EAD5963
MANAGING FOR STAKEHOLDERS
Session #10
A CONSUMER PERSPECTIVE ON
VALUE CREATION
PRIEM, R.L.
(2007)
A Consumer Perspective on Value Creation
Abstract
I show how company strategies that focus on improving
consumer benefits can create value by increasing consumer
payments to an entire value system. This “consumer benefit
experienced” viewpoint on value creation complements the
value capture orientations of the firm positioning, transaction
cost, and resource-based approaches. It helps to clarify oftenblurred distinctions between value creation and value capture
and offers an additional tool for addressing intractable issues
in strategic management.
A Consumer Perspective on Value Creation
Strategic Management and Value
SUPPLY SIDE
1980’s Porter  firm
positioning and firm’s value
chains
1990’s RBV  value,
rareness, inimitability and
nonsubstitutability
2000’s Dynamic Capabilities
and firm specific Knowledge
and Transactions Cost
Economics (TCE)
DEMAND SIDE
Consumer’s role is
underestimated
Consumer Benefit Experienced
(CBE)  consumers as basis
for strategy formation;
companies – customers
relationships drives
consumer’s willingness to pay;
more integrative approach
A Consumer Perspective on Value Creation
Value: Concepts and Approaches
Supplier’s
perspective
Consumer´s
perspective
Use Value
Subjective
valuation of
consumption
benefits by a
consumer
(Bowman and
Ambrosini,
2000)
VPC
Value
Capture
Value
Creation
Value
Creation
VALUE
“Appropriation
and retention
by the firm of
payments
made by
consumers in
expectation of
future value
from
consumption”
Priem (2007)
“Innovation
that
establishes or
increases the
consumer’s
valuation of
the benefits of
consumption
(i.e., use
value).”
Priem (2007)
“increasing
use value or
decreasing
exchange
value, each of
which can
increase
consumer
surplus
(V -P).”
Priem (2007)
PRICE
(Exchange
value)
COST
Value (-) Price
=
Consumer surplus
Price (-) Cost
=
Seller Profit
A Consumer Perspective on Value Creation
Value System
Consumers´
perspective
Suppliers’
perspective
A Consumer Perspective on Value Creation
How to increase consumer benefit?
• Household production – systems’ view
maximize utility (output, Z) to increase value for
customers
Max V = U(Zi)
A Consumer Perspective on Value Creation
Differences among perspectives