3 items, due to an invalid Cronbach Alpha (α.577), 1 of the 3 items is deleted. The measurement is based upon a measure by Hellier, Phillip K (2003) to measure the customer repurchase intention. The answers are given on a 7-point Likert scale (1=strongly agree, 7= strongly disagree). Averaging the response is justified on the basis of a mean of 3.44.
Supplier commitment ( α.628). The independent variable is measured based on 3 items, due to an invalid Cronbach Alpha ( α.566), 1 of the 3 items is deleted. The measurement is based upon a measure by Selnes, F (1996) to measure the antecedents and consequences of trust and satisfaction in buyer-seller relationships. The answers are given on a 7-point Likert scale (1=strongly agree, 7= strongly disagree). Averaging the response is justified on the basis of a mean of 2.78.
Customer value ( α.843). The dependent variable is computed out of 4 separated outcome variables; customer loyalty, customer satisfaction, customer expectation and customer retention. Customer loyalty ( α.778) is measured based on 5 items answered on a 7-point Likert scale (1=strongly agree, 7= strongly disagree). Averaging the response is justified on the basis of a mean of 3.34. The measurement is based upon a measure by Taylor, S. (2004) to measure the importance of brand equity to customer loyalty. Customer satisfaction ( α.843) is measured based on 4 items answered on a 7-point Likert scale (1=strongly agree, 7= strongly disagree).
Averaging the response is justified on the basis of a mean of 2.58. The measurement method is based upon a measure by Thurau, T. (2004) to measure customer orientation and the impact on customer satisfaction, commitment and retention. Customer expectation ( α.807) is measures based on 2 items answered on a 7-pont Likert scale (1=extremely satisfied, 7=extremely dissatisfied). Averaging the response is justified on the basis of a mean of 2.34. The measurement is based upon a measure by Kelley.S, Davis, M. (1994) to measure the antecedents to customer expectations for service recovery. Customer retention ( α.366) is measured based on 4 items, due to an invalid Cronbach Alpha ( α.566), 1 of the 4 items is deleted. The answers are given on a 7-point Likert scale (1=strongly agree, 7= strongly disagree). Averaging the response is justified on the basis of a mean of 3.00. The measurement method is based upon a measure by Thurau, T. (2004) to measure customer orientation and the impact on customer satisfaction, commitment and retention. The mean computed by the 4 outcome variables shows that the computed mean for customer value is 2.81.
Product service systems. Product service systems are divided in (1) product oriented service systems, (2) user oriented service systems and (3) result oriented service systems. After a short introduction participants could choose one type of product service system while they referred their answers to the respective chosen type of PSS. The classification of PSS is done by Manzini&Vezzoli (2003) and Tukker&Tischner (2006).
Control variables. To check that the results are not affected by other variables several control variables were included. In this research the type of employment, the age of the participants and the type of gender have been selected.
4. RESULTS
4.1 Statistical Procedure
Missing values. First a missing value analysis is conducted. For all items, the missing value is below 10%. Only 7 participants out of 107 did not fill in the survey correctly. Due to 7 missing / incorrect values, 7 participants were excluded from the analysis.
Analysis. For testing of the hypothesis hierarchical regressions are used in SPSS. To test whether the moderator has actually a moderating effect, the sample is divided in three sub samples. One sample stands for the product oriented users, one for the use oriented users and the third sample consists out of result oriented users of PSS. After dividing the sample, multiple regression analysis were conducted for all the three samples.
4.2 Correlation analysis
Table 1 shows the descriptive statistics, mean, standard deviation and correlations of independent variables, dependent variable and control variables.
Switching costs correlates negatively with relative price (=-.552, ρ <.001). Innovativeness correlates positively with type of employment (= .286, ρ <.001) and perceived quality (= .344, ρ <.001). Brand preference correlates positively with innovativeness (= .276, ρ <.001). Supplier commitment correlates positively with perceived quality (= .319, ρ <.001) and innovativeness (= .410, ρ <.001). Customer value correlates positively with perceived quality (= .579, ρ <.005), innovativeness (= .359, ρ <.001), supplier commitment (= .520, ρ <.001) and negatively with age diversity (= -.213, ρ <.001).
