High Degree of Consumer Co-creation - Coursework Example

IF A SERVICE INVOLVES A HIGH DEGREE OF CONSUMER CO-CREATION, WHAT DOES THIS MEAN FOR THE DESIGN AND DEVELOPMENT OF NEW SERVICES? Professor (Tutor) Course City/State Date Introduction Co-creation is an economic strategy or a management initiative that brings the producers and the consumers together in order to produce a jointly valued outcome (2009 Service Science and Service Innovation Awards: SRII: Service Research & Innovation Initiative, 2010). The co-created value comes in the form of unique customer experiences that are personalised and ongoing learning, revenue, and enhanced market performance drivers for the producer firm. Value co-creation occurs when and if customers can personalise their experiences using a firms service-product proposition in its lifetime. Customers get their tasks accomplished, and the firm can source a greater value from its service-product investment through increased revenues, new knowledge and superior brand loyalty. In the recent past, the trend has changed from co-production to co-creation in the service and product industries. In the modern world’s markets today, the advancement in technology has opened up the consumers’ access to unlimited information (Bhalla, 2011). It has significantly increased their ability to converse with other consumers and the companies in different locations across the world. In effect, the consumers have been endowed with great empowerment resulting in their desire for a more significant role in the course of exchanging with business enterprises. The increase in consumer empowerment has made them play a significant role in the value creation process. The process of value creation is called the co-creation process that can occur in a variety of contexts. Customer engagement behaviour is importantly manifested in this co-creation process. The area of new service creation forms an important context in which the consumer co-creation is quite vital in the modern business world. The consumers are increasingly willing and able to provide substantive information and ideas for new services that may meet consumer needs not yet addressed by the market or in improving the existing services. Such important consumer ideas on value creation in the digitalised community are conferred on the producer companies through e-mails, social networks and the internet websites alongside direct phone calls. In the above perspective, the term co-creation can be defined in the service value addition sense. It can be taken to mean a collaborative service development process in which consumers are actively involved in the selection and contribution of elements that of a new service offering (Brunoe, 2014). In simpler terms, it is a process that involves both the producer firms and the consumers of the services that are so developed and provided. Through co-creation, consumers can play a central role in the bringing of new services into being. This article aims at the primary focus of the impact of a high degree of consumer co-creation on the design and development of new services. Based on a number of reasons, the concept of consumer co-creation represents an attractive approach used by the service producer firms. More notably, the ideas generated by the consumers in the co-creation process result in services that highly reflect and represent the actual consumer needs. A successful service design and development process greatly depends on the ability of the service producer firms to understand the real consumer needs and the design and development criteria that meet them. The identification of these particular consumer needs is not an easy process. The reason behind this argument is that consumer needs are often than may be noted very complex and quite hard to establish through traditional market research methods. The reason for both new service and product failure accrues from the inability of the firms to identify the actual customer needs (Burdon, Mooney and Al-Kilidar, 2015). The process of both new service and product development requires the valuable involvement of consumers for the contribution of insights and ideas that directly reveal the particular customer needs. The inclusion of the features that are highly valued by the consumers in the design and development of new services increases the chances for the success of the service in the market. Businesses have continued to move from the traditional approach of creating services for the market to Seeking the market needs to develop services that create and deliver value to the consumers. Firms that value the importance of consumer involvement in the design and development of new services have a higher sustainability of the competitive advantage in the market than those that do not. Consumer co-creation implies the reduction of the risk of market failure of new services by improving the acceptance of the newly developed services by the consumers. In an environment where there is a high degree of consumer involvement in the development of a service, the designing of subsequent services must prudently be formulated to develop the earlier attractive features. By no means, a subsequent service development process must not go below the standards set by the prevailing and preceding services. Most successful service provider firms in the world, today have incorporated the consumers into the innovative processes. The importance of consumer co-creation and the implications posed by it on new service development forms the noble foundation of this essay. The Concept of Consumer Co-creation There a number of thematic concerns that need to be discussed in the endeavour to achieve the underlying objectives of the subject matter of this discussion. In order to exclusively comprehend the concept of high consumer co-creation concerning service provision, the analysis of the consumer motivators and the firm stimulators is of paramount importance. The unique contributions and influences resulting from these key aspects of consumer co-creation are worth a critical analysis in pursuing the effects of the deeper consumer involvement in the development and design of new services. Consumers are motivated by a set of factors to desire to pay a greater role in their engagement with the service provider firms (Chakraborty, Bhattacharya and Dobrzykowski, 2014). These factors range from financial, psychological and social to technological factors. The service producer firms are stimulated by the reduced consumer costs and increased consumer