Who Creates Value: Perceived Value and Co-Creation

The Concept of Perceived Value

• Value is not a fixed property built into a product but a subjective judgement made by the user.
• Valarie Zeithaml (1988) defined perceived value as a consumer's overall assessment of a product's usefulness, weighing what is received against what is given up.
• Because value is perceived and not fixed, companies cannot fully control it; they can only design and promote products while the final judgement resides with the customer.

Transition from Goods-Dominant to Service-Dominant Logic

• Goods-dominant logic is the traditional view that treats physical products as the primary carriers of value, which is transferred at the point of sale.
• Stephen Vargo and Robert Lusch (2004) proposed service-dominant logic, arguing that goods are merely vehicles for the application of skills and knowledge for a user's benefit.
• Value-in-exchange refers to the value assumed at the moment of purchase.
• Value-in-use is the value realized only when the customer actually applies the product in their own life.
• A company provides a value proposition rather than delivered value; the real value appears during use in environments such as the home, gym, or commute.

Value Co-Creation and Service Ecosystems

• Value co-creation, developed by C.K. Prahalad and Venkat Ramaswamy (2004), posits that customers are active participants who bring their own resources (time, knowledge, and effort) to the value creation process.
• Service ecosystems describe a network where value is created through the combined efforts of many actors, such as the university degrees involving students, employers, and industry bodies.

Theory of Consumption Values

• Jagdish Sheth, Bruce Newman, and Barbara Gross (1991) identified five distinct kinds of value that influence purchase decisions:
  • Functional value: The practical, useful benefit of a product.
  • Emotional value: The feelings or affective states created by a product.
  • Social value: The connection a product provides to a specific group or community.
  • Epistemic value: Value derived from curiosity, novelty, or a desire to learn.
  • Conditional value: Value that depends on a specific situation or set of circumstances.