Table 1: Means, Standard Deviations, Correlations Variables M SD 1 2 3 4 5 6 7 8 9 10 1. Age diversity 3.70 1.27 2. Gender diversity 1.25 .435 .052 3. Employment 1.72 1.48 -.179 .066 4. Perceived quality 2.59 .66 -.068 .252 .197 5. Relative price 2.84 1.60 .198 .000 -.072 -.028 6. Switching costs 3.45 1.49 -.175 .125 .142 .017 -.552* 7. Innovativeness 3.10 .78 -.117 .025 .286* .344* .060 -.061 8. Brand preference 3.44 1.01 -.133 .115 .063 .045 -.061 .066 .276* 9. Supplier commitment 2.78 .73 -.094 -.063 .166 .319* .000 -.043 .410* -.076 10. Customer value 2.81 .65 -.213* ,094 .085 .579** -.115 .035 .359* -.094 .520*
* Correlation is significant at the 0.01 level (2-tailed) ** Correlation is significant at the 0.05 level (2-tailed)
4.3 Testing Hypothesis
To test Hypothesis 1, stating that there is a direct relationship between perceived quality and customer value, a hierarchical regression was conducted to investigate the independent variable perceived quality predict a higher degree of customer value. In the first step of the hierarchical linear regression, the control variables are entered: age, gender and employment. This model is not statistically significant. After entering the independent variable perceived quality in step 2 we see p= 0.000 so there is a significant relationship. Therefore we could say that the degree of perceived quality has a direct relationship on customer value. Hypothesis 1 will not be rejected. To test Hypothesis 2, stating that there is a direct relationship between the relative price and customer value, a hierarchical regression was conducted to investigate the independent variable relative price predict a higher degree of customer value. In the first step of the hierarchical linear regression, the control variables are entered: age, gender and employment. This model is not statistically significant. After entering the independent variable relative price in step 2 we see that p= not significant. Therefore we reject Hypothesis 2, there is no significant relationship between the relative price and customer value.
To test Hypothesis 3, stating that there is a direct relationship between switching costs and customer value, a hierarchical regression was conducted to investigate the independent variable switching costs predict a higher degree of customer value. In the first step of the hierarchical linear regression, the control variables are entered: age, gender and employment. This model is not statistically significant. After entering the independent variable switching costs in step 2 we see that p= not significant. Therefore we reject Hypothesis 3, there is no significant relationship between switching costs and customer value.
To test Hypothesis 4, stating that there is a direct relationship between the innovativeness and customer value, a hierarchical regression was conducted to investigate the
independent variable innovativeness predict a higher degree of customer value. In the first step of the hierarchical linear regression, the control variables are entered: age, gender and employment. This model is not statistically significant. After entering the independent variable innovativeness in step 2 we see that p= not significant. Therefore we reject Hypothesis 4, there is no significant relationship between the innovativeness and customer value.
To test Hypothesis 5, stating that there is a direct relationship between brand preference and customer value, a hierarchical regression was conducted to investigate the independent variable brand preference predict a higher degree of customer value. In the first step of the hierarchical linear regression, the control variables are entered: age, gender and employment. This model is not statistically significant. After entering the independent variable brand preference in step 2 we see that that p= not significant. Therefore we reject Hypothesis 5, there is no significant relationship between the brand preference and customer value.
To test Hypothesis 6, stating that there is a direct relationship between supplier commitment and customer value, a hierarchical regression was conducted to investigate the independent variable supplier commitment predict a higher degree of customer value. In the first step of the hierarchical linear regression, the control variables are entered: age, gender and employment. This model is not statistically significant. After entering the independent variable supplier commitment in step 2, we see that p= 000 is significant. Therefore we can say that the degree of supplier commitment has a direct relationship on customer value. Hypothesis 6 will not be rejected.
To test Hypothesis 7, stating that the type of product service system is influencing the relationship between the critical success factors and customer value, the sample was first divided in the participants that choose product oriented, user oriented and result oriented PSS. After dividing the sample, multiple hierarchical regressions were conducted. The critical success factors that have a significant effect on customer value are perceived quality and
supplier commitment. If we conduct a hierarchical regression analysis between the critical success factors and customer value for the product oriented users of PSS, the relationship between perceived quality, supplier commitment and customer value is still significant. If we conduct a hierarchical regression analysis between the critical success factors and customer value for the user orientated users of product service systems, the relationship between perceived quality, supplier commitment is still significant. The relationship is only weaker for the user orientated users of product service systems. If we conduct a hierarchical regression analysis for the result orientated users of product service systems, there is only a significant relationship between switching costs and customer value. So therefore we do not reject Hypothesis 7, because the type of product service system has a moderating effect on the relationship between critical success factors and customer value.
Product and use oriented users of PSS both have significant relationships between perceived quality, supplier commitment and customer value. Result oriented users differ from the other two types, this type of PSS has a significant effect between switching costs and customer value, no significant relationships have been found between perceived quality, supplier commitment and customer value.
