KOREASCHOLAR

This conceptual paper is motivated by personal industry experience from over 100 customer-purchasing decisions from the machine tooling industry. The insights suggest that the customer’s ability to pay (ATP) constitutes a key deal-breaker criterion for value-based decision making that up to date has been overlooked in research. Customers may be willing, but unable to pay for the offering with the highest perceived value, simply because they lack the financial resources. The traditional view on value-based marketing strategies proposes that firms must provide offerings that create value for their customers (premise 1: customer need perspective) and that the value created must be superior to competition (premise 2: competitor perspective) while generating profits (premise 3: firm’s perspective). Customers will estimate which offering provides superior value, and they will choose the offering that delivers the highest value. I introduce the customer’s ability to pay as an additional foundational premise suggesting that the firm’s offering must also be within the customer’s budget (premise 4: customer budget perspective). I propose that frontline employees must not only develop a high degree of customer need knowledge, but they must also build-up a high level of customer budget knowledge. I conclude by deriving operative and strategic management implications supported with empirical evidence from the Australian machine tooling industry.

• Matthias Koch(University of Melbourne, Australia)