benefits in the value creation process. The degree of consumer co-creation in the value creation process is primarily dependent on the firm stimulators and the consumer motivators. However, a couple of factors on the side of the company also take the operation to moderate on the degree to which co-creation results from the initiating variables. These factors include production infeasibility, secrecy concerns of the firm, information overload and the sharing of intellectual property. According to the Journal of Service Research, the degree of co-creation created in the designing and development of new services has effects both on the consumer and on the service producer firm. It may not exclusively be said that these resultant factors are purely positive (Dato-on, 2014). At certain levels and depending on how well the impacts of high consumer co-creation are understood by the firm, the effects may sometimes bear a negative dimension. Among the notable benefits of co-creation that are experienced at the level of the service, producer firm are the effectiveness and efficiency of service design and development. As a result, the costs of operation and the risk associated with the failure of services declines increasing the profitability of the firm in the long run. Co-creation may also result in complexity experienced in the service development process due to greater specifications that require the accuracy of conformation. On the other hand, a high degree of co-creation influences the nature of services in a number of ways to the advantage of the consumer. Firstly, it helps tailor the services to fit the specific consumer needs. Secondly, a high degree of co-creation results to higher levels of consumer engagement and satisfaction. In effect, the relationship between the consumers and the service provider firms are built to on strong mutual bonds. The reduction of defects in the service provision process improves the value delivered to the final consumer. The authors of the Journal of Service Research observe that despite the importance underlying the concept of consumer co-creation, little research has been done in the area. There are several studies that have been conducted on the management of consumer relationships but hardly address the contentious issue of co-creation in the service industry (Goyal, 2013). These studies are commonly known to have ignored the involvement of the consumers in the service design and development process and the formulation of innovations on the current services. However, the journal postulates that the few studies that have been done on the critical concern provide a narrow thought about the process. The agenda of consumer participation in the co-creation process requires a wide range of literature to expose every significant detail of the lengthy subject matter. In the endeavour to establish a reasonable framework to explain co-creation, it is important to lay down a number of questions. Firstly, one can ask the reason behind the willingness of some consumers to participate in co-creation while other consumers totally express their unwillingness. What constitutes the impediments and motivators of consumer co-creation? Secondly, the question of the existence of disparity in the scope of consumers and firms across the different stages of service development process should be raised and addressed. The integration of the customers in the service development process varies across a range of markets. Therefore, such an aspect is of importance in the analysis of consumer co-creation. In some market placements, the distance between the consumers and the firms is quite large (Nóvoa and Drăgoicea, 2015). The case necessitates the presence of active intermediaries such as the retailers. As a result, there is experienced a low level of consumer loyalty. In such a context, there is a considerably large number of potential customers with rapidly changing needs and preferences. In this instance, it is difficult to achieve consumer integration and the level of consumer involvement in the service development process is minimal. The outcome in such a situation results in a high rate of service failure when introduced in the market due to non-conformity with the consumer needs. A serious managerial challenge is presented in that context to the firms that provide services to the consumers in such markets. Through innovations, the distance between the service producer firms and the consumers is narrowed by the elimination or reduction of the number of intermediaries in the service development and marketing chain. The companies are nearly placed to the consumers. The consumer involvement level in the new services and innovation development and that of the existing services is high. A great consumer co-creation results to the tailoring of the services towards meeting the specific requirements of the consumers. The acceptance level of new services is high and the risk of failure minimised. The firms benefit through increased efficiency and effectiveness and from the increased financial returns from the increased investments in the development of new services. The concept of the scope of co-creation refers to the propensity of the collaboration between the consumers and the firms in the process of new service development (Ramaswamy and Gouillart, 2010). The process involves the ideation, designing, service development, the post-launch activities and the commercialization of the services. Firms are required to have a high degree of collaboration in co-creation across these stages. The intensity of co-creation, on the other hand, describes the extent to which the service producer firms depend on the co-creation to develop new services in a particular stage of service development. Firms that exclusively rely on the involvement of consumers in the service development activities across the range of the development stages are said to have a higher intensity of co-creation. Firms that rely on co-creation exchange ideas with customers in the websites and the internet where the consumers can submit their views on the design and the value delivered by a service. These ideas are evaluated for the development of new services or considered for the innovation of the existing services to ensure that consumer needs are met. It is important to note that despite the application of co-creation activities across a range of service firms, a number of them still have a zero application level. Innovators in the context of consumer co-creation refer to the consumers who are the