Table 2: Regressions results – all participants Variables B Std. Error b* t p Age diversity -.054 .035 -.123 -1.545 .126 Gender diversity -.056 .118 -.038 -.478 .634 Employment -.082 .041 -.160 .2.023 .046 Perceived quality .0427 .082 .436 5.199. .000 Relative price -.037 .039 -.092 -.949 .345 Switching costs -.03 .041 -.08 -.085 .932 Innovativeness .118 .075 .143 1.566 .121 Brand preference -.098 .051 -.152 -1.916 .059 Supplier commitment .283 .075 .319 3.764 .000
Table 3: Regressions results – users product oriented PSS Variables B Std. Error b* t p Age diversity -.187 .064 -.068 -.615 .543 Gender diversity -.041 .215 -.103 -.869 .390 Employment -.040 .077 -.059 -.533 .597 Perceived quality .550 .145 .500 3.801. .001 Relative price -.028 .065 -.063 -.433 .668 Switching costs -.052 .085 -.074 -.0617 .541 Innovativeness -.165 .163 -.149 -1.014 .317 Brand preference -.126 .082 -.167 -1.534 .134 Supplier commitment .434 .121 .460 3.590 .001
Table 4: Regressions results – users user oriented PSS Variables B Std. Error b* t p Age diversity -.088 .068 -.234 -.1289 .211 Gender diversity .316 .179 .299 1.767 .092 Employment -.108 .048 -.435 -2.265 .084 Perceived quality .363 .164 .372 2.220 .038 Relative price .071 .077 .181 .961 .370 Switching costs .183 .141 .264 1.301 .207 Innovativeness .192 .113 .277 1.694 .105 Brand preference .042 .084 .087 .506 .618 Supplier commitment .332 .141 .386 2.350 .029
Table 5: Regressions results – users result oriented PSS Variables B Std. Error b* t p Age diversity -.256 .106 -.635 -.2.411 .067 Gender diversity -.001 .213 ..001 -.006 .996 Employment -.076 .071 -.231 -1.069 .310 Perceived quality .289 .133 .451 2.173 .055 Relative price -.285 .243 -.297 -1.175 .267 Switching costs -.309 .122 -.600 -2.536 .030 Innovativeness .115 .145 .169 .790 .448 Brand preference -.215 .099 -.396 .2.171 .055 Supplier commitment -.037 .146 -.055 -.251 .0807
5. DISCUSSION
In a world where sustainable products and the term sustainability becomes more and more important, product service systems (PSS) will play a bigger role in the near future (Tukker&Tischner,2006). PSS are a specific type of value proposition that offers or co-produce a business to clients. PSS are becoming more important because of globalization and the need for sustainable ways of producing (Stahel,1997).
In this research the relationship between six critical success factors (perceived quality, relative price, switching costs, innovativeness, brand preference, supplier commitment) and customer value for PSS users is studied. Duo to the different types of PSS, the sample in this study is divided in product, use and result oriented users of PSS. This is done to investigate whether the different types of PSS, which are all focusing on a different way to deliver value to the customer, have a moderating effect on the output variable customer value.
5.1 Theoretical Implications
The theoretical model proposed based on the literature searched for a direct effect between six critical success factors (perceived quality, relative price, switching costs, innovativeness, brand preference, supplier commitment) and customer value. The effect of the relative price, switching costs, innovativeness and brand preference were found to be non-significant. Firstly, the non-significant results can be due to a low sample size. This yields low statistical power, and because of this the effect might be present even when the effects are not found. The effect of perceived quality on customer value was tested significant. This makes sense because in prior research significant relations have been found between perceived quality and customer satisfaction, one of the variables which is used in this study to measure customer value. Prior research showed that perceived quality is an immediate antecedent to customer satisfaction and repurchase intention (Haemoon,1999). Prior research also mentioned that perceived quality has
a bigger effect in creating value than the price, another reason why the relationship between relative price and customer value has been non-significant in this study. Consumers with high perceptions of quality also do have a high level of satisfaction and repurchase intention. Therefore it is reasonable that perceived quality is affecting customer value which consist out of customer satisfaction and customer retention (Tsiotsou,2005).
The second relationship that has been found to be significant, is the effect supplier of commitment on customer value. This research shows that when a supplier is committed to the customer, which can be done in making certain adjustments to the customer needs, tailor-made products or change the product when the customer demands are changed , a higher degree of customer value is measured. Commitment in relationships between the supplier and the customer has received increasing research attention lately (Kim,2001). Suppliers become aware that customers are getting more power and knowledge due to globalization and social media. When the supplier is committed he shows more dedication to the customer which is valuable (Anderson&Weitz,1992). Furthermore high commitment promotes the ability to coordinate activities so that the needs of the customer can be better served (Kim,2001). Another explanation for the strong relationship between supplier commitment and customer value is that committed suppliers who adjust their products or services to consumers, increase the degree of retention of the customer (Hambrick&Lei,1985).
