How to See Co-Creation of Value When Creating New Services

Review of a few related articles.

Written by Tiia-Marina and Juha

The 6th foundational proposition on service dominant logic is: “The customer is always a co-creator of value: There is no value until an offering is used – experience and perception are essential to value determination.” So the co-creation is a goal to reach. By achieving that you can highlight the customers view and clarify customer needs (Payne, Storbacka &Frow, 2008).

Grönroos and Ravald (2011) point out that customer as co-producer (participates in e.g. defining new service) differs from customer as co-creator of value. They argue that it is always the customer who creates the value for himself and that the supplier is more a value facilitator. Supplier becomes a co-creator of value if it can create value for itself at the same time with the customer. Michel, Brown and Gallan (2008) see also that companies cannot fulfill all the needs but only create value propositions for the consumer to choose from. The goal is to mobilize customers to take advantage of the offerings. One of the challenges for the future will be to create business models that successfully integrate the service provider’s processes with the customer’s process of value creation.

To develop and design services the distinction to goods is relevant. Services are more challenging than products. The innovation process does not proceed systematically, the new service offers are insufficiently modularized and instead of a source of revenue, the service mutates into a cost driver (Dörner, Gassmann & Gebauer, 2011). The service concept can be the key driver of service design decisions at all levels of planning. Defining the service concept drives design decisions for new and redesigned services. An organization’s definition of its service concept is necessary at the strategic level and operational level during service design planning, particularly in integrating service strategy into the service delivery system (Goldstein, Johnston, Duffy & Rao, 2002).

Value is invariably treated as a positive outcome. However, value creation out of a resource can lead to a negative outcome as well. For example, if a good does not work, the value-creating process makes the customer worse off rather than better off. In the service (dominant) logic, traditionally non-marketing tasks have marketing consequences. The extended marketing process is mainly promise keeping, and thus a base for future promise making. (Grönroos et al. 2011.)

Emotional engagement can be formed in various ways to involve the customer in value co-creation. Payne et al. (2008) see different levels of emotional engagement as the ways value is created: Through advertisements and promotional activities, self-service where (where part of the labor is transferred to the customer), customers being part of the context where the service is produces (theme parks), where customers self select most suitable ones from suppliers pre described processes (airport), and fifth customer and supplier engage closely in certain solving activity.

The specific actions and behaviors that make up co-creation, and how companies should communicate with customers in order to gain a better understanding of customer co-creation in the development process; that is, co-creation for others. Gustafsson, Kristensson and Witell, 2012) define customer co-creation as a frequent, bidirectional, and face-to-face communication process that is used when attempting creative problem solving (innovation). However, companies must apply different communication strategies in co-creation depending on the degree of innovativeness of a development project. In developing incremental innovations, high frequency of communication, democratic dialogue and the content of interaction created in the customer environment will lead to increased product and market success. How the information is transmitted doesn’t play an important role. The customers should not be too highly involved in developing the actual content of radical innovations, since the demand for something fundamentally new is completely unpredictable.

“Customer needing”. It is formed based on the customers` mental models of their business and their strategies that affect their decision making. Needing can be operationalized to three dimensions that represent desired value in use for the customer ; Doing  dimension that consists relieving and enabling functions, the experiencing dimension consisting energizing and sheltering functions and scheduling consisting time-framing and timing functions. Sellers tempt to focus on their products, not to meet the needing of the buyer. Seller could benefit from focusing on discovering buyers needing and focusing on profile of functions the buyer needs. (Strandvik, Holmlund, & Edvardsson, 2012.)

Payne et al. (2008) argue that tree forms of encounters facilitate co-creation of value: communication encounters, usage encounters and service encounters. By choosing the ways to use different encounters you can manage the value co-creation. Encounters must be seen as possibilities to enrich the customers understanding and organizational knowledge. Encounters also can be seen as cumulative contributions to co-creation of value.

The service concept is useful in determining appropriate performance measures for evaluating service design. The chosen performance measures for the service delivery system are crucial since they affect the behavior of workers in all functional areas of an organization, and hence the service processes as well. Determining how to model performance measures in a service system design is complicated by the lack of standards within service industries. (Goldstein et al. 2002.)

As seen the problem of complexity in service systems is evident. It can be addressed by a way to picture it using the Multilevel Service Design (MSD) Method. The method recognizes that organizations cannot design customer experiences but service systems can be designed FOR the customer. “The MSD method offers a systematic view of service design levels and flexible approaches that accommodate the co-creative nature of customer experience.” (Patricio, Fisk, Falcao e Cunha & Constantine, 2011)

A few full papers worth reading:

Dörner, N., Gassmann, O. & Gebauer, H. (2011), Service innovation: why is it so difficult to accomplish? Journal of Business Strategy, Vol. 32 No. 3, pp. 37-46.

Goldstein, S.M., Johnston, R., Duffy, J.A. & Rao J. (2002), The service concept: the missing link in service design research? Journal of Operations Management, 20 , 121–134.

Grönroos, C. & Ravald, A. (2011), Service as business logic: implications for value creationand marketing, Journal of Service Management, Vol. 22 No. 1, pp. 5-22

Gustafsson, A., Kristensson, P. & Witell, L. (2012), Customer co-creation in service innovation: a matter of communication? Journal of Service Management, Vol. 23 No. 3, 2012, 311-327.

Michel S., S. W. Brown & A. S. Gallan (2008), Service-Logic Innovations – How to Innovate Customers, not Products, California Management Review, Vol. 50, No.2, 49-65.

Patricio, L., Fisk, R., Falcao e Cunha J. & Constantine L. (2011), Multilevel Service Design: From Customer Value Constellation to Service Experience Blueprinting, Journal of Service Research.

Payne, A.F., Storbacka, K. & Frow P. (2008), Managing the co-creation of value, Journal of the Academy of the Marketing Science, 36, 83-96.

Strandvik, T., Holmlund, M. & Edvardsson, B. (2012), Customer needing: a challenge for the seller offering, Journal of Business & Industrial Marketing, Volume 27, Number 2, pp.132–141

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