The starting point of value co-creation is always an interactive experience
A second important element in addressing co-creation is that it always starts with an interaction. Regardless of the tools on which it leverages, the players involved, the goals pursued, the kind of value generated, any co-creation starts with an interaction. As Ramaswamy and Ozcan (2018) highlighted, interactive platforms - i.e., persons, artefacts, processes, and interfaces that, together, contribute in a balanced way - represent a context, a joint sphere, in which multiple players participate, each of them carrying out his/her own duties for the final shared goal. The act of participating in itself connotes co-creation, which links it with customer experience. Indeed, interaction is “the primary interface between parties undertaking coproduction” (Ranjan & Read, 2016, p. 293).
Two parties that are typically and traditionally different interact and contribute to reach a common goal. The latter represents the point of contact between players: on the one hand, there is the company with its managerial processes aimed at efficiency for the identified KPIs; on the other, there is the consumer with his/ her wishes and needs. The combination of the specialized skills and competencies of the actors participating in the co-creation guides its success, which will therefore be achieved jointly by definition (Prahalad & Ramaswamy, 2004a, 2004b).
The final output of co-creation is always value
A third element refers to the final output: value represents the final output of the whole interactive process. Note that value is, by definition, innovative. Indeed, studies investigating the role of creation in the new product development processes have highlighted the innovativeness brought by co-creation. Such customer—company collaboration provides both parties with increased value (Von Hippel, 2001); further, thanks to established business relationships, parties have access to valuable resources (Alves, Fernandes, & Raposo, 2016). Specifically, from the customers’ point of view, the fit between customer expectations and preferences is better perceived, thus generating higher perceptions of the quality and variety of the selection (Diehl & Zauberman, 2002). The customers’ ability to specify their preferences increases, resulting in a higher customer satisfaction (Franke, Schreier, & Kaiser, 2010; Ouschan, Sweeney, & Johnson, 2006; Randall, Gravier, & Prybutok, 2011). Finally, the feeling of psychological ownership towards personally designed products allows customers to express their innate desire to be unique and original (Franke, Schreier, & Kaiser, 2010; Franke & Schreier, 2010). All these consequences induce customers to pay a premium price, increasing the “money on the table” available to companies (Franke, Keinz,
& Steger, 2009; Franke & Piller, 2004; Franke, Schreier, & Kaiser, 2010; Schreier, 2006) investing in co-creation.
Such a value exchange systematically leads to service innovation. The innovative power is indeed another key feature of co-creation, which is particularly evident in new product development because, via co-creation, companies have access to new knowledge, already developed by customers, and this is useful in designing products more effectively. Despite the multiplicity of the indicators used to measure the returns on investments in co-creation, all of them generally refer to its extraordinary innovative capacity. In fact, co-creation is generally a way for companies to access typically distant knowledge. Further, because it is about customer knowledge - and in principle also, knowledge of other market players - it is an asset of great value. Indeed, the benefits of co-creation are not limited to innovating products; they also include stronger relationships with customers and with the whole networks. With regard to the returns for customers, co-creation leads to engaging experiences and, via them, to more favourable customer reactions and higher levels of customer loyalty. With regard to the whole networks, co-creation extends its beneficial effects on the entire networks of relationships that the company has built. Indeed, via co-creation, resources are exchanged, advantages are generated, and relationships are reinforced. Thus, allowing customers to take part in the new product development leads to higher market performances (Bogers, Afuah, & Bastian, 2010). Because brands are dynamic social processes (Black & Veloutsou, 2017), each party contributes in creating a brand with their resources, knowledge, and skills.Thus, not only are goods, services, and experiences co-created, the whole brand is co-created. Innovation, resources, exchanges, relationships, knowledge, and loyalty are all themes that characterize co-creation from its first conceptualization (Prahalad & Ramaswamy, 2003), which contribute in explaining why, today, cocreation has gained so much attention.
Value co-creation might refer to production or exchange processes
The value co-creation framework proposed by Ranjan and Read (2016) clarified that co-creation is a managerial approach, referring to one of the following two key processes: production and exchange. Value can be co-created by interacting with customers either in the productive processes or in the exchange processes.