Finally, this study examined the moderating effect of the type of PSS (product, use and result oriented) on the relationship between the critical success factors and customer value. This effect was found to be significant. A reason for this is because suppliers create value for the customer differently for each type of PSS (Tukker&Tischner,2006). Therefore it makes sense that customers of different PSS think some critical success factors are more valuable than others. The relationship between perceived quality, supplier commitment and customer value for users of product oriented service systems is still significant.
For product oriented service systems, the service system is focused on the product (Tukker&Tischner,2006). For this type of PSS perceived is important, which makes sense because the consumer buys the product and is dependent on the perceived quality. A committed supplier will lead to more value, that also makes sense because customer assess the flexibility of their product highly valuable (Anderson&Weitz,1992).
Use oriented service systems, the service system where the product is leased for a certain period of time (Tukker&Tischner,2006) has the same outcome as product oriented service system. The relationship between perceived quality, supplier commitment and customer value is found to be significant. Although we do mention that the direct effect of perceived quality and supplier commitment will increase the degree of customer value, but statistical lower as for product oriented PSS. An explanation for this change in relationship can be found in the fact that use oriented users of service systems does not own the product. They do not worry about operation, maintenance or services (Tan,McAloone,2006). The quality and commitment is still significantly important, but the customer has more power. While there is a contract the customer already knows what to he bought and what to expect.
Finally, there is a significant difference in the effects the critical success factors have on customer value, tested for result oriented users of PSS. The relationship between perceived quality (slightly p.0059), supplier commitment and customer value is not significant. An explanation for this is that consumers only pay for the provision of agreed results. The supplier is offering a mix of services, the customer decides if he wants to buy the outcome (Baines,2007). Furthermore the relationship between switching costs and customer value is found to be significant for result oriented users. An explanation for this is that result oriented users value performance rather than ownership, this achieves differentiation through the integration of product and services that provide value in use to the customer (Baines, 2007). Customers want
to be free and independent, high switching costs will significantly lead to a lower degree of customer value.
5.2 Practical Implications
Some practical implications can be derived in this research. Where PSS become more important suppliers should focus on the possibility for customers to buy an outcome and not a product. The outcome becomes more important due to globalization and the need for sustainability, not all customers want to own the product (Lightfood,2007). The assumption that there is a relationship between perceived quality, supplier commitment and customer value is confirmed in this research. Suppliers should be committed to their customers when they own the product and make adjustments to their need (Selnes,1995). PSS are becoming more important and suppliers should shift their focus from selling the product to the value for the customer and let the customer decide what he wants. When the customers feel independent they tend to return to the supplier more often.
5.3 Limitations
This study has several limitations.
First, the sample size in this study was relatively low, resulting in low statistical power. This small sample size affects the possibility to generalize the results. Moreover, the small sample size might be a cause that there are no relations found between the critical success factors relative price, switching costs, innovativeness, brand preference and customer value, this gives this study less statistical power.
Second, participants found it hard to understand the differences between the three types of PSS, this could be a reason that the moderation effect is not tested 100%, due to vapidity.
Third, PSS systems are often linked to sustainability, because the underpinning expectation is that a pure PSS will have a lower environmental impact. Traditional transactions where an enterprise manufactures products but then transfers responsibilities of ownership and use to the customer (Baines, 2007). This study did not investigate the need for sustainability for customers and particularly the differences between the users of the three types of PSS.
5.4 Future Research
For future research it would be valuable to investigate why the relationship between perceived quality and customer value is less important for result oriented users than result oriented users of PSS. Prior research did mention that there is a shift in consumer preferences. PSS are becoming more important and the current literature only mentions the three types but does not deeply describe details about the differences between those PSS. Further research is recommended.
In this study one aim was to investigate if the type of PSS has a moderation effect on the relationship between critical success factors and customer value. The type of PSS can be seen as a moderator and there are significant differences among the three types which is endorsed by the current literature.
6. CONCLUSION
In a world where sustainable products and the term sustainability becomes more and more important, product service systems (PSS) will play a bigger role in the future (Tukker&Tischner,2006). Prior research shows that customers more and more want to buy outcomes and not products. This study investigated the effects of several critical success factors on customer value, the sample consists out of users from PSS. This study contributed to existing literature by investigating the effects of critical success factors on customer value moderated with the type of PSS. The analysis has been executed for product oriented, use oriented and result oriented users of PSS to test whether the users of different types of PSS value critical success factors differently.