earliest to adopt the new services (Ramaswamy and Ozcan, 2011). The individuals who face the needs that are likely to be more general in the marketplace and needs for which they are best suited to solve themselves are called lead users. The consumer who has the ability to develop judgement and apply intuition in the improvement of services which turns appealing to other consumers are called emergent consumers. There is a category of consumers who have a wide range of information about the services available, the places to acquire them and the market features. They also have the ability to discuss and share the information with other consumers. This category of consumers is called the market mavens. These various types of consumers considered above can be engaged in the co-creation process to install a different effort in the process of developing new services. The Benefits, Costs and Reasons for Varied Levels of Consumer Participation in Co-Creation The process of co-creation involves a number of costs on the part of both consumers and the firms. From a consumer perspective, co-creation includes non-monetary and monetary costs (Ramaswamy and Ozcan, 2014). These costs are manifested in terms of resource use, time, and the psychological and the physical effort by the consumer to learn and take part in the process. There are also a number of benefits that are considered for the sacrifice made by the consumers to partake in the co-creation process. The common belief is that the benefits accruing from the participation in the process are perceived by the more willing consumers as overriding the costs and conversely by the less willing consumers. The explanation for the reasons for the different levels of participation of amongst the consumers draws from the psychological, financial, social and the technical factors that influence consumers. Some co-creation consumers who participate in the process are motivated by direct and indirect economic benefits (Sampson, 2012). The immediate financial rewards in terms of monetary prizes and the indirect financial rewards through the intellectual property that consumers may receive in the process play a critical role. Some consumers may also be motivated by the visibility obtained from the competitions in the designs and development of new services. Visibility is evaluated in terms of the importance attached by the consumers in winning the design and development competitions and the financial benefits that accrue from such winning. However, some consumers are motivated by the free desire and the will to share ideas and efforts in the stages of service design and development. Another category of consumers is socially motivated by the social benefits of participation such as recognition and the value that may be attached to the service producer firms on the principal contributors. The titles are more particularly valued by a number of socially motivated contributors. The social benefits are summed up by the increased self-esteem, the improved individual status and the establishment of good ties with the firms and others. These and the many other symbols make the consumers appear more unique than the others in terms of contribution to the creation of the value enjoyed by the rest of the customer base. A number of the consumers are led by the desire to acquire technology or service knowledge in their participation in the designing and service development forums created by the service producer firms (Saxena, 2006). There are potential cognitive benefits that can accrue to the co-creators through learning and acquisition of useful information. For example, in the technology-based companies, the consumers of the software are severally involved at the various stages and forms of the co-creation process and benefit from the acquisition of knowledge. These consumers benefit from the exchange of technological ideas with the many others in the society that lead to the build-up of technology knowledge. The Journal of Service Research explains the psychological motivations for consumer participation in the co-creation process are hardly well understood (Snene and Léonard, 2014). However, the author of the journal argues that the consumers pursue the creative aspects of co-creation that have a probability to facilitate intrinsic motivation and a sense of pride and self-expression. People enjoy the contribution of ideas and are pushed by the positive effects of participation to become co-creators. Additionally, some consumers prefer to participate in the co-creation process due to the sense of altruism. They freely choose to participate out of their firm belief in the objectives of service development and improvement. Others may opt to participate in the co-creation process due to their current dissatisfaction with the current services that in their perspective require innovation or replacement. In the provision of medical services, for example, the medics may not be motivated by the financial or social benefits but their absolute believe in humanity to strive to improve the status of the medical services. The Stimulators and Impediments of Consumer Co-Creation at the Firm-Level As stated earlier, different firms may have different levels of consumer co-creation due to varied reasons. Firstly, firms differ in their consumer co-creation due to the disparity in the level of propensity to engage in a high scope of co-creation owing to the impediments facing different firms of different nature (Saxena, 2006). Secondly, particular service producer firms have better processes and tools required to stimulate the consumer motivation to participate in the co-creation process. The first reason for the disparity in the level of firm participation in the co-creation process constitutes the impediments of consumer co-creation. The difficulties explain the effects of the factors operating at the firm level on co-creation. The second reason for the disparity represents the stimulators of consumer co-creation at the level of the firm. These describe the effects of the firm level stimulators on the relationship between co-creation and the consumer-level motivators. Impediments of Consumer Co-creation at the Firm- Level The impediments to the co-creation process are represented by the characteristics manifested in the consumer co-creation process (Special Section of the Journal of Service Research: "Service Operations: Theory, Practice, and Future Research", 2007). Firstly, there is required a fair amount of transparency on the part of the firm in the process since