Companies can thus allow customers to play active roles in producing their own products, transforming them into prosumers who actively participate in designing and creating their products. By allowing customers to take part in the most intimate of the managerial processes, such as product creation, companies leverage on consumer knowledge, and the classical borders of the company disappear. In that sense, customers become employees, and co-production value is generated. Thus, lead users generate high innovative value for companies (Von Hippel, 2001).
Co-production is a major topic in marketing literature, even with a range of labels. If the service-dominant logic calls it co-production, the new product development literature calls it mass customization, focusing specifically on the online platforms. According to this field of research, mass customization is the new frontier for competitive effectiveness even in mass markets (Chan,Yim, & Lam, 2010; Fuchs & Schreier, 2011). These studies specifically focus on technology and its application to enable the customers’ participation online (Franke & Schreier, 2010; Fuchs, Prandelli, & Schreier, 2010).
Similarly, while the new product development literature talks about prosumers to indicate the consumers who actively participate in the productive processes, the brand management literature labels them “working consumers” to highlight that they voluntary and constructively devote their time, skills, and knowledge to co-create brands and organizations (Bauer & Gegenhuber, 2015; Black & Veloutsou, 2017; Cook, 2008; Cova & Dalli, 2009; Cova, Dalli, & Zwick, 2011; Pongsakornrungsilp & Schroeder, 2011; Zwick, Bonsu, & Darmody, 2008).
The second process in which customers can be actively involved is in value exchange. In the consumption process, customers play a main character by definition. Thus, their involvement in this second kind of managerial processes is more typical and traditional. Plowever, value-in-use is the label of the value created, thanks to the customer participation as recognized by a company. Whichever of the two processes is deemed co-creative, companies always enter into a dialogue with customers (Payne, Storbacka, Frow, & Knox, 2009). Interestingly, in order to customize the customer experience, companies can obtain value by personalizing simple communication contents. Indeed, it has been estimated that personalized content is 30 times more able to gain customer attention than standard mailings and brochures and receives higher click-through rates (Peverelli & De Feniks, 2017). In that regard, the case of user-generated content (UGC) is especially illustrative of co-creative advertising, with its own success dimensions (Figure 6.2).
Value co-creation is a difficult challenge
Co-creation is not easy. Typically, consumers are interested in the positive returns of this managerial approach, but we also need to keep in mind that co-creation is a double-edged sword, which can also lead to co-destruction. Smith (2013) identified several reasons for this loss of well-being; generally speaking, however, they always relate to a resource misuse in the interactive process (Echeverri & Skalen, 2011; Moschis, Ferguson, & Zhu, 2011; Pie & Caceres, 2010).
Moreover, these benefits might not materialize if customers fail to appreciate the customized products and fully understand their benefits (Bendapudi & Leone, 2003; Franke & Piller, 2004). Recent studies have highlighted that the relative cognitive effort needed to activate, start, and finish any activity within the co-creative platforms might represent a relevant obstacle (Dellaert & Stremersch, 2005; Franke, Schreier, & Kaiser, 2010; Franke & Schreier, 2010; Piller & Tseng, 2010). Indeed, the co-creative platforms ask customers to carefully evaluate the broad range of alternatives provided (Pralahad & Ramaswamy, 2004) and exert great efforts to deal with the high complexity of these toolkits (Bettman, Johnson, & Payne, 1990; Dellaert & Stremersch, 2005; Huffman & Kahn, 1998; Piller, 2004).
FIGURE 6.2 The UGC dimensions
Source: Contents of figure derive from Roma & Aloini (2019)
As a consequence, consumers may become confused, dissatisfied, annoyed, and disappointed by manufacturers (Mitchell & Papavassiliou, 1999; Mitchell, Walsh, & Yamin, 2005). Indeed, if customers are confronted with information overload, they may lack the capabilities to cope with the challenges regarding the configuration task. Consequently, the consumer can neither design a fitting product specification nor feel satisfied with the configuration process. The resulting “paradox of choice” might impair customers’ buying intentions (Novemsky, Dhar, Schwarz, & Simonson, 2007). Thus, co-creation success relies on deep choices and process simplifications when the toolkits are difficult by nature (Piller & Tseng, 2010).
As difficult as using the tools might be, however, customers are but one of the key players in leveraging on customer insight and data; i.e., making them participate in the experience is only part of the game. The rest is similarly difficult because it asks companies to reinvent each and every process in order to place customers at the centre of company activities.