The research has found significant effects between perceived quality, supplier commitment and customer value. The moderating role of type of PSS is significant as well. The outcomes for product and use oriented users of PSS are significant equally where the results from the result oriented PSS differ. The relationship for the result oriented users of PSS is not significant for perceived quality and supplier commitment, but there is a significant relationship with switching costs.
An explanation for the differences is that the value creation for every type of PSS is differently. This research confirms this statement, because customers of product and use oriented PSS valuing different critical success factors as result oriented users of PSS. There is a lot of research available about PSS where result oriented service system become more important in the future due to globalization and the need for sustainable ways of consuming.
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APPENDIX I: LIST OF SURVEY ITEMS
Short introduction regarding different types of PSS
Q2 Please choose which of the three PSS you bought most recently and answer the questions based on the chosen type of Product Service System.
Product orientated PSS (1) Use orientated PSS (2) Result orientated PSS (3)
Perceived quality Hellier, Geursen, Carr & Rickard (2000) 1=Strongly agree, 7=Strongly disagree
The supplier of the PSS tells me exactly when service will be performed. The supplier of the PSS gives me prompt service.
The supplier of the PSS is always helping me. The behavior of the supplier gives me confidence. The supplier of the PSS understand my specific needs.
Relative price Grewal,Monroe&Krishnan (1998)
1= € 50,-, 7= € 75.000,- +
What is your estimate of the average market price for this PSS? What do you think would be a fair price for this PSS?
Switching costs Hellier, Geursen, Carr & Rickard (2000)
1=Far above average, 7=Far below average
What level of costs do you feel be incorred in switching to another PSS supplier?
What amount of inconvenience do you feel be incurred in arranging to switch to another supplier?
What amount of time do you feel would be involved in arranging to switch to another supplier of the PSS?
Innovativeness Nasution (2011) 1=Strongly agree, 7=Strongly disagree
The PSS supplier has introduced many new PSS to the market.
The supplier of the PSS has introduced many modifications to the existing PSS. The supplier of the PSS constantly find new services
The supplier of my PSS has introduced more new services than their competitors. The PSS our supplier introduced have caused significant changed in the industry.
Brand Preference Hellier, Geursen, Carr & Rickard (2000) 1=Strongly agree, 7=Strongly disagree
The supplier of the PSS meets my requirements better than other suppliers. I am interested in trying PSS from other suppliers.
In intent, in the near future, to replace my PSS with a PSS from another supplier.
Supplier Commitment Selnes (1995)
1=Strongly agree, 7=Strongly disagree
The supplier of the PSS makes adjustments to my needs. The supplier of the PSS tailor-makes its products to my needs.
The supplier of the PSS is flexible when my product demands are changed.
Customer Loyalty Taylor, Celuch&Goodwin (2004)
1=Strongly agree, 7=Strongly disagree
I use this PSS from the company I am evaluating because it is the best choice for me I consider myself to be a loyal patron of the supplier of the PSS I am evaluating. I am committed to the supplier of the PSS I am evaluating.
In the future, I would be willing to pay a higher price for the PSS from the PSS supplier I am evaluating over competitive offerings.
I consider the supplier of the PSS I am evaluating my first choice when buying this PSS.
Customer Satisfaction Hennig-Thurau (2004)
1=Strongly agree, 7=Strongly disagree I am fully satisfied with my PSS.
The PSS always fulfills my expectations. The PSS has never disappointed me so far. My experiences with the PSS are excellent.
Customer Expectation Kelley&Davis (1994) 1=Extremely satisfied, 7=Extremely dissatisfied
How would you rate your satisfaction or dissatisfaction with regard tho the availability of the PSS?
How would you rate your satisfaction or dissatisfaction with regard to the attention provided by this PSS?
Customer Retention Hennig-Thurau (2004)
1=Strongly agree, 7=Strongly disagree
In the future I will buy most PSS at this supplier. I am a loyal customer at the supplier of the PSS. My next PSS purchase will take place soon.
This PSS supplier is my first choice when it comes to buying PSS.
Control Variables Age Diversity
What is your age? Please fill in.
Gender Diversity What is your gender?
o Male o Female
Employment
What is your employment? o Employed full time o Employed part time
o Unemployed looking for work o Unemployed not looking for work o Retired
o Student o Disabled
Consumer/Company
Did you filled in this questionnaire on behalf of yourself (consument) or a company? o Male