co-creation significantly depends on the revelations of the service provider firms. These disclosures involve the disclosure of ideas that may have been concealed for longer periods of time due to the avoidance of leaking crucial information to the competitors. Therefore, firms that highly constitute secretive information that may not exclusively be disclosed to the consumers are most likely to engage in a narrow range of co-creation activities. Secrecy is most likely to be involved at the launch and service development stages to avoid the spreading of critical information to the competitors at the early stages. Secondly, the ownership of the intellectual property can result to grappling between the consumers and the firms. It is possible that different consumers will have different expectations for the maintenance of the intellectual property that results from their hard work to produce new ideas. Some consumers are known to have sufficient generosity as to surrender wholly the intellectual property to the co-creating firm. However, others would wish o exclusively maintain and enjoy the fruits of their hard work. There has been an inconsistency in the formulation of policies pertaining the retention of the exclusive legal rights that has severally been interpreted to mean that the consumer contributors are unfairly treated. Firms that lay emphasis on the preservation of the exclusive legal rights are known to engage in a lesser degree of co-creation (2009 Service Science and Service Innovation Awards: SRII: Service Research & Innovation Initiative, 2010). Thirdly, information overload results from the accumulation of a large yield of consumer input in the process of co-creation. The firms are entitled to screen the enormous number of ideas contributed by the users in an effort to sort the valid ideas from the less actionable ones. The process of selecting between thousands of ideas is not an easy task for the firm to accomplish. The success accruing from the ideation stage becomes a significant burden on the part of the company. In a bid to minimise the complexity of the ideas contributed through initial co-creation activities, some firms engage consumers at another level to sort the co-creation ideas. For the deadline sensitive post-ideation stages, the ideation stage of co-creation may prove burdensome to the service provider firms. Many of the consumer co-creation inputs at the ideation stages may be infeasible in the standpoint of the new service development (Bhalla, 2011). The challenge of the lower value identifiable in the contributions of some consumers and the screening of many ideas to result in just a few relevant ideas is a fundamental reason why many service provider companies do not engage in the co-creation activities. The participation of many groups at the post-launch and early stages is minimal, but emphasis is laid on the participation at the commercialization stage. Stimulators of Consume Co-Creation at the Firm-Level These are the moderators of the relationship between the degree of co-creation and the consumer motivators of co-creation at the level of the firm (Burdon, Mooney and Al-Kilidar, 2015). Users may prefer not to participate in the co-creation activities if the perceived benefits of such co-creation are exceeded by the costs of such participation in particular firms than in others. There are two generic options available for the firms to stimulate the consumer co-creation. Firstly, the firms have the option of increasing the amount of benefits accruing to the co-creator consumers from participating in the co-creation activities. Firms, therefore, have the option of modelling or creating the motivators earlier referred to. Many co-creator consumers are attracted by the combination of a wide range of benefits. Firms, therefore, should apply an effective approach that combines the social, financial, psychological and the technical benefits. Secondly, the firms have the option of reducing the costs incurred by the consumers in the co-creation process (Brunoe, 2014). The reduction of costs should include the costs of the opportunity costs for participation, the time taken and the effort made by the consumers in the co-creation activities. The reduction of these elements of cost would go a long way in stimulating the consumer participation in the co-creation process. The provision of user toolkits in the generation of new ideas is a critical approach for cost reduction. Modularisation of the new service development process to ensure that consumers are selected to fit in various modules of the process. Such a step would help consumers familiarise with the module processes and hence help in reducing the amount of time spent in the co-creation process and generation of ideas with ease. The expertise and passion that results from modularisation is essential for the accomplishment of the co-creation tasks with greater efficiency. Consumer Involvement at the Various Stages of New Service Development Process Ideation, Design and the New Service Development Stage Innovation at the earlier stages of the service development process are critical to the success of the entire co-creation process and the attainment of the desired objectives (Dato-on, 2014). The significance of the concept of new service development and idea generation in relation to high consumer co-creation cannot be undermined in the light of attaining process success. The available traditional literature stipulates that firms, through well-selected market researches engage customers highly in the early stages of new service development. Lead users and focus groups are commonly used techniques by the firms to narrow down and design the service concept. These techniques, however, are quite elaborate and expensive and limit the possibility of consumer interactions with the firms. The landscape of value co-creation in the world, today has significantly changed due to the use of world-wide-web that supports the interactions between the consumers and the firms and among the consumers. The social media is commonly used by the companies to at the ideation stage to increase the depth of consumer inputs (Goyal, 2013). At the design and service concept development stage, the firms often engage the customers directly to seek their input. The minimisation of the risk of failure of new services and the reduction of costs is achieved at these early stages. Commercialization and the Post-launch stages The commercialisation and the post-launch stages of the new service development process are the