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When and why do customer solutions pay off in business markets?

Author

Listed:
  • Stefan Worm

    (BI Norwegian Business School, Department of Marketing)

  • Sundar G. Bharadwaj

    (University of Georgia)

  • Wolfgang Ulaga

    (Arizona State University)

  • Werner J. Reinartz

    (University of Cologne)

Abstract

Manufacturers invest in customer solutions to differentiate their offerings and sustain profitability despite declining margins from goods sales. Notwithstanding strong managerial and academic interest, an examination of whether and explanations for when and why solutions translate into superior performance are lacking. We test hypotheses developed from the resource-based theory and transaction cost economics, supplemented with in-depth theory-in-use interviews, on primary and secondary data collected from 175 manufacturers. From a model that corrects for endogeneity, the findings suggest that, compared with other service offerings, solutions are associated with increased return on sales. This positive profitability effect is enhanced in firms with greater sales capabilities; it is stronger in industries with greater buyer power but weaker in technology-intensive industries. These results caution against the simplistic view of solutions as a universal route to gaining competitive advantage and aid in better identifying the role of solutions in a manufacturer’s offering portfolio.

Suggested Citation

  • Stefan Worm & Sundar G. Bharadwaj & Wolfgang Ulaga & Werner J. Reinartz, 2017. "When and why do customer solutions pay off in business markets?," Journal of the Academy of Marketing Science, Springer, vol. 45(4), pages 490-512, July.
    • Handle: RePEc:spr:joamsc:v:45:y:2017:i:4:d:10.1007_s11747-017-0529-6
    DOI: 10.1007/s11747-017-0529-6
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    References listed on IDEAS

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    Cited by:

    1. Anna Salonen & Harri Terho & Eva Böhm & Ari Virtanen & Risto Rajala, 2021. "Engaging a product-focused sales force in solution selling: interplay of individual- and organizational-level conditions," Journal of the Academy of Marketing Science, Springer, vol. 49(1), pages 139-163, January.
    2. Wolfgang Ulaga, 2018. "The journey towards customer centricity and service growth in B2B: a commentary and research directions," AMS Review, Springer;Academy of Marketing Science, vol. 8(1), pages 80-83, June.
    3. Mullins, Ryan & Swain, Scott & Friend, Scott B., 2023. "How and should firms motivate salesperson effort across a Multi-Brand Portfolio?," Journal of Business Research, Elsevier, vol. 158(C).
    4. Christian Homburg & Moritz Tischer, 2023. "Customer journey management capability in business-to-business markets: Its bright and dark sides and overall impact on firm performance," Journal of the Academy of Marketing Science, Springer, vol. 51(5), pages 1046-1074, September.
    5. Wei, Zelong & Huang, Wengao & Wang, Yanping & Sun, Lulu, 2022. "When does servitization promote product innovation? The moderating roles of product modularization and organization formalization," Technovation, Elsevier, vol. 117(C).
    6. Wirtz, Jochen & Ehret, Michael, 2017. "Capturing Value in the Service Economy," SMR - Journal of Service Management Research, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 1(1), pages 22-38.
    7. Huang, Lei & Nenonen, Suvi, 2022. "Challenges in co-creating solution value during utilization phase: Insights from three failed projects," Journal of Business Research, Elsevier, vol. 150(C), pages 1-11.
    8. Krämer, Martin & Desernot, Christina & Alavi, Sascha & Schmitz, Christian & Brüggemann, Felix & Wieseke, Jan, 2022. "The role of salespeople in industrial servitization: How to manage diminishing profit returns from salespeople’s increasing industrial service shares," International Journal of Research in Marketing, Elsevier, vol. 39(4), pages 1235-1252.
    9. Ad Jong & Nicolas A. Zacharias & Edwin J. Nijssen, 2021. "How young companies can effectively manage their slack resources over time to ensure sales growth: the contingent role of value-based selling," Journal of the Academy of Marketing Science, Springer, vol. 49(2), pages 304-326, March.
    10. Jamie McLellan & William A. Young & Elizabeth C. Levin & Lester W. Johnson, 2021. "Developing Innovative Integrated Business Solutions Using a Scrum Project Management Methodology," Businesses, MDPI, vol. 1(2), pages 1-11, July.
    11. Franz Hackl & Rudolf Winter-Ebmer, 2020. "Customer reactions to a webshop’s service quality," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(4), pages 699-731, November.
    12. Li, Ai Qiang & Kumar, Maneesh & Claes, Björn & Found, Pauline, 2020. "The state-of-the-art of the theory on Product-Service Systems," International Journal of Production Economics, Elsevier, vol. 222(C).
    13. Maximilian Bock & Martin Wiener & Carol Saunders, 2023. "Non-ownership business models in the manufacturing industry: Uncertainty-exploiting versus uncertainty-mitigating designs and the role of context factors," Electronic Markets, Springer;IIM University of St. Gallen, vol. 33(1), pages 1-18, December.
    14. Dannenbaum, Judith & Edinger-Schons, Laura Marie & Rese, Mario & Plötner, Olaf & Wieseke, Jan, 2020. "What Does it Take to Successfully Implement a Hybrid Offering Strategy? A Contingency Perspective," SMR - Journal of Service Management Research, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 4(2-3), pages 100-120.
    15. Prior, Daniel D. & Keränen, Joona, 2020. "Revisiting contemporary issues in B2B marketing: It's not just about artificial intelligence," Australasian marketing journal, Elsevier, vol. 28(2), pages 83-89.

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