PERCEIVED VALUE IN BUSINESS RELATIONS: ARE WE ALWAYS AND EXCLUSIVELY LED BY THE FUNCTIONAL ELEMENTS OF VALUE?
Associate Professor Maja Arslanagić Kalajdžić
When we look at the perceived value in business relations, we usually treat business buyers as completely „rational“ entities which are moved by functional motives. Namely, as the basic mantra of every business is to increase profit (whether via the increase of purchase or decrease of expenses), it is believed that businesses act in accordance with that mantra even when they are in the role of business buyers. This is why value propositions on business (B2B) markets are functional in their core, which actually means that companies that are suppliers always want to demonstrate functional benefits (for example, quality) and/or functional victims with which their supply is related (for example, expenses/price). However, there is a question, is it always like this on business markets? Is there anything more than functional elements of value in business (B2B) relations?
The results of previous scientific research show that perceived value in business relations is of key importance for further behaviour of business buyers, and that it is complementary to the concept of satisfaction. Due to the propositions above, researchers have so far been mainly focused on the analysis and development of the functional dimension of value. However, through focusing on business relations in the sector of professional services, we have scientifically proven that there are other dimensions of perceived value in business relations and that they are relevant for the outcomes of business relations. Suppliers of professional services most often include accounting services, legal services, IT services, services of advertising and specialized agencies, consulting services, architectural services, engineering services, etc.
Relying on the theory of consumer values that is, in line with its name, dominantly used in the research aimed at final consumers (individuals), we have defined and developed a functional, emotional and social value in business relations. Functional dimension of the perceived value implies rational, economic and monetary benefits and expenses. Rational choice theory, as well as means-end theory, serve to provide basic argumentation on this dimension of the perceived value. Two most visible components of functional value are precisely quality and price of products/services, but they can be spread onto other functional characteristics of products/services, and also on the value of time, effort and energy that is invested in a certain relation. In case of professional services that were the object of our research, we defined functional value as the usefulness perceived by the company that is the client, which comes from the perception of quality, and the perception of decreased short-term or long-term expenses, as well as from the expected performances of the overall service supply and process.
Emotional value, as a dimension of the percieved value, is truly neglected in business research. The reason can be searched precisely in the implication that companies are rational creations which can only assess functional elements of values. However, if we talk about business services, buying centers which make decisions on the purchase are made of people. Also, when a service supplier is chosen, supplier representatives cooperate with client representatives. In the context of professional services, that are high-quality services, people are the key on both sides of that relation. On the supplier's side, people, that is, their expertise, are the main „ingredient“ of the service that is offered. On the client's side, without the expression of needs and ideas, and close cooperation of the representatives of the client company with the members of the team of the supplier company, the supplier can hardly understand and meet the client's expectations. In accordance with the above-said, emotional value is defined as the benefit perceived by the client company, which comes from the feelings and/or affective states generated by a service and service process in the decision maker/buying center.
Third dimension, social value, is explained through the concept of significance of social relations in the theory of consumer values. This dimension of the perceived value has already been subject to research up to a certain point, in the context of business relations, mostly through observing social relations created between supplier and client. The assessment of social value of services provided by the supplier can vary depending on whether that social value is significant for the client's products/services or for the client's business in general. In the context of professional business services, a product/service which the client offers can be socially perceived in different ways, depending on which service supplier is chosen (for example, if a certain marketing agency is well-known on the market for its high-quality production of advertising videos, the client's products/services can have bigger social value if it is known that services of the above-mentioned agency will be used). Also, professional services can have social value in the sense of business references for the client's business in general, so that the client's company has a better reputation in business circles precisely because of the cooperation with a certain supplier (for example, cooperation with a certain accounting agency that has been recognized on the market as credible can reflect back on the credibility of the client in business circles). Therefore, social value as a dimension of the perceived value of business services is defined as the usefulness perceived by the client company, which comes from acceptance, positive impressions and social approval that are generated for the client company and products/services of the client company by the service supply and process. Social approval encompasses the approval of different interest groups (for example, owners, clients, partners).
Results of the research conducted in Bosnia and Herzegovina on the example of marketing agencies and their clients show that all three dimensions of the perceived value truly exist on the business market and that they have different effects on the outcomes of relations, that is, on satisfaction and clients' loyalty. There is a strong connection between the perceived functional value and satisfaction, which has also been confirmed by other research. Also, it has been additionally shown that satisfaction is also explained by highly-perceived social value. However, what is surprising and new is the fact that the perception of emotional value does not have impact on clients' satisfaction, but that it is directly connected to loyalty. On the one hand, this finding can be interpreted through the perspective that emotional value which is generated has a significant role in the creation of loyalty, which is defined by a long-term dedication which is built in that relation, and that this is the reason why emotional value can serve as an argument for the continuation or termination of a business relation with a supplier. On the other hand, functional and social values primarily generate dissatisfaction, and then they indirectly affect loyalty through it.
These results show that service suppliers cannot be exclusively focused on the functional value if they want a long-term connection with their clients. The development of the value proposition that will contain positive appeals to both emotional and social values should be considered. By building and maintaining good corporate reputation, by investing in the credibility building and by providing high-quality relationships with clients (and managing those relationships), supplier companies can manage different dimensions of the perceived value and through them (functional, emotional and social dimensions) have a positive effect on the outcome when it comes to their clients. Although the research is conducted on the example of marketing agencies and their clients, the results can be generalized and spread to other professional services. Therefore, consistent results regarding the whole professional service sector are expected. When it comes to other sectors, especially if we consider production or relations in the distribution chain, we think that the evidence on the existence of emotional and social perception of value (along with the functional perception) can also be found. However, their significance in the outcome of mutual relations surely depends on other factors as well, such as the level of knowledge/expertise that the supplier should offer, the intensity of the contact between the two sides, supply duration, and other elements that are part of buying situations.
This blog is based on the scientific article that was published in an internationally recognized journal in the field of business marketing: Arslanagic-Kalajdzic, M., & Zabkar, V. (2017). Is perceived value more than value for money in professional business services? Industrial Marketing Management, 65, 47–58. doi:10.1016/j.indmarman.2017.05.005
Regards,
Sarajevo, July, 2021