most expensive, risky and critical (Special Section of the Journal of Service Research: "Service Operations: Theory, Practice, and Future Research", 2007). However, despite the degree of sensitivity involved at these stages, the Journal of Service Research observes that little effort has been done to improve the certainty of success in such stages. Many new service development projects have benefited from the consumer involvement at the level of commercialisation and the post launching. Several significant modifications are done to the services concept using the contributions of co-creator consumers at these stages. It is imperative to acknowledge that consumer participation at these last two stages of new service development creates challenges as much as the benefits for the service provider firms. The proliferation of social technologies like the social networking sites and consumer communities has created challenges and opportunities for the management of post-launch and the commercialisation stages. These have significantly affected the marketing processes at these stages. The general awareness of the consumer about the new service is critical to its success. Creation of awareness is achieved through promotional and advertising strategies. The use of social media and the consumer communities in creating awareness of the services in the modern world have saved firms a lot of advertising and promotional costs. Faster diffusion stimulated by high awareness increases the chances of success of a newly developed service. The Impact of High Consumer Co-creation on the Design and Development of New Services There has been a shift towards consumer co-creation in the recent past as adduced in the preceding discussions. The shift has had significant implications for both the firms and the consumers. In both the service and product development processes, the implementation and definition of consumer co-creation has an important influence on the process success. In the case of a service that involves a high degree of consumer co-creation, there are both positive and negative implications for the subsequent design and development of new services. The marketing theory and practice recognise the potential impacts of consumer co-creation in a service industry (Snene and Léonard, 2014). In the case where the initial degree of consumer co-creation is high, certain higher standards are set and expected of future designs and developments of new services. Service producer firms are required to manage properly and implement the co-creation of new services to ensure that competitive advantage is created for the subsequent service. A firm should ensure that it attains efficiency and improve o the effectiveness of the co-creation processes that follow. It is important for the firms to bear in mind that the nature of consumer needs is dynamic and keeps changing. Every design and development of a new service would require greater innovations to ensure that duplication of the previous service specifications is not done. The service that could be meeting consumer needs may get obsolete the next day. Therefore, subsequent development of new services would require substantial investments in the co-creation process to ensure that the new services improve on the gaps left by the previous (Ramaswamy and Ozcan, 2014). The costs of performing this important activity across the various stages of development involve an increment and decrement of costs at varied stages. However, the net effect in the long-term is a reduction in the total operational costs. Where success has substantially been achieved in the previous tests, the subsequent offerings have a better foundation for success. The risk of failure for the new services developed is minimised by the ameliorations done on the key elements of the development process. The high degree of consumer empowerment has the potential for creating managerial challenges in balancing the interests of diverse shareholders and the objectives of the new service development. Constraints, coordination requirements and the nonmonetary costs may increase with the number of co-creators involved. Conclusion The concept of consumer co-creation forms an important function in both the development of new products and services. It is the involvement of the consumers in the processes of designing and transforming new ideas into valuable output (Nóvoa and Drăgoicea, 2015). The participation of the users in the co-creation activities is a concept that is not very popular among the service delivery enterprises. However, the advancement in the technology and the increased globalisation and interaction between and within firms and consumers has necessitated the picking momentum of co-creation. The importance of this concept in improving the competitiveness of services, the efficiency and effectiveness in which they are developed and delivered cannot be undermined. The co-creation process involves both costs and benefits to the consumers and the firms (Sampson, 2012). Consumers can only participate in the co-creation process when the benefits accruing from such participation exceeds the costs involved in terms of time and effort. Financial, social, psychological and technical motivators make different consumers opt to participate in the co-creation activities. The stimulator activities including the reduction of the process costs and increment of the benefits can influence consumers in co-creation activities. The impediments imposed at the level of the firm have a significance in moderating the degree of consumer co-creation achieved. Subsequent designs and development of new services is significantly influenced by a variety of perspectives on the level of consumer co-creation attained in the previous events. References 2009 Service Science and Service Innovation Awards: SRII: Service Research & Innovation Initiative. (2010). Journal of Service Research, 13(2), pp.136-136. Bhalla, G. (2011). Collaboration and co-creation. New York: Springer Science Business Media, LLC. Brunoe, T. (2014). Proceedings of the 7th World Conference on Mass Customization, Personalization, and Co-Creation (MCPC 2014), Aalborg, Denmark, February 4th-7th, 2014. Burdon, S., Mooney, G. and Al-Kilidar, H. (2015). Navigating service sector innovation using co-creation partnerships. Journal of Service Theory and Practice, 25(3), pp.285-303. Chakraborty, S., Bhattacharya, S. and Dobrzykowski, D. (2014). 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Journal of Service Research, 9(4), pp.388